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Role Of The Banks?

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I was wondering about this the other day, the BoE lends at 0.5% to the banks who add a hefty premium before lending to me.

Now, I was under the impression that that premium was justified because the banks that lend to me take on the risk, have to deal with the administration of my mortgage and make some profit to pay for the outrageous bonuses.

Since the first argument has been entirely removed from the equation, the banks no longer take on any risk since in essence they get bailed out, the risk is passed on to the government or the BoE, I am not sure the premium they are asking is really justified.

Hell, if they're just keeping tabs on my repayments, surely 0.1% should be more than enough to pay for the associated costs and still make a decent enough profit.

I'm going to be paying off the banks debts through all these rises in tax, yet I'm still not allowed to go and get a mortgage directly from the bank (BoE) I'm financing, I'm certainly not getting any interest back on the money I'm being forced to hand out to help those very institutions who are making massive profits by lending me my own money at a massive premium. Because this is what is really happening isn't it? The banks are lending you your own money you are being forced to hand out, and taking a pretty decent chunk out of it on the way so they can buy themselves all the latest luxuries that are way out of reach to the rest of us.

Something's got to give...

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I was wondering about this the other day, the BoE lends at 0.5% to the banks who add a hefty premium before lending to me.

Now, I was under the impression that that premium was justified because the banks that lend to me take on the risk, have to deal with the administration of my mortgage and make some profit to pay for the outrageous bonuses.

Since the first argument has been entirely removed from the equation, the banks no longer take on any risk since in essence they get bailed out, the risk is passed on to the government or the BoE, I am not sure the premium they are asking is really justified.

Hell, if they're just keeping tabs on my repayments, surely 0.1% should be more than enough to pay for the associated costs and still make a decent enough profit.

I'm going to be paying off the banks debts through all these rises in tax, yet I'm still not allowed to go and get a mortgage directly from the bank (BoE) I'm financing, I'm certainly not getting any interest back on the money I'm being forced to hand out to help those very institutions who are making massive profits by lending me my own money at a massive premium. Because this is what is really happening isn't it? The banks are lending you your own money you are being forced to hand out, and taking a pretty decent chunk out of it on the way so they can buy themselves all the latest luxuries that are way out of reach to the rest of us.

Something's got to give...

Congratulations that is almost perfectly expressed.

This is the reason we should have all got the pitchforks out when they bailed out the banks.

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.

.

Something's got to give...

Perplexing, innit.

I would encourage you to research the underlying structure of our debt-based, commercially issued money supply to see how our means of exchange, our broad money supply, is quite literally on loan to us.

We appear to be paying the banks for their intermediation services between depositors and borrowers of that money supply.

We are in fact paying them mainly (and unnecessarily) for its very existence.

Unless collectively we borrow it at interest from the banks, it doesn't exist.

There's the rub.

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Yeah places where you can't get an affordable loan or a savings account interest rate that keeps pace with inflation. Capital is free to move though. The cgt lot won't sell until some unspecified date at a set price to equal their required pension, and new demand is weak. No need for banks or money with this velocity ?

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Perplexing, innit.

I would encourage you to research the underlying structure of our debt-based, commercially issued money supply to see how our means of exchange, our broad money supply, is quite literally on loan to us.

We appear to be paying the banks for their intermediation services between depositors and borrowers of that money supply.

We are in fact paying them mainly (and unnecessarily) for its very existence.

Unless collectively we borrow it at interest from the banks, it doesn't exist.

There's the rub.

Well said, what surprises me is that even on this forum most people don't wanna listen when I point this out in other threads.

Our debt-based, commercially issued money supply is the elephant in the room, without removing it nothing will ever really improve.

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Guest Steve Cook

Well said, what surprises me is that even on this forum most people don't wanna listen when I point this out in other threads.

Our debt-based, commercially issued money supply is the elephant in the room, without removing it nothing will ever really improve.

By "improve", I take it you are referring to an improvement that will be of benefit to the majority instead of a minority.

Which is why, without the use of force, nothing will improve.

The only thing these bastards will ever understand is a wall against their backs

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By "improve", I take it you are referring to an improvement that will be of benefit to the majority instead of a minority.

Obviously.

Which is why, without the use of force, nothing will improve.

The only thing these bastards will ever understand is a wall against their backs

As you can see from my signature, I don't like that method. Violence only leads to more violence.

A better way would be to reduce the importance of the debt-based, commercially issued money supply by using it less and less.

An excellent example on how to do this comes from Switzerland:

http://en.wikipedia.org/wiki/WIR_Bank

The WIR bank (even though it's little known outside Switzerland) is a strong pillar of the Swiss economy, a lot of inland transactions between businesses are made at least partially with WIR money rather than CHFs. Since WIR money supply is not debt-based this has a stabilising effect on the economy during times where credit from traditional banks is hard to come by.

Edited by wise_eagle

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Guest Steve Cook

Obviously.

As you can see from my signature, I don't like that method. Violence only leads to more violence.

A better way would be to reduce the importance of the debt-based, commercially issued money supply by using it less and less.

An excellent exapmle on how to do this comes from Switzerland:

http://en.wikipedia.org/wiki/WIR_Bank

The WIR bank (even though it's little known outside Switzerland) is a strong pillar of the Swiss economy, a lot of inland transactions between businesses are made at least partially with WIR money rather than CHFs.

Why do you suppose that system of money issuance is used in Switzerland? Could it be because the Swiss state allows it to be so? However, if that state did not allow it to be so, it would not exist would it.

What do you do, wise eagle, if your state does not allow such forms of money to exist? Take a look at the history of attempts to introduce local forms of money in this country, wise eagle, and see what the state has done in response.

The question that pacifists such as yourself must ultimately face is what are you prepared to in the face of an intransigent ruling elite who set the system up such that you have no choice but to use their debt based money system as long as they call the shots.

If, from the outset, you rule out in principle even the possibility of enforcing change, you are condemend to the potential for permanent servitude.

Thanks, but no thanks

Edited by Steve Cook

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I think everyone's overlooking the valuable service the banks provide in the intelligent allocation of capital. Without their wisdom and insight the economy might be in a right mess today.

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Guest Steve Cook

I think everyone's overlooking the valuable service the banks provide in the intelligent allocation of capital. Without their wisdom and insight the economy might be in a right mess today.

:lol:

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Why do you suppose that system of money issuance is used in Switzerland? Could it be because the Swiss state allows it to be so? However, if that state did not allow it to be so, it would not exist would it.

I don't think Switzerland explicitly allows it, rather it's not forbidden, so it's allowed.

Take a look at the history of attempts to introduce local forms of money in this country, wise eagle, and see what the state has done in response.

TBH, I don't know what the legal situation with regards to an exchange system in the UK is (I know there are LETS in the UK which are essentially the same thing but at a much smaller local level), remember the WIR bank doesn't issue any paper money, all WIR money only exists on the accounts of the members and is only transferred among them.

I would be interested in knowing if such a system would be legal or not in the UK.

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Guest Steve Cook

I don't think Switzerland explicitly allows it, rather it's not forbidden, so it's allowed.

TBH, I don't know what the legal situation with regards to an exchange system in the UK is (I know there are LETS in the UK which are essentially the same thing but at a much smaller local level), remember the WIR bank doesn't issue any paper money, all WIR money only exists on the accounts of the members and is only transferred among them.

I would be interested in knowing if such a system would be legal or not in the UK.

The relationship between LETS and the inland revenue can be summed up in the following way.

If the LETS system in operation does not confer any kind of profit to the individuals using it (in other words, if you are not using such a monetary system to actually conduct real world economic transactions), then the inland revenue is not interested. If on the other hand, the individuals using the LETS system use it in any way that does represent a real world economic activity, then they are not allowed to use it and are instructed to use sterling instead.

Or, put more succinctly, if a LETS system, at any time represent a real, functional alternative to sterling, you are not allowed to use it

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I think everyone's overlooking the valuable service the banks provide in the intelligent allocation of capital. Without their wisdom and insight the economy might be in a right mess today.

:lol:

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Re LETS, mutual credit is a fine idea and concept, but when you're competing against banks with access to central bank money, government deposit guarantees and 'too big to fail' government bailout guarantees, how can you compete?

It's not that there aren't good and worthy alternatives, it's the fact that the competition has such an unfair advantage.

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Re LETS, mutual credit is a fine idea and concept, but when you're competing against banks with access to central bank money, government deposit guarantees and 'too big to fail' government bailout guarantees, how can you compete?

It's not that there aren't good and worthy alternatives, it's the fact that the competition has such an unfair advantage.

Agreed,

LETS systems have also attracted the 'funding vultues' to pretend to regen. areas, damaging its credibility further. The deepening crisis may force barter economy on us, so make it work.

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Re LETS, mutual credit is a fine idea and concept, but when you're competing against banks with access to central bank money, government deposit guarantees and 'too big to fail' government bailout guarantees, how can you compete?

It's not that there aren't good and worthy alternatives, it's the fact that the competition has such an unfair advantage.

LETS in general are examples of debt-free, collectively issued, persistently circulating currencies. As such they have almost zero existential cost to their community of users.

As far as I know none of them is lent exclusively and at interest to its community of users by a commercial issuer.

After all, who in their right mind would organize such an obviously exploitative means of exchange? :blink:

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Well said, what surprises me is that even on this forum most people don't wanna listen when I point this out in other threads.

Our debt-based, commercially issued money supply is the elephant in the room, without removing it nothing will ever really improve.

I agree - the fundamental problem is that without debt we would have no money supply, since every penny has to be borrowed into existence by someone, somewhere from the commercial banking system. If everyone were suddenly to have the means and desire to pay back their debts, we would have no purchasing power whatsoever. It's our abject dependence upon the banks for our money supply, not their size, which makes them "too big to fail".

There is currently a Bill being circulated to MPs which shows how we could escape from the stranglehold of the banks.

The Bank of England (Creation of Currency) Bill 2010 is "a reform that could prevent a future financial crisis, clear the national debt, and restart the economy". This Bill establishes the following Universal Principle:

"Throughout the entire banking and deposit taking system, and its entire deposit taking, money handling, safe keeping, loan making, and repayment process, every credit to an account must be matched by an equal debit from a different account." (This is, in fact, what many people wrongly assume to be the case already.)

Only the Bank of England would be exempt from this Universal Principle, giving it a monopoly over the creation of new non-cash money. This would nationalise the UK's money supply without nationalising the banks, which would continue to be private businesses, competing in the market place for lending and borrowing already existing money.

Enactment of the Bill would complete the process begun by the Bank Charter Act of 1844. Recognising that notes of credit from private banks had effectively become money, this conferred upon the Bank of England the exclusive right to issue banknotes. From that time on, it was as illegal for commercial banks to print notes as it was for them to forge coins.

The clear intention of the Bank Charter Act was to stabilise the money supply by nationalising it. However, those good intentions have long been overtaken by the proliferation of non-cash money, which now accounts for 97% of the total money stock, and which, at present, can only come into existence in the form of loans from the banks to their preferred customers - ie, those whose purposes (frequently speculative, rather than productive) offer the best prospect of financial return to the lenders.

By recognising that the nation's means of exchange is a public utility, which should rightly be administered by a publicly-accountable body, the Bill proposes a way out of the present impasse. With a stable money supply, immune from the fluctuation of interest rates, it would be possible to focus on the real purpose of an economy, which is not to multiply financial units at the expense of real wealth creation, but to produce and distribute life-sustaining and life-enhancing goods and services.

The new, nationalised money supply, created without debt at source by a non-political public authority with a specific mandate (along the lines of the MPC), would be spent into circulation as decided by the elected government. Once in the market place, it would circulate in the normal way, offering an improved source of independent capital formation without the need to go into the red.

The Bank of England (Creation of Currency) Bill 2010 is online at http://www.bankofenglandact.co.uk/, together with an explanatory section and FAQs.

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I agree - the fundamental problem is that without debt we would have no money supply, since every penny has to be borrowed into existence by someone, somewhere from the commercial banking system. If everyone were suddenly to have the means and desire to pay back their debts, we would have no purchasing power whatsoever. It's our abject dependence upon the banks for our money supply, not their size, which makes them "too big to fail".

....

The new, nationalised money supply, created without debt at source by a non-political public authority with a specific mandate (along the lines of the MPC), would be spent into circulation as decided by the elected government. Once in the market place, it would circulate in the normal way, offering an improved source of independent capital formation without the need to go into the red.

The Bank of England (Creation of Currency) Bill 2010 is online at http://www.bankofenglandact.co.uk/, together with an explanatory section and FAQs.

Yeah okay.

No thanks - massively inflationary. Expensive money. Massive transfer of wealth to the State.

I'll take my chances with gold specie over this.

Edited by Alan B'Stard MP

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Guest Steve Cook

Yeah okay.

No thanks - massively inflationary. Expensive money. Massive transfer of wealth to the State.

I'll take my chances with gold specie over this.

agreed

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No thanks - massively inflationary. Expensive money. Massive transfer of wealth to the State.

Hi Alan & Steve

Could you please justify your three criticisms above?

edit: Steve Cook added

Edited by The Spaniard

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Hi Alan

Could you please justify your three criticisms above?

The State gets to introduce all new money into the economy. They and their service providers get all the benefit. If an elected democratic government - they will promise the moon. If they promise the moon they will introduce a lot of money. The third, fourth, fifth etc etc recipients of this money are merely being robbed. With the amounts of money government will need to pump into the economy - the holders of existing money will demand higher payment to lend for investment. Once capacity is reached everything else is inflationary.

One thing for say for bonded spending is that it takes an equal amount of money out of circulation.

This system does nothing to balance default and bad investment.

It will be repudiated in short order.

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Guest Steve Cook

The State gets to introduce all new money into the economy. They and their service providers get all the benefit. If an elected democratic government - they will promise the moon. If they promise the moon they will introduce a lot of money. The third, fourth, fifth etc etc recipients of this money are merely being robbed. With the amounts of money government will need to pump into the economy - the holders of existing money will demand higher payment to lend for investment. Once capacity is reached everything else is inflationary.

One thing for say for bonded spending is that it takes an equal amount of money out of circulation.

This system does nothing to balance default and bad investment.

It will be repudiated in short order.

What he said

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The State gets to introduce all new money into the economy. They and their service providers get all the benefit. If an elected democratic government - they will promise the moon. If they promise the moon they will introduce a lot of money. The third, fourth, fifth etc etc recipients of this money are merely being robbed. With the amounts of money government will need to pump into the economy - the holders of existing money will demand higher payment to lend for investment. Once capacity is reached everything else is inflationary.

One thing for say for bonded spending is that it takes an equal amount of money out of circulation.

This system does nothing to balance default and bad investment.

It will be repudiated in short order.

I was asking for your specific reasoning behind your three previous criticisms:

1) Massively inflationary.

2) Expensive money.

3) Massive transfer of wealth to the State.

In answer to your further remarks:

The proposal is that the Monetary Authority is a-political. The politicians will give it inflationary targets but thereafter have no control over money issuance.

Assuming reasonable economic growth of no more than a few percent per annum, core uncontroversial State spending will easily outweigh the balancing (price inflation neutral) new money to be spent into circulation. Taxation will bridge the gap. All else equal less taxation, so if anything less State wealth, the opposite of what you suggest.

Generally, whoever gets first use of new money has the advantage of pre-inflationary purchasing. Better that this (limited) advantage is shared implicitly by everyone through State spending rather than through whatever particular spending a commercial issuer chooses.

Defaults will be defaults and bad investors and lenders will take the hit from their bad own decisions.

As for bonded spending this is demonstrably an ever-inflating process, quite the opposite of what you imply.

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  • 140 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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