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terryturbojr

Why Would Money Exist Before I Borrowed It?

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People on here frequently moan about banks creating money out of thin air when one gets a loan but the more i think about it the more reasonable it .

Money is, amongst other thngs, effectively a numerical representation of the value of work, in this case mine, allowing me to exchange my output or my skills for the output or skills of someone else, or lots of other people.

By taking a loan, i'm saying i want to spend the output of my future work (represented by a numerical value of money) now, prior to doing the work i.e I'm taking my future work output, something which doesnt yet exist and bringing it forward to today. So until I decide to bring my output forward why would the money that represents it exist in this current time?

Also, it seems like I'm the one creating the money from thin air too, not the bank.

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The borrowing of money is just bringing forward the returns of your future wealth creation/earnings.

You agree to sign over part of your life to the banks in return.

Your future wealth creation/earnings does exist, in theory, but for some it will never materialise ( through ill health, laziness, fraud, death ) so the banks don't always get a return but over-all this will even out and they will be rewarded with a chunk of your wealth/earnings/life.

Hence why we see this desire to get people into the country by any means possible....sheep are worth money, To me it is evident that we're not living in some democratic society where the good of the many out-weight the good of the individual...we are living in a sheep farm.

A borrower would be better termed a debt slave.

Edited by TheCountOfNowhere

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People on here frequently moan about banks creating money out of thin air when one gets a loan but the more i think about it the more reasonable it .

...

Also, it seems like I'm the one creating the money from thin air too, not the bank.

Not entirely sure what you're getting at here.

I agree with the idea that you take a loan to "spend the output of my future work" but banks cannot make money out of thin air (by themselves.) There are certain criteria that must be satisfied for the creation of money to take place:

1. There must be a party willing to sign the loan (borrower.)

2. The borrower must be deemed creditworthy by the bank (i.e. will repay loan.)

3. The bank may have to satisfy capital regulatory requirements (which I won't discuss further because I find them a bit confusing.)

At the point of making the loan, the bank writes an asset and a liability into its books:

- Asset is the loan/debt

- Liability is the cash issued to borrower.

Obviously, the loan/debt vaue will be greater than the cash value and the bank hopes to profit on this after future operating costs.

The main gripe about this type of banking is that the more loans the banks issues, then the greater their profits so they need to find a safe way to make lots of loans. Generally banks try to avoid risk by securing rights to assets that can be confiscated if a loan goes bad. It turns out that the easiest type of loan security is against residential property so ... we have a system that encourages banks to create loads of new money for property loans.

What could possibly go wrong? And when the banks do get into trouble, we seem to have to bail them out. And we have no choice but to play this wonderful game because we have to live somewhere i.e. choose between renting or playing the property market.

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+1

Borrower is in collusion with the bank when creating money (out of thin air)which is based on a promise to pay in the future.It is in the '"human"nature to exaggerate (amongst other bad things),hence this promise (which is based on some other promises) is just one of many other promises to repay the future money.Eventually the whole chain of promises is really one hugely exaggerated promise to pay in the future which collapses even if one link (promise) fails to materialise.

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I should have added that I don't think this system is without fault and it isn't a defence of it. More that the idea of money appearing from nothing when a loan is made, an idea that initially shocked me, after lots of thinking about it now seems perfectly logical.

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I should have added that I don't think this system is without fault and it isn't a defence of it. More that the idea of money appearing from nothing when a loan is made, an idea that initially shocked me, after lots of thinking about it now seems perfectly logical.

fruit trees appear from nothing.

steel too.

money is no different. It is a construct, manufactured to represent something of value. It is created when a person wishes to convert a thing of value he has, say a ounce of gold, but the value of the gold is way more than the things he wishes to purchase,

the note/coins handed out as the loan are a symbol of the ounce of gold...this process is called monetisation, ie, converting the wealth into a portable means of exchange.

This is normally carried out by the vehicle of a loan...ie the wealth owner says to the monetiser, please take my wealth as guarantee that I will repay you your means of exchange.

So we have two parts to this deal....the contract between monetiser and wealth owner of the pledge of the wealth, and the contract between wealth owner and monetiser to return the means of exchange at some period in the future. In the UK, these two aspects are usually in one contract, in the US the two parts are often separate, especially for mortgages, as the property aspect needs to be a publicly notarised contract by law.

Yes, money is entirely manufactured, just like a car or toothbrush....but I woudnt go so far as to suggest it is a product in the same sense of the car or toothbrush...the notes are, but the loans that create the value certainly arent.

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I should have added that I don't think this system is without fault and it isn't a defence of it. More that the idea of money appearing from nothing when a loan is made, an idea that initially shocked me, after lots of thinking about it now seems perfectly logical.

Money doesn't appear from nothing when a loan is made - bank credit does.

It's just that bank credit is (normally) completely fungible with actual money to the extent that over 90% of what we transact in the economy is bank credit.

The loan represents the bank formalising and underwriting your promise of future work/goods into something that can be swapped for other goods and services today. In return, you pay a fee for this service in terms of your interest payments (and possibly a loan arrangement fee for stuff like mortgages).

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I should have added that I don't think this system is without fault and it isn't a defence of it. More that the idea of money appearing from nothing when a loan is made, an idea that initially shocked me, after lots of thinking about it now seems perfectly logical

The interesting question is this; if your signature on a piece of paper is sufficient to create a debt why is it not deemed sufficient to repay one?

After all-when a bank gave you a loan purely based on your signature they established the principle that you could create money from nothing- so if you choose to repay that money with another signature on another piece of paper can they object?

Can they claim your repayment invalid without at the same time invalidating the original contract, which was also based purely on your signature?

I'm not sure they can- at least not logically.

The dirty little secret of banking is their ability to issue bank credit but to then demand legal tender in return- they will not allow you to repay their magic money in kind.

So the real magic trick the banks have mastered is their ability to issue their own private currency in the form of bank credit- and then to launder this fake currency by demanding coin of the realm in return for it.

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The interesting question is this; if your signature on a piece of paper is sufficient to create a debt why is it not deemed sufficient to repay one?

snip

it is...often called a refinance, a payday loan, a consolidation loan.

Your signature isnt sufficient by itself..it is your future they are lending against.

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The interesting question is this; if your signature on a piece of paper is sufficient to create a debt why is it not deemed sufficient to repay one?

After all-when a bank gave you a loan purely based on your signature they established the principle that you could create money from nothing- so if you choose to repay that money with another signature on another piece of paper can they object?

Can they claim your repayment invalid without at the same time invalidating the original contract, which was also based purely on your signature?

I'm not sure they can- at least not logically.

The dirty little secret of banking is their ability to issue bank credit but to then demand legal tender in return- they will not allow you to repay their magic money in kind.

So the real magic trick the banks have mastered is their ability to issue their own private currency in the form of bank credit- and then to launder this fake currency by demanding coin of the realm in return for it.

The bank creates the loan, the borrower's signature ratifies the terms of repayment.

Surely, banking's dirty little secret is not that they create money but they destroy it too?

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it is...often called a refinance, a payday loan, a consolidation loan.

Your signature isnt sufficient by itself..it is your future they are lending against.

They have nothing to lend- they are not taking your deposit and handing it to me- that would reduce the amount in your account.

So the 'credit' they create is called into being by the simple act of me signing a piece of paper.

This means that my signature alone has value- that being so they should happy to accept payment from me in the same form they used to create the debt- but they don't want to do that.

They create a pseudo currency called 'bank credit' and use me to launder it into legal tender via a process they call 'lending'.

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The bank creates the loan, the borrower's signature ratifies the terms of repayment.

Surely, banking's dirty little secret is not that they create money but they destroy it too?

They create bank credit- but demand legal tender in return- it's essentially a laundering scheme that allows them to convert their pseudo currency into legal tender.

The real alchemy occurs not at the point of credit creation- but at the point where that credit is transformed by the borrower into legal tender repayments.

It's the most elegant con ever invented- the borrower is the author of his own debt slavery- he is both the source of credit origination and the one who then bears it's burden. Having created the credit by the simple act of signing his name- he then must labour to make real the imaginary wealth that his signature has called into being.

No wonder the bankers laugh at us. We willingly enslave ourselves to them.

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I used to be Genghis Khan......

...and Henry VIII

I was Anne Boleyn in a previous life.

Oh Henry! Where did it all go wrong? To think we were once so happy. :(

Edited by 1929crash

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People on here frequently moan about banks creating money out of thin air when one gets a loan but the more i think about it the more reasonable it .

Money is, amongst other thngs, effectively a numerical representation of the value of work, in this case mine, allowing me to exchange my output or my skills for the output or skills of someone else, or lots of other people.

By taking a loan, i'm saying i want to spend the output of my future work (represented by a numerical value of money) now, prior to doing the work i.e I'm taking my future work output, something which doesnt yet exist and bringing it forward to today. So until I decide to bring my output forward why would the money that represents it exist in this current time?

Also, it seems like I'm the one creating the money from thin air too, not the bank.

Money is a representation of a claim on a share of resources & labour. For you to spend resources & labour they must exist. You can't buy bread if none has been baked.

In other words, you aren't spending the results of your future labour. You are spending the results of someone else's finished labour. That labour is completed, so the claim to it must exist, so the money must exist.

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Money is a representation of a claim on a share of resources & labour. For you to spend resources & labour they must exist. You can't buy bread if none has been baked.

In other words, you aren't spending the results of your future labour. You are spending the results of someone else's finished labour. That labour is completed, so the claim to it must exist, so the money must exist.

Have you never heard of futures and options? Buying bread before it's been baked is the root of all our problems!

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Have you never heard of futures and options? Buying bread before it's been baked is the root of all our problems!

You dont buy the bread before it's baked with either a future or an option. You just set the price you will (future) or might (option) buy it for once it is baked.

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You dont buy the bread before it's baked with either a future or an option. You just set the price you will (future) or might (option) buy it for once it is baked.

Surely you're assuming that the bread will be baked and that you will be compensated for the risk of it not being?

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You dont buy the bread before it's baked with either a future or an option. You just set the price you will (future) or might (option) buy it for once it is baked.

As a future in this context would be a commitment to buy the bread at the determined price then surely under any reasonable interpretation of the transaction, you have bought the bread. Even though the future is a security that you can trade, if you can't find anyone willing to buy the future from you, then you'll be buying the bread or facing the consequences of failing to honour the contract into which you had entered.

It does show how embedded ideas about the right of speculators to speculate with instruments that were supposedly created not to facilitate speculation but facilitate trade that we can discuss whether or not buying a bread future is or isn't equivalent to buying bread, when clearly it involves buying bread from the future.

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This thread is premised on inflationary lending. The propaganda has it that this is the only way. It is not. You can have a fixed supply of money and savings can be loaned to borrowers. If the loan succeeds the investment pays dividends in the form of interest , as well as returning the full amount loaned, to the lender. If the loan fails the borrower has to return whatever is left of the principle to the lender as well as agreed upon collateral.

There is no inflation in this system, as the economy grows each unit of money becomes more valuable so people are inclined to save, thus making more loans available. Units of money are divided down to create more subunits as the economy grows, while the total quantity of money stays constant. The interest earned on money equals the growth rate of the economy. As it should be.

This is called sound money, a long forgotten notion in the era of inflationary usury.

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This thread is premised on inflationary lending. The propaganda has it that this is the only way. It is not. You can have a fixed supply of money and savings can be loaned to borrowers. If the loan succeeds the investment pays dividends in the form of interest , as well as returning the full amount loaned, to the lender. If the loan fails the borrower has to return whatever is left of the principle to the lender as well as agreed upon collateral.

There is no inflation in this system, as the economy grows each unit of money becomes more valuable so people are inclined to save, thus making more loans available. Units of money are divided down to create more subunits as the economy grows, while the total quantity of money stays constant. The interest earned on money equals the growth rate of the economy. As it should be.

This is called sound money, a long forgotten notion in the era of inflationary usury.

But aren't you just talking about commodity money and a barter economy? Agreed upon collateral? How can you know beforehand that this will be sufficiently valuable to bring the quantity of 'money' back to par? And if people are inclined to save where will the demand for loans come from?

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