[switters]

The most beautifully simplet explanation of where we came from, where we are and where we should go.

[aa3]

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.

[whocares]

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.

[Bloo Loo]

aa3, on 17 February 2012 - 09:27 AM, said:

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.

[57percent]

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.....

[Bloo Loo]

57percent, on 17 February 2012 - 11:12 AM, said:

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.

[The Eagle]

Bloo Loo, on 17 February 2012 - 11:09 AM, said:

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.


---

This post has been edited by awake_eagle: 17 February 2012 - 11:36 AM

[Bloo Loo]

awake_eagle, on 17 February 2012 - 11:36 AM, said:

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.

This post has been edited by Bloo Loo: 17 February 2012 - 11:44 AM

[Nuggets Mahoney]

Bloo Loo, on 17 February 2012 - 11:18 AM, said:

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

[Nationalist]

57percent, on 17 February 2012 - 11:12 AM, said:

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!

[Bloo Loo]

Nationalist, on 17 February 2012 - 02:44 PM, said:

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.

[Grrrr I'm a tiger]

switters, on 17 February 2012 - 09:09 AM, said:

The most beautifully simplet explanation of where we came from, where we are and where we should go.

http://www.youtube.c...be_gdata_player

Nnoooooooooooooooooooooooooooooooooooooooooooooo!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!



Its central hypothesis is wrong. It's been proven to be wrong many, many times. :lol:

This post has been edited by !EURO!: 17 February 2012 - 03:18 PM

[Traktion]

Promises of money != money.

Anyone can print promises. Only the BoE can print (Sterling) money.

[Grrrr I'm a tiger]

I did a blog post on it after seeing it some time ago....

Quote

Saturday, 1 August 2009

Money as Debt rubbish
I have a fight with the "Money as Debt " charlatans.

Their argument being that because interest is charged there is suddenly more liabilities than money to repay them.

This is misleading. The system always balances in terms of assets and liabilities as I have shown. When the interest is created a liability is created for the borrower and an asset for the lender. It is exactly the same process when you buy anything. A liability may be created for the person who is using a product or service being sold by someone else. By law, interest can even be charged on the invoice. And the buyer settles the debt created with money or some other exchange the seller is willing to accept.

What you will notice is that there are always more liabilities than there is money in circulation. It would be strange if there weren't.

No. The real issue is one of balance. The fact that ownership of assets and liabilities is unequal between people, between companies, between countries. The balance between creditors and debtors. Between exporters and importers. Between rich and poor. We will hear a lot more of the word BALANCE over the coming years mark my words.

We are even starting to hear the term 'Balance of trade' once again. And whilst we started to think of it merely as an accounting figure to denote what the actual balance was, the meaning will adjust to mean that balance must be restored.

Posted by Hotairmail at 16:29

[Bloo Loo]

!EURO!, on 17 February 2012 - 03:22 PM, said:

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.