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I don't know the answer to this question- I'm not sure that anyone else does either- but it's maybe worth discussing.

In the light of the Bank of England's recent overt declaration that bank loans are not a matter of transferring the savings of patient saver A to impatient borrower B but are in fact the outright creation of money from thin air what is the legal status of a person who refused to pay back that loan?

My-admittedly limited- understanding of the law is that in order to claim damage of some kind you would have to provide evidence of loss- so in the case of a defaulting borrower the bank would have to provide evidence that it did indeed give that borrower something-and that it would suffer a loss of some kind were that borrower to fail to repay that loan.

But since in reality the bank created that loan from nothing, it's potential loss would also be nothing, since the money it lent out did not exist until the moment the loan was made.

The bank cannot point to a loan shaped hole in it's accounts and say to the judge 'See- right there, that's the money we lent that deadbeat- that's the money we stand to lose if he fails to pay it back'-because no such hole exists.

So on what basis could the borrower be deemed to have imposed a loss on the bank- and if no loss occurred then no damage has taken place and so there is no case to answer.

So in principle at least it seems to me that following the B of E's announcement the cat is out of the bank and loan agreements should be open to a very basic legal challenge based on the idea that no loss means no damage means no case to answer.

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But since in reality the bank created that loan from nothing, it's potential loss would also be nothing, since the money it lent out did not exist until the moment the loan was made.

The bank cannot point to a loan shaped hole in it's accounts and say to the judge 'See- right there, that's the money we lent that deadbeat- that's the money we stand to lose if he fails to pay it back'-because no such hole exists.

Borrow money pay it back. Funny how many people struggling with this, don't have the same problem working out where massive HPI comes from, and can confidently tell us houses in the North are cheap.

http://www.elliottwave.com/DeflationEssays/deflation_full.pdf and it goes on to explain credit expansion... which requires willing borrower wanting the credit/debt, and contracts where they agree repayment and interest .

Defining Money and Credit
Money is a socially accepted medium of exchange, value storage and final payment. A specified amount of that medium also serves as a unit of account.
According to its two financial definitions, credit may be summarized as a right to access money. Credit can be held by the owner of the money, in the form of a warehouse receipt for a money deposit, which today is a checking account at a bank.
Credit can also be transferred by the owner or by the owner's custodial institution to a borrower in exchange for a fee or fees - called interest - as specified in a repayment contract called a bond, note, bill or just plain IOU, which is debt.
In today's economy, most credit is lent, so people often use the terms "credit" and "debt" interchangeably, as money lent by one entity is simultaneously borrowed by another.

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Borrow money pay it back.

Can you show where that money was before I' borrowed' it- if not-can you prove any kind of loss if I don't pay it back?

And if you can't prove any loss on what basis can you proceed against me?

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Can you show where that money was before I' borrowed' it- if not-can you prove any kind of loss if I don't pay it back?

And if you can't prove any loss on what basis can you proceed against me?

A banking licence, or consumer credit licence.... or between friends... I could magic £100 up into your bank account via a transfer for you to spend, with a promise you will repay me 3 months later (at no interest let's say - just buy me a drink - when we next met up as a thank you).

Materialises for the borrower to use.

Loss? Non repayment, defaulted repayment = capital value and shares downvalued for shareholders in the bank (the owners) when debtors don't meet their contractual obligations. Other losses including job losses at the company who lent the credit to you.... you putting me in a bind if you break your promise, when I had other obligations of my own to meet.

For banks, best to seize their secured assets and sell them back to market, at whatever the market will pay, to those who didn't over-extend themselves. Perhaps write loans to those buyers to finance the purchases of the assets, less likely to default at the lower price/loan value.

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Can you show where that money was before I' borrowed' it- if not-can you prove any kind of loss if I don't pay it back?

And if you can't prove any loss on what basis can you proceed against me?

You didnt borrow a loan...you borrowed the means of exchange that was moved to create your loan.

The loan is a commitment by the bank, or any other entity to lend you a means of exchange.

The loan record is a recording of what you have been paid, what you have paid back, and what the bank charged you in charges.

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This has actually gone to court a couple of times but I no longer have the bookmarks. IIRC one of the cases was successful in Austrailia where the court ruled in the homeowners favour (but it almost certainly went to appeal) and another was going through the American courts.

It was a long time ago that I read about those cases and so I am very hazy on the details.

Edited by doahh

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Can you show where that money was before I' borrowed' it- if not-can you prove any kind of loss if I don't pay it back?

And if you can't prove any loss on what basis can you proceed against me?

Yes. There's occasional cases where debtor gets off citing some obscurity of the law, or debtors goes bankrupt having spent up or lived a life of entitlement or just failed investments.

What more do you want? The lenders had to write of billions in bad debt, borrowers took out + interest, and failed to repay. Jobs lost, branches closed, banks sold on to others like American investors.

If you've got a security pledged, it's right for the banks to go for it. I want it on the market, and I want it market cheap.

A similar dynamic holds in the creation and destruction of credit. Let’s suppose that a lender starts with a million dollars and the borrower starts with zero. Upon extending the loan, the borrower possesses the million dollars, yet the lender feels that he still owns the million dollars that he lent out. If anyone asks the lender what he is worth, he says, “a million dollars,” and shows the note to prove it. Because of this conviction, there is, in the minds of the debtor and the creditor combined, two million dollars worth of value where before there was only one. When the lender calls in the debt and the borrower pays it, he gets back his million dollars. If the borrower can’t pay it, the value of the note goes to zero.
Near the end of a major expansion, few creditors expect default, which is why the lend freely to weak borrowers. Few borrowers expect their fortunes to change, which is why they borrow so blissfully.
Paper-bag head gave his trust, and partly backed his belief in whatever the investment was with his Uncle. You lend the money and you take some risk... for no lender can be 100% certain of repayment without problems.
It might be credit magicked out of the air, but it's got bearing on shareholder value, capital ratios.. SOLVENCY.... it's all in the books. Too many at HPC only seeing debtors as victims, who never have a brain and are oh-so-cuddly. Get this HPC going hard.
PUBLISHED: 15:47, 12 May 2014 | UPDATED: 17:25, 13 May 2014
Shia LaBeouf has won yet another legal battle against a relative who borrowed nearly one million dollars and then failed to repay it.
LaBeouf's maternal uncle Barry Saide has been ordered by a judge to pay the star $200,000 in addition to the $800,000 he already owed the actor, reports RadarOnline.
The 27-year-old's latest legal victory comes after he filed a lawsuit against Saide claiming he failed to repay the six-figure loan from 2009.
...According to the NY Daily News, the original agreement was to be paid back in fifteen installments of $53,333, but this immediately defaulted.

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Yes. There's occasional cases where debtor gets off citing some obscurity of the law, or debtors goes bankrupt having spent up or lived a life of entitlement or just failed investments.

What more do you want? The lenders had to write of billions in bad debt, borrowers took out + interest, and failed to repay. Jobs lost, branches closed, banks sold on to others like American investors.

If you've got a security pledged, it's right for the banks to go for it. I want it on the market, and I want it market cheap.

Paper-bag head gave his trust, and partly backed his belief in whatever the investment was with his Uncle. You lend the money and you take some risk... for no lender can be 100% certain of repayment without problems.
It might be credit magicked out of the air, but it's got bearing on shareholder value, capital ratios.. SOLVENCY.... it's all in the books. Too many at HPC only seeing debtors as victims, who never have a brain and are oh-so-cuddly. Get this HPC going hard.

the mortgage itself becomes credit, but you cant spend a mortgage, as you cant spend credit...the creditor has to do it for you.

but, in order for a mortgage to exist, money has to be exchanged.

People argue if the mortgage and the account are at the same bank, there is no exchange,but that assumes the borrower never used the credit to pay for anything....and people tend to buy things with their mortgages.

getting off will be a non conformity in the contract v statute law, which overides all and can make part or all of a transaction invalid.

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Doesnt the bank immediately re-package that loan up to someone else and sell it, thus they have a liability that requires servicing too?

Regardless of who creates the money, the bank still makes their cut on being a middleman.

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Doesnt the bank immediately re-package that loan up to someone else and sell it, thus they have a liability that requires servicing too?

Regardless of who creates the money, the bank still makes their cut on being a middleman.

indeed, because the loan ISNT money, it is an asset, it can be bought, sold, hypothecated, securitised or whatever...all based on the premise that it has a lifetime of payments and interest to accrue over its life, ie, it represents repayments and receipts of actual money, and each and every time some means of exchange goes towards it, some of the loan is settled.

When you think of the loan, and the bits that it represents, then the idea of credit and money creation become blindingly obvious.

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getting off will be a non conformity in the contract v statute law, which overides all and can make part or all of a transaction invalid.

If they can find it, have funds to instruct a litigation solicitor, to prove it in court against the banks' legal team - although they might confidentially settle with an individual were there such a weakness in the contract.

Do you want them to be let off their mortgages?

As I recall it, in the past you had no such fluffy forgiveness on a position you once held, when market circumstances changed. Interest rates and values.

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If they can find it, have funds to instruct a litigation solicitor, to prove it in court against the banks' legal team - although they might confidentially settle with an individual were there such a weakness in the contract.

Do you want them to be let off their mortgages?

As I recall it, in the past you had no such fluffy forgiveness on a position you once held, when market circumstances changed. Interest rates and values.

I dont think forgiveness was in my post.

I was answering the question about getting off...there would have to be an overriding Statute issue as in law, contracts are between two consenting parties, but if the contract violates a statute then all or part could be invalid.

I dont think there is a statute that says a person cannot pledge his prospective house in return for cash to buy the thing and an agreement to return the cash, over time,with interest.

The credit card cases were to do with Statutory requirements missing...IIRC signatures.

In the case of a House, there is a process in law in the Exchanging of Contracts, all involving lawyers, stamps and procedures. To argue that money never transacted would be a futile one IMHO.

Of course, a lender is entirely free ( within limits) to waive or forgive any loans it took as the borrower is unlikely to insist on paying what he can get for free..

Edited by Bloo Loo

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I dont think forgiveness was in my post.

I was answering the question about getting off...there would have to be an overriding Statute issue as in law, contracts are between two consenting parties, but if the contract violates a statute then all or part could be invalid.

I dont think there is a statute that says a person cannot pledge his prospective house in return for cash to buy the thing and an agreement to return the cash, over time,with interest.

The credit card cases were to do with Statutory requirements missing...IIRC signatures.

In the case of a House, there is a process in law in the Exchanging of Contracts, all involving lawyers, stamps and procedures. To argue that money never transacted would be a futile one IMHO.

Of course, a lender is entirely free ( within limits) to waive or forgive any loans it took as the borrower is unlikely to insist on paying what he can get for free..

Yes Serpico got let off lot of debt mid 90s. All depends on the circumstances.

I agreed to let them try the bank at the £40K, I had nothing to lose the security contract I had signed restricted the bank only to property I was amazed the bank accepted their offer leaving a £160K shortfall, At first I bluffed and refused the bank authority to sell at that price unless their legal boys drafted a wateright agreement that if the house sold at £110 and the business premises at £40K I would be clear of all liabilities that stood at £350 most of which was compounded interest anyway.

It just seems a lot like scraping bottom of the barrel trying to find wriggle out of took on themselves, for many people who chose to borrow, spend, have a good time.. holidays, clothes, the house I wanted but was outbid for.

Oh it was credit magicked out of thin-air? "I took the credit, had real pleasure spending it as I chose, or investing it as I chose... . but it wasn't not real money." Cmon.

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I don't know the answer to this question- I'm not sure that anyone else does either- but it's maybe worth discussing.

In the light of the Bank of England's recent overt declaration that bank loans are not a matter of transferring the savings of patient saver A to impatient borrower B but are in fact the outright creation of money from thin air what is the legal status of a person who refused to pay back that loan?

My-admittedly limited- understanding of the law is that in order to claim damage of some kind you would have to provide evidence of loss- so in the case of a defaulting borrower the bank would have to provide evidence that it did indeed give that borrower something-and that it would suffer a loss of some kind were that borrower to fail to repay that loan.

But since in reality the bank created that loan from nothing, it's potential loss would also be nothing, since the money it lent out did not exist until the moment the loan was made.

The bank cannot point to a loan shaped hole in it's accounts and say to the judge 'See- right there, that's the money we lent that deadbeat- that's the money we stand to lose if he fails to pay it back'-because no such hole exists.

So on what basis could the borrower be deemed to have imposed a loss on the bank- and if no loss occurred then no damage has taken place and so there is no case to answer.

So in principle at least it seems to me that following the B of E's announcement the cat is out of the bank and loan agreements should be open to a very basic legal challenge based on the idea that no loss means no damage means no case to answer.

The cat has been out of the bag for me since I did A-level economocs long ago. The Bank paper just repackaged the story in a slightly different way.

If loans are not repaid the hit goes to its equity capital line. If sufficient loans do not get repaid, it will go insolvent. That is why banks prefer secured lending rather than unsecured because the firm's equity base will be protected.

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snip. That is why banks prefer secured lending rather than unsecured because the firm's equity base will be protected.

of course, lending into a property ponzi is simply asking for trouble...because the day that credit is now unavailable, the security value drops...then they need to recover with accounting illegality such as shell companies and back handed interlocked publicly unconnected programs.

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You didnt borrow a loan...you borrowed the means of exchange that was moved to create your loan.

Nothing was 'moved' at all- that's my point. If you borrow 500 quid from a bank they don't move that money from another account into yours- they simply type 500 quid into a computer and it appears in your account- from nothing.

So if the bank says you owe them 500 quid and you ask them to produce proof that they moved 500 quid into your account they can't do it. So do you still owe them anything?

If anything that 500 quid was created by you with your signature- so you have a more legitimate claim on it than they have- you were the source of that money.

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Loss? Non repayment, defaulted repayment = capital value and shares downvalued for shareholders in the bank (the owners) when debtors don't meet their contractual obligations. Other losses including job losses at the company who lent the credit to you.... you putting me in a bind if you break your promise, when I had other obligations of my own to meet.

Non repayment of what? Can you prove that you gave me anything in the first place? For example you say you lent me your car and want it back- but if you can't prove you ever owned a car in the first place what court in the country will make me liable to you for it's value?

Before a loss can be recognized there must first be proven ownership of the thing that has been lost- no bank can offer proof that the 'money' it lent you ever existed in the first place- so there is no loss on their part which means any attempt to force you to make good that loss must fail a basic test of common law.

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Doesn't the argument rely on you having converted the bank credit into bagfulls of fivers, which you then used to pay for the house?

Otherwise, the money you paid for the house no more exists than the money the bank lend you (as it's one and the same), and your purchase of the house is just as valid or invalid as your mortgage with the bank.

And if you did swap your bank credit for bagfulls of fivers, the bank's fivers, then there is your material loss. No?

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venger :

" It might be credit magicked

out of the air, but it's got

bearing on shareholder value,

capital ratios.. SOLVENCY....

it's all in the books."

what a crock of excrement. So if I sit in my basement, hang a sign outside "Acme Loans", start printing notes and lending them out , the borrower is at fault if he doesn't repay. because the perceived value if my company suffers? ! That is the opening sketch of a vaudeville routine.

The only reason why banks get away with this chicanery is because Legal Tender laws make it compulsory to use their funny notes for tax and paying state debts. They write these powers into a monopoly for the banks, and back it with the full force of state policing. ie you are stuffed.

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Nothing was 'moved' at all- that's my point. If you borrow 500 quid from a bank they don't move that money from another account into yours- they simply type 500 quid into a computer and it appears in your account- from nothing.

So if the bank says you owe them 500 quid and you ask them to produce proof that they moved 500 quid into your account they can't do it. So do you still owe them anything?

If anything that 500 quid was created by you with your signature- so you have a more legitimate claim on it than they have- you were the source of that money.

they have their own bank account with the central bank, which does issue means of exchange...no numbers in the account no pay your account.

course, they can fix this by taking a loan with the CB themselves, or borrow from a bank that has a balance of numbers spare.

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blood loo:

" they have their own bank

account with the central

bank, which does issue

means of exchange...no

numbers in the account no

pay your account."

and the central bank does the same conjuring trick to produce those numbers.

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I don't know the answer to this question- I'm not sure that anyone else does either- but it's maybe worth discussing.

In the light of the Bank of England's recent overt declaration that bank loans are not a matter of transferring the savings of patient saver A to impatient borrower B but are in fact the outright creation of money from thin air what is the legal status of a person who refused to pay back that loan?

My-admittedly limited- understanding of the law is that in order to claim damage of some kind you would have to provide evidence of loss- so in the case of a defaulting borrower the bank would have to provide evidence that it did indeed give that borrower something-and that it would suffer a loss of some kind were that borrower to fail to repay that loan.

My legal knowledge is damn near zero, but what you'd have is a tort - a civil wrong for which remedy exists. This seems to me to be a matter where you need to bear in mind the three part definition of money as a means of exchange, store of value and unit of account. In the creation of debt contracts we only care about it's most straightforward aspect which is a unit of account. My instinct would be that their legal status is that they entered into a contract where at time A then received an amount of money and at time B they pay it back (there may be interest along the way). If they fail to pay it back there is a civil wrong (they failed to honour the debt contract) for which legal remedy exists (the law will stipulate that bailiffs can grab stuff and sell it, the sale proceeds provide money which extinguishes the debt).

I think that your philosophical point is an interesting and important one, but the state of things is that the banks enjoy such an 'exorbitant privilege' by virtue of their ability to create new money exactly because our laws are drafted around more naive notions of money which is informed by notions of sound money and banks and bank-like organisations as intermediaries between savers and borrowers where the banks move parcels of existing sound money. Hence, as a line of attack, I don't think it goes anywhere, but as a way of reframing the problem, you're in good company, as it's barking up the same tree as the question that Graeber chooses to kick off Debt: The First 5000 Years. It certainly helps in pulling back the curtain with regard to what we might call our contemporary 'ideology of money', i.e. a set of unquestioned beliefs about what money is and how money works which are so deeply embedded in our conscious and unconscious thinking that we actually unaware of the existence of those unquestioned beliefs. Where's my TFH?

Edited by ex nihilo de novo

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blood loo:

" they have their own bank

account with the central

bank, which does issue

means of exchange...no

numbers in the account no

pay your account."

and the central bank does the same conjuring trick to produce those numbers.

Ford makes cars...central bank makes money...your point?

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blood loo

" Ford makes cars...central

bank makes money...your

point?"

money that can be counterfeited at the push of a button, would have no utility outside of Legal Tender laws. Maybe as ablution paper.

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blood loo

" Ford makes cars...central

bank makes money...your

point?"

money that can be counterfeited at the push of a button, would have no utility outside of Legal Tender laws. Maybe as ablution paper.

you are not wrong...but money is supposed to be a representation of a pledge by a borrower...the pledge has a value, the loan "monetises" the pledge.

Sound money would dictate that two identical pledges at any two points in time would produce the identical money.

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