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Moneyweek - British interest rates & debt....are we all doomed?
Comments
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most of the debt is owed to ourselves
I think that's a fallacy, much like the fallacy that governments own and control central banks. If we had a nationalised banking system you might have a point, but we don't. The other question if that's true, is why are we charging ourselves interest?
Everything I've read indicates private banks create money out of thin air when new credit is created, it isn't lent, it is invented via a keyboard as debt. Those banks then trouser the interest charges as profit as and when that debt is repaid and the capital then disappears whence it came.
Unless I have it all wrong, ultimately, all interest is owed to the private banks who created the money in the first place.
Central banks act as little more than a backstop to protect the private banking system and their profits, at current and future public expense. Their mandate of protecting financial stability simply means doing whatever it costs to keep the government and banking system they rely on going, but everything I've read shows that simply isn't possible indefinitely.'We don't need to be smarter than the rest; we need to be more disciplined than the rest.' - WB0 -
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They have to refinance the debt. Even if they wiped sterling out and so the debt, we'd be in trouble because every day we ask them to lend bigger amounts.
Devaluation would be very negative at the extremes and is also most likely the case now.
Greece wont let you setup a newspaper shack without 6 months of license delays and other gov junk. Thats their main problem, ongoing thanks to europecompare our position to Greece
Re: the OP we are better off then USA. They are spoilt with cheap money and will have the furthest to go back to reality in the least time0 -
I think that's a fallacy, much like the fallacy that governments own and control central banks. If we had a nationalised banking system you might have a point, but we don't.
On the whole, governments aren't supposed to control central banks. Central banks are supposed to be independent.... The other question if that's true, is why are we charging ourselves interest?
In order to pay ourselves interest, of course, because money has a time value....Everything I've read indicates private banks create money out of thin air when new credit is created, it isn't lent, it is invented via a keyboard as debt. Those banks then trouser the interest charges as profit as and when that debt is repaid and the capital then disappears whence it came.
You ought to get out more. Like down the library. Read some actual books on economics, for example.Unless I have it all wrong, ultimately, all interest is owed to the private banks who created the money in the first place.
You do have it all wrong, as it happens.Moneyweek is a pile of extreme monetarist drivel.
It's certainly a pile of drivel. I imagine many monetarists would object to the association.0 -
John isn't far wrong. It depends which economics book you read. Of course economics books are written mainly by those whom the system supports. They don't necessarily misinform as fail to emphasise particular aspects and the implications. A few do support the notion that our financial system is designed around supporting a financial elite rather than serving wider society.
The best way to think about money is as a method of exchange rather than something of inherent value, unlike the assets they allow us to exchange flexibly. As civilisation expanded, real assets expanded and it was sensible to expand the means of exchange (money) to suit this or else the same amount of money would be chasing more assets. Problems can occur when these get out of balance.
There was a good youtube video on this subject, this might be it. Part 3 only seems to works in explorer than my version of Firefox
Money as Debt0 -
I think that's a fallacy, much like the fallacy that governments own and control central banks. If we had a nationalised banking system you might have a point, but we don't. The other question if that's true, is why are we charging ourselves interest?
Everything I've read indicates private banks create money out of thin air when new credit is created, it isn't lent, it is invented via a keyboard as debt. Those banks then trouser the interest charges as profit as and when that debt is repaid and the capital then disappears whence it came.
Unless I have it all wrong, ultimately, all interest is owed to the private banks who created the money in the first place.
Central banks act as little more than a backstop to protect the private banking system and their profits, at current and future public expense. Their mandate of protecting financial stability simply means doing whatever it costs to keep the government and banking system they rely on going, but everything I've read shows that simply isn't possible indefinitely.
I agree - however:
The only source of "income" is labour on which we pay tax. All the interest that has been fraudulently allowed to be applied has to be paid back by the only source of "income" which is labour - i.e. we either pay back banks straight interest on "debt", or we pay for it indirectly through corporations's debt. Either way, it is always the taxpayer that foots the bill - or the "performer of labour". In THAT way, we do owe ourselves all the money because we are the only ones paying it off. And this is the true meaning of the phrase "wealth transfer".
J0 -
Generic ignorant sniping doesn't bother me, some people obviously choose to interpret things the way they'd wish them to be rather than the way they really are.
"In the real world, banks extend credit, creating deposits in the process , and look for the reserves later." - Alan Holmes, then Senior Vice President, Federal Reserve Bank of New York (1969)
"It is argued by some that financial institutions would be free to instantly transform their loans from the central bank into credit to the non-financial sector. This fits into the old theoretical view about the credit multiplier according to which the sequence of money creation goes from the primary liquidity created by central banks to total money supply created by banks via their credit decisions. In reality the sequence works more in the opposite direction with banks taking first their credit decisions and then looking for the necessary funding and reserves of central bank money." - Vitor Constancio, vice president of the ECB (2011)'We don't need to be smarter than the rest; we need to be more disciplined than the rest.' - WB0 -
Wow, there's a lot of mis-information and mis-interpretation on this thread.
Private banks don't, and can't legally, create money. That function is reserved exclusively to the Bank of England. What private banks do is to take money on short term loan (deposits) and lend it long term (mortgages, loans etc). Because short term debt has a lower interest rate than long term debt, they make a spread on the interest and that's how they make profits.
The act of loaning money increases the money supply in the economy, because now that money has been lent out to be spent, whereas otherwise it would have sat as savings doing nothing. That is not the same thing as creating money.
Moneyweek are very sensationalist, it sells magazines. I would take everything they say with a pinch of salt. I'd never take investment advice from them. I remember buying an edition 4 years ago saying to sell your house it will drop in value by 40%. Look how that turned out...Faith, hope, charity, these three; but the greatest of these is charity.0 -
On the whole, governments aren't supposed to control central banks. Central banks are supposed to be independent.
In order to pay ourselves interest, of course, because money has a time value.
You ought to get out more. Like down the library. Read some actual books on economics, for example.
You do have it all wrong, as it happens.
It's certainly a pile of drivel. I imagine many monetarists would object to the association.
Antrobus
I think I remember you from other threads on this subject where to seem to seek to ridicule and discredit people who are debating *certain* issues. If you are going to "contribute" to this one, perhaps you could come up with some points of debate from your own view, telling someone they are wrong with no reasons given is not going to be of value to anyone.
J0 -
Wow, there's a lot of mis-information and mis-interpretation on this thread.
Private banks don't, and can't legally, create money. That function is reserved exclusively to the Bank of England. What private banks do is to take money on short term loan (deposits) and lend it long term (mortgages, loans etc). Because short term debt has a lower interest rate than long term debt, they make a spread on the interest and that's how they make profits.
The act of loaning money increases the money supply in the economy, because now that money has been lent out to be spent, whereas otherwise it would have sat as savings doing nothing. That is not the same thing as creating money.
Moneyweek are very sensationalist, it sells magazines. I would take everything they say with a pinch of salt. I'd never take investment advice from them. I remember buying an edition 4 years ago saying to sell your house it will drop in value by 40%. Look how that turned out...
Wow is a good word, ironically.
Banks do effectively create money because they are allowed to lend multiples of the deposits held, of course this can only happen if demand for such loans exist. Personally I do not see the point of discussing the definition of "creating money" - it is semantics because if an activity increases the money supply it has the same effect.
Please stop muddying the waters with semantics, it does neither the debate or yourself any favours.
J0
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