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Why bankers rule the world
Comments
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what has a fractional banking system got to do with 'endless' growth?
in a fractional banking system the amount lent by banks is more than covered by the amount borrowed by banks.
'everyone' don't pay interest; some, the people who borrrow from bank pays interest, others who lend to bank receive interest; banks make their profit on the margin between the two flows.
you don't need to lend to banks; there are an increasing number of peer to peer lending/borrowing organisations that you can patronise instead.
This has been discussed before.
Infinite growth is necessary to sustain a debt-based monetary system. There will always be more money required to pay the debt than there is in existence.
Banks lend out multiples of the deposits they have ( gained through debt or actual depositors) - if a relatively small portion of those default then the bank will be unable to meet its obligations and will need a bailout if things get bad enough. This has happened many, many, many times before.
Lending to banks? Well, when you put money into a bank then it increases their reserves from which they can lend out multiples again.
A monetary system based on debt on a planet with limited resources is always going to be an interesting thing to behold in the longer term....
imho
J0 -
Jegersmart wrote: »This has been discussed before.
Infinite growth is necessary to sustain a debt-based monetary system. There will always be more money required to pay the debt than there is in existence.
Banks lend out multiples of the deposits they have ( gained through debt or actual depositors) - if a relatively small portion of those default then the bank will be unable to meet its obligations and will need a bailout if things get bad enough. This has happened many, many, many times before.
Lending to banks? Well, when you put money into a bank then it increases their reserves from which they can lend out multiples again.
A monetary system based on debt on a planet with limited resources is always going to be an interesting thing to behold in the longer term....
imho
J
makes no sense whatsoever.
what is a debt based system? is that the same as a savings based system?
what has it to do with infinite growth?
the money supply (if I knew what is was) and debt aren't (simply) related.
Whether or not banks go bankrupt and whether or not they are bailed out doesn't seem obviously related to the requirement for infinite growth.
banks don't lend out 'multiples' people's savings; they lend out less than that deposited.0 -
banks don't lend out 'multiples' people's savings; they lend out less than that deposited.
Are you sure?
Fractional banking would suggest for each £1 deposited then this creates say £9 in total through lending and redepositing so many times over. A prudent banker wouldn't lend out every last deposit I accept, some would need to be held in reserve to cover bad debts and people demanding their deposits back back out of sync. with loan repayments.
A prudent banking would also build risk tendency into his pricing structure or margin. This could only cover normally expected risk not GFCs. Bailouts should not be needed in the normal scheme of things. Neither should ever increasing growth unless that is accommodate ever increasing profit rather than just accepting a normal rate of return and cover bad lending decisions."If you act like an illiterate man, your learning will never stop... Being uneducated, you have no fear of the future.".....
"big business is parasitic, like a mosquito, whereas I prefer the lighter touch, like that of a butterfly. "A butterfly can suck honey from the flower without damaging it," "Arunachalam Muruganantham0 -
I dont even know why we need banks - the interest is terrible and they dont lend. So why bother?
Paypal is fine.0 -
DebsSpends wrote: »I dont even know why we need banks - the interest is terrible and they dont lend. So why bother?
Paypal is fine.
Will Paypal lend you money?"If you act like an illiterate man, your learning will never stop... Being uneducated, you have no fear of the future.".....
"big business is parasitic, like a mosquito, whereas I prefer the lighter touch, like that of a butterfly. "A butterfly can suck honey from the flower without damaging it," "Arunachalam Muruganantham0 -
And Paypal is a bank. It holds a banking licence in Luxembourg.0
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makes no sense whatsoever.
what is a debt based system? is that the same as a savings based system?
what has it to do with infinite growth?
the money supply (if I knew what is was) and debt aren't (simply) related.
Whether or not banks go bankrupt and whether or not they are bailed out doesn't seem obviously related to the requirement for infinite growth.
banks don't lend out 'multiples' people's savings; they lend out less than that deposited.
The multiples are less than the deposit but banking is ultimately a closed system and the lent money can all be redeposited, which allows the bank to lend again.
You deposit £10 with me, I lend you £9. You deposit your new £9 with me again and I lend you £8.10. You redeposit your £8.10 and I lend you £7.29, and so on.
Meanwhile you are incurring 10% interest on all these loans. So how do you ever pay them back?0 -
makes no sense whatsoever.
what is a debt based system? is that the same as a savings based system?
what has it to do with infinite growth?
the money supply (if I knew what is was) and debt aren't (simply) related.
Whether or not banks go bankrupt and whether or not they are bailed out doesn't seem obviously related to the requirement for infinite growth.
banks don't lend out 'multiples' people's savings; they lend out less than that deposited.
Hi Clapton
Whenever money is printed - i.e. money supply increased - interest is always applied. There is some debate on how this work in the UK, when the Government wants to print money it issues Gilts which the BOE buy from them with money it created out of thin air. All these gilts or bonds have a coupon or interest rate applied to them. You may have seen in the news recently that the UK Government may be getting a "windfall" because the BOE is due to hand over the interest paid on the gilts by the Government, back to the Government. In the US it is not so clear what happens to the interest paid - it gets paid to the Fed - but not sure how/when/if they pay the interest back to the taxpayer or not. Remember that the Government has no funds or create any "wealth" apart from what it receives from taxpayers. Why is there interest applied when a Government wants to expand the money supply?
Nonetheless, all money that is created has interest applied to it, it is debt. All money that currently exists is owed by someone to someone else. Almost all interest paid flows back to a bank.
The interest owed is what makes infinite growth necessary, unless there are major changes to the system there will always be more money needed to pay back the debt/money that exists now because interest is applied. Please note that I say *unless they change the system completely*.
As to your comment about banks lending out less than they have as deposits is completely false, I suggest you do some reading.
In some ways it does get a bit jaded to have this discussion every month or so but at the same time it is fascinating how many people do not understand how money and a monetary system works and what effect it has on all taxpayers on an ongoing basis. It is very important that as many people as possible understand this. If enough people see the system for what it is then we may have a chance of changing it in the longer term, before the change is forced upon us of course. This planet has limits, both in terms of finite taxpayers that can be sustained and the resources needed for survival.
A monetary system is one of the most limiting systems I can think of for humankind in a high-level sense...
imho
J0 -
ruggedtoast wrote: »The multiples are less than the deposit but banking is ultimately a closed system and the lent money can all be redeposited, which allows the bank to lend again.
You deposit £10 with me, I lend you £9. You deposit your new £9 with me again and I lend you £8.10. You redeposit your £8.10 and I lend you £7.29, and so on.
Meanwhile you are incurring 10% interest on all these loans. So how do you ever pay them back?
Yes, this is correct but in reality the whole banking system is involved - i.e. not the same bank but the principle is the same.
J0 -
Jegersmart wrote: »Yes, this is correct but in reality the whole banking system is involved - i.e. not the same bank but the principle is the same.
J
Yes, I am aware that the banking system involves more than one person and one bank thank you.
Obviously it was an illustrative vignette which can be upscaled as the global banking is a closed system, regardless of how many banks and customers are included.0
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