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

Bantex_2

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.

No they don't, they are bailed out.
Sort of where the system starts to fall down. Capitalism sort of relies on moral hazard where risk can involve a downside.
That seems to have been removed when if a gamble pays off the punter gets the rewards, but if it fails others are forced to pay the price.

antrobus

Banks (or perhaps more accurately the banking system) create money by lending money, and the only way to stop banks from creating money is to stop them lending money. It's not like this was a revelation or anything. The standard method of controlling the phenomenon has generally been regarded as interest rates or maybe capital ratios, i.e. rationing credit by price. I suppose you could, if you wanted to, impose a heap big pile of controls and ration by some other means, and have the state set quantity limits, or whatever. But past experience suggests certain issues with that sort of approach.

Generally speaking, the problem with credit growth is that it's awfully easy for politicians to let it rip, as it's an easy way of pumping up economic activity. At least in the short run, until you reach the point at which people start asking questions about how and when all that debt is going to be repaid. Given recent experience however, I'm not that certain that giving politicians more power over the process is necessarily a good idea. Neither am I terribly convinced that it would actually work in our modern internet-enabled globalised world where some offshore entity can have a shadow banking/peer-to-peer operation up and running at the flick of a switch.

Thrugelmir

antrobus wrote: »

Banks (or perhaps more accurately the banking system) create money by lending money, and the only way to stop banks from creating money is to stop them lending money.

The higher capital requirements being imposed will progressively have this effect.

Interesting this week that the UK major banks all reported significant falls in investment banking profits. Suggesting that policy is finally having effect. Perhaps the heydays are over.

ging84

8 signatures on that epetition
i reckon i could get more people to sign one calling to ban lizards from working in school kitchens

Bantex_2

ging84 wrote: »

8 signatures on that epetition
i reckon i could get more people to sign one calling to ban lizards from working in school kitchens

They are too busy controlling the world to work in kitchens.

antrobus

ging84 wrote: »

8 signatures on that epetition
i reckon i could get more people to sign one calling to ban lizards from working in school kitchens

Personally I think that campaigning for debt-free money is a bit like campaigning for calorie-free food. Whilst I can see the attraction; it sort of misses the point.

GeorgeHowell

http://www.bankofengland.co.uk/publications/Documents/quarterlybulletin/2014/qb14q1prereleasemoneycreation.pdf

princeofpounds

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.

Exactly this.

It's amazing how many cranks out there seriously think that a bank manager sits there multiplying everything that comes in by 10.

I guess it doesn't help that the terms 'money creation' and 'money multiplier' are used. It probably doesn't help that most people don't understand that money is more than the stuff in your pocket.

I'll try to illustrate a simple example so people can understand how the banking system 'creates' money.

A granny walks into a bank, and deposits 100 of her savings.

A builder walks into the bank. He asks for a loan for 90, to build a house. The bank loans him 90; they have to keep 10 back because the granny may want to withdraw a portion of her savings at short notice, and besides the Bank of England tells them they have to to ensure the granny can.

The builder walks out of the bank. He needs bricks for his house, so he phones the brick merchant, and spends 90 on bricks to be delivered next week. The money gets transferred to the brick merchant's bank account, and the 90 flows straight back into the bank as deposits.

The bank has no clue that the 90 is the money they just lent out remember!

A few minutes later, a driver comes into the bank, wanting a loan for a car. The bank can offer him 81 because of the deposit inflow they just had - again, they need to keep a little back for liquidity purposes.

The driver walks out and visits the dealership. He hands over the 81 to order his car. The sales guy drives to the bank at lunchtime to deposit the 81 from his sale. So, now the bank has a new deposit inflow of 81.

A student walks in wanting to borrow 72 for his tuition fees. the banks can lend him that....

You get the idea.

So, from this original £100, we have managed to spend 90+81+72. £243 and the day isn't even finished!

The simple act of giving a loan 'creates' money. There is no master plan, nothing weird going on.

chucky

Mike4DebtFreeMoney wrote: »

I was thinking

Unless Moneyweek are telling me I'm not interested.

Thrugelmir

princeofpounds wrote: »

So, from this original £100, we have managed to spend 90+81+72. £243 and the day isn't even finished!

The simple act of giving a loan 'creates' money. There is no master plan, nothing weird going on.

That's all very well. At the point Barclays sold themselves out to the Arabs the balance sheet was leveraged up to £72 of assets to a £1 of reserves. So a loan default rate of over under 2% had them in trouble.

Light touch regulation combined with financial engineering are the real issues.