switters Posted February 17, 2012 Share Posted February 17, 2012 The most beautifully simplet explanation of where we came from, where we are and where we should go. http://www.youtube.com/watch?v=Dc3sKwwAaCU&feature=youtube_gdata_player Quote Link to comment Share on other sites More sharing options...
aa3 Posted February 17, 2012 Share Posted February 17, 2012 Yes it is the clearest/simplest explanation of how the process works that I have seen. A brilliant person did that video. When you understand how the monetary system works it really changes how you view many policies. Like when a politician comes out and says they want to pay off the national debt.. it makes no sense. You would have to destroy the corresponding money on the other side of the ledger. Quote Link to comment Share on other sites More sharing options...
whocares Posted February 17, 2012 Share Posted February 17, 2012 Yes! Very thought provoking. (Am sending it to my kids who are at or just left uni to see what they think about it.) Thanks for posting. Quote Link to comment Share on other sites More sharing options...
Bloo Loo Posted February 17, 2012 Share Posted February 17, 2012 snip. Like when a politician comes out and says they want to pay off the national debt.. it makes no sense. You would have to destroy the corresponding money on the other side of the ledger. er no. most national debt is owed to people who buy their bonds...paid for the wealth generated by the economy. You are confusing a central bank, that issues notes, with the Government. Bernanke made the point that without a central bank, we would have £1 notes issued by private banks, so lots of different ones. Quote Link to comment Share on other sites More sharing options...
57percent Posted February 17, 2012 Share Posted February 17, 2012 Been posted a few times. At best, I'd call it disingenuous. It's simply not true that a bank creates money out of thin air. The process of lending out money does increase the the broad money supply, but the bank has to have the money to lend. A deposit, bond, equity or loan. The bank of England however..... Quote Link to comment Share on other sites More sharing options...
Bloo Loo Posted February 17, 2012 Share Posted February 17, 2012 Been posted a few times. At best, I'd call it disingenuous. It's simply not true that a bank creates money out of thin air. The process of lending out money does increase the the broad money supply, but the bank has to have the money to lend. A deposit, bond, equity or loan. The bank of England however..... of course, money IS created out of thin air, they are reciepts representing something real...or as of today...nothing at all...so thin air paper not worth the paper its not printed on. Quote Link to comment Share on other sites More sharing options...
The Eagle Posted February 17, 2012 Share Posted February 17, 2012 (edited) er no. most national debt is owed to people who buy their bonds...paid for the wealth generated by the economy. er yes, whenever a 'debt' is paid back by anyone to a bank or a CB, that same amount of 'money' is taken out of circulation by the bank or CB by virtue of it's accounting practices. It doesn't matter who holds the bonds now, what matters is how the money/debt was created to begin with. --- Edited February 17, 2012 by awake_eagle Quote Link to comment Share on other sites More sharing options...
Bloo Loo Posted February 17, 2012 Share Posted February 17, 2012 (edited) er yes, whenever a 'debt' is paid back by anyone to a bank or a CB, that same amount of 'money' is taken out of circulation by the bank or CB by virtue of it's accounting practices. It doesn't matter who holds the bonds now, what matters is how the money/debt was created to begin with. --- there is a difference between national debt and money. You are suggesting that if government balanced their books, there would be no money. Credit is destroyed on repayment...sure, but means of exchange?>..are you suggesting that I pay off my credit card with £100 in cash that that £100 is dissolved....I dont think so. Edited February 17, 2012 by Bloo Loo Quote Link to comment Share on other sites More sharing options...
Nuggets Mahoney Posted February 17, 2012 Share Posted February 17, 2012 of course, money IS created out of thin air, they are reciepts representing something real...or as of today...nothing at all...so thin air paper not worth the paper its not printed on. I have the strangest feeling of deja vu Quote Link to comment Share on other sites More sharing options...
Nationalist Posted February 17, 2012 Share Posted February 17, 2012 Been posted a few times. At best, I'd call it disingenuous. It's simply not true that a bank creates money out of thin air. The process of lending out money does increase the the broad money supply, but the bank has to have the money to lend. A deposit, bond, equity or loan. The bank of England however..... Not true. Take a real world example with approximate numbers... You want to buy a new car. You got to HSBC and say, "Lend me £10,000 to buy a new car." They say, "OK," tap, tap on keyboard and there's £10K in your account. It doesn't cost them anything to go tap tap on the keyboard. They don't have to have the money in a vault to go tap tap on keyboard. It's cost free to them. HSBC then says, "There you go, Sir. The money is in your account. You'll be paying us 8% interest." Then you go to a car dealer, pick out the car you want, haggle the price down to £10K, and say, "How should I pay? I've got the money in my current account." The dealer says, "Just put your debit card in our machine and we'll transfer the cash." And while the transaction is going through you happen to notice that the dealer also banks at HSBC! All that's happening is that your money is being transferred to a different HSBC account. So as you drive away from the dealership what's the financial situation? You owe HSBC £10,000 and are paying 8% pa. The dealer has £10,000 in his account and is receiving 1% interest at the most. The missing 7% pa (£700) is being kept by HSBC, on money they CREATED OUT OF NOTHING! But, of course, you're thinking, the dealer is going to spend the money before long. HSBC is only going to get free money for a few days. OK, let's say the dealer buys new stock and the money ends up at Barclays. The dealer writes a cheque on his HSBC account which arrives at Barclays which results in an inter-bank conversation that goes like this... Barclays to HSBC: "You have to send us £10,000 now" HSBC to Barclays: "Sorry, we don't have £10,000, we just created that money out a nothing." Barclays to HSBC: "No problem, we'll just notionally lend the money back to you at the LIBOR rate - say 4%" HSBC to Barclays: "Works for us!" So what's the financial situation now? You are paying HSBC 8%, they are passing on 4% to Barclays which is keeping 3% for itself and paying 1% to the actual account holder (who may just leave the money in the bank anyway.) Of course, for every £10,000 loan originated at HSBC and arriving at Barclays there will be another £10K loan originated at Barclays and ending at HSBC, so mainly the transactions cancel each other out. And so the money goes around and around and the bankers make money from thin air. Oh, and by doing so they rob you a second time: that shiny new car would not have cost £10K if credit hadn't been available - it would have been cheaper. Pumping up the money supply has made everything more expensive. It's not a new trick by the way. It doesn't rely in computers or the internet - it used to be called pulling money out of the ink well! Quote Link to comment Share on other sites More sharing options...
Bloo Loo Posted February 17, 2012 Share Posted February 17, 2012 snip Barclays to HSBC: "You have to send us £10,000 now" HSBC to Barclays: "Sorry, we don't have £10,000, we just created that money out a nothing." Barclays to HSBC: "No problem, we'll just notionally lend the money back to you at the LIBOR rate - say 4%" HSBC to Barclays: "Works for us!" snip Libor is very short term. and yes, in essence, the clearing system would work something like that. and it collapses when too many promises are made and there isnt the cash to settle them all....Ahla Northern Rock....thats called a credit crunch. Thats why there is a call to print...as the cause of the collapse is NOT overlending, its under cashing.....which of course, is the situation on its head. Quote Link to comment Share on other sites More sharing options...
Traktion Posted February 17, 2012 Share Posted February 17, 2012 Promises of money != money. Anyone can print promises. Only the BoE can print (Sterling) money. Quote Link to comment Share on other sites More sharing options...
Bloo Loo Posted February 17, 2012 Share Posted February 17, 2012 I did a blog post on it after seeing it some time ago.... OH..THATS who you are!... anyway, just because it balances, as it must, doesnt mean the thing will work.. Greece has a perfectly balanced balance sheet...so did Northern Rock. I say bring back the polar bear and the penquin avatar. Quote Link to comment Share on other sites More sharing options...
Toto deVeer Posted February 17, 2012 Share Posted February 17, 2012 Nnoooooooooooooooooooooooooooooooooooooooooooooo!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! Its central hypothesis is wrong. It's been proven to be wrong many, many times. ?? Quote Link to comment Share on other sites More sharing options...
wonderpup Posted February 17, 2012 Share Posted February 17, 2012 It's simply not true that a bank creates money out of thin air. They create credit/debt out of unsubstantial promises to repay-which then spends like money- as long as people believe in it. Quote Link to comment Share on other sites More sharing options...
57percent Posted February 17, 2012 Share Posted February 17, 2012 Not true. Take a real world example with approximate numbers... You want to buy a new car. You got to HSBC and say, "Lend me £10,000 to buy a new car." They say, "OK," tap, tap on keyboard and there's £10K in your account. It doesn't cost them anything to go tap tap on the keyboard. They don't have to have the money in a vault to go tap tap on keyboard. ..... I've stopped reading there. Quote Link to comment Share on other sites More sharing options...
'Bart' Posted February 17, 2012 Share Posted February 17, 2012 Bernanke made the point that without a central bank, we would have £1 notes issued by private banks Except that the Federal Reserve itself is a private bank (or a collection of them). The Bank of England was a private bank for hundreds of years (1694 to 1946). The Bank is one of eight banks authorised to issue banknotes in the United Kingdom, but has a monopoly on the issue of banknotes in England and Wales and regulates the issue of banknotes by commercial banks in Scotland and Northern Ireland. LINK It wasn't until 1844 that the bank acheived the sole right of issuing banknotes: The 1844 Bank Charter Act tied the issue of notes to the gold reserves and gave the bank sole rights with regard to the issue of banknotes. Private banks which had previously had that right retained it, provided that their headquarters were outside London and that they deposited security against the notes that they issued. LINK Even in Bernanke land, there are local currencies: Communities print their own currency to keep cash flowing Quote Link to comment Share on other sites More sharing options...
Nationalist Posted February 17, 2012 Share Posted February 17, 2012 I've stopped reading there. Then you will remain in blissful ignorance. Quote Link to comment Share on other sites More sharing options...
The Eagle Posted February 17, 2012 Share Posted February 17, 2012 there is a difference between national debt and money. You are suggesting that if government balanced their books, there would be no money. Not 'no money' but a lot less money. Credit is destroyed on repayment...sure, but means of exchange?>..are you suggesting that I pay off my credit card with £100 in cash that that £100 is dissolved....I dont think so. Of course the 100 pounds are gone once you repay them, they never existed in the first place, they were CREDIT, not money. Any bank accountant can explain you that. The same goes for any credit you get from a bank whether it's a small loan or a mortgage. Quote Link to comment Share on other sites More sharing options...
Bloo Loo Posted February 17, 2012 Share Posted February 17, 2012 Not 'no money' but a lot less money. Of course the 100 pounds are gone once you repay them, they never existed in the first place, they were CREDIT, not money. Any bank accountant can explain you that. The same goes for any credit you get from a bank whether it's a small loan or a mortgage. wut?...I hand over 100 crisp oncers and they are gone? where did they go? Did they self destruct after mission completed? Quote Link to comment Share on other sites More sharing options...
The Eagle Posted February 17, 2012 Share Posted February 17, 2012 wut?...I hand over 100 crisp oncers and they are gone? where did they go? Did they self destruct after mission completed? I would expect someone who has more than 5 years history on HPC and has almost 40000 posts under his/her(?) belt to be a bit more clued about about these basic facts of money and credit. This has been explained many times already, go look it up yourself. Quote Link to comment Share on other sites More sharing options...
Bloo Loo Posted February 17, 2012 Share Posted February 17, 2012 (edited) I would expect someone who has more than 5 years history on HPC and has almost 40000 posts under his/her(?) belt to be a bit more clued about about these basic facts of money and credit. This has been explained many times already, go look it up yourself. no...you tell me....where did they go?...you said they cancelled out...I say they are there for settling debt and lending...as they were when I had them. If you are referring to credit...I dont regard this as money as I cant spend it...I need an intermediary to do so, and they will need,,,,,those self same oncers. Edited February 17, 2012 by Bloo Loo Quote Link to comment Share on other sites More sharing options...
SuperChimp Posted February 17, 2012 Share Posted February 17, 2012 Promises of money != money. Anyone can print promises. Only the BoE can print (Sterling) money. The Bank of England does not print money. A private company called De La Rue prints all the bank notes in the UK (and for many other countries). All coins are created by a mint in Wales. On a slightly related note, it always annoys me when Quantitative Easing is called printing money when really it has nothing to do with it. Quote Link to comment Share on other sites More sharing options...
Bloo Loo Posted February 17, 2012 Share Posted February 17, 2012 The Bank of England does not print money. A private company called De La Rue prints all the bank notes in the UK (and for many other countries). All coins are created by a mint in Wales. On a slightly related note, it always annoys me when Quantitative Easing is called printing money when really it has nothing to do with it. we are talking high powered money...that is promises issued by the BoE.. Matters not which printer prints them, as long as they are "backed" by the BoE...they are the issuers, not De La Rue or the Mint. Quote Link to comment Share on other sites More sharing options...
200p Posted February 17, 2012 Share Posted February 17, 2012 It's all funny money out there. Keep your wealth in cash flow positive property, productive land, valuable commodities, dividend yielding shares or better still, SLAVES! Hoard those £1 shop hammers and G-clamps. They are worth more than £1 I can tell you now! Quote Link to comment Share on other sites More sharing options...
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