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Post by LunarOrbit on Sept 7, 2005 0:17:30 GMT -4
That is, every bank charges that same 2% fee on currency exchanges. Where are the banks competing for my money in this case? They don't exist. I should be able to find a bank, wanting my $10,000, that will offer me a 0.5%, 1%, or even a 1.5% exchange rate. Believe it or not, banks have expenses. If they all charge roughly the same fees that tells you they are as low as they can afford to put them. By your reasoning there should be gas stations selling fuel for $0.50/gallon in order to attract customers. They obviously can't afford to do that, that's why all gas stations sell their fuel for more or less the same amount... within fractions of a cent.
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Post by turbonium on Sept 7, 2005 1:11:31 GMT -4
Believe it or not, banks have expenses. If they all charge roughly the same fees that tells you they are as low as they can afford to put them.
Oh, to live in a world such as this, where banks only charge based on reasonable returns of profit, and not a penny more. They all charge exactly the same 2% fee, regardless of the amount of money being exchanged. When I exchange $1000.00 US into, for example, Euros or $CDN, I am charged $20.00 US off the top. On $10,000.00 US, I am charged $200.00 US. The same service, but 10 times the service charge. The same charges occur in a reverse exchange. If there were truly a competitive banking system, I would definitely be able to "shop around" for a deal on my 10 grand.
Do you use ATM's? The fees, even on ATM's of your own bank, cost you money no matter where you do your banking. Even if you don't pay a per use fee, you still need to pay a monthly package fee to allow a limited number of ATM transactions. The expenses for operating these ATM's are well below the fees charged for using them. But again, try and find a bank charging 25 cents per use, which would still making the bank a profit on their ATM's.
Bank fees and surcharges have skyrocketed over the last 10 years, as a collective group. Collusion (acting as a monopoly) is the norm in banking and at the gas pumps.
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Post by frenat on Sept 7, 2005 1:16:46 GMT -4
I pay nothing for the use of an ATM. My bank even reimburses me up to $20 a month for the fees incurred by using other bank's ATMs.
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Post by turbonium on Sept 7, 2005 1:28:59 GMT -4
I pay nothing for the use of an ATM. My bank even reimburses me up to $20 a month for the fees incurred by using other bank's ATMs. That's unusual where I live. No ATM fees for using your bank's ATM's, and no monthly fee for usage? Plus, non-member bank reimbursements? Well, that's a good deal for you. Do they have any fees or surcharges that seem excessive to you? For example, high fees for stop payments, NSF's or any type of transaction?
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Post by frenat on Sept 7, 2005 1:43:39 GMT -4
None of the fees seem excessive. I don't know of any other banks that reimburse for other bank's charges but I know of many that don't charge any fees for their own. Many offer free checking, free online banking, no atm fees and free check cards.
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Post by Data Cable on Sept 7, 2005 5:38:48 GMT -4
Almost exclusively. Nope. Nope.
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Post by echnaton on Sept 7, 2005 12:21:18 GMT -4
They all charge exactly the same 2% fee, regardless of the amount of money being exchanged. Most banks that offer foreign exchange as a service don’t make much off small currency transactions. There is a overhead cost to keeping an inventory of foreign currency above the cost of the actual transaction. If you are not at the facility that holds the inventory it has to be specially transferred to your local branch. Currency transactions expenses don’t scale well with transaction size because of the requirement to hold or specially acquire inventory. Many small or medium sized banks actually do foreign exchange through one or a few large banks that actually offer the service to banks in their area. Thus a more uniform fee because costs are probably uniform. Deposit $10 million in a money center bank and ask what they charge to change it into a foreign currency deposit. It will be a much lower percentage than a $10,000 currency swap at the same bank. Why, because they have no inventory expense and can do it with a few clicks on a computer, maybe within the banks own customers. Call a bank and ask them, they should tell you the rack rates for transactions so you can at least get and idea of how this works. Figuring exact costs though is difficult without knowledge of bid/ask spreads and other factors.
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Post by Joe Durnavich on Sept 7, 2005 20:41:57 GMT -4
I should be able to find a bank, wanting my $10,000, that will offer me a 0.5%, 1%, or even a 1.5% exchange rate.
That would be the case, again, in a true free enterprise banking system.No, that is not correct. Prices in a free market will tend to converge on an equilibrium between supply and demand, a market-clearing price. This is the price that gets a given good or service moving through the economy. Basically, it is the price the banks are willing to provide the service at, and the price consumers are willing to pay--even if both sides grumble about the unfairness of it all. Prices may still differ because the circumstances of supply and demand for a given product or service are not the same everywhere. By the way, here are some tips on exchanging currency. The market does provide a variety of choices: Tips for cutting your foreign exchange lossesThe fact is, the banks are operating as a monoplistic system right now, and we have no recourse or alternatives within our current system.Actually, banks--at least in regards to their traditional functions--have been becoming ever more insignificant in the modern world. They may be a dying breed. I don't like any monopolies, but I prefer one that is recognized as such by the public, and under much needed scrutiny, accountability, and ability to change and revamp through independent auditing.Free from competition and market discipline, your auditors would have little vested interest in driving for technological innovation like ATMs, online banking, etc. The grand experiment of Communism has taught us that common ownership of the means of production results in economic stagnation and decay.
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Post by Joe Durnavich on Sept 7, 2005 21:00:08 GMT -4
Turbonium, how would your system pay the US budget? As I remember, the government spends about $2.3 trillion a year, and takes in about $1.9 trillion of that in tax revenues. What I am wondering is how much money would you have to print up each year to pay the budget?
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Post by turbonium on Sept 7, 2005 22:39:58 GMT -4
Turbonium, how would your system pay the US budget? As I remember, the government spends about $2.3 trillion a year, and takes in about $1.9 trillion of that in tax revenues. What I am wondering is how much money would you have to print up each year to pay the budget? That goes back to what we briefly touched on earlier - the damn Gov't pork barrel projects have to be cut down radically. No economic system that was ever implemented can operate efficiently and productively if the Gov't spends money faster than it can be printed - far too often spent on wasteful endeavors and buying votes from special interest groups. Reining in the spendthrift bureaucrats is a difficult task at the best of times. I have to admit, there is no easy solution for that problem. Vote one out, another one comes in who may even be worse.
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Post by turbonium on Sept 7, 2005 22:51:06 GMT -4
This is the price that gets a given good or service moving through the economy. Basically, it is the price the banks are willing to provide the service at, and the price consumers are willing to pay--even if both sides grumble about the unfairness of it all. This is true, but it does not mean the banks have no room to move on the identical fees they charge, even for amounts under $100, 000.00. They truly choose to not compete with each other on these transactions, which a genuine free enterprise bank would do.
It's significant to realize that you can shop for a loan, which is a transaction where you become indebted to the banks,, but are not able to shop for an actual saving on exchange transactions, which does not indebt you to the banks. They'll do you certain "favors", but only ones that benefit them at your expense.
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Post by turbonium on Sept 7, 2005 22:58:53 GMT -4
Free from competition and market discipline, your auditors would have little vested interest in driving for technological innovation like ATMs, online banking, etc. The grand experiment of Communism has taught us that common ownership of the means of production results in economic stagnation and decay. I don't see the system I advocate as Communistic. That system leaves all the control and power in the hands of the "privileged" few in Gov't. In my system, lower Congress, transparent to the public in its economic operations, and fully accountable to the public, would indeed implement the technological advancements the public agrees would be a benefit and convenience to them. I'm not pushing for The Bank of Stalin here.
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Post by Data Cable on Sept 8, 2005 2:19:34 GMT -4
Ok, let me see if I have this straight....
Turbo, you want to abolish the practice of one private party lending money to another for profit (that would include individuals earning interest from savings accounts). In it's place, you propose that private parties who want money will directly ask the federal government to give it to them, at no interest and with no strings attached.
Do I have that right?
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Post by turbonium on Sept 8, 2005 3:17:44 GMT -4
Ok, let me see if I have this straight.... Turbo, you want to abolish the practice of one private party lending money to another for profit (that would include individuals earning interest from savings accounts). In it's place, you propose that private parties who want money will directly ask the federal government to give it to them, at no interest and with no strings attached. Do I have that right? No, you don't . First, I don't oppose investments by individuals whatsoever - which is what a savings account is, albeit with a minimal return . Second, those who need a loan would still be obligated to repay that loan, nor would loans be without standardized, scaled fees,. This is not a free cash grab, by any means. But it also is not an unfair penalty imposed on the borrower. The interest charges on most loans are front loaded to pay mostly interest and a small percentage of the principle. It places an unfair burden on the borrower when he repays the loan, in that it leaves him still owing almost the entire loan he received, even after many months of payment to the bank. That is why in most mortgages, for example, the bank cannot lose, but the homeowner certainly can. Time is on the side of the lender, not the borrower, because the borrower has to ensure he can come up with monthly payments over the course of many years, before he has retained any equity in his home. A fee system would require the borrower to pay the fee back to the lender with his first couple of payments, but then the payments would go entirely towards paying back the principle amount loaned. Of course, loan defaults can and would occur, but the number of them would greatly decrease, as the loan repayment would be zeroed over a much shorter time frame. In the case of a mortgage, it would reduce the time to pay off by years. I abhor usury in every shape and form, and unfair interest charges on loans are among the most insidious forms of usury.
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Post by Data Cable on Sept 8, 2005 5:04:32 GMT -4
Obligated by what means? What would be the penalty for defaulting on the loan?
Yes, interest.
Terms the borrower willingly agreed to when they signed the loan.
But during that time, the homeowner has posession and use of the home, which they wouldn't have unless the bank plunked down the cash up front. And while they're coming up with money to pay off the loan, the'yre (presumably) not coming up with money to pay rent, from which they never aquire equity.
Yes, front-loading the fee. Literally interpreting "couple of payments," then no fee would be greater than double the amount of each payment, or conversely, no payment would be less than half the amount of the fee.
So, let's see some numbers. What would be the "fee" to borrow, say, $100,000?
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