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Bill Still On The Keiser Report


Harry Sacks
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No, credit is never the same as money*. Credit is always more risky, as it's only a promise to return money, rather than money itself. You can trade these promises, but they're still not money... they're always just promises of money.

Also, there is less demand for bank promises of money. That's why you get bank runs. That's because a failing bank may break its promise to repay any money it owes you.

* As base fiat money, gold, silver etc.

Money in the hand is different from a promise to repay money. Money in the hand is money you actually have. Money in the bank is a promise to repay the money. It's a logic fail to not understand the difference.

As the saying goes, one (pound) in the hand, is worth two (or more) in the bush (bank).

Yes but in the real world (at least up to now) failing banks have been vanishingly rare, so credit amounts to the same for all but you, Injin etc. Tell you what, I'll give you £950 in cash (or gold if you prefer) for every £1000 you may have in savings in a bank account. Not snatching my arm off to take up my offer? Aw, pity, I could have made an easy 5% profit there. Obviously you only believe in this nonsense at a strictly abstract theoretical level, that's understandable...

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Yes but in the real world (at least up to now) failing banks have been vanishingly rare, so credit amounts to the same for all but you, Injin etc. Tell you what, I'll give you £950 in cash (or gold if you prefer) for every £1000 you may have in savings in a bank account. Not snatching my arm off to take up my offer? Aw, pity, I could have made an easy 5% profit there. Obviously you only believe in this nonsense at a strictly abstract theoretical level, that's understandable...

Yes - but it's precisely in the case of a bank run situation that the distinction between credit with the bank and real money really matters so why would anyone trade bank credit at a discount for cash in the hand outside of this scenario happening or looking imminent?

Offer that cash to someone after their bank has folded or a 'bank holiday' has been announced and they'll bite off your hand.

How unlikely is such a scenario to happen, well we came within hours of it in the UK just 3 years ago.

UK banking system 3 hours from collapse

Britain was just three hours away from going bust last year after a secret run on the banks, one of Gordon Brown's Ministers has revealed.

City Minister Paul Myners disclosed that on Friday, October 10, the country was 'very close' to a complete banking collapse after 'major depositors' attempted to withdraw their money en masse.

The Mail on Sunday has been told that the Treasury was preparing for the banks to shut their doors to all customers, terminate electronic transfers and even block hole-in-the-wall cash withdrawals.

Only frantic behind-the-scenes efforts averted financial meltdown.

... and people were willing to take a hit on the nominal value of their desposits to get their money out of the banking system:

Bloomberg

Jan. 24 (Bloomberg) -- The U.K. banking system was within three hours of collapse on Oct. 10, days before the government announced a bailout for banks, City Minister Paul Myners told the Times newspaper in an interview.

Major depositors tried to withdraw from a number of large banks, and were willing to pay penalties for early withdrawal, the newspaper cited Myners as saying.

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Yes but in the real world (at least up to now) failing banks have been vanishingly rare, so credit amounts to the same for all but you, Injin etc.

Vanishingly rare? How many banks have had to be bailed out recently? How many are about to fail across Europe and beyond? A hard lesson in what credit is, is about to be taught.

Take a look here: http://ml-implode.com/ (ht to the the person who bumped the post on the forum... from 2007... :lol: )

Tell you what, I'll give you £950 in cash (or gold if you prefer) for every £1000 you may have in savings in a bank account. Not snatching my arm off to take up my offer? Aw, pity, I could have made an easy 5% profit there.

Why would I do that? I can withdraw the whole £1000 out today. I tell you what though, if you want to offer me the deal the day my bank fails, I'll snatch your hand off*!

* Not that I would be dumb enough to leave any large quantity of money in a bank at the moment.

Obviously you only believe in this nonsense at a strictly abstract theoretical level, that's understandable...

Oh, it's very real and it's unfolding in front of your eyes. Enjoy the show!

Edited by Traktion
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Vanishingly rare? How many banks have had to be bailed out recently? How many are about to fail across Europe and beyond? A hard lesson in what credit is, is about to be taught.

Take a look here: http://ml-implode.com/ (ht to the the person who bumped the post on the forum... from 2007... :lol: )

Why would I do that? I can withdraw the whole £1000 out today. I tell you what though, if you want to offer me the deal the day my bank fails, I'll snatch your hand off*!

* Not that I would be dumb enough to leave any large quantity of money in a bank at the moment.

Oh, it's very real and it's unfolding in front of your eyes. Enjoy the show!

When I said vanishingly rare I meant to date, and 'failed and were not bailed out and people lost their money'. So timing is everything. You admit you can withdraw the whole £1000 today so therefore TODAY credit is demonstrably the same as cash. I agree with you a storm is coming, banks may fail, and your point about credit not being the same as cash will hold true at that point. If it happens in the UK it will be the first time in around 150 years, so with that history it's hardly surprising that people still contend that credit is the same as cash. In living memory it is.

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When I said vanishingly rare I meant to date, and 'failed and were not bailed out and people lost their money'. So timing is everything. You admit you can withdraw the whole £1000 today so therefore TODAY credit is demonstrably the same as cash. I agree with you a storm is coming, banks may fail, and your point about credit not being the same as cash will hold true at that point. If it happens in the UK it will be the first time in around 150 years, so with that history it's hardly surprising that people still contend that credit is the same as cash. In living memory it is.

The possibility of having done something is not the same as having done it.

In this worl, other than in banking we pay on performance of contract, not on possibility of it.

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Strictly practical actually.

The governments re-wrote the rules on the hoof in 2008 and have saddled the tax payers of many countries with the results of that. Lower wages, pensions, public sector services etc.

Depositors and bond holders saved but tax payers hit...including our children and their children's children before that act of largesse is paid off.

Their policy hasn't been about how do we get out of this but deciding who pays the bills.

We have many years of pain left and we are at a dangerous stage where some sovereigns cannot pay their own debts, and if they can't pay their own debts they cannot save their banks. It now relies on the largesse of other countries' tax payers which is much harder to rely on.

Well not strictly practical because to be that you would demonstrate that credit had been proved non-interchangeable with cash - and that hasn't happened yet. I totally deplore the casting of bailout debts onto future generations, though I suspect many of the taxpayers who will be paying the debts would have lost money if the banks had been allowed to fail, not just depositors and bondholders. On a genuine point of interest, exactly what rules were rewritten in 2008?

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When I said vanishingly rare I meant to date, and 'failed and were not bailed out and people lost their money'. So timing is everything. You admit you can withdraw the whole £1000 today so therefore TODAY credit is demonstrably the same as cash.

Just because banks fail infrequently, it doest't mean you can discount it. As bank failure can wipe out deposits, knowing this information means that you should plan accordingly.

Additionally, it's not really even a black swan event. You could see the leverage. You could see the malinvestment. The warning signs were flashing for years before the 2008 crisis occurred.

Even if a layman didn't know this, why on Earth did the government not do anything or tell them? In fact, why did they even plot the course in the first place?

I agree with you a storm is coming, banks may fail, and your point about credit not being the same as cash will hold true at that point. If it happens in the UK it will be the first time in around 150 years, so with that history it's hardly surprising that people still contend that credit is the same as cash. In living memory it is.

It would have happened years ago, if the government hadn't been busy bailing and burying its head in the sand. It looks like they've run out of unborn people to saddle the debt with now though, so I guess the bailing will have to cease and default will have to ensue.

Promises of money compared to having money in the hand isn't a complicated thing to explain. People used to know this, but they believed the nonsense spouted by the government about 'deposit guarantees' and 'regulation' solving all ills; such dangerous policy by the government has lead to this mess and people have every right to be angry about it.

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The possibility of having done something is not the same as having done it.

In this worl, other than in banking we pay on performance of contract, not on possibility of it.

I don't really understand what you contend has not been done (up till now). I receive my pay into the bank and I take it out. If that's the contract it's been honoured. The bank has been paid with the interest (prob next to nothing on most current accounts).

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I don't really understand what you contend has not been done (up till now). I receive my pay into the bank and I take it out. If that's the contract it's been honoured. The bank has been paid with the interest (prob next to nothing on most current accounts).

No, you don't recieve anything, the banks just tells you stuff has happened and you treat it as if it has.

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No, credit is never the same as money*. Credit is always more risky, as it's only a promise to return money, rather than money itself. You can trade these promises, but they're still not money... they're always just promises of money.

Also, there is less demand for bank promises of money. That's why you get bank runs. That's because a failing bank may break its promise to repay any money it owes you.

* As base fiat money, gold, silver etc.

Money in the hand is different from a promise to repay money. Money in the hand is money you actually have. Money in the bank is a promise to repay the money. It's a logic fail to not understand the difference.

As the saying goes, one (pound) in the hand, is worth two (or more) in the bush (bank).

There's this thing called the bond market...

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The difference between bank credit and actual money will become obvious in the event of a collapsed bank (if you were a creditor) or a 'bank holiday' which is likely to be mandated in the wake of such a collapse and would affect all banks. Of course up until that point, "all is fine".

Argentina in early 2002 is a good example of this:

13th May 2002

20th April 2002

23rd April 2002

That's not what I'm disputing.

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Thanks to the internet, the information is already out there and accessible with a bit of effort and mental work but people seem to be largely unconcerned with informing themselves about what is probably the single most important factor throughout their lives, money.

My experiences with the general (and not so general) public strongly confirm your observations.

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When a central bank purchases a government bond from the primary markets is that money or credit?

That's printing money.

It also has nothing to do with the way the banking system works. The banking system can make promises to repay any sort of money, whether fiat (which can be printed), gold, silver, cabbages or whatever people want. These monies emanate from outside of the banking system.

Why are you erecting this straw man? If you want to talk about how fiat money operates, that is a different debate to how the banking system works.

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That's printing money.

It also has nothing to do with the way the banking system works. The banking system can make promises to repay any sort of money, whether fiat (which can be printed), gold, silver, cabbages or whatever people want. These monies emanate from outside of the banking system.

Why are you erecting this straw man? If you want to talk about how fiat money operates, that is a different debate to how the banking system works.

If I withdraw cash on my credit card is that money or credit?

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No, you don't recieve anything, the banks just tells you stuff has happened and you treat it as if it has.

Of course I receive something. My company sells goods and has hard cash revenue, they credit my account monthly as an employee. If I wish I can go along and take it all out in cash. Where is the deceit? It appears a perfectly normal transaction to ma and the millions of other people in the same situation. You need to explain properly what the problem is here. Should my company be taking out shedloads of cash and employing loads of security vans and personnel to dole it out in readies in 20 different currencies to the 70,000 employees?

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Of course I receive something. My company sells goods and has hard cash revenue, they credit my account monthly as an employee. If I wish I can go along and take it all out in cash. Where is the deceit? It appears a perfectly normal transaction to ma and the millions of other people in the same situation. You need to explain properly what the problem is here. Should my company be taking out shedloads of cash and employing loads of security vans and personnel to dole it out in readies in 20 different currencies to the 70,000 employees?

Falling for a con is not the same as something happening.

"Credit your account" just means some banker somewhere has had a little dream about cash changing hands.

Nothing in the real world has happened.

Dunno about you, but I like my contracts actually performed before I pay up for them. Yes, people should actually have the cash. Any accounting should actually tie 1:1 with cash. Most people in fact think that it does.

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Falling for a con is not the same as something happening.

"Credit your account" just means some banker somewhere has had a little dream about cash changing hands.

Nothing in the real world has happened.

Dunno about you, but I like my contracts actually performed before I pay up for them. Yes, people should actually have the cash. Any accounting should actually tie 1:1 with cash. Most people in fact think that it does.

But money has changed hand - it moved from the person who bought the goods through to my payslip via all the usual channels, but you see a massive conspiracy even in this fairly straightforward logistic. So we'll go back to the hugely inefficient cash nexus, and abandon international money transfers. I work and I receive cash (albeit via an ATM), my bills get paid. How has my bank deceived me ?

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But money has changed hand - it moved from the person who bought the goods through to my payslip via all the usual channels, but you see a massive conspiracy even in this fairly straightforward logistic. So we'll go back to the hugely inefficient cash nexus, and abandon international money transfers. I work and I receive cash (albeit via an ATM), my bills get paid. How has my bank deceived me ?

No money has changed hands.

It's really easy - and so easy that the mind rebels at it, as others have famously have said.

Looks, try it with some item you dn't jhave this hypnotic reaction to.

You ask Dave to give Jim a mop and bucket for you. Dave says "ok sure", and writes it down that he has. That's all he does. He doesn't even have a mop and bucket.

Knowing this, what would your response be if Dave now asked you for a mop and bucket to "repay" your "debt"?

Mine is, and has been "do ****** off."

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But money has changed hand - it moved from the person who bought the goods through to my payslip via all the usual channels, but you see a massive conspiracy even in this fairly straightforward logistic. So we'll go back to the hugely inefficient cash nexus, and abandon international money transfers. I work and I receive cash (albeit via an ATM), my bills get paid. How has my bank deceived me ?

The only things that moved were promises of money. No actual money moved anywhere.

BTW, it's not just about paper money not moving, it's about digital fiat money (of the QE variety) not moving either. The only thing that happens, is a promise to repay one bank some money, is made to another. That's why you get a credit crunch, when banks stop trusting each others' promises.

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It is clearly credit. Just as a loan being advanced is credit.

Cash / base money is merely the thing that conveys value between accounts, it is the medium of settlement.

Credit is 'fungible' with cash...but it is not cash. A very important distinction when the time comes.

He asked if he 'withdrew cash'. He would then owe the bank money (he has made a promise to the bank), but he would have the money cash in his hand.

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