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SoundBarrier
13th Jan 2009, 03:54
So here I am and I hear the news headline...

"It's bad, VERY bad, a One News look at the economy...."

For Pete's sake, how is this going to encourage a country to try and recover from the current economic downturn?

Why is it that this scaremongering and sensationalism is acceptable? Also why is it acceptable that those who have caused the world economic issue to remain unpunished.

Not really a rant, but more of a question (with a hint of a rant)

Richard Taylor
13th Jan 2009, 06:00
Recent news of companies going under or cutting back, the one thing I've heard recently is that either the company concerned cannot get credit or loan facilities from the banks for expansion (eg. Oilexco NS, McLeish Bros both locally) or their customers (in the case of JCB).

Proves the banks, which helped start the crisis, are a law unto themselves.

The Govt in the UK are apparently due to announce a scheme to guarantee the banks that they will be paid if any company defaults on a loan facililty given by the banks. In other words, the tax payer will foot any bill - again.

Bloody banks.:mad:

BlueWolf
13th Jan 2009, 06:21
Yes, but the "money" which Government uses to bail out said Banks is imprest supply credit, ie new money issued by Parliament, not taxpayers' funds.

In the same way as the "money" which was "lost" by the Banks was fractional reserve credit, ie new money issued by the Bank in question under the terms of its Banking Licence, and not depositors' funds.

So money which didn't exist before it was lent, gets "lost", and is refunded with money which didn't exist before it gets spent. No-one loses anything.

Sir Lee B´stard
13th Jan 2009, 06:58
:confused:Thanks for that Blue Wolf, it is 0855 here and I now need a drink! I suppose one way or another we are being stuffed - again:{

D SQDRN 97th IOTC
13th Jan 2009, 07:14
so if no-one loses anything, there shouldn't be a problem with the banking system?

but when I last looked...it seemed the banking system was having real difficulty, and a few big banks and broker dealers had gone bust. And the industry still seems to be having problems.

so something must be wrong with your logic BlueWolf, impeccable as it may sound.

Wholigan
13th Jan 2009, 07:58
Hark - - - - I hear a "whoosh" sound!

;)

BlueWolf
13th Jan 2009, 08:43
Well, the last time I checked my account, all my money was there where it should have been, which makes me suspect that it can't also have been lent to anyone else.

And yet someone else HAS borrowed money from my Bank.

So what did they borrow and where did it come from?

Please don't say Belgian dentists and Japanese housewives, because the whole world works this way. Earth is a closed system as far as economics, banking, and money is concerned. We don't have off-planet investment by aliens. All new money which enters circulation here on earth is created here on earth. Parliamentary imprest supply money is issued into circulation by Governments, who then take most of it back again in tax. If they take back more than they issue, they make a surplus. If they issue more than they tax back, they run a deficit. What is a deficit?

Bank money comes into existence and enters circulation in the form of interest-bearing debt. It is taken back again in the form of repayments, plus interest, which is in turn funded from yet more interest-bearing debt. The capital portion of the repayment cancels out the loan, and the Bank keeps the interest as profit.

Banks can only lend out to a maximum proportion of the deposited funds which they hold (90% fractional reserve is common in many jurisdictions). But this doesn't mean that they lend out an actual proportion of those deposited funds. What they lend is credit to the equivalent of that proportion.

The deposited funds can be from any source. Bonds from a foreign Bank are as good as any other. Mrs Yakashima deposits 1000 currency units with the 1st Tokyo Bank, which then lends 900 currency units to the BNZ, which allows the BNZ to lend 810 currency units to Yours Truly. I pay the BNZ back 923.4 currency units (at 14%), the difference being 113.4 CU. BNZ refunds 1st Tokyo its 900 CU, plus 63 (7%), and they keep the other 50.4 CU as profit. 1st Tokyo then gives Mrs Yakashima back her 1000 CU, plus 35 (3.5%) in interest, and they keep the other 28 as profit. Not a bad return for lending something which didn't exist beforehand, based on the holding of something which belongs to someone else.

But if I default on my loan, Mrs Yakashima doesn't lose her savings, because I never borrowed them. They were always held safely on deposit with 1st Tokyo. 1st Tokyo doesn't lose either, and neither does the BNZ, because they were both lending money which didn't exist before they lent it. Yes, they lose out on potential profit from interest, and if they have to compensate the next Bank up the chain for that, then they take a hit, but in the case of the BNZ, that's a 63 CU hit, not a 900 CU hit.

This really is how it works. Go check your bank balance, I dare you. ;)

The Banks have got themselves into trouble by lending out more than they ever should have, to people who were never going to be able to pay it back, against collateral which was never worth enough to provide a backstop. In other words, they got greedy. For the system to work, people still have to be able to service their debts. If they can't, the currency becomes devalued, just as it would be if Governments spent too much while taxing too little.

However the system will heal itself, because at the end of the day, Mrs Yakashima still wants to make an interest profit on her 1000, and the only way she can do that is to put it in the Bank, and the only way the Bank can make a profit is by lending at interest, and thus people have to be allowed to borrow. But the Bank has never been allowed to lend Mrs Yakashima's actual funds, because they are the Bank's liabilities.

This is the reality of fractional reserve banking, and if it sounds unbelievable, that's perhaps because it should be. But it isn't. And the Government has to prop it up, because what would happen if they didn't? But don't worry, because once again, the bail-out isn't funded from taxpayers' pockets. I mean does anyone seriously believe that the Irish Government has 400 billion Euro, of the NZ Government has $150 billion, or the British or the Germans or the Americans have however many billions in cash just sitting around in a vault somewhere, ready to bail out the Banks? That would be three years' worth of GDP for us. But guarantee the Banks they have, and furthermore, they have also guaranteed the finance companies, who DO on-lend their depositors' funds. No, the money for the bail-out comes from imprest supply, i.e. thin air backed by legal authority, same as the original Bank loan money.

Taking a stake in the holdings or portfolios of the Banks and other financial institutions in question, in return for the bail-out, is really a way of making sure that the new bail-out money is backed by assets, and therefore non-inflationary.

Happy thoughts

IB4138
13th Jan 2009, 08:55
The problems will only start to heal, when the banks are given back to bankers to run and the economists, accountants and politicians are shown the exit door.

What makes these people think they no more about banking than bankers. :ugh:

BladePilot
13th Jan 2009, 09:13
BlueWolf, absolutely brilliant you should be running for Governer.:ok: what an informative explanation.

Latest news is that the Irish Government are in such deep s:mad:t that they are borrowing 55million euro a day just to balance the books so where are they 'borrowing' that from will they be using the 'fractional reserve' approach and borrowing from themselves?

BlueWolf
13th Jan 2009, 09:45
Yes, they're doing well to have tapped into such a rich vein of credit, in these times of supposed crunch, eh.

55 million Euros a day...that's a lot of clams.

Actually it's about 13 Euros a day for every man, woman, and child in Ireland, or 91 Euros a week for each and every aforementioned Paddy. I wonder how long they're going to keep it up, because that's an awfully big required tax increase to pay it all back (with interest, presumably) if and when they eventually do.

If they don't, who do we suppose will go bust as a result?

Good job it's all made up money, eh.

Flying Binghi
13th Jan 2009, 09:54
Wow man! ... BlueWolf, you been smoking some serious weed there :ok:

BladePilot
13th Jan 2009, 10:01
BlueWolf
Irish Government already of the case with rumours that big TAX increases on the way including a return of 'rates taxing' on houses. They have already placed a 1% levy on all PAYE workers over and above normal income TAX levels. VAT increased to 21.5% already.
Pity the poor Irish paying the cost of a failed economic policy the Celtic Tiger is well and truly dead! :sad:

D SQDRN 97th IOTC
13th Jan 2009, 11:28
Bluewolf

good try - but that is not how it works.
the money in your bank account? all you have done is lend money to your bank. those numbers? those numbers are not money - they are just evidence of a debt the bank owes to you as a depositor if you want your money back.
but the cash - i.e the money - you once held in your hand....it is no longer in your hand. it is either in the bank's vault (and you get numbers on your bank statement), or they have given the cash to someone else either because that someone else wants their deposit back, or they want to borrow money.
If they borrow money, then they get money in their hand....and the numbers on their loan statement are evidence of debt from them to the bank - like the bank's statement to you.
now hey ! there is a loan out there.....but no extra money has been created.

I'm with Flying Binghi - you are on some good stuff.:ok:

ShyTorque
13th Jan 2009, 11:37
Perhaps someone could explain why my bank expect 11% interest on a proposed loan, bearing in mind the 1.5% rate they would give me on savings?

fireflybob
13th Jan 2009, 11:49
Irish Government already of the case with rumours that big TAX increases on the way including a return of 'rates taxing' on houses.

Why not abolish all taxes to get the economies going?

Here's an interesting clip from Atlas Shrugged:-

Galt: "You want me to be Economic Dictator?"

Mr. Thompson: "Yes!"

"And you'll obey any order I give?"

"Implicitly!"

"Then start by abolishing all income taxes."

"Oh no!" screamed Mr. Thompson, leaping to his feet. "We couldn't do that . . . How would we pay government employees?"

"Fire your government employees."

"Oh, no!"

Abolishing the income tax. Now that really would be a genuine economic stimulus. But Mr. Obama and the Democrats in Washington want to do the opposite: to raise the income tax "for purposes of fairness" as Barack Obama puts it.

Atlas Shrugged (http://online.wsj.com/article/SB123146363567166677.html?mod=djemEditorialPage)

Avitor
13th Jan 2009, 12:05
Yes but......Yes but....It's not my fault, it's "Global"

You all must remember, I am "Determined" to do "All in my power" I will "Announce" the solution in my own time.

I was Chancellor only for 10 years, I never had a chance!

The solution Gordon is in the door handle at number Ten. Please close it, from the outside.

Scumbag O'Riley
13th Jan 2009, 12:12
Seems like Brown is taking us down the path to a command economy. Fecking champagne socialists cannot change their spots. The first, and possibly only, wedge of public spending I'd authorise if I was in charge would be to build a not so nice new jail to put these politicians in for fecking up so many lives.

SpringHeeledJack
13th Jan 2009, 12:20
Yes but......Yes but....It's not my fault, it's "Global"

You all must remember, I am "Determined" to do "All in my power" I will "Announce" the solution in my own time.

I was Chancellor only for 10 years, I never had a chance!

The solution Gordon is in the door handle at number Ten. Please close it, from the outside.

Amen to that! More than perhaps anyone in the present government Incapability Brown would have had a grandstand seat and impeccable information from many sources during the last 10 years. He (and his minions) have orchestrated and allowed the financial mess that he now 'discovers' that we are in, where every unborn child in the UK already owes £13,000 or so to pay off the newly printed money that is supposedly plugging the toxic hole in the finances..

It's so wrong as to be a joke, if it wasn't so serious a fraud perpetrated on the population. :mad:


regards


SHJ

JennyB
13th Jan 2009, 12:55
" What makes these people think they no more about banking than bankers. :ugh:"

Because a ten year old child does??

bnt
13th Jan 2009, 18:04
Well, the last time I checked my account, all my money was there where it should have been, which makes me suspect that it can't also have been lent to anyone else.

And yet someone else HAS borrowed money from my Bank.

So what did they borrow and where did it come from?


Ah, but your money isn't really there, is it? If all a bank's customers get it in their heads that their money should not be "in" the bank, and all try to take it out at once, it's called a "bank run".

So the bank has your money on its books as an asset, along with other kinds of assets (such as money owed in e.g. mortgages), and so it uses those assets as collateral to borrow more money. It then invests that money in other ways e.g... by loaning it to people, or buying bonds, or various "securities".

So far, so reasonable, and the system has worked before, so what went wrong this time? It's complicated, and I'm only a "punter", but I see two classes of problem:
a: banks and other institutions, including insurance companies like AIG, borrowed too much relative to their assets (too much leverage), to invest in:
b: new forms of unregulated "securities", which included credit-default swaps (http://en.wikipedia.org/wiki/Credit_default_swap) (CDS) and other derivatives (securities that are collateralized and repackaged to be sold on).

It's not as if everyone was blind to the potential problems. Warren Buffet famously described derivatives as "financial weapons of mass destruction"... but he still had one whole leg in the pond, and has been financially amputated at the knee, as it were. (He still has a leg to stand on, financially, so he'll be OK.)

So all these banks had obligations going in booth directions, all leveraged up the wazoo, all hoping to make money off everyone else. One bank takes a knock, e.g. another bank defaults on a CDS, so it has to pay out, so it calls in a loan from another bank, which has to get money from somewhere... other banks get wind of this, and they all start demanding money back from each other. It's the bank run all over again, except that the customers are other banks. As I heard it described, this is why the commercial credit markets seized up back in September-October, and there was an immediate knock-on effect on the credit lines of other (non-financial) businesses.

It's like a game of musical chairs, except that the chairs are missing half the legs, and only stand up when leaned against each other. When the music stops, lots of bums try to hit the seats, and they all crash to the ground. The one guy without a chair stands there, wondering what the hell happened. :}

BlueWolf
13th Jan 2009, 18:59
good try - but that is not how it works.

Oh, but it is, I am afraid.

the money in your bank account? all you have done is lend money to your bank. those numbers? those numbers are not money - they are just evidence of a debt the bank owes to you as a depositor if you want your money back.

Yup, true.

but the cash - i.e the money - you once held in your hand....it is no longer in your hand. it is either in the bank's vault (and you get numbers on your bank statement), or they have given the cash to someone else either because that someone else wants their deposit back, or they want to borrow money.

Actually no, and this is where people get confused. Cash itself, i.e. notes and coins, only makes up around 3% of all money in circulation. The rest is 'cheque money', book entries, which of course are electronic these days.
My money which went in the Bank was never (or at least hasn't been for a long time) folding stuff from an envelope. It was an electronic transfer. There is no 'cash' as such sitting in a vault to back up 97% of that electronic money, and there never has been.

The old horror stories about 'a run on the Banks' were only ever about a shortage of cash. Yes, of course, if everyone wanted to withdraw their money, in cash, at the same time, there wouldn't be enough. Nowhere near it. Never has been. But if they wanted to transfer it by cheque, or electronic means, well, then, of course there would, because why wouldn't there be? I mean there it is, in their accounts, as evidenced by the numbers on their statement.

When Joe Bloggs comes along to borrow 100,000 currency units to buy a house, the Bank doesn't go down to the vault with a wheelbarrow to collect notes and coins for him to take away. They open a mortgage account in Joe's name, which starts life as a 100,000 debt.
Joe goes and spends this money which he has been advanced. He buys his house and moves in. The people he buys it off get real money in their hands, from Joe's Bank (not cash mind, but a real book entry in their account) which they can then take out and spend, or transfer to someone else's account, or write cheques against, and so on.
My money, meantime, is still there in my account, and I can take it out and spend it as well! :ooh: spooky, eh.

there is a loan out there.....but no extra money has been created.

Oh yes it has, by virtue of the fact that they have been given real money which they can spend, while I still have my real money which I can spend, at the same time.

To quote Sir Josiah Stamp, Director of the Bank of England from 1928-1941 (Reputed to be second richest man in England in his day.):

The modern banking system manufactures money out of nothing. The process is perhaps the most astounding piece of sleight of hand that was ever invented. Banking was conceived in iniquity and born in sin. Bankers own the Earth. Take it away from them, but leave them the power to create money, and with the flick of the pen they will create enough money to buy it back again...Take this great power away from them and all great fortunes like mine will disappear, and they ought to disappear, for then this would be a better and happier world to live in. But if you want to continue to be slaves of the banks and pay the cost of your own slavery, then let bankers continue to create money and control credit.

Apologies for mixing up quotes from the both of you, but

Ah, but your money isn't really there, is it? If all a bank's customers get it in their heads that their money should not be "in" the bank, and all try to take it out at once, it's called a "bank run".

If it isn't really there, how am I able to take it out, shuffle it about, and pay other people with it? And it isn't just me; everyone else can do exactly the same thing, at exactly the same time.
And cash withdrawals or not, when most people take money out of their accounts, it immediately goes back into someone else's account, at the same Bank or another. Book entry money, electronic or not, almost by definition, never leaves the banking system.

So the bank has your money on its books as an asset,

Absolutely not. They have it on their books as a liability.

you been smoking some serious weed there

Oh, I wish ;)

IB4138
13th Jan 2009, 19:20
" What makes these people think they no more about banking than bankers. "

Because a ten year old child does??

JennyB

Please keep up to speed. :ugh:

The banks are being run by economists, accountants, analysts, politicians and academics. They are NOT bankers! Just clowns who don't know a thing about banking. :mad:

That is why we are in such a mess.

I presume you are still 9 and a half years old, as you don't seem able to tell the difference or know where to find the information. :rolleyes:

People like you scare me with their lack of nonse, who believe all the tabloids tell you about where the blaim lies.

BlueWolf
13th Jan 2009, 19:34
Oh look, here's something I prepared earlier. Don't just take my word on the way the banking system operates and how it creates money, take it from the experts and those on the inside.

Just because you don't want to believe it, because the idea is so repugnant, so seemingly criminal, doesn't mean it isn't so.

http://www.pprune.org/jet-blast/326176-what-if-its-not-american-householders-mortgages-blame-3.html

Quote:
Only commercial banks can lend money which they manufacture by lending it.
‘100% Money’ - Professor Irving Fisher, of Yale University

Various rights and duties have been conferred on banks by legislation, the most important of which is the exclusive operation of the payments system and the unique ability to create credit.
John Kerin, Treasurer of Australia. Letter to Senator Paul McLean, 1991

When money is lent by a bank it passes into the hands of the person who borrows it without anybody having less. When ever a bank lends money there is therefore, an increase in the total amount of money available.
Dr H.C. Coombs, Governor of the Commonwealth Bank, and the Reserve Bank of Australia, also a financial advisor to every government from Chifley to Whitlam

The modern banking system manufactures money out of nothing. The process is perhaps the most astounding piece of sleight of hand ever invented.
Sir Josiah Stamp, former Governor of the Bank of England

Banks lend by creating credit. They create credit out of nothing.
‘Currency and Credit’ - Ralph M. Howtrey, former Secretary to the Treasury, England

Commercial Banks create check book money every time they grant a loan simply by adding new deposit dollars to accounts in exchange for a borrowers IOU.
Federal Reserve Bank of New York

The process by which banks create money is so simple the mind is repelled.
‘Money: Whence it came, where it went’ - J.K. Galbraith

The fiat money systems that emerged have given considerable power and responsibility to central banks to manage the sovereign credit of nations. Under a gold standard, money creation was at the limit tied to changes in gold reserves. The discretionary range of monetary policy was relatively narrow. Today’s central banks have the capability of creating or destroying unlimited supplies of money and credit.
Chairman Alan Greenspan at the 15th Annual Monetary Conference of the CATO Institute, Washington D.C. Oct 14th 1997

Money loaned by a bank is not a loan of pre existing money. Money loaned by a bank is additional money created. The supply of money depends on people going into debt.
‘Grip of Death’ - Michael Rowbotham 1998

Royal Commission on Monetary, Banking, and Credit Systems 1956
(P= Page, PR = Paragraph)
An increase in bank lending or purchase of assets normally involves an increase in the total volume of money available to the public. (P.46 PR.161)
The importance of lending by trading banks lies in the fact that an expansion of their lending leads to an expansion of the supply of money. (P.59 PR.221)
The trading banks in NZ are able to create and destroy money through their lending transactions. (P.106 PR.440)

R J Kinloch
13th Jan 2009, 20:12
And it's a serious question.

I don't have any physical cash. All I have is an electronic number that resides in the bowels of my bank's computer.
When I do an electronic transfer all that happens is my number gets smaller and someone else's number gets larger.
With the most of the world encouraging electronic transfer more and more money is just an electronic number.
So I go back to the question, what is money and does it even exist:bored:

bnt
13th Jan 2009, 20:39
The old horror stories about 'a run on the Banks' were only ever about a shortage of cash. Yes, of course, if everyone wanted to withdraw their money, in cash, at the same time, there wouldn't be enough. Nowhere near it. Never has been. But if they wanted to transfer it by cheque, or electronic means, well, then, of course there would, because why wouldn't there? I mean there it is, in their accounts, as evidenced by the numbers on their statement.

Old horror story? It happened in the UK in 2007: Northern Rock. That's what I meant by your money not being "there" - as you say, it's just numbers. Since the abolition of the gold standard in each country their currency has been a "fiat currency" (http://en.wikipedia.org/wiki/Fiat_currency), not backed by physical assets, but by confidence in the country. Zimbabwe, like Weimar Germany, is what you get when the confidence evaporates.
If it isn't really there, how am I able to take it out, shuffle it about, and pay other people with it? And it isn't just me; everyone else can do exactly the same thing, at exactly the same time.
And cash withdrawals or not, when most people take money out of their accounts, it immediately goes back into someone else's account, at the same Bank or another. Book entry money, electronic or not, almost by definition, never leaves the banking system.
Right - so it stays in the banking system, and never leaves the system. That alone doesn't cause problems. Neither is borrowing or lending a problem as such, because one side of the transaction balances the other: assets vs. liabilities.

However, when it comes to derivatives, this logic breaks down... that's what gives me the yips. The credit-default swaps I mentioned were bought and sold as assets, but could be "created" again and again, new "assets" with nothing behind them but a bet that a business would default on a loan. The CDS creator did not need to have any connection with the business that the CDS was created off of.

Maybe I've been listening to too much NPR Planet Money (http://www.npr.org/blogs/money/), but the way their interviewees described CDS was like this: it's as if you could walk down the street, pick a house at random, then take out insurance so that you would be paid a sum of money if that house burned down. (No, I'm not saying CDS is insurance as such, but it's a similar model.) There was no limit to the number of speculators who could do that at the same time, so the market ballooned to insane proportions by the end of 2007: approx $45 trillion, of which approx $20 trillion was pure speculation of that sort, and AIG were up to their ears in it. *

So, for various reasons, some loans default - and one "smoking gun" is the sub-prime mortgage market. These overweight CDS obligations (insurance-type payouts) kick in, and AIG is scrambling to find money to pay them out, calling in their debts... more defaults trigger more CDS payouts, then AIG defaults on its obligations... next thing you know, staff at Lehmann Brothers are taking the paintings off the walls and walking out. :eek:

Absolutely not. They have it on their books as a liability.One the one side of the ledger, owing money to you is a liability. On the other side, they have your cash in the (virtual) safe and can use it as collateral. Neither I nor the bank gain or lose anything directly when I make a deposit, but I hope to gain interest on my account, and they hope to leverage that deposit in to a gain much higher than they pay me.

* source: Credit Default Swaps: From Protection To Speculation
(http://www.rkmc.com/Credit-Default-Swaps-From-Protection-To-Speculation.htm)

Avitor
13th Jan 2009, 21:08
If the banks had any confidence in government strategy, they might lend. As things are they have none and are cautious.

Flying Binghi
13th Jan 2009, 23:32
BlueWolf, you got me thinking here.

A few years back an Oz political party, One Nation, proposed a bank transaction tax. Apparently the idea was that all current taxs be removed and replaced with a tax on money movements in bank accounts and the like (my memory is a bit vague on the concept) The only reason i took much notice at the time was an article by Noel Whittaker in a news paper suggesting it may work. (who N.W. is - Noel Whittaker [online!] (http://www.noelwhittaker.com.au/ie/index.html) )

One Nation never got in Government. (fortuitously methinks, but not because of tax) What i have heard over the years are comments from O.N. supporters that the banks were the main reason for O.N.s demise. I took little notice of what, to me, were extremist views, so car'nt recall what the claimed reasons were.

Now, i read some of the posts here and wonder :confused: ...would a Bank Transaction Tax have exposed the fact (?) of all the 'extra' money getting around ?

LapSap
14th Jan 2009, 00:33
BlueWolf is on the money so to speak.
Has probably been on other threads but start with this link and work your way through the subsequent parts.

Wealth created from Debt
YouTube - 1. Corrupt Banking System - Cartels Robbing the Public (http://www.youtube.com/watch?v=cy-fD78zyvI)

P.S. I don't necessarily subscribe to the titles the user has given these - nonetheless the original presentation is sound.

BlueWolf
14th Jan 2009, 00:40
One Nation, wasn't that Pauline Hanson's lot? Dunno about the conspiracy thing; I think maybe a lot of people are happy to vote for borderline extremists once or maybe twice, to give the establishment a wake-up call, but they don't necessarily want them in Government. I would guess that that, rather than the Dark Forces of Banking, were probably responsible for their lack of success.

A couple of Parties here have pushed the Transaction Tax line, one as an alternative to GST, the other as an alternative to all taxes. The idea has never gained much traction. I can see advantages in replacing GST with a FTT, in terms of reduced compliance and administrative costs.

Replacing all taxes with a Transaction Tax on Bank account movements probably isn't a goer. The thing about Bank transactions is that they include the direct and indirect payment of all other taxes and tax components, and if you remove all the other taxes, the volume of money going through the banking system is reduced, by about half, which means the FTT would have to be set at something like 35% to replace existing levels of Government revenue. People would simply balk at that, and switch to the Black economy in droves.

There is certainly no shortage of stories out there, concerning Banking's sometimes underhanded methods of retaining control of its own industry and commodity.

D SQDRN 97th IOTC
14th Jan 2009, 06:48
Bluewolf

I had this discussion with another proooooner late last year.

We both agree that your "money" held in a bank is your asset, the Bank's liability. But as I have said before - this "money" - the numbers on your bank statement - is only evidence of a debt. I will come back to this.

We both don't agree however that because money has been magicked out of thin air, that there is no banking crisis. Last time you may have looked at your bank statement, your "money" may have still been there - but for a lot of people, for example people who had accounts with Icelandic banks, their "money" might have been, but it definitely wont get honoured by the banks. (Government bail out schemes might honour the first part of it though.....)

Let's take your comment

"When Joe Bloggs comes along to borrow 100,000 currency units to buy a house, the Bank doesn't go down to the vault with a wheelbarrow to collect notes and coins for him to take away. They open a mortgage account in Joe's name, which starts life as a 100,000 debt.
Joe goes and spends this money which he has been advanced. He buys his house and moves in. The people he buys it off get real money in their hands, from Joe's Bank (not cash mind, but a real book entry in their account) which they can then take out and spend, or transfer to someone else's account, or write cheques against, and so on.
My money, meantime, is still there in my account, and I can take it out and spend it as well! spooky, eh."

My thoughts....

Before the 100k can be advanced to the borrower, it has to come from somewhere. The Bank has to have sufficient liquidity. Two common sources of liquidity are depositors and shareholders.
So let's say the Bank uses a combination of your money and shareholder money to make the loan - and it gets paid eventually by the borrower to the seller of the house.
If you now go to the Bank, and want your money out (in cash) or transferred to another Bank, then it is only able to pay you so long as it has the liquidity to do so. I.e. it now needs to find the assets of other depositors to pay you. If it can't find enough, then it has to go to the money markets. if it can't find the liquidity there, then it is in trouble.

And you might get what is called a run on the Bank. I.e. too many people at one time asking for their money back. See what happened at Northern Rock.

Now....as you have chosen to quote from an old thread to back up your comment about the creation of money, you should go a bit further into the thread and see how I responded that time.

Sighs again.........

Flying Binghi
14th Jan 2009, 22:01
One Nation, wasn't that Pauline Hanson's lot? Dunno about the conspiracy thing; I think maybe a lot of people are happy to vote for borderline extremists once or maybe twice, to give the establishment a wake-up call, but they don't necessarily want them in Government. I would guess that that, rather than the Dark Forces of Banking, were probably responsible for their lack of success.


Yes, it were certainly interesting times re politics back then.

It was interesting the focus of the O.N. crew (the ones i knew at any rate) on banks and the general financial system. From newspaper/T.V. reports i expected the focus to be elswhere.

Those former One Nation people are still voters in Oz. Considering the current economic climate, methinks a polly having any reference to banking in their C.V. will have a little trouble getting their vote.

Apoligies for thread drift, i'll butt out now.

airfoilmod
14th Jan 2009, 22:13
A very telling loophole revolving around Liquidity Sir. Liquidity is measured in Ratios, a banks may be (should be 10/1). A savings and loan somewhat more dilute. Derivatives? more like a thousand to one. It is the leakage of the liquid @ 1/1 (Gold Standard) into very non nutritious ratios like 1,000/1 that causes panic and disaster. The Reserve doesn't keep printing money in greater and greater runs (it actually doesn't need to print money at all, how quaint) because it is unaware of the consequences, but because of them, Sir. Electronic finance requires morality and integrity, something sorely lacking in Greenspan's circuitous and tortured explanations.

arcniz
15th Jan 2009, 05:31
Here's a tribute to the fellow who showed the Fed a thing or two about making money outta thin air-- Bernie Maddof:


http://cityfile.com/system/article_images/3895/134330.jpg?1231958421


version suitable for framing LINK (http://cityfile.com/system/article_images/3895/134331.jpg?1231958458)

ORAC
15th Jan 2009, 05:43
http://d.yimg.com/us.yimg.com/p/uc/20090115/lnq090115.gif

BladePilot
15th Jan 2009, 10:07
Me thinks the Irish Banks already levy a number of TAXES on account holders there is certainly a TAX based on use of a bank card issued by any of the Irish Banks so every time you use the card to access your own money by way of a cash dispenser or 'cash less' transaction in a store you pay for it.
Lets face it the 'ankers have got us all by the short 'n' curlies:)

CarltonBrowne the FO
15th Jan 2009, 11:05
The thing to be remembered (IMO at least) is that money is intrinsically worthless; it cannot be eaten, there are few things you can make with it- it only represents a promise of value, whether in goods or in services. When too many people stop keeping their promises, the system collapses.
As to where it ends, all civilisations in history have collapsed entirely. It was assumed until recently that under the modern economic model emerging economies would take over, almost seamlessly; there would be changes in which nations were top, but the system would continue. If confidence is sufficiently lost, even this may no longer apply- all we can do to stave off a new Dark Age is to keep our promises, and expect others to do the same.
Oh, and invest heavily in canned food and shotguns.

D SQDRN 97th IOTC
16th Jan 2009, 06:43
Irish Banks.....

not sure if they have been / are collecting enough taxes then! Anglo Irish bank is being nationalised / taken over by the government.

For me, if someone provides you with a service, then you should expect to pay for it. (Although sometimes how you are paying for it might not be very obvious.)

A lot of cash points / dispensers are free. That is the expectation of most people .........but if your bank is charging you for withdrawals, and if they are not making up for these charges by giving you a higher rate of interest on your savings, then take your business elsewhere.