Where did all the money go???

Babycakes

The Icelandic PM used it to buy fishy smell remover cream.

It didn't work.

Ian_W

HH62 wrote: »

The one thing that is crystal clear from the events of the past few days is that many people think that 'their' bank actually stores their cash, in physical pound/ten/twenty/fifty pound notes in a big pile somewhere....

WHAT!?! WHAT? :mad:
It doesn't have my money in a shoe box in the safe? I'll be down to see the bank manager first thing - the man wants horse whipping, playing fast and loose with my hard earned cash!
Probably some Johnny Foreigner I'll wager!

Hungerdunger

But to be serious for a moment, Robert Peston among others keeps saying "the banks are not lending to each other". So if they're not lending to each other, then surely some of them must be sitting on pig piles of money.
(If this sounds stupid, please don't shout at me)

1694

This is how banking works (against you.)
-The bank has £0, you have £100 paper notes
-You deposit £100 in paper cash, you now have a bank statement of £100
-Someone asks for a loan of £100 and gets a £100 credit to their account
-They withdraw your £100 of cash-your bank statement remains at £100
-You can electronically transfer that £100 to anyone else if you want to buy something on debit card for example.
-So you have £100 on your debit card which you can spend, and the other person has £100 in cash to spend...the money is doubled!!! If the money available to spend is doubled but your £100 stays the same (plus a little interest) your buying power halves.
-If you choose not to spend on your debit card but try to withdraw cash, this is a run on the bank and the bank will ask for a tax payer bail out.

Since very few people do ask for cash, banks are permitted by law to do this nine times. The banks of course know form experiance that only 1/9th of demands will be in the form of hard cash so they always make up and lend a digital 9 times the original paper or coin. Every time you deposit £1 in the bank your buying power is reduced by a factor of 9.

Keeping your money in a bank makes you poorer, the only person that gains is the banker.

Deep down you already know this, but have never thought about it before.

(This stems back to a time when, gold bars were real money and gold certificates were the digital money. Goldsmiths could forge 10 certificates for every 1 bar of gold they had. As long as people were happy with the gold certificates and didn’t withdraw the gold things would be fine)


Now the real problem! If there was £100 to start with and £900 was lent at interest of 0.2% even if the borrowers took all the money of that originally existed and added it to their loans they will still be short of the total repayments: £900 at 0.2% interest is £1080. Where can that £80 come from? No where, someone has to give up something they owned before they borrowed. The process can take place slower if the interest rate charged is lower than 0.2% but compound interest on debts that will always end the same way.

We have simply come to the crunch, where is that extra money? It never existed to start with, it hasn't been magicaly created by fractional reserve....Stuck!

jillie1974

cant they just print some more money

1694

jillie1974 wrote: »

cant they just print some more money

Possibly: Given the above, if we print new money BUT legally require banks to increase the paper money they store in there vaults at the same rate as we print it unitl the banks have all a deposit to loan ratio of one 2 one then the current problem is not only solved but cannot occure again.

jillie1974

but isnt that how banks originally were??
i'm looking for a credit union myself...

TRUSt_NO_1_2

iamesbo wrote: »

If you think about it really really really hard you have to realise that there is a massive pile of money somewhere?


BUT WHERE!!!!!!!!!!??????????/

Where's the money..
A safe haven that asks no questions.

Austria,Switzerland probably ?

The Swiss and Austrians probably still have billions of Nazi money.

As for the account holder ?
Put yourself in the shoes of the person with a 5hitload of pi55ed off investors money.Where would you go ?
Monte Carlo would be a good start...blend in nicely.

cbobting

Count_Dante wrote: »

I often thought the Kaupthing Edge logo looked like the corner of a credit card with some cocaine. Maybe that is where all the money has gone?

http://www.kaupthingedge.co.uk/

and how do you know what that would look like. tut tut



subliminal marketing at work maybe? or open a student account and get a free gram of k. that would get people backing the banks. there would be a queue to go in and a pile of bodies on the way out. lol.

1694

jillie1974 wrote: »

but isnt that how banks originally were??
i'm looking for a credit union myself...

Yes but they became greedy and corrupt, in the short term the corruption created a boom so it was legalised.