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How Mortgage Banks Magically Create Money

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Excellent article, top of the tree are the Bankrupt of England and their false inflation targeting which is an attempt to disguise what is really going on and will wreak havoc on the living standards in the UK and imperil what is left of "real" industry and investment in the UK.

The Bankrupt of England is new a prime member for the 125% lending conduit, underwritten by the taxpayer.

http://www.moneyweek.com/file/36187/how-mo...eate-money.html

How mortgage banks magically create money

Edited by OnlyMe

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Excellent article, top of the tree are the Bankrupt of England and their false inflation targeting which is an attempt to disguise what is really going on and will wreak havoc on the living standards in the UK and imperil what is left of "real" industry and investment in the UK.

The Bankrupt of England is new a prime member for the 125% lending conduit, underwritten by the taxpayer.

http://www.moneyweek.com/file/36187/how-mo...eate-money.html

How mortgage banks magically create money

Ace news if you have a mortgage, you don't have to pay it back!

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can't help getting this feeling that we're facing financial meltdown. This seems to be complete lunacy.

Oh no mate!

It makes lots of great sense. See there is money money, and legal tender money and m15 money and money that might be found down the back of the sofa money and future money and money that exists in a parallel dimension money.

If we call them all the same thing, put them all on the books as an asset (including money we gave away three days ago) then leverage the total we just made up to the moon and lie to people who want to "buy" houses with our imaginary coinage and tell them we have given something that really exists, it will all work out fine!

Providing everyone else who owns a bank or mortgage company doesn't do it and there is no downturn in house prices for any reason or anyone asks any questions about it.......oh ..shit....

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Good post!

Perhaps customers of Bristol and West might like to form orderly queues outside their own branches.

Halifax Bank of Scotland (HBOS) has lent out £1.74, says The Telegraph, for every £1 it's taken in from its savers. Standard Life Bank has lent £2.40...Northern Rock lent £3.21...and Bristol & West, another aggressive mortgage bank, has turned every £1 kept on deposit into £6.60 of loans!

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Oh no mate!

It makes lots of great sense. See there is money money, and legal tender money and m15 money and money that might be found down the back of the sofa money and future money and money that exists in a parallel dimension money.

If we call them all the same thing, put them all on the books as an asset (including money we gave away three days ago) then leverage the total we just made up to the moon and lie to people who want to "buy" houses with our imaginary coinage and tell them we have given something that really exists, it will all work out fine!

Providing everyone else who owns a bank or mortgage company doesn't do it and there is no downturn in house prices for any reason or anyone asks any questions about it.......oh ..shit....

It makes you wonder about human nature.

I mean lots of well educated and intelligent people must have looked at this over the years and thought this is madness. Yet very few people with influence have had the intellectual confidence to stand up and say "we're heading for disaster." Most people, even most intelligent people, have simply assumed it will all be OK.

I find it incredible.

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It makes you wonder about human nature.

I mean lots of well educated and intelligent people must have looked at this over the years and thought this is madness. Yet very few people with influence have had the intellectual confidence to stand up and say "we're heading for disaster." Most people, even most intelligent people, have simply assumed it will all be OK.

I find it incredible.

Until the magic box that you sit in front of wired up to the internet, so few people knew that they came in one of two camps.

Crusty academics who were interested in theories and not practice.

Bankers, who make out like bandits from this process.

Now we are adding -

Those who are running around like dogs to find cash to pay back these imaginary "loans" and know they have been scammed into the mix.

Interesting times....

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I fail to see the banks doing anything wrong.

The bank is right to see debtors as assets (they bought a cashflow when they laid out the principle)

And banks are right to state deposits are liabilities (depositors can redeem their deposits whenever they like, statistically redemption of deposits correlates with perceived systemic risk).

Deposits are just one sinlge means of banks obtaining capital for market operations.

This is just another article that omits key information and warps the reality of what actually happens. Written by somebody who also (coincidently or not) sells gold.

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Until the magic box that you sit in front of wired up to the internet, so few people knew that they came in one of two camps.

Crusty academics who were interested in theories and not practice.

Bankers, who make out like bandits from this process.

What about the category of people who had watched Mary Poppins?

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I fail to see the banks doing anything wrong.

The bank is right to see debtors as assets (they bought a cashflow when they laid out the principle)

And banks are right to state deposits are liabilities (depositors can redeem their deposits whenever they like, statistically redemption of deposits correlates with perceived systemic risk).

Deposits are just one sinlge means of banks obtaining capital for market operations.

This is just another article that omits key information and warps the reality of what actually happens. Written by somebody who also (coincidently or not) sells gold.

Thats why NR got into trouble- It BORROWED money to pay for its LOANS- all ok Till the borrowing cost more than the loans: a they start to make a loss, and b: their loan rates go up = HPC

The simple model of using depositors as the source of the loan would not be broken in this case, that is, until the Defaults come in!

= HPC again

borrowers are fracked either way

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I fail to see the banks doing anything wrong.

Fraud, misrepresentation?

The bank is right to see debtors as assets (they bought a cashflow when they laid out the principle)

That's fine, but they record it as an asset prior to "lending" it out, so they don't make a loss or lend anything. THe banks don't lay out the principle, the customer does.

And banks are right to state deposits are liabilities (depositors can redeem their deposits whenever they like, statistically redemption of deposits correlates with perceived systemic risk).

Quite right. Shame they don't tell their customers that, isn't it?

Deposits are just one sinlge means of banks obtaining capital for market operations.

The main one being the recording of "loans" as "assets" before they occur. The second being accessing of exemption from citizens at the central banks via signature.

This is just another article that omits key information and warps the reality of what actually happens. Written by somebody who also (coincidently or not) sells gold.

Indeed. Which financial institution do you work for?

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I fail to see the banks doing anything wrong.

The bank is right to see debtors as assets (they bought a cashflow when they laid out the principle)

And banks are right to state deposits are liabilities (depositors can redeem their deposits whenever they like, statistically redemption of deposits correlates with perceived systemic risk).

Deposits are just one sinlge means of banks obtaining capital for market operations.

This is just another article that omits key information and warps the reality of what actually happens. Written by somebody who also (coincidently or not) sells gold.

Yes, I entirely see what you mean regarding loans being assets and deposits as liabilities. That part of the article doesn't make sense to me.

However, there has to be some limit to how much banks can lend. It seems pretty obvious that they can't lend unlimited amounts of money. As far as I can see unprecedented amounts of money have been lent and if those loans go bad it seems to me that the whole financial system would be in deep trouble. I can't see how that can not be the case.

I don't see what is wrong with the article's comments about money supply.

Edited by JimmyMac

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That's fine, but they record it as an asset prior to "lending" it out, so they don't make a loss or lend anything. THe banks don't lay out the principle, the customer does.

I don't know if anyone will ever get you to see that this is nonsense but I'll try again. You seem to be basing the assertion on the fact that the bank's books still balance even after having loaned 'money' to someone, right? But this is perfectly logical - if the bank lends someone £10 then they lose £10 of capital and they gain a £10 asset. It really makes no difference which order it's done in. As the person repays the loan the size of their asset, and therefore the bank's ability to earn interest on it, goes down.

Edited by thecrashingisles

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Guest DissipatedYouthIsValuable
I fail to see the banks doing anything wrong.

The bank is right to see debtors as assets (they bought a cashflow when they laid out the principle)

And banks are right to state deposits are liabilities (depositors can redeem their deposits whenever they like, statistically redemption of deposits correlates with perceived systemic risk).

Deposits are just one sinlge means of banks obtaining capital for market operations.

This is just another article that omits key information and warps the reality of what actually happens. Written by somebody who also (coincidently or not) sells gold.

While I see gold as just another commodity generally, I do feel that having a monetary system based on debt and obfuscated devaluation of currency is quite mad.

There's a limit on borrowing for future needs for everything from healthcare to housing. I think most people under 40 are on the limit of what they can actually do to pay for all this.

The bottom line for me is that the population demographic is unfavourable to soaking up increasingly parasitic taxation.

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I don't know if anyone will ever get you to see that this is nonsense but I'll try again. You seem to be basing the assertion on the fact that the bank's books still balance even after having loaned 'money' to someone, right? But this is perfectly logical - if the bank lends someone £10 then they lose £10 of capital and they gain a £10 asset. It really makes no difference which order it's done in. As the person repays the loan the size of their asset, and therefore the bank's ability to earn interest on it, goes down.

It does make a difference.

One way the bank has given you something, the other you have given the bank something. The banks books balance back to the level they were at before you ever walked in the door. The bank lends nothing, gives nothing, loses nothing. They take no risk on themselves, and cannot possibly lose out.

Currently banks are letting customers finance their own loans. It's double billing fraud in every other industry.

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It makes you wonder about human nature.

I mean lots of well educated and intelligent people must have looked at this over the years and thought this is madness. Yet very few people with influence have had the intellectual confidence to stand up and say "we're heading for disaster." Most people, even most intelligent people, have simply assumed it will all be OK.

I find it incredible.

Central bankers and Chancellors/Treasury don't seem to have had a problem with it. Maybe we are missing something.

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Central bankers and Chancellors/Treasury don't seem to have had a problem with it. Maybe we are missing something.

Few can resist power.

And these are very evil people, with no honour or integrity at all.

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Few can resist power.

And these are very evil people, with no honour or integrity at all.

I'd hesitate to call them evil.

I think humans have an incredible capacity for self-delusion.

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I'd hesitate to call them evil.

I think humans have an incredible capacity for self-delusion.

These are people who fully understand how the system works, how it takes value from savers and holders of pounds, who know that the pound is backed by the ability of men in uniforms to threaten the defenceless and steal from ordinary people and go to work anyway, when they don't have to.

Mr. Darling and co voted to bomb children, and Mervin ran the preses to pay for the bombs. Evil.

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It does make a difference.

One way the bank has given you something, the other you have given the bank something. The banks books balance back to the level they were at before you ever walked in the door. The bank lends nothing, gives nothing, loses nothing. They take no risk on themselves, and cannot possibly lose out.

Currently banks are letting customers finance their own loans. It's double billing fraud in every other industry.

not forgetting their printing costs

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These are people who fully understand how the system works, how it takes value from savers and holders of pounds, who know that the pound is backed by the ability of men in uniforms to threaten the defenceless and steal from ordinary people and go to work anyway, when they don't have to.

Mr. Darling and co voted to bomb children, and Mervin ran the preses to pay for the bombs. Evil.

well, my general experience of life is that people often do weird and seemingly deliberately unpleasant things to other people, but more often than not this is due to incompetence rather than any maliciousness. People often make the most incredibly stupid decisions and simply do not want to listen to people telling them not to do it.

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These are people who fully understand how the system works, how it takes value from savers and holders of pounds, who know that the pound is backed by the ability of men in uniforms to threaten the defenceless and steal from ordinary people and go to work anyway, when they don't have to.

Mr. Darling and co voted to bomb children, and Mervin ran the preses to pay for the bombs. Evil.

How can you hold any credibilty after such a bizarre and twisted post?

I don't think Alistair Darling voted to bomb children. And I don't think he or any other sensible person does either.

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Guest DissipatedYouthIsValuable
These are people who fully understand how the system works, how it takes value from savers and holders of pounds, who know that the pound is backed by the ability of men in uniforms to threaten the defenceless and steal from ordinary people and go to work anyway, when they don't have to.

Mr. Darling and co voted to bomb children, and Mervin ran the preses to pay for the bombs. Evil.

Seems true.

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