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Am I Missing Something?


Velgud

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HOLA441

That is precisely the point, the shop suddenly becomes property of the bank for a substantially lower cost zero cost actually. Remember when the banks create loans they are actually engaging in an illusion as there is no actual debt.

sorry Ken, but banks cant lend credit.

they lend money...which comes from the BoE in the case of the UK.

if they dont have it, they borrow it....from savers, investors and other money markets.

if they end up with the house on an unpaid debt, they are out of pocket...they then must sell the asset, otherwise they cant pay back the money they borrowed (course, in the event that they have thousands of deals, one default wont kill them but you can see the effect).

another way to hide this is to have their own shell company buy the house with capital from the bank itself...this means the bank has now cleared its loan and has a new interest in a property company with a house as its asset.

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HOLA442

You are partially right about it being perfect competition i.e. one party cannot raise prices against another because nobody has control over prices in perfect competition.

However you ignore buying and selling of shops and also the fact that those who are not in debt today may well have been in debt in the past.

There is also a petrol price thing as well whereby you will match what you can get away with, therefore the indebted people charge more, the non debt people charge a price similar to that and take it as extra profit instead. Which I suppose is the reward for the risk taken.

That can indeed be the case. However, this is seldom the case in real life.

I think it is more likely that the newcomer matches the existing players prices (and perhaps go bust after a year). I have not really seen any new shop opening and then charge a higher price. After all, there are supermarket selling oven-able/microwavable fish and chips.

Petrol prices is a bit different as well as the prices change weekly and there are more scope for manipulation. Chip prices tend to stay the same for a long time.

In fact, if I have a chip shop with debt paid off, I probably will offer 2 for 1 so to expedite the exit of the new shop if I know they are debt to the eyeball.

Sometimes ago a shop was complaining that Tesco do special offers when they open. Tesco of course said that the promotion was preplanned long ago. Tesco obviously did not raise price in this case as well.

Also, the newcomer is desperate to gain market share and selling at higher price to start with is a non starter.

To test the theory, one can open a coffee shop next to a starbuck and charges £10 per cup and see if Starbuck will raise price to match or the new shop will disappear soon.

Edited by easybetman
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HOLA443

if they dont have it, they borrow it....from savers, investors and other money markets.

if they end up with the house on an unpaid debt, they are out of pocket...they then must sell the asset, otherwise they cant pay back the money they borrowed (course, in the event that they have thousands of deals, one default wont kill them but you can see the effect).

Um banks aren't out of pocket because the money loaned never existed in the first place...

While a bank may have X amount of assets on the balance sheet you ask them to prove it they'll say no or they'll go to the BoE and get a batch printed off to prove they have it.

Sit tight Injin should be along to explain it with greater lucidity.

Edited by ken_ichikawa
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HOLA444
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HOLA445

So who is going to be handing out these pay rises to UK employees?!

A weak government that needs to avoid civil unrest. Haven't Transport for London staff just got themselves a 17% increase spread over 3 years (assuming RPI at 5%....more if it increases)? More pay, higher prices, and the BoE printing more money..............there is no other way to protect house prices, and no one is going to let these fall without a fight. More borrowing and more printing is all that's needed.

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HOLA446

You sure?

rbs50.jpg

Anyone can lend one of these. Of course houses can deviate slightly to one of these:

banknote.960705.jpg

But that depends on the parties involved.

Morning B'stard, we had this chat some time ago....each scottish note is backed by a BoE £, so its really the same with a different logo.

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HOLA447

Um banks aren't out of pocket because the money loaned never existed in the first place...

While a bank may have X amount of assets on the balance sheet you ask them to prove it they'll say no or they'll go to the BoE and get a batch printed off to prove they have it.

Sit tight Injin should be along to explain it with greater lucidity.

they cant lend you credit...end of....only BoE money will do.

and yes, they can get money from the BoE if they have a balance in their favour. otherwise, they borrow it.

For proof.....ask yourself why they had a "liquidity" crisis officially, and not a "solvency" crisis ( the truth). Liquidity means cash, or means of settling a commitment.

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HOLA448

if they end up with the house on an unpaid debt, they are out of pocket...they then must sell the asset, otherwise they cant pay back the money they borrowed (course, in the event that they have thousands of deals, one default wont kill them but you can see the effect).

another way to hide this is to have their own shell company buy the house with capital from the bank itself...this means the bank has now cleared its loan and has a new interest in a property company with a house as its asset.

Which is fine until they want the taxpayer to pick up the bad loans and the CDO (squares).

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HOLA449

they cant lend you credit...end of....only BoE money will do.

and yes, they can get money from the BoE if they have a balance in their favour. otherwise, they borrow it.

For proof.....ask yourself why they had a "liquidity" crisis officially, and not a "solvency" crisis ( the truth). Liquidity means cash, or means of settling a commitment.

If the buyer and seller both bank at the same bank?

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HOLA4410
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HOLA4411

I would but its a £70 book on amazon!

"When Money Dies" has just been reprinted. A new paperback is about £10.

And is well worth reading.

Ultimately, the source of hyper-inflation is the desire of an overburdened government to avoid public unrest, rioting, hardship, AND the danger of extremist agitation arising from high rates of unemployment and poverty. The overwhelming need of the wartime German to obtain funds, and of the Weimar government to void hardship, and unemployment led to a policy of full employment, with industry subsidised by the government. The fear of communist insurrection led to the government and industry giving in to all union demands for wages to be increased in line with increase of costs of living. Remember that this was only a few years after the Russian revolution and the formation of the USSR. As the extremists on the left and right rose in power, it became more and more critical for the government to maintain law and order, and hence to pay whatever people required. The physical printing of money because a major logistic challenge.

A more interesting comparison to the UK is the Austrian hyperinflation which preceded the Weimar hyperinflation by a couple of years. Th Austro-Hungarian empire was broken up by terms of the resolution of WW1 and the residual Austrian state had all of the bureaucracy, administration and overheads of the empire, but not the wealth or food generative resources (e.g. the agricultural plains of Hungary) hence it was, to all intends and purposes, and unviable state without wholesale econo-social restructuring. Which was never going to be acquiesed to by the leaders or the population in a democracy. Hence the overwhelming public sector burden and the loss of funding from external debt markets, led to the government just printing to cover costs to pay workers. But there was real scarcity of food, and so food prices rode dramatically at a rate in excess of wage increases, leaving people destitute and starving, nonetheless.

When it becomes a political necessity for a government to raise public sector wages to avoid national unrest and anarchic political instability, when there becomes a real risk of 'blood on the streets', then inflationary monetisation of the deficit will happen, whatever is said about the 'independence' of a central bank. No central bank is independent in a state of emergency.

It will be interesting to see what happens in Greece. I suspect that, at some point, the Greek government will try have to augment the austerity policy based reductions of workers wages (in Euros) with some sort of promissory notes (Deferred Obligations of the Government Scrip - DOGS) and will try and pretend that DOGS are a sort of parallel currency. Over time, DOGS will start to make a greater and greater proportion of wages, and the government runs out of cash. Of course DOGS will plummet in value in Euro terms, and one will eventually see hyperinflation of DOGS, and the de-Euro-isation of the Greek public sector.

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HOLA4412
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HOLA4413

My money's on a default.

Of course, I picked my bookie wisely.

Mr B'Stard, I read your posts with intrigue and normally a large amount confusion ...

I think this is the first post of yours which clearly states your view (that I have read and understand).

Is this your view and if so do you see default as the solution / endgame for this everywhere or is it only Greece that are lucky enough to follow this path?

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HOLA4414

Mr B'Stard, I read your posts with intrigue and normally a large amount confusion ...

I think this is the first post of yours which clearly states your view (that I have read and understand).

Is this your view and if so do you see default as the solution / endgame for this everywhere or is it only Greece that are lucky enough to follow this path?

I think when one goes - they will all go.

Who is the weakest link?

Edit: Yes, default is the only solution.

Edited by Alan B'Stard MP
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HOLA4415
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HOLA4416

If the buyer and seller both bank at the same bank?

then the loan book increases for one, and the debt book increases for the other.

settlement is in the daybooks.

the limit for this transaction is in the Capital Ratios...so if the bank is at or near its legal limit, they would STILL need to make up the capital...because....the seller may actually want to spend his newly gained cash...maybe elsewhere.

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HOLA4417
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HOLA4418
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HOLA4419
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HOLA4420

then the loan book increases for one, and the debt book increases for the other.

settlement is in the daybooks.

Settlement? It's your bank. You only have to be funded and balance yourself.

the limit for this transaction is in the Capital Ratios...so if the bank is at or near its legal limit, they would STILL need to make up the capital...because....the seller may actually want to spend his newly gained cash...maybe elsewhere.

I don't understand. A bank can't borrow capital unless someone is buying equity?

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HOLA4421

But I believe that the government will only realise that after the testing of the currency to destruction.

Maybe. Time will tell. I can't see it myself.

Lots of misguided people at the top - but not many dik darstardlies I think.

If it does - I don't think it will be policy - just happenstance.

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HOLA4422

Settlement? It's your bank. You only have to be funded and balance yourself.

I don't understand. A bank can't borrow capital unless someone is buying equity?

point 1....you are looking at the transaction in isolation....the seller now has money to spend...the bank has to find the money if he decides to spend any.

banks deal with millions of transactions every day.

they total them all up at the end of the day and either deposit at the BoE, or borrow from somewhere to balance it all.

in the old days, they used to move piles of gold around the vaults at the bank of England.

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HOLA4423
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HOLA4424

point 1....you are looking at the transaction in isolation....the seller now has money to spend...the bank has to find the money if he decides to spend any.

banks deal with millions of transactions every day.

they total them all up at the end of the day and either deposit at the BoE, or borrow from somewhere to balance it all.

in the old days, they used to move piles of gold around the vaults at the bank of England.

Yes.

That's why I don't pass it as fact.

It's unknown. Just deal with what you know and provide commentary thereof.

You write a loan - what follows cannot be prescribed unless you know the surplus.

Edited by Alan B'Stard MP
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HOLA4425

Yes.

That's why I don't pass it as fact.

It's unknown. Just deal with what you know and provide commentary thereof.

You write a loan - what follows cannot be prescribed unless you know the surplus.

I DO know they ran out of cash. or didnt you hear?

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