Campaign for debt free money, stable house prices, pension still worth something...

Mike4DebtFreeMoney

I was thinking the other day that one way out of debt would be to print banknotes in my garage. Unfortunately a Policeman friend tells me this is illegal: however, it turns out there is a get-out clause, and that’s if I am a High Street Bank. It works like this: you go to them for a Mortgage, they type numbers into your account, and then get to charge you interest on the balance for 25 years. They didn’t have to work for the money; it was not some pensioners’ savings; it was money created from thin air just by typing numbers into a computer. In the process, those numbers are now your debt. I observe many people today are in debt.


The process is the same whatever the loan, but I used a Mortgage for a reason. Let’s say you’re a bank manager and have this privileged position to create money: where are you going to put it? You could lend it to the productive economy, a business employing people and making widgets: but that’s risky. Much safer to put it into bricks and mortar, where you can go and reclaim the asset should the payments stop. Bearing in mind you get to charge interest on whatever numbers you type, do you want houses to be cheap or expensive? The incentive is for higher prices, and it works in your favour: people want houses; you loan money into housing creating debt as you go, prices go up, and you make more on the interest.


A bit of research shows that 97% of UK money is currently debt owed to a bank. The main root cause of so much debt is this ability for banks to create money from nothing. Personally I’m not happy with the situation.


It’s not the first time this has happened. In the 1800s banks discovered they could play the same trick, created a property bubble, and Parliament stepped in with the Bank Charter Act of 1844 ensuring that only the Bank of England could create money. After 170 years it’s time for the legislation to be updated to close this loophole. Money is not a natural phenomenon, it is manmade and we make the rules. I think that the rules should have money serve society, not private, unaccountable, profit seeking enterprises.

If you agree, please google ‘epetitions 64050’ and sign my e-petition to stop banks 'printing' electronic money. I know that’s a bit of effort but the topic is important, I appreciate it, and so does everyone in debt. I set up a new account for this campaign so I can’t yet post a direct link.

If you don’t agree, please say why, *cite your evidence*, and we can have a sensible debate about it.

Thank you.
Mike G

FireWyrm

Mike4DebtFreeMoney wrote: »

It works like this: you go to them for a Mortgage, they type numbers into your account, and then get to charge you interest on the balance for 25 years.

Yes, it is called a fiat monetary system. It is the one we have. Live with it.

Mike4DebtFreeMoney wrote: »

They didn’t have to work for the money; it was not some pensioners’ savings; it was money created from thin air just by typing numbers into a computer. In the process, those numbers are now your debt. I observe many people today are in debt.

Did you observe them going into the bank and asking for the money because I can almost guarantee it didnt just turn up in your account unbidden.

Mike4DebtFreeMoney wrote: »

Let’s say you’re a bank manager and have this privileged position to create money: where are you going to put it? You could lend it to the productive economy, a business employing people and making widgets: but that’s risky. Much safer to put it into bricks and mortar, where you can go and reclaim the asset should the payments stop.

Completely useless unless you can sell that solid asset again.

Mike4DebtFreeMoney wrote: »

Bearing in mind you get to charge interest on whatever numbers you type, do you want houses to be cheap or expensive? The incentive is for higher prices, and it works in your favour: people want houses; you loan money into housing creating debt as you go, prices go up, and you make more on the interest.

You really have no idea do you.

House prices go up because of supply and demand. Yes, there is cheap credit, but that cheap credit is in response to demand from people who want the credit. When you could only borrow 3x salary and 1x wife's salary, house prices were low. Consumers werent happy with that, and lobbied for 3 x wifes salary to be taken into account. Since we were trying not to be all judgemental, we just threw the marriage clause out and counted anyone living together as as unit....and then, in response to market pressure from consumers, they just threw the entire rule book out of the window and started lending whatever silly people asked for, regardless of whether they could repay it. As people could get more money, they could pay higher prices. As prices got higher, people needed more money and so on ad-infinitum.

Mike4DebtFreeMoney wrote: »

A bit of research shows that 97% of UK money is currently debt owed to a bank.

And a bit more research will show that the debt was not forced on the debtor.

Mike4DebtFreeMoney wrote: »

The main root cause of so much debt is this ability for banks to create money from nothing. Personally I’m not happy with the situation.

Yes, they leverage. The mechanisms behind that are far to beyond complicated to explain adequately here. Suffice it to say, there is absolutely nothing you can do about it.

Mike4DebtFreeMoney wrote: »

It’s not the first time this has happened. In the 1800s banks discovered they could play the same trick, created a property bubble, and Parliament stepped in with the Bank Charter Act of 1844 ensuring that only the Bank of England could create money. After 170 years it’s time for the legislation to be updated to close this loophole. Money is not a natural phenomenon, it is manmade and we make the rules. I think that the rules should have money serve society, not private, unaccountable, profit seeking enterprises.

Ah...politics of envy.

BillJones

If what the OP said was anywhere within spitting distance of reality, no banks would ever have gone bankrupt, as they could simply have conjured up whatever cash they needed to remain solvent.

I won't engage with the OP, as it is inevitable that any and all evidence contrary to their viewpoint will be waved away with accusations of conspiracy.

Mike4DebtFreeMoney

FireWyrm wrote: »

Since we were trying not to be all judgemental, we just threw the marriage clause out and counted anyone living together as as unit....and then, in response to market pressure from consumers, they just threw the entire rule book out of the window and started lending whatever silly people asked for, regardless of whether they could repay it. As people could get more money, they could pay higher prices. As prices got higher, people needed more money and so on ad-infinitum.

Thanks for completely confirming that irresponsible lending by banks created the house price bubble. That house prices go up is supply and demand. The *extent* to which they go is a function of the aforementioned lending coupled with the ability to make profit off that lending through creating new money. There only needs to be a small imbalance in supply and demand to create an asset price bubble when the money pumping into the bubble is new credit created by banks. If banks were only allowed to lend out money deposited with them (as per e-petition), they would have had to stop lending, and we would have lower house prices and much less debt.

FireWyrm wrote: »

Yes, it is called a fiat monetary system. It is the one we have. Live with it.
Suffice it to say, there is absolutely nothing you can do about it.
Ah...politics of envy.

No thanks. 10’s of millions of people have been pushed into poverty worldwide due to the financial crash caused by private banks inflating the money supply and then acting irresponsibly with that money. Banks that had to be saved one year are in a position to pay themselves billions in bonuses a short while later. Proven manipulation of interest rates defrauding indirectly hundreds of thousands if not millions of pension holders, yet no-one goes to jail. We live in a democracy. Society does have a choice. I think the only solution is political. Is that politics of envy or justice?

Mike4DebtFreeMoney

BillJones wrote: »

If what the OP said was anywhere within spitting distance of reality, no banks would ever have gone bankrupt, as they could simply have conjured up whatever cash they needed to remain solvent.

No, because the clearing system requires inter-bank debts to be settled in Central Bank Reserves, i.e: real democratic money. Only the Bank of England can create this. Secondly, Commercial Banks can only create money via new loans, and following the crash not only were people reluctant to take on more debt, but the banks were even more reluctant to loan in order to protect their balance sheets: many people tried to clear some of their debt and the money system actually contracted.

If you don’t think this is fact, then please as requested cite your evidence.

FireWyrm

Mike4DebtFreeMoney wrote: »

Thanks for completely confirming that irresponsible lending by banks created the house price bubble.

How about irresponsible borrowing. I wish I could own a million pound house, I really covet one - there are a few down the road, but it doesnt mean I ought to try and even borrow that much money, if if the bank was prepared to lend it.

Mike4DebtFreeMoney wrote: »

That house prices go up is supply and demand.

Yes, you supply stupid amounts of irresponsibly borrowed money and the vendor will demand whatever they can get.

Mike4DebtFreeMoney wrote: »

The *extent* to which they go is a function of the aforementioned lending coupled with the ability to make profit off that lending through creating new money.

Did you really think bank shareholders were in it for the warm feeling they get from lending you money? No. They are in it to make money, large and obscene amounts to be sure, but I defy you to turn YOUR nose up at bonuses offered by your employer.

Mike4DebtFreeMoney wrote: »

There only needs to be a small imbalance in supply and demand to create an asset price bubble when the money pumping into the bubble is new credit created by banks.

What imbalance. There are plenty of houses to buy. Some, are even outside of the M25 corridor. Believe it or not, there is life outside of London, we're not all riding on horses and carts out here saying "arghhh".

Mike4DebtFreeMoney wrote: »

If banks were only allowed to lend out money deposited with them (as per e-petition), they would have had to stop lending, and we would have lower house prices and much less debt.

:rotfl::rotfl::rotfl:
Oh dear. You really dont understand do you. That horse bolted a century ago. We're locked into this system for the duration and nothing you say or do will change it. It would require a total fundimental fiscal reset and a recession you would not like to witness making the great depression look like a flipping tea party.

Mike4DebtFreeMoney wrote: »

No thanks. 10’s of millions of people have been pushed into poverty worldwide due to the financial crash caused by private banks inflating the money supply and then acting irresponsibly with that money.

The borrowers acted irresponsibly with the money...you didnt have to borrow it.

Mike4DebtFreeMoney wrote: »

Banks that had to be saved one year are in a position to pay themselves billions in bonuses a short while later.

Those are contractually obligated bonuses. Would you really just shrug your shoulder if you employer said "oh well, sorry, no 'bonus' this year mate..." Didnt think so. You would want paying like everyone else.

Mike4DebtFreeMoney wrote: »

Proven manipulation of interest rates defrauding indirectly hundreds of thousands if not millions of pension holders,

Try the governmental tax raid which killed pensions in this country. Banks had nothing to do with that.

Mike4DebtFreeMoney wrote: »

We live in a democracy.

No we dont. We live in a benign dictatorship with the illusion of democracy.

Mike4DebtFreeMoney wrote: »

Society does have a choice. I think the only solution is political. Is that politics of envy or justice?

Definitely envy. You are upset because they have more money than you.

Mike4DebtFreeMoney

The thrust of your argument seems to be,
"We chased profits at the expense of logic by lending to anyone from whom we could get a signature, nearly brought down the economy, had to be bailed out by all these people we now blame, take whatever we can get, but we are not responsible because you would have done the same."
Are you sure? There are many people who come to this forum deep in debt because of the actions of your industry and the priviledged position it holds in society. "oh well, sorry, no 'bonus' this year mate..." is not the refrain they hear, but "oh well, sorry, no pay rise this year mate...". The world we inhabit seems different from the world you inhabit. Fortunately we each get a vote and we collectively can change the status quo.

Arguments are not won by the number of emiticons you post. For example, claiming I don't have a clue then posting exactly the irresponsible lending I describe supports me not you. I recommend some research: the Gold Standard was dissolved by Nixon in 1971, not "a century ago". Your threat of a giant recession is not true either: there are plenty of economists who would disagree. It is entirely possible to bring the UK money supply back into democratic control. There will be some losers, your industry might have to return to the picture people have of banking: lending out only the money collected from depositors. At the same time there will be winners: pensions will not get drastically devalued, house prices will be more stable, more investment will go into the productive economy leading to more jobs, banks won't need bailing out by the taxpayer, and the supply of money will return to democratic control via the Bank of England. Feel free to gamble in derivatives all you like - with your own money not ours. The 'duration' for which we allow private companies to print electronic money will last up until the point when the majority decide they have had enough and contact their MP/sign the petition/vote for change. Lets start now: epetitions 64050.

Mike4DebtFreeMoney

Nice of the FT to confirm what I'm saying, and come to a similar conclusion. The clue is in the title, "Strip private banks of their power to create money".

http://www.ft.com/cms/s/0/7f000b18-ca44-11e3-bb92-00144feabdc0.html#axzz30PY2Lbn

If you don't want to register with FT, here are some highlights:

"The giant hole at the heart of our market economies needs to be plugged.
Printing counterfeit banknotes is illegal, but creating private money is not. ... It could – and should – be terminated."
...
"Banks create deposits as a byproduct of their lending. In the UK, such deposits make up about 97 per cent of the money supply. Some people object that deposits are not money but only transferable private debts. Yet the public views the banks’ imitation money as electronic cash ..."
...
"[Irving] Fisher [famous economist] argued that this would greatly reduce business cycles, end bank runs and drastically reduce public debt. A 2012 study by International Monetary Fund staff suggests this plan could work well."
...
"The state, not banks, would create all transactions money, just as it creates cash today."
...
"Banks could offer investment accounts, which would provide loans. But they could only loan money actually invested by customers. They would be stopped from creating such accounts out of thin air and so would become the intermediaries that many wrongly believe they now are."

"The transition to a system in which money creation is separated from financial intermediation ... would bring huge advantages. It would be possible to increase the money supply without encouraging people to borrow to the hilt. It would end “too big to fail” in banking. It would also transfer seignorage – the benefits from creating money – to the public."
...
"It [loophole] could be closed by separating the provision of money, rightly a function of the state, from the provision of finance, a function of the private sector."

"This will not happen now. But remember the possibility. When the next crisis comes – and it surely will – we need to be ready."

[This loophole is the subject of the e-petition below. If you agree with any of the benefits above identified by the Financial Times, then please sign your support.
http://epetitions.direct.gov.uk/petitions/64050
]

Generali

Mike4DebtFreeMoney wrote: »

It works like this: you go to them for a Mortgage, they type numbers into your account, and then get to charge you interest on the balance for 25 years.

No they don't. You don't understand Fractional Reserve Banking.

Banks lend out money they've borrowed. That money is put into other bank accounts and most of it can be re-lent. That's how credit creates money. Banks can't just create money from nothing, they create money from deposits.

I'm sorry you're a bit dim and have fallen for this. Fractional Reserve Banking is a part of any economics 101 course. I have taught undergraduates both micro and macro economics.

PS Gold isn't the solution to your 'problem'.

tomterm8

This thread is silly.

For example it ignores the fact Gold is a fiat currency.
It doesn't understand that it costs money to create money, and banks can only create money if they are sure they will get the money back with interest. If they don't they go bankrupt.

Generali

tomterm8 wrote: »

This thread is silly.

For example it ignores the fact Gold is a fiat currency.
It doesn't understand that it costs money to create money, and banks can only create money if they are sure they will get the money back with interest. If they don't they go bankrupt.

Banks don't just create money from nothing!!!! They create money from increased deposits as a system not as individual entities. In the UK the Bank of England is the body with the power of seigniorage so only it can initiate an increase in the money supply. Through Fractional Reserve Banking, any increase can be multiplied.

Gold is an in specie currency not a fiat currency.

Maybe we can understand what we're on about before posting about this. Seigniorage (the profit to be made from the difference between the cost of creating money and its value as a store of wealth) is an interesting point at the moment given the (temporary?) rise of private fiat money such as Bitcoin.

Bitcoin raises legitimate questions about whether seigniorage should solely be in the power of the Government and if not, who should profit from it.