Feeling Safe? Boe Paper: "depositors Who Deposit Their Money With A Bank Are Therefore No Longer The Legal Owners Of This Money"

[Assume The Opposite]

An interesting BoE paper titled: Working Paper No. 529 Banks are not intermediaries of loanable funds — and why this matters (May 2015)

http://www.bankofengland.co.uk/research/Documents/workingpapers/2015/wp529.pdf

This is an interesting addition to their publication last year explaining how banks effectively create money out of thin air which accounts for 97% of our money supply.
It explains how banks are not the intermediaries of funds and don't rob pensioners deposits to create loans.

They also say that loans lead to deposits, not the other way around, rubbishing the idea of savings before investment. This probably also destroys Osbourne's propaganda of a 'nation without debt' and 'march of makers'. Maybe he was told how it really works and decided on a 'march of bankers' instead with HTB?

It also suggests than the current ILF models of banking which also includes Basel 3, are incorrect?

The most interesting part to me was this, pg 12:

"Depositors who deposit their money with a bank are therefore no longer the legal owners of this money, with the bank holding it in trust for them, but rather they are one of the general creditors of the bank"

(we implemented bail legislation in 2013)

The smarter members can probably draw further conclusions from the paper as I'm not an expert.

Edited August 18, 2015 by Assume The Opposite

[canbuywontbuy]

At the end of the day, you 'own' absolutely nothing. Not even land. Certainly not your income. It is all there by grace. Pieces of paper.

I'm feeling this way more and more each day.

[Ah-so]

I read the exec summary. A useful addition to wrist knowledge. However, like last year's paper, it overlooks liquidity requirements which also add a de facto fractional reserve requirement. The incoming Basel III leverage ratio will also limit credit money creation.

[Ah-so]

Of course they are not.

Banks can lend your money out without your explicit agreement. In fact they can lend it out multiple times in effect.

I'm not sure how meaningful the statement is once you look at the whole thing on a system basis rather than you with your cash putting said cash into vault for safekeeping.

There is ONLY ONE bank, basically. They are part of one complete banking system whereby if one bank lends more than another, it simply balances the books by getting it off those who have received more deposits than they lent.

How worthwhile is it to say "I'm keeping my cash, because if I put it in the bank they may take it". Cash is worthless in its own right. Its worth is generated in pretty much the same way as the record of your deposit in 'your' bank. If they wanted to haircut cash at any particular moment in time at the same time as deposits, that is perfectly possible to my mind. In fact they may well do so to prevent 'runs' on banks (you heard it here first ).

At the end of the day, you 'own' absolutely nothing. Not even land. Certainly not your income. It is all there by grace. Pieces of paper.

Actually the interbank lending market almost totally disappeared post-crisis. What was first risk-aversion has been replaced by counterproductive liquidity rules and stringent RWA requirements.

Interbank lending really only occurs through the repo markets these days.

[pipllman]

indeed, as I said on another thread where the Nationwide was grumbling about paying £300m tax that could otherwise support £10bn of lending

if that is the case, that the bank can lend £33 for every £1 of mine it has, that isn't safe and I want my £1 back

[Ah-so]

indeed, as I said on another thread where the Nationwide was grumbling about paying £300m tax that could otherwise support £10bn of lending

if that is the case, that the bank can lend £33 for every £1 of mine it has, that isn't safe and I want my £1 back

No. It can lend £33 for every £1 of equity capital it has, not for every 1 pound of deposit liabilities.

[Assume The Opposite]

At the end of the day, you 'own' absolutely nothing. Not even land. Certainly not your income. It is all there by grace. Pieces of paper.

Good post and this part is so true.

[janch]

Preparing us for possible bail-ins???

[interestrateripoff]

An interesting BoE paper titled: Working Paper No. 529 Banks are not intermediaries of loanable funds — and why this matters (May 2015)

http://www.bankofengland.co.uk/research/Documents/workingpapers/2015/wp529.pdf

This is an interesting addition to their publication last year explaining how banks effectively create money out of thin air which accounts for 97% of our money supply.

It explains how banks are not the intermediaries of funds and don't rob pensioners deposits to create loans.

They also say that loans lead to deposits, not the other way around, rubbishing the idea of savings before investment. This probably also destroys Osbourne's propaganda of a 'nation without debt' and 'march of makers'. Maybe he was told how it really works and decided on a 'march of bankers' instead with HTB?

It also suggests than the current ILF models of banking which also includes Basel 3, are incorrect?

The most interesting part to me was this, pg 12:

"Depositors who deposit their money with a bank are therefore no longer the legal owners of this money, with the bank holding it in trust for them, but rather they are one of the general creditors of the bank"

(we implemented bail legislation in 2013)

The smarter members can probably draw further conclusions from the paper as I'm not an expert.

http://www.bankofengland.co.uk/publications/Documents/quarterlybulletin/2014/qb14q1prereleasemoneycreation.pdf

Is that this paper?

[billybong]

At the end of the day, you 'own' absolutely nothing. Not even land. Certainly not your income. It is all there by grace. Pieces of paper.

Even a person's car - the "owner" is only the registered keeper. Unfortunately Carlin seems to have it pretty much spot on.

Edited August 18, 2015 by billybong

[pipllman]

No. It can lend £33 for every £1 of equity capital it has, not for every 1 pound of deposit liabilities.

Does it create equity capital from the profit it can make on my £1?

[chronyx]

Even a person's car - the "owner" is only the registered keeper. Unfortunately Carlin seems to have it pretty much spot on.

Who is the 'owner' then? I'm curious as the registered keeper is who the DVLA only care about for registration and penalty purposes. Yet the receipt will still by in your name.

[billybong]

Who is the 'owner' then? I'm curious as the registered keeper is who the DVLA only care about for registration and penalty purposes. Yet the receipt will still by in your name.

Presumably it's ultimately TPTB as that gives them the power to confiscate for infringements against the rules or say in national emergency (when they might need the materials) or whatever mainly with impunity (who makes the rules).

There's probably something written in law (like the bit above posted by hotairmail about land) about everything anyone "owns".

Gold the same.

For "clarification" of the vehicle ownership issue there's a link below with an exchange between someone and the DVLA

https://

www.whatdotheyknow.com/request/vehicle_registration_2

Edited August 18, 2015 by billybong

[bankstersparadise]

Seriously if we get the big housing crash that everyone on this site is looking for then the 50% lost in UK property is going to be a better return than the 100% losses (above say £9k) that all those "savvy" savers will lose who saw it coming and kept "wealth" in cash. With these high levels of asset correlations and weird economic dislocations globally it is all about diversification. Property, gold, cash, oversees assets, uk assets, the whole lot.

Bank bail-ins are right on the table for the next crisis. Neither the UK balance sheet nor any politican in the land can support another bail-out.

Quite easy for Cameron to tell the general public they are bailing-in in above c.£9k. "Not fair to put it on the public balance sheet and harm future generations", "those with the broadest shoulders need to do the heavy lifting" etc etc. Most normal people won't have enough savings to be hit and all the rich/powerful own assets not bank accounts and loads is off-shore. Not to mention they will be tipped off. Only the middle class that get hurt and they are close to extinction anyway.

Edited August 18, 2015 by bankstersparadise

[WideAsleep]

As I have said on other threads (Moral Primacy of Debt thread I think) people think cash is the safest investment and many people are 'all in' with their entire net worth stored as currency in a bank account. This is a mistaken belief and is very risky as it is when anyone goes 100% into one investment.

Better to diversify your purchasing power into other savings vehicles, there are plenty out there, the trouble is all of them have their flaws. Currency historically has been one of the worst as its value always returns back to zero. Many people still choose to save everything in currency despite almost everyone learning via the media about regular devaluation of other nations currencies and having some knowledge of historical events that saw currencies destroyed. Its the mindset of 'it can't happen here/to me' I guess.

[davidg]

re land, this question was answered in the Houses of Parliament a few years back:

ultimately the "crown" only squats the land for as long as it can muster enough force of arms to maintain its writ, something it has managed since 1066 more or less.

[oracle]

Preparing us for possible bail-ins???

no bail in's here.

the aristocracy of old should have learnt their lesson by now.

when things get really out of whack in this country,and france,and the US, we have a habit of removing the top brass who were appropriating to themselves property that has been obtained by fraudulence or by dubious/unothodox legal wordsmithery.

The same applies to tax/revenue from said assets.

there are laws on the books here that are there to prevent royalties/clergy etc from such actions.

in this country, unlike most of europe, they are merely custodians of national assets.They don't own it.

Edited August 18, 2015 by oracle

[dances with sheeple]

Seriously if we get the big housing crash that everyone on this site is looking for then the 50% lost in UK property is going to be a better return than the 100% losses (above say £9k) that all those "savvy" savers will lose who saw it coming and kept "wealth" in cash. With these high levels of asset correlations and weird economic dislocations globally it is all about diversification. Property, gold, cash, oversees assets, uk assets, the whole lot.

Bank bail-ins are right on the table for the next crisis. Neither the UK balance sheet nor any politican in the land can support another bail-out.

Quite easy for Cameron to tell the general public they are bailing-in in above c.£9k. "Not fair to put it on the public balance sheet and harm future generations", "those with the broadest shoulders need to do the heavy lifting" etc etc. Most normal people won't have enough savings to be hit and all the rich/powerful own assets not bank accounts and loads is off-shore. Not to mention they will be tipped off. Only the middle class that get hurt and they are close to extinction anyway.

Which is why there is no point in raiding whatever pot they have. Banks will be able to absorb a 50% + crash without bail in`s, that is what all the QE and other nonsense has been about?

[This time]

Seriously if we get the big housing crash that everyone on this site is looking for then the 50% lost in UK property is going to be a better return than the 100% losses (above say £9k) that all those "savvy" savers will lose who saw it coming and kept "wealth" in cash. With these high levels of asset correlations and weird economic dislocations globally it is all about diversification. Property, gold, cash, oversees assets, uk assets, the whole lot.

Bank bail-ins are right on the table for the next crisis. Neither the UK balance sheet nor any politican in the land can support another bail-out.

Quite easy for Cameron to tell the general public they are bailing-in in above c.£9k. "Not fair to put it on the public balance sheet and harm future generations", "those with the broadest shoulders need to do the heavy lifting" etc etc. Most normal people won't have enough savings to be hit and all the rich/powerful own assets not bank accounts and loads is off-shore. Not to mention they will be tipped off. Only the middle class that get hurt and they are close to extinction anyway.

I think the priced out would actually riot if they straight out just stole our deposits. I don't think many people realised that ZIRP and QE was stealing their money but everyone will notice if the couple of tens of thousands that they were saving up towards a house just disappeared. I doubt it's that uncommon for people in their 20s or 30s to have more than 10k in the bank. I probably had near that a couple of times even when I was an undergrad as I would work by **** off over the holidays and then live off the money over the rest of the year.

[dances with sheeple]

no bail in's here.

the aristocracy of old should have learnt their lesson by now.

when things get really out of whack in this country,and france,and the US, we have a habit of removing the top brass who were appropriating to themselves property that has been obtained by fraudulence or by dubious/unothodox legal wordsmithery.

The same applies to tax/revenue from said assets.

there are laws on the books here that are there to prevent royalties/clergy etc from such actions.

in this country, unlike most of europe, they are merely custodians of national assets.They don't own it.

That`s right, if they do the London riots will look like a Buddhist retreat. It would be the last straw for many, people would go absolutely bat-shit bonkers.

http://1.bp.blogspot.com/-_i79JI3Y7RI/US049X_lsBI/AAAAAAAAXvU/Bct45ggEHKM/s1600/invasion-of-the-body-snatchers-1978.jpg

"Where`s my money! I know it exists, sitting in a bank vault with a man guarding it. It`s mine, it exists, just like the HPI I earned".

I would love them to try bail-in`s in the UK, it might just be the straw that brings down the monarchy and the old boys club...........On the other hand the sheeple might just suck in in, like they do everything else.....

Edited August 18, 2015 by dances with sheeple

[evetsm]

That`s right, if they do the London riots will look like a Buddhist retreat. It would be the last straw for many, people would go absolutely bat-shit bonkers.

http://1.bp.blogspot.com/-_i79JI3Y7RI/US049X_lsBI/AAAAAAAAXvU/Bct45ggEHKM/s1600/invasion-of-the-body-snatchers-1978.jpg

"Where`s my money! I know it exists, sitting in a bank vault with a man guarding it. It`s mine, it exists, just like the HPI I earned".

I would love them to try bail-in`s in the UK, it might just be the straw that brings down the monarchy and the old boys club...........On the other hand the sheeple might just suck in in, like they do everything else.....

are you kidding? we don't do riots. we bow and scrape to our sovereign. we stand in queues. our national motto is " keep calm and carry on"

you've got the wrong people

[This time]

are you kidding? we don't do riots. we bow and scrape to our sovereign. we stand in queues. our national motto is " keep calm and carry on"

you've got the wrong people

Do you not remember the demonstrations when the Tories won the election? The young are at breaking point - it won't be half as civilised if they steal our money.

[bankstersparadise]

I think the priced out would actually riot if they straight out just stole our deposits.

If somebody bought an overpriced 3 bed in Twickenham for 800k and lost their shirt because the market crashed would you argue it was the banksters/government/chinas/gods fault and all they wanted was a family home? Or would you argue that they made their bed and they should lie in it?

What about if someone bought shares in a bank and it fails, the shares lose most/all their value. It's the investors own fault right?

Same can be said for bank deposits, if you decide to become a creditor of a financial instiution ie a depositor in a bank and the bank of england ends up needing your deposit (ie credit) to make that bank hole beacuse it fails. It isn't stealing your deposits, it is acting in precisely what you have agreed to. I mean you get 0.5% to bear the risk.

[Venger]

Hmm that's not how I remember 2008. It was all about how the more recent buyers were victims of media/parents - couldn't have expected a crash, for outbidding others by absolute fortunes. Not made their £800,000 beds and lie in it, but lobbying for bailouts.

Anyway I take it you're being whimsical, with that 0.5% reward (lol), as those 2008 £800K houses now worth £1.3 million, and older upsizers treated themselves to houses at £800K that were worth £500K in 2008 in Croydon just recently, in the forever HPI victimhood... 'make renters pay'.

We last moved in Jan this year and for the first time I used a solicitor, simply because I could get a competent solicitor for such a low price (£350 on an £800k purchase) it wasn't worth the hassle of doing it myself.

[Venger]

Oh and I can't forget... "They didn't know what they were doing." (£800K houses)

Best excuse of 2008, and believed.