The banks will all fail eventually

1694

This is how banking works:
-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 EU law to do this around nine times. The banks of course know form experiance that only 1/9th or so 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 as the ratio of money in existence to goods and sevices available shifts.

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. Gold smiths would forge more certificates than they had gold. As long as people were happy with the gold certificates and didn’t want 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.

As with this credit crunch, when the music stops some people are being forced to sell assets they used to own. Everytime there is a credit crunch people end up owning a little less and working a little more.

The Government (back in 1694) wanted to spend more than it had raised in tax revenue, instead of minting new money as it had no gold to mint into coins it borrowed from the newly formed Bank of England (a private bank owned by Robert Patterson for him to make a profit) with the intention of repaying the loan + the interest on the loan from increased tax the next year. Since the then Private Bank of England also wrangled a legal monopoly on gold certificate production the debt could only be repaid in BOE gold certificates or gold. As we know there would not be enough BOE gold certificates to cover the interest, so the government would have to use gold. However the government was afraid to raise taxes and take the peoples gold as they would loose popularity! So when the loan repayment fell due it didn't have the money, so the loan rolled over with compound interest. This has continued since that time.

(Patterson and the original investors pooled there gold and of course issued 9, or more, it was never audited, times as many gold certificates as they had in gold. Remember: As long as people were happy with the gold certificates and didn’t want the gold things would be fine!)


Gold today is no longer legal tender so cannot be used to repay a debt if the lender refuses. The only legal tender is “Money” be it digital or paper, which should represent the wealth of the nation.

National Debt (the amount the government has borrowed with the intention of repaying it through taxes) exceeded Gross Domestic Profit (the amount of wealth the country creates on which tax can be levied) even before the bailout. The gap between what the government has borrowed and what the country can produce has dramatically widened since the recent torrent of government borrowing.

You can see here borrowing already exceeded production in 2006.
http://www.dailymail.co.uk/news/arti...nt-claims.html

There is no way we can pay off the debt in the style of Andrew Jackson (US president that paid of the national debt, closed the central bank and refused to allow the government to borrow).

The value created in this country through the work of the people is now considerably less than the principal of its borrowing even before the new interest is added.

Nothing in this country has actually been paid for as the original money was borrowed so it has outstanding debt attached accruing compound interest at rates which the government will not disclose.

So for every years work we do, all of the profits of production PLUS a portion of the means of production needs repaid to the banks to meet the repayment demands. As the means of production is decreased with each repayment how can we produce the next repayment? If we fall short of the repayments, the compound interest widens the gap.

You can see the effects of this in action as house prices and share prices fall. Remember the price of these assets is a reflection of their Net Present Value, the sum of the future discounted cash flows. Houses will no longer be able to be rented for as much and rents will fall, companies will shrink and profits will fall there fore the NPV, or amount people are prepared to pay for them today is falling. This is also why banks are unable to use your savings to create more wealth in the country and are failing.

We now owe the banks the government borrowed from for everything in this country, plus everything that it will ever be able to create.

Theoretically unless changed or stopped eventually there will be nothing left to give, children will be born into so much national debt that taxes will have to be over 100% of what they will ever earn and will have to work for no pay and die owing more than when they were born.

These loans have been taken out without your consent and the government will have to try and repay them through increased taxation.

Notice there was no income tax in the US or UK until the government borrowed (as recently as 1913 in the USA!). Income tax was meant to be temporary (it is still renewed yearly) to repay the loans. If you think about it where does income Tax go...it existed long BEFORE the NHS, or state schools. Council Tax, Road Tax etc. are designed to pay for the services they provide. Income tax is not apportioned to anything.

fishpond

The point you are trying to make is?

1694

A) People should realise/know this
Maybe someone can work out a solution

Print that post. Show it around. Bailing out the banks now is only sealing the lid on our coffins.

nicko33

Tell it to your MP
Create a petition on the No.10 website
Telephone the BBC and the newspapers
Tell Robert Peston !
call :money:

maybe that would be more useful than spamming the forum

Seajays

Ah 1694, a modern day Cassandra - a harsh wyrd indeed.

1694

nicko33 wrote: »

Tell it to your MP
Create a petition on the No.10 website
Telephone the BBC and the newspapers
Tell Robert Peston !
call :money:

maybe that would be more useful than spamming the forum

I have infact done all of those (except the petition) + contacted the treasury. (Pause before you think im a nutter, the whole point of voting in a democracy get a government that will do what the people wante)

If you see the logic you will to.

Last post on the forum. Best of luck to all of us.

tellustuff

which is why you have to let markets re-adjust naturally and accept its part of the capitalist system. You cant artificially try and remove the adjustments by throwing pretend money at it as the governments are currently trying to do.

Masomnia

Is your username an allusion to the fact that the Bank of England was established in 1694?

Rafter

This is yet another scaremongering post about fractional reserve banking that relies on the banks somehow having more assets than cash in the system and the potential stupidity of a situation of someone borrowing money, only to deposit it in another bank and presumably losing interest rather than using the money to buy something of value or which has the potential to generate a return.

You are suggesting a return to the middle ages where nobody could buy their own home without saving up the full cost in advance.

There is absolutely nothing wrong with banking per se: Taking in deposits, paying interest, loaning most of that money out so people can buy homes, invest in businesses etc and charging them more interest.

The credit crunch didn't happen because of that. It happened because banks took too little care about the quality of the loans they were making, and hid their full liabilities through creative off balance sheet activity that allowed them to grow artificially and boost profits, as long as the good times rolled.

R.

Bromley86

Masomnia wrote: »

Is your username an allusion to the fact that the Bank of England was established in 1694?

I'll answer for him/her as they've made their last post - Yes.

Just_landed

Rafter
The credit crunch didn't happen because of that. It happened because banks took too little care about the quality of the loans they were making, and hid their full liabilities through creative off balance sheet activity that allowed them to grow artificially and boost profits, as long as the good times rolled.

Agreed but why didnt the Government do something about it, they were warned many times over the years even at the dispatch box.:cool: