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House Price Crash Forum


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Everything posted by the_austrian

  1. Being forced to use any currency is not preferable, but since we are forced to use Sterling, I see no harm in improving the currency by removing the right to inflation from the banking sector and for that reason I don't see much wrong with the proposals.
  2. If the FTSE is not high enough, the Government can always print some more money.
  3. They can make the deposits whole by printing money, it's a paper currency so of course they can carry out this threat. I'm not saying whether they will or they won't, there's no way to know, they could even change their mind if they intend to make good on the promise now, or they could be lying and later decide to print the money anyway.
  4. There aren't enough funds to guarantee all deposits to £50k, nothing like, so it must be a Government promise, beyond the FSCS.
  5. You must have misunderstood my position, I may have been misleading.
  6. The scheme is not the protection, the Government promise is the protection. It doesn't matter if the FSCS has nothing in it.
  7. No, the promise is for £50k the funding is inconsequential.
  8. I'm working on that assumption, provide counter evidence.
  9. The banks only need one pence to make the fractional lending work for them, they can use the same deposits, no matter how small over and over again. It would need comprehensive coordination to deprive the banks of their fuel, even the bank owners themselves could proved the seed capital.
  10. The Government backs deposits to £50k in all deposit taking UK banks.
  11. The bank has promised to look after your money and on top of that, the Government has explicitly guaranteed your money up to £50k. If you don't get your money back that looks like default to me. The extreme nature of the circumstances is a moot point because if it is not reliable under those circumstances the promise is worth nothing at all.
  12. We can't know that they won't print, but if they default, as you suggest, this would be fraud committed against every depositor in the system.
  13. A big problem with understanding banking is that we don't know to what extent we can trust the deposit guarantee. We don't know for certain what would happen if the population tested the threat to print up the bank credit into cash. Since we can't know this, only speculate, we must break it down into the following scenarios: i) The Government is reliable and they will turn the credit into cash, printing billions of new notes and coins in the process. In this case depositors are right to trust their banks and to leave the money on deposit. In this case banking is a form of THEFT because this inflation of the money supply amounts to counterfeiting which is transferring wealth by reproduction. ii) The Government is not reliable and they will eventually renege on their promise to print up the required notes to make good on the bank credit. If there is a bank run, the banks will default and it makes sense to keep your money out of the banks. In this case banking is a FRAUD because their credit is not good and they know their promises are not backed by actual notes. We could say the fraud is perpetrated by the Government in this situation, because the bank could be unaware of their plan to default. Banking is either theft or a fraud and because we cannot know the mind of the Government and Bank of England, we can never know for sure which one of these is actually the case.
  14. If they don't retain the funds in the same account, the bank immediately faces a bank run because it has no reserves. This approach could be practical if, for example, the credit is given to the seller of the house when the credit is a mortgage. The borrower doesn't ever take it out in cash, instead it is credited to the destination account to begin with. I'm not really arguing that the mechanics are exactly as I describe only that the effects amount to the same thing. Sure, a bank could arrange to borrow some reserves, lend in increments as most people envision they do, build up a portfolio of loans and deposits, then return the reserves. The end outcome is no different from if they simply issue the credit from nowhere. What they actually do in practice I'm not sure about but, to me the difference is not significant. Each method, whether in small steps or all in one go, is equally adept at eroding the savings of the rest of the population. The question to answer for the naysayers is by what other mechanism do banks reduce the purchasing power of money?
  15. Yes but that doesn't mean they don't issue credit now.
  16. I don't see an economic reason (in that it is not economically distinct) why they can't just start off with no customers and issue a mortgage to a new customer, provided they retain the funds in the account. It makes the nature of the system pretty transparent to do this and I suspect many people even within the industry would find this naked creation a bit offensive to the tastes.
  17. It's entirely to do with the currencies concerned. If the central bank of the UK defends Sterling deposits held in Spain then it has increased the money supply because it affects the price of Sterling, assuming the market is efficient and recognises (and trusts) Spanish deposits such as this.
  18. Yes, but that will be a short term credit transaction made with the other clearing banks. The issuance of credit is entirely to do with mismatched maturities. If the maturities are matched there is no credit creation.
  19. If the person ultimately loaning the money loses use of it for the duration of the loan, then yes, no money, or credit has been created. If the converse is true and a new person has use of the money whilst everyone else still keeps their money available on demand then, yes new money or credit has been issued.
  20. Without the depositors they would be in a bank run situation. If they didn't go to the credit markets they would need instead to go to the central bank.
  21. Praise from you and Traktion this evening, very much appreciated.
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