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Guest DissipatedYouthIsValuable

If You're An Investment Bank, Borrowing From A Central Bank

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Guest DissipatedYouthIsValuable

Is it just me, or does this whole capitalist nonsense just keep disappearing up its own ****?

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Is it just me, or does this whole capitalist nonsense just keep disappearing up its own ****?

Pardon?

As far as I'm aware, commercial banks are borrowing from central banks - though, I agree, for the past decade, some of those have had investment banking arms which are now (indirectly) funded by central bank facilities.

Where investment banks borrow, they invest in assets - and the capital can, in principle, be repaid if/when those positions are unwound. What I see as dangerous and unethical is how systemic risk has been encouraged as every greater leverage has been permitted by the banking system - forcing everyone to take greater risks.

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Is it just me, or does this whole capitalist nonsense just keep disappearing up its own ****?

:)

Systems of theft such as the banking enterprise only last until they have eaten all capital.

Low interest rates are supposed to slow down the gorging.

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Pardon?

As far as I'm aware, commercial banks are borrowing from central banks - though, I agree, for the past decade, some of those have had investment banking arms which are now (indirectly) funded by central bank facilities.

Where investment banks borrow, they invest in assets - and the capital can, in principle, be repaid if/when those positions are unwound. What I see as dangerous and unethical is how systemic risk has been encouraged as every greater leverage has been permitted by the banking system - forcing everyone to take greater risks.

Sounds great.

only...

Central banks don't have anything of their own - just the ability to steal from others.

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Guest DissipatedYouthIsValuable
Pardon?

As far as I'm aware, commercial banks are borrowing from central banks - though, I agree, for the past decade, some of those have had investment banking arms which are now (indirectly) funded by central bank facilities.

Where investment banks borrow, they invest in assets - and the capital can, in principle, be repaid if/when those positions are unwound. What I see as dangerous and unethical is how systemic risk has been encouraged as every greater leverage has been permitted by the banking system - forcing everyone to take greater risks.

Ok, commercial banks will do.

If the populace were able to refuse to take on more debt, by those in employment paying down loans, and those not by rationally defaulting, how are the central bank loans going to be repaid?

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Ok, commercial banks will do.

If the populace were able to refuse to take on more debt, by those in employment paying down loans, and those not by rationally defaulting, how are the central bank loans going to be repaid?

a bank is like a shark..a shark has to keep swimming to breath, a bank likewise.

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Guest DissipatedYouthIsValuable
a bank is like a shark..a shark has to keep swimming to breath, a bank likewise.

So, if one were to sensibly attempt a strategy of non-violent revolution against the current system, all that would be needed would be mass default by those who can't pay and refusal to borrow further by those who can?

Seems a fairly straightforward coup if everyone can identify with non-attachment and transience.

After all, the tangibles of 'wealth' will still be there.

Edited by DissipatedYouthIsValuable

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Ok, commercial banks will do.

If the populace were able to refuse to take on more debt, by those in employment paying down loans, and those not by rationally defaulting, how are the central bank loans going to be repaid?

Am I missing something?

They'll just make commercial loans instead or buy government bonds with it, or shares, or commodities or any number of other investments.

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So, if one were to sensibly attempt a strategy of non-violent revolution against the current system, all that would be needed would be mass default by those who can't pay and refusal to borrow further by those who can?

Seems a fairly straightforward coup if everyone can identify with non-attachment and transience.

After all, the tangibles of 'wealth' will still be there.

Well you could massively up their costs by asking them loads of questions as well...... ;)

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From a thread a long time ago

Can anyone tell me what exactly happens to the interest collected by the BoE?

Does it merely get pumped back into the economy as a new loan? Inflating the money supply?

Does it end up in the Treasury for them to spend/waste depending on your view.

Can anyone explain the following or have I misunderstood how the system works.

If the central bank produces all the money and lends out £1m to person A and person B which would give you £2m in the money supply and the base rate is 5% how do persons A/B get the £1,050,000 to pay the bank back at the end of the year? Do we then need a person C to borrow another £1m several months later to lend the £50k a piece to A and B to pay the central bank back?

This clearly doesn't make any sense, this can't be the system that in order to pay the central bank back the central bank has to continually create new money so it's existing loans can be paid back with interest?

There must be something missing from this loop what is it?

Now if you add in foriegn companies and exchanges it just gets more complex.

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a bank is like a shark..a shark has to keep swimming to breath, a bank likewise.

That equally applies to most businesses I can think of. :huh:

At the moment commercial banks can afford to lend less as margins are greater and until default probabilities stabilise and loss severities fall (which they are starting to do) it makes sense to restrain lending

The role of Central Banks has been discussed ad nauseam here, and I find myself in a small part agreeing with Injin regarding their role, but they are what they are.

Know your enemy and turn their weaknesses to your advantage

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Is it just me, or does this whole capitalist nonsense just keep disappearing up its own ****?

Actually this is correct.

If you watch he money is debt video, some people/organisations have to go bankrupt. Usually they are the bottom of the food chain and have not been able to profit from the capital borrowed. If the banks are not lending , they effectively form a bottom of the new money food chain, though I guess they carry on collecting on their old loans.

This rate of bankruptcy will slow with lower interest rates. Clearly with higher rates more go bankrupt given a given level of debt, but the issue is that with low rates people tend to borrow more. This is how a liquid trap occurs. Rates so low stop bankruptcy cannot rise anymore, meanwhile the stimulus of low rates no longer works. Of course we can try QE, but if the debt revulsion has also occurred then QE will not work either.

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