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Money For Nothing


Setantii
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Al Jazeera recently aired a short program which explains how banks create money out of nothing when they make a loan - pity there aren't any UK broadcasters willing to expose this fact to the general public.

http://www.aljazeera.com/programmes/countingthecost/2012/08/20128410162559268.html

Conservative economic thinking - cuts and austerity for the plebs - leads to a shrinking of the money supply and a collapse of the system.

Labour economic thinking - more government debt - would merely kick the debt time bomb down the road for a few more years till is finally dawns on people that these debts are unpayable leading to a collapse of the system.

When will somebody in power address the real economic problem, namely our debt based monetary system?

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When will somebody in power address the real economic problem, namely our debt based monetary system?

Just as soon as the elite Zionist families have swallowed up 85% of the worlds real assets and resources, driven the world into bankruptcy and global warfare, and cornered the gold market....then we will have some collection of glove puppet politicians advocating a new system based on hard money, where the world government will have to purchase the PMs to form the basis of this hard money system from the Zionist bankers, but since the world will be broke, the world government and the populations it controls will have to become debt peons to the elites.

The credit creation multiplier is no dark secret. Its in every 'A' level economics text book. I dont see any shady cabal trying to keep it under wraps.

You my friend, clearly have not slightest idea what you are talking about. Most students of economics can go through a university course only to come across no more than a few vague references to the 'credit multiplier'. I myself have read through volumes of economics books written by authors who are critical of the system, yet who fail to address the 'credit multiplier' issue. The whole thing with private banks creating 97% of our money out of thin air is a highly taboo subject that most in the mainstream dont like to talk about. Perhaps it is a bit like nobody wanting to talk about the paedo uncle who keeps touching up all the families bairns? It will certainly be known about by some, but since nobody likes to talk about it, everybody in the know acts like it isn't happening leaving those not in the know totally incredulous.

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Just as soon as the elite Zionist families have swallowed up 85% of the worlds real assets and resources, driven the world into bankruptcy and global warfare, and cornered the gold market....then we will have some collection of glove puppet politicians advocating a new system based on hard money, where the world government will have to purchase the PMs to form the basis of this hard money system from the Zionist bankers, but since the world will be broke, the world government and the populations it controls will have to become debt peons to the elites.

You my friend, clearly have not slightest idea what you are talking about. Most students of economics can go through a university course only to come across no more than a few vague references to the 'credit multiplier'. I myself have read through volumes of economics books written by authors who are critical of the system, yet who fail to address the 'credit multiplier' issue. The whole thing with private banks creating 97% of our money out of thin air is a highly taboo subject that most in the mainstream dont like to talk about. Perhaps it is a bit like nobody wanting to talk about the paedo uncle who keeps touching up all the families bairns? It will certainly be known about by some, but since nobody likes to talk about it, everybody in the know acts like it isn't happening leaving those not in the know totally incredulous.

The creation of money through credit is well known to readers of this forum, though I don't think most of the public grasp the idea.

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Just as soon as the elite Zionist families have swallowed up 85% of the worlds real assets and resources, driven the world into bankruptcy and global warfare, and cornered the gold market....then we will have some collection of glove puppet politicians advocating a new system based on hard money, where the world government will have to purchase the PMs to form the basis of this hard money system from the Zionist bankers, but since the world will be broke, the world government and the populations it controls will have to become debt peons to the elites.

You my friend, clearly have not slightest idea what you are talking about. Most students of economics can go through a university course only to come across no more than a few vague references to the 'credit multiplier'. I myself have read through volumes of economics books written by authors who are critical of the system, yet who fail to address the 'credit multiplier' issue. The whole thing with private banks creating 97% of our money out of thin air is a highly taboo subject that most in the mainstream dont like to talk about. Perhaps it is a bit like nobody wanting to talk about the paedo uncle who keeps touching up all the families bairns? It will certainly be known about by some, but since nobody likes to talk about it, everybody in the know acts like it isn't happening leaving those not in the know totally incredulous.

ERROR

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The creation of money through credit is well known to readers of this forum, though I don't think most of the public grasp the idea.

I was replying to Joboxer who said that the credit multiplier was basic stuff taught out of any high school economics text book. Well, he is fkn wrong. It isn't even taught at university level, or at least it wasn't when I was there ten years ago.

If there is increasing public awareness on the subject of money creation then it is thanks to the internet allowing fringe voices to be heard by those who are willing to listen. Even critics of the monetary system (that get in the public spotlight), who complain about too much debt and money printing, always cop out and blame the situation on government 'money printing' etc.

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I was replying to Joboxer who said that the credit multiplier was basic stuff taught out of any high school economics text book. Well, he is fkn wrong. It isn't even taught at university level, or at least it wasn't when I was there ten years ago.

If there is increasing public awareness on the subject of money creation then it is thanks to the internet allowing fringe voices to be heard by those who are willing to listen. Even critics of the monetary system (that get in the public spotlight), who complain about too much debt and money printing, always cop out and blame the situation on government 'money printing' etc.

I can recall the credit multiplier being discussed in the basics level Economics text books. I believe it was even on my HND syllabus!

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I was replying to Joboxer who said that the credit multiplier was basic stuff taught out of any high school economics text book. Well, he is fkn wrong. It isn't even taught at university level, or at least it wasn't when I was there ten years ago.

Where were you taught?

This was in GCSE Economics in '95.

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Where were you taught?

This was in GCSE Economics in '95.

It wasn't.

What is taught in economics classes is that banks take deposits and then leverage them.

It isn't taught that banks have no need for deposits as they can extend credit - and for good reason, any sane person who knows this has no need to make "repayment."

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It wasn't.

What is taught in economics classes is that banks take deposits and then leverage them.

It isn't taught that banks have no need for deposits as they can extend credit - and for good reason, any sane person who knows this has no need to make "repayment."

Thankyou Please!

If there is one thing I hate, it is when people take knowledge which has come to them only very recently and start acting like 'they knew it along' and tell everyone how 'they were taught all about collateralised debt obligations and the shadow banking system when they were in Kindergarten'......fkn t0ssers.

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The credit creation multiplier is no dark secret. Its in every 'A' level economics text book. I dont see any shady cabal trying to keep it under wraps.

+ 1

The creation of money through credit is well known to readers of this forum, though I don't think most of the public grasp the idea.

+ 1

I can recall the credit multiplier being discussed in the basics level Economics text books. I believe it was even on my HND syllabus!

+ 1

Where were you taught?

This was in GCSE Economics in '95.

+ 1

The banking system just increases the speed of money circulation, and as you increase its speed, it's like having more money. But it's the same money, created by the central banks.

The same happens with paper money, if a butcher and a fishmonger spend a fiver on each other just once a week, and then go up to twice a week, their "GDP" doubles. Same fiver, just twice as fast.

Same for our savings, being lent to others, and them buying a house, and the seller depositing it in another bank, and so forth. It's just circulation of the same money.

Also:

Money x Velocity = Prices x Quantities

Or: M x V = P x Q

Some links:

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

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

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

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

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

Edited by Tired of Waiting
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+ 1

+ 1

+ 1

+ 1

The banking system just increases the speed of money circulation, and as you increase its speed, it's like having more money. But it's the same money, created by the central banks.

The same happens with paper money, if a butcher and a fishmonger spend a fiver on each other just once a week, and then go up to twice a week, their "GDP" doubles. Same fiver, just twice as fast.

Same for our savings, being lent to others, and them buying a house, and the seller depositing it in another bank, and so forth. It's just circulation of the same money.

Also:

Money x Velocity = Prices = Quantities

Or: M x V = P x Q

Some links:

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

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

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

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

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

All awesome.

All wrong.

Banks extend credit, they don't lend money.

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The banking system just increases the speed of money circulation, and as you increase its speed, it's like having more money. But it's the same money, created by the central banks.

The same happens with paper money, if a butcher and a fishmonger spend a fiver on each other just once a week, and then go up to twice a week, their "GDP" doubles. Same fiver, just twice as fast.

-100.

Go and sit in the same corner as all the other dunces who seem to think they know the score. At least the others were smart enough not to say too much as to betray their ignorance.

P.S. If what you say is correct, why is there 37 times more money sitting in UK bank accounts than the central bank has on its reserve account with the BoE? Is the same money moving that fast that it appears to be in 37 different places at once?

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-100.

Go and sit in the same corner as all the other dunces who seem to think they know the score. At least the others were smart enough not to say too much as to betray their ignorance.

P.S. If what you say is correct, why is there 37 times more money sitting in UK bank accounts than the central bank has on its reserve account with the BoE? Is the same money moving that fast that it appears to be in 37 different places at once?

It's just the same pound, owed to 37 different people.

Works great as a financial system, until it doesn't.

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Amazingly there are even some people at the IMF now looking approvingly at full reserve banking:

http://www.imf.org/external/pubs/ft/wp/2012/wp12202.pdf

What would be the difference between a "full reserve banking" and the currently available banks safety deposit boxes?

Re. that working paper:

This Working Paper should not be reported as representing the views of the IMF. The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate.
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What would be the difference between a "full reserve banking" and the currently available banks safety deposit boxes?

Re. that working paper:

It wouldn't be fraudulent?

Cos you know, right now all the debts should be cleared due to fraud and all the "savings" rescinded due to idiocy.

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It's just the same pound, owed to 37 different people.

Works great as a financial system, until it doesn't.

Not to get into a philosophical discussion about what money is and what money isn't, that would mean that the banking system has made 37 promises to pay £1 for every £1 created by the BoE. Since however, what we all use to pay for goods and services is in fact 'bank credit' (apart from when we pay with BoE printed cash or Royal Mint coins), is it not fair to say that in our current economic system, that bank credit is money (that has been created out of thin air)?

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-100.

Go and sit in the same corner as all the other dunces who seem to think they know the score. At least the others were smart enough not to say too much as to betray their ignorance.

P.S. If what you say is correct, why is there 37 times more money sitting in UK bank accounts than the central bank has on its reserve account with the BoE? Is the same money moving that fast that it appears to be in 37 different places at once?

Please calm down, I am just trying to help you here.

This chart is very useful. For instance, with a higher reserve requirements (say 50%), the amount retained by each bank increases, and after a few transactions the multiplier dissipates. With lower reserve requirements, it last longer, and multiplies much more:

Fractional_reserve_lending_varyingrates_100base.jpg

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

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

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Not to get into a philosophical discussion about what money is and what money isn't, that would mean that the banking system has made 37 promises to pay £1 for every £1 created by the BoE. Since however, what we all use to pay for goods and services is in fact 'bank credit' (apart from when we pay with BoE printed cash or Royal Mint coins), is it not fair to say that in our current economic system, that bank credit is money (that has been created out of thin air)?

I really don't see what the problem is with that.

For me there are two issues with the whole system.

Firstly, the obvious one. The banks have leveraged the narrow to broad money supply too highly. Partly due to the poor regulation, partly due to some underhanded accounting by the banks (SIVs). This meant that money supply inflated way too much (and wasn't matched by wage inflation) and only a small percentage of the loans had to be defaulted to make the banks insolvent.

Secondly, the relationship between the deposits and loans. It's my understanding (and please correct if I'm wrong) that on a day to day basis the loans don't have to be backed by deposits. Eventually (month end?) they do, but this relationship means that loans tend to drive deposits, rather than opposite (as most would expect).

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