Main Rule Of Debt If You Borrow, Don't Worry.

[crispindry]

So contracting to do the impossible is not fraudulent?

Not in the eyes of HM Goverment at least.

[Injin]

There is no judgement on guilt or innocence. The judgement is on whether money is owed. The lender fills the burden of proof by providing the loan agreement. You have to counter that by providing proof payment. If you cannot because you have not paid - the judge rules in the lenders favour. Goodbye tele.

What loan?

We are asking for proof that the loan occured.

Yes it is. They have filled the burden of proof that they have made a loan by showing the agreement, credits into your account, withdrawl of funds from that account. You have to prove to the judge that payment has occured.

No, the bank has to prove that their accounts correspond with things in the real world.

And I imagine the judge will dismiss the issue as the accounting practices are covered by Law.

Nope.

The plaintiff is the cooperation. If that the judge is satisfied by that then goodbye tele. Usually they are.

Sorry - standard legal procedure - id there evidence of a plaintiff?

Who is making the complaint?

How tall are they?

Afaik santa can't bring a case to court.

No. You misrepresent the facts. Your little ditty about Dave and the tenner shows that. But then you have an agenda don't you

Yes, I want the truth to be known and people freed from slavery to others via concepts.

Empathy.

[aliveandkicking]

I use this agreement to repay as evidence of my assets to prove to depositors that I am solvent.

That is where you are going wrong i think. You are approaching it from the wrong angle.

You are solvent because you have honest savers earning money via the interest you receive from honest debtors. So savings enable borrowing. No savings. No borrowings.

But the savers are protected from misfortune or dishonesty by the quality of the collateral you take or the higher rates of interest you expect for lower quality collateral. For example an unsecured loan offered on the expectation a person will repay is the lowest quality collateral possible.

[D Vardy's Shadow]

It is more complicated than that.

The internet theory is that the banks create money from thin air with no consequence to the bank other than the ability to charge interest from money they invent out of no process or method that enables sellers to be owed money by banks when buyers are loaned money by banks.

Naturally if you create money from thin air and charge full interest on it as if you had to source this money yourself without needing a complex process involving owing money then it would be fraud.

but so far we dont have facts to substantiate the out of thin air theory that dont in turn support the theory the banks are just margin banks borrowing short and lending long and as far as i can see all attempts to establish facts results in a torrent of abuse directed at the person wanting to establish what facts may exist where these two theories are compared and contrasted.

As i see it myself it is abuse versus facts. Conveniently the abusers like to say it is just facts and they just keep repeating this position while being abusive.

As i see it the internet theory relies on as few facts as possible. The other facts are just inconvenient.

If you select your facts you can of course create any theory you want.

In my own personal view the internet theory relies on a belief logic can be used to describe reality when in truth all facts are not known to the person attempting to assemble what they think they already know is a fact. And so if you have garbage in you get garbage out.

In the final analysis the internet theory seems to rely on powerful faith and beliefs before it relies on facts we can talk about and investigate. It is almost a childs view as for example if you make a nice video and millions of people have seen it then it must be true.

At the end of the day the facts alone seem very compelling the internet theory is bogus and is just based in mythology ignorance and wishful thinking. It is a sign of the times that people actually believe you can create such a smoke and mirrors something for nothing system rather than actually have to work and be creative to earn a living.

No, it is quite simple. Injin and B'stard appear to have different ideas as to what fraud is. You will never get any sense out of the argument until it is understood that they are talking about different [but related] concepts.

So save the effort with long posts about the methodology of what is going on until the meaning of the term 'fraud' is either agreed or the differences understood. You can't agree on whether it is or is not fraud until you agree on what fraud is.

[crispindry]

That is where you are going wrong i think. You are approaching it from the wrong angle.

You are solvent because you have honest savers earning money via the interest you receive from honest debtors. So savings enable borrowing. No savings. No borrowings.

But the savers are protected from misfortune or dishonesty by the quality of the collateral you take or the higher rates of interest you expect for lower quality collateral. For example an unsecured loan offered on the expectation a person will repay is the lowest quality collateral possible.

Some savings. Quite a lot of borrowings. I'm insolvent.

Some savings = Some borrowings I am solvent.

Some interest for acting as a fraudulent intermediary = jail for me but knighthood for others = FUBAR.

Lots of interest + knighthood for pretending to hold assets and loaning money that does not exist in my vault = Monty Python.

Edit: fault does not = vault

Edited April 26, 2009 by crispindry

[aliveandkicking]

A bank operates by attracting *and* retaining savers by offering sufficient interest or security or perks like convenience via atm and eftpos.

If people dont want to save it has to charge higher rates of interest.

All of these discussions always end up with what happens if every saver in the whole wide world wants to put their money in a mattress.

Similarly we could ask what happens when the sun blows up.

But let us say that every saver in the whole wide world puts their money in the mattress. As that begins asset prices collapse and the end point is a collapse back to say 1950 when gold was 35 an onze and an ok house was 2000 pounds. So then before that happens you have to then ask how many mattress stuffers have bought stuff from people who dont want stuff in their mattresses?

All we are really talking about is a recession. This scenario is played out until the mattress holders decide that they dont want cash any more.

We can go endlessly around and around on this if people want to play a pretend game that economics is totally irrelevant to a discussion of banking and money supply where most of our money that we use day in day out is created with the cooperation of the government by the commercial banks who can only do that if people are saving somewhere.

[aliveandkicking]

Some savings. Quite a lot of borrowings. I'm insolvent.

Some savings = Some borrowings I am solvent.

Some interest for acting as a fraudulent intermediary = jail for me but knighthood for others = FUBAR.

Lots of interest + knighthood for pretending to hold assets and loaning money that does not exist in my fault = Monty Python.

Are you on drugs? A beer too many?

A bank cannot create credit unless it creates a savers deposit.

Grasp the reality please.

[crispindry]

Are you on drugs? A beer too many?

A bank cannot create credit unless it creates a savers deposit.

Grasp the reality please.

So you're telling me we have a total reserve banking system?

I'm not on drugs. But thanks for caring.

[aliveandkicking]

No, it is quite simple. Injin and B'stard appear to have different ideas as to what fraud is. You will never get any sense out of the argument until it is understood that they are talking about different [but related] concepts.

So save the effort with long posts about the methodology of what is going on until the meaning of the term 'fraud' is either agreed or the differences understood. You can't agree on whether it is or is not fraud until you agree on what fraud is.

What it comes down to is a definition of ownership:

1. As an individual is it a fact you own something.

or

2 Is it a fact you only own something because somebody else does not have the power to take it off you?

To my way of seeing reality number 2 clearly applies.

But if you believe 1 applies so that 2 is irrelevant and regarded as absurd to consider there is nothing further to discuss from my point of view.

I spent 200 pages on this banking topic before grasping that i was dealing with anarchists who only see their own authority and refuse to see the power of the group to decide how their lives will play out.

And yet each time there is a discussion on this group the same group come to attempt to alter reality.

These people argued for dozens of pages there is no such thing as a group.

Sure i present a reasoned case. But i cannot change a persons mind who tells me my cd collection does not exist.

[InternationalRockSuperstar]

There is no judgement on guilt or innocence. The judgement is on whether money is owed. The lender fills the burden of proof by providing the loan agreement. You have to counter that by providing proof payment. If you cannot because you have not paid - the judge rules in the lenders favour. Goodbye tele.

showing your ignorance there.

bailiffs can't take you tele. or children's stuff.

[aliveandkicking]

So you're telling me we have a total reserve banking system?

I'm not on drugs. But thanks for caring.

We have a fractional reserve system.

You lend me a fiver and I lend it out with no reserve for zero fractional reserve.

I can only create credit in fractional reserve if my credit loans create sellers savings. If i fail to create and maintain savings then i pay out cash

I am repeating myself again and again.

Are you listening though?

[Authoritarian]

4. That is, banks extend credit by creating money.

Yes they create most of the money in the economy. But they can only create money as debt where money is created as savings. Without additional created savings there can be no additional created debt.

Well that's where we're going to have to disagree then. The quote that I pulled clearly says that this isn't the case. They can create credit and lend it to somebody and the amount owed simultaneously becomes an asset of equal value, this is without any BofE cash being invloved.

When they're creating credit they're increasing their future liabilities, that is they're increasing the chances that somebody at some point in the future is going to ask them to make good on their offer and hand over some cash, but at the same time they're also creating an asset - from nothing - that gives the bank a claim on cash too.

If somebody asked me if banks can create money out of thin air though I would have to answer 'yes', although I don't believe that its the root cause of financial problems that many others would have you believe.

And the semi colon above implies a list. You have quoted from something and truncated it. I am not sure what was in that list if so.

I gave you the link to the document, you could have checked if you thought I was trying to present the information in a misleading way. I only cut the bit that I thought was relevent.

Edited April 26, 2009 by chefdave

[crispindry]

We have a fractional reserve system.

You lend me a fiver and I lend it out with no reserve for zero fractional reserve.

I can only create credit in fractional reserve if my credit loans create sellers savings. If i fail to create and maintain savings then i pay out cash

I am repeating myself again and again.

Are you listening though?

Your credit loans almost always end up as deposits in a bank somewhere unless they are stuffed under the mattress. Is that what you mean as seller savings?

[Injin]

Your credit loans almost always end up as deposits in a bank somewhere unless they are stuffed under the mattress. Is that what you mean as seller savings?

What he means is that when the banks have told people they have money, they might have to come good on it at some point.

But that's their problem - they didn't have to lie.

Edited April 26, 2009 by Injin

[aliveandkicking]

Your credit loans almost always end up as deposits in a bank somewhere unless they are stuffed under the mattress. Is that what you mean as seller savings?

If the credit loans leave that bank they are no longer credit loans but payments of cash via the nightly settlements.

Sure it all flows around between banks but bottom line is the bank has to attract those deposits back just as if they never left the bank or it is simply unable to loan out more money.

When a bank has a credit portfolio it means it has savings and loans. Bare in mind savings are not just loans. Loans get spent. If the money leaves the bank it goes as cash. If it stays it stays as savings.

The bank can only lend money if it retains savings or it attracts new savings.

[thombleached]

Best.

Thread.

Ever.

[aliveandkicking]

Well that's where we're going to have to disagree then. The quote that I pulled clearly says that this isn't the case. They can create credit and lend it to somebody and the amount owed simultaneously becomes an asset of equal value, this is without any BofE cash being invloved.

When they're creating credit they're increasing their future liabilities,

Banks work a bit like pawn shops who borrow from a bank to pay out cash to the person depositing the precious family heirloom. There is not much difference in reality. The pawn shops rely on a correct valuation of the collateral being seized to pay back the bank or they just work the margin of high interest they charge against their overdraft with the bank.

If you go to a bank with the title deeds of your house the bank creates an asset from that collateral.

If you pledge yourself and the bank thinks you are good for the money then you get an unsecured loan which is the riskiest loan and the type the pawn shop refuses to do but which pays the highest rate of interest margin for the bank.

You said:

"When they're creating credit they're increasing their future liabilities,"

When a bank creates credit it does not create future liabilities. It creates a current liability as a liability to pay out cash today or next week. The liability exists immediately. By saying future you are changing what is really happening as if the bank can wind up an elastic band.

As the Boe says the art of banking is managing the current liability to pay out cash with the expectation that savers will not immediately or cannot immediately ask for all of their money back so that the banks liquidity is good and the bank is sound. I am not saying that issues have not been created by interbank lending of surplus reserves but even so it is all about margin of the difference between what needs to be borrowed and what is saved. The 'future liabilities' you describe are the savings. Some of those savings can be very long term timed deposits but they are still the current liabilities of the bank as i understand the term liability. The word current also being redundant.

Edited April 26, 2009 by aliveandkicking

[crispindry]

Banks work a bit like pawn shops who borrow from a bank to pay out cash to the person depositing the precious family heirloom. Their is not much difference in reality. The pawn shops rely on a correct valuation of the collateral being seized to pay back the bank or they just work the margin of high interest they charge against their overdraft with the bank.

If you go to a bank with the title deeds of your house the bank creates an asset from that collateral.

If you pledge yourself and the bank thinks you are good for the money then you get an unsecured loan which is the riskiest loan and the type the pawn shop refuses to do but which pays the highest rate of interest margin for the bank.

When a bank creates credit it does not create future liabilities. It creates a current liability as a liability to pay out cash today.

As the Boe says the art of banking is managing the current liability to pay out cash with the expectation that savers will not immediately or cannot immediately ask for all of their money back so that the banks liquidity is good and the bank is sound.

This does not mean that any second it will be busted as you are suggesting.

And what happens when all ( or more than the reserve ratio) depositors turn up and demand their money? They go pop ala Northern Rock init? But they are juggling and they are insolvent but they con me and you into believing that they are not.

Art not science.

[aliveandkicking]

And what happens when all ( or more than the reserve ratio) depositors turn up and demand their money? They go pop ala Northern Rock init? But they are juggling and they are insolvent but they con me and you into believing that they are not.

Art not science.

As i recall it and later learnt also.

Northern rock were securitizing loans and doing off balance sheet stuff so they could lend out all of the money they had rather than holding back the reserve.

Their loans were risky and the borrowers paid higher rates of interest and fees for the priviledge of getting the money. The risky assets they were creating and selling attracted investors who liked that high interest. And their dodgy lending for higher rates of interest also probably attracted savers and investors wanting the higher rate of interest.

By holding the loans on off balance sheet devices they could create more loans than allowed while they prepared the existing loans for securitization.

Even so a bank cannot create money from thin air without creating a saver.

Northern rock were fine while the smaller amount of off balance sheet stuff being prepared for securitization could be sold and the bulk of the existing loans on their books being prepared for sale could be sold. But the market ended for that stuff and house prices softened and they had insufficient collateral.

They were busted because they then needed to borrow a huge amount of money and since this is at least partly happening at the bank of england in overnight settlement it was obvious somethign was so wrong it was unrecoverable because nobody other than the government would lend them the money to 'get by' and their own wealth and depositors wealth was now in severely impaired assets nobody wanted to buy. They were busted for all to see.

But not in the manner you seem to be thinking they were busted.

Edited April 26, 2009 by aliveandkicking

[crispindry]

As i recall it and later learnt also.

Northern rock were securitizing loans and doing off balance sheet stuff so they could lend out all of the money they had rather than holding back the reserve.

Their loans were risky and the borrowers paid higher rates of interest and fees for the priviledge of getting the money. The risky assets they were creating and selling attracted investors who liked that high interest. And their dodgy lending for higher rates of interest also probably attracted savers and investors wanting the higher rate of interest.

By holding the loans on off balance sheet devices they could create more loans than allowed while they prepared the existing loans for securitization.

Even so a bank cannot create money from thin air without creating a saver.

Northern rock were fine while the smaller amount of off balance sheet stuff being prepared for securitization could be sold and the bulk of the existing loans on their books being prepared for sale could be sold. But the market ended for that stuff and house prices softened and they had insufficient collateral.

They were busted because they then needed to borrow a huge amount of money and since this is at least partly happening at the bank of england in overnight settlement it was obvious somethign was so wrong it was unrecoverable because nobody other than the government would lend them the money to 'get by' and their own wealth and depositors wealth was now in severely impaired assets nobody wanted to buy. They were busted for all to see.

But not in the manner you seem to be thinking they were busted.

So can they create it out of thin air given the right circumstances?

NR got rumbled but not in the simplistic way I've stated I'll give you that. Still fraud though.

And fundamentally assets < than liabilities.

Assets worth almost nish since they are based on not much other than some greater fool coming along and saying "yes please".

[The XYY Man]

Sure.

Cool.

What do I do first then...?

[The XYY Man]

Game on! You going to set-up the thread XYY Man?

It'll be a pleasure...

[aliveandkicking]

So can they create it out of thin air given the right circumstances?

NR got rumbled but not in the simplistic way I've stated I'll give you that. Still fraud though.

And fundamentally assets < than liabilities.

Assets worth almost nish since they are based on not much other than some greater fool coming along and saying "yes please".

I cant see any way a bank can create private commercial bank money out of thin air with no consequence. Follow this thru please.

Firstly consider that an unregulated bank that has no central bank relationships works very similarly to a regulated bank which uses overnight settlement at the central bank. They are both private businesses that create their own private money for *only* their own customers use.

So a bank with 1 penny can create a promise to pay out a loan at some % return one million pounds at 100 million leverage.

But once the promise has been made what comes next?

How does a private buisiness working at 100 million leverage enable you to buy something any place on earth when it has one penny? The answer can only be that you either buy something from one of the banks customers who is happy to be owed or the bank goes and sources the money on the money market from some place on earth.

Obviously a seller does not want a deposit with a bank with one penny unless it knows the loan customer or can rely on the bank to make good failure of the loan customer to pay the sellers money over time.

There is no money making machine here. The bank can create all of the loan monies it wants using the private commercial bank money it creates but it has to manage the reality of you spending the money.

It is loans and spending, rather than simply private commercial bank money out of thin air backed by an asset.

The problem today was created by banks lending their surplus reserves so that they were always fully 'loaned out' and the regulated banks did this overnight at the central bank. But as soon as risk came back into the market nobody wanted to be fully loaned out so they all withdrew from this interbank lending and the central banks had to step in.

The system survives but has insufficient desire to lend out surplus reserves.

As I see it this is mainly a problem for the weakest banks. One by one the bad banks must be taken over.

The additional problem is that some of the bad banks were unregulated banks and are huge banks. Even so it is no problemo if these banks can be 'northern rocked'. Once a bank is seen to be safe then it can borrow the plentiful surplus reserves and the surviving banks with surplus reserves begin making more profits since they can borrow reserves from the central banks at more or less no cost.........if they are good for the money.

[Authoritarian]

Banks work a bit like pawn shops who borrow from a bank to pay out cash to the person depositing the precious family heirloom. There is not much difference in reality. The pawn shops rely on a correct valuation of the collateral being seized to pay back the bank or they just work the margin of high interest they charge against their overdraft with the bank.

Metaphors are a bit like processed cheese. Its like the original product but never quite makes the grade.

You said:

"When they're creating credit they're increasing their future liabilities,"

When a bank creates credit it does not create future liabilities. It creates a current liability as a liability to pay out cash today or next week. The liability exists immediately. By saying future you are changing what is really happening as if the bank can wind up an elastic band.

You've really pushed that to the max. It creates a liability that will they will be asked to be made good upon at some time in the future.

Edited April 26, 2009 by chefdave

[aliveandkicking]

Metaphors are a bit like processed cheese. Its like the original product but never quite makes the grade.

You've really pushed that to the max. It creates a liability that will they will be asked to be made good upon at some time in the future.

The pawn shop reality comparison is not a metaphor.

The only difference to a regulated bank is that a bank attempts to manage savers to get maximum margin in cooperation with the goverment to enable lending to occur at market rates that the government attempts to control.

Whereas the pawn shop just charges a higher rate of interest relative to the government controlled market rate and is prepared to be known as an asset seizer and i imagine does not do unsecured loans outside of horrendous rates of interest.

When a bank creates credit it must by definition create an external liability where a saver is saving with the same bank, if it cannot do this then it pays out cash and there is no credit.

Sure i am pushing that to the max

You want to tell me it is all smoke mirrors and metaphors.

Edited April 26, 2009 by aliveandkicking