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Simple Fractional Reserve/loan Default Question


mattyboy1973

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HOLA441
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HOLA442
there is no real risk of a run on the banks in our modern system.

thats why the whole NR incident was so silly.

at worst there would have been a delay as the boe shifted some cash over to tide the withrawers.

I cant believe you can believe that to be true.

A bank is a business. If it ******s up then the depositors money that was lent elsewhere is almost certainly not recoverable.

The depositors only hope is then a BOE bailout. The BOE then has the liabilities of the bank on its own books.

Countries cannot indefinately hold liabilities on their books and cannot take part in normal money creation if they have already abused this power.

There are no magic answers here as many of you believe.

The banks power is its ability to attact lending. If the BOE attracts liabilities by not monitoring the health of its bank it has to pay a higher price to borrow money.

This free lunch idea is not part of the real world.

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HOLA443
I cant believe you can believe that to be true.

A bank is a business. If it ******s up then the depositors money that was lent elsewhere is almost certainly not recoverable.

The depositors only hope is then a BOE bailout. The BOE then has the liabilities of the bank on its own books.

Countries cannot indefinately hold liabilities on their books and cannot take part in normal money creation if they have already abused this power.

There are no magic answers here as many of you believe.

The banks power is its ability to attact lending. If the BOE attracts liabilities by not monitoring the health of its bank it has to pay a higher price to borrow money.

This free lunch idea is not part of the real world.

Any chance of that apology and retraction yet?

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HOLA444
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HOLA445

the funny thing about the NR debacle is that people queued up believing the bank would go bust but i didnt see people coming out of the bank with their 'money' in a suitcase. and i extend that idea to say as long as people think everything is ok they dont panic. its only when people get a whiff that a bank/country is on the rails they ask for more interest/move their cash.

so the boe can step in with its SLS and thats enough to placate most worried depositors. but SLS is being removed in october which will be fun. i presume theyll replace it with a special liquity plan instead!

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HOLA446
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HOLA447
I cant believe you can believe that to be true.

A bank is a business. If it ******s up then the depositors money that was lent elsewhere is almost certainly not recoverable.

The depositors only hope is then a BOE bailout. The BOE then has the liabilities of the bank on its own books.

Countries cannot indefinately hold liabilities on their books and cannot take part in normal money creation if they have already abused this power.

There are no magic answers here as many of you believe.

The banks power is its ability to attact lending. If the BOE attracts liabilities by not monitoring the health of its bank it has to pay a higher price to borrow money.

This free lunch idea is not part of the real world.

ummm, I said there is little possibility of a BANK RUN, and less and less each day as we switch more and more to digital banking.

do you really see Virgin say, withdrawing all of their money into cash?

the bank runs in the 30's etc were devastating because people were taking their money out in gold, when the gold was gone, the bank would fold.

in theory you could make demands on a bank until they ran out of CASH,like NR, but you would get what we got, government guarantees etc.

nothing like the old days at all.

your NOTATIONAL VALUE of money is really pretty safe.

it's the REAL value you have to watch out for.

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HOLA448
I''m not.

I'm saying that a bank can have no deposits and can "lend" infinite amounts of money.

This is factually how modern banks work

You create your own facts. They do not monetize your promise. Instead your promise to pay back to them the 100 they give you becomes an assett for them in the books. That is the part that *begins* this process. And it *depends* on the money already existing *before it begins* and *then* after the loan document is created by them they pay the money they had *already* into your account.

The money in your account is ***only**** a deposit while it is ***in*** your account. It is part of a loan for ******s sake! not a deposit that you intend to hold on deposit while paying the bank for the privelidge!!!!

In your example if one single ******ing penny gets moved to another bank electronicly then the loan held is in violation of banking law by one penny.

To be compliant they have to receive a penny first.

There is no magic machine working here. Deposits come in and the loans go out.

And whats more as the loan amounts increase the capital requirements must also increase!!!!

It is absolutely pointless pointing people to text books and central bank documents and wiki if you invent your own facts and totally ignore the facts held in the very documents you get others to read.

And pointless suggesting others contact their bank and ask for account details to get information about your facts as you did when the end result of your own mission was the likely one that they close your account and ban you from the premises after you endlessly hassling them with the facts you invent!!!

It is a useless thing to do to provide account details to support a theory when there are no accounting based facts supporting your theory.

But to you it is not a theory just facts.

And based on what??

Nothing. Absolutely nothing.

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HOLA449
so if i were to look at hbos' books at 1pm on any one day youre telling me that the debits would not equal the credits?

Logically in general that is the case, and "HBOS's books at 1pm" might not be a meaningful term in practice.

The participating clearing banks settle up with each other after close of business, which is when they "look at their books".

They then clear their books by making inter-bank loans so that each has balanced books.

However it might be the case that each bank's computers keep running totals in anticipation of, and to facilitate, the after hours clearing process(?)

If these running totals are included, then a (rapidly changing) balance sheet of sorts could be maintained at all times.

Does anyone know to what extent this actually happens, if at all?

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HOLA4410
At the start of business the books balance for both bank A and bank B.

Joe takes out a loan of £100 from A and deposits it in B.

At this point A’s assets have increased by £100 and B’s liabilities have increased by £100.

Neither individual bank’s books balance, though their combined books, the whole banking system in this simple model, do balance.

At close of business A borrows £100 from B (at LIBOR).

Each separate bank’s books now balance again, ready for the next day.

A charges Joe more than LIBOR for his loan.

B gives Joe less than LIBOR for his deposit.

Each bank makes a profit.

I am not sure what you are saying

you say:

"At this point A’s assets have increased by £100 and B’s liabilities have increased by £100."

For some reason when B receives an assett you describe this as only a liability.

but surely B receives something tangible which is an assett which it is liable for to Joe?

Banks deposits are things they are liable to return but they also got something (before they lose it) to cover that liability.

I think what you are getting at is that the interest differentials between the lending and borrowing will never balance?. B having the deposit is liable for the interest it pays Joe. But has no interest as an assett to cover that liablity.

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HOLA4411
ummm, I said there is little possibility of a BANK RUN, and less and less each day as we switch more and more to digital banking.

do you really see Virgin say, withdrawing all of their money into cash?

the bank runs in the 30's etc were devastating because people were taking their money out in gold, when the gold was gone, the bank would fold.

in theory you could make demands on a bank until they ran out of CASH,like NR, but you would get what we got, government guarantees etc.

nothing like the old days at all.

your NOTATIONAL VALUE of money is really pretty safe.

it's the REAL value you have to watch out for.

Why do you think a bank run cannot happen electronicly?

If funds are transferred out of deposits a bank is required eventually to get extra deposits elsewhere. If it fails then it must reduce its lending by calling in loans.

If you imagine that a central bank is going to bail out all of its failing loans you are not living on the same planet as me.

You do know i am sure that the BOE limits on protection of depositors money are relatively small? Any bank in trouble is going to find it impossible eventually to borrow money unless it can sort out the trouble it has.

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HOLA4412

Qn for Injin.

Why do banks care if a loan it has granted is not repaid (i.e. the borrower defaults)?

(Presumably you believe they couldn't care less as it doesn't matter, since they magicked the money into existence in the first place.)

Looking forward to your unique perspective. Don't hold back, tell us how it really works.

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HOLA4413
Qn for Injin.

Why do banks care if a loan it has granted is not repaid (i.e. the borrower defaults)?

(Presumably you believe they couldn't care less as it doesn't matter, since they magicked the money into existence in the first place.)

Looking forward to your unique perspective. Don't hold back, tell us how it really works.

I asked injin how banks could go bankrupt if they never really loaned anything (which is kinda the same thing you're asking I suppose). This was the response, and I'm still scratching my head..

It's possible for a bank to go bankrupt because they run out of legal tender, if people stop accepting the bank credit they issue. Most banks have massive disparities between legal tender held and loans/deposits etc if they can possibly help it, they will try to get you to accept bank credit instead of money. (internet banking, sir? How about phone banking? I'm sorry sir, we don't give out withdrawl slips any longer, do you have any ID?...)

However, they are aware that this only works because people generally mistake bank credit for legal tender and will provide legal tender on a 1 to 1 basis if asked to do so. It's possible, therefore, for a hefty loan to wipe them out, if withdrawn as cash.

Can you throw more light on it? You sound knowledgeable and your avatar looks wise and venerable! :)

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HOLA4414
If you imagine that a central bank is going to bail out all of its failing loans you are not living on the same planet as me.

what exactly do you think the central banks are doing swapping by swapping bonds for the poorly performing assets?

I'm on earth, what planet are you on again?

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HOLA4415
what exactly do you think the central banks are doing swapping by swapping bonds for the poorly performing assets?

I'm on earth, what planet are you on again?

At this point in time this is a temporary abnormal exstreme exstraordinary worrying scary event that cannot continue increasing for ever.

Banks are also being asked to make their accounts transparent and ensure they are adequately capitalised.

A process is under way that takes time.

At this point in time the banks need for cash/digits to make their accounts compliant is driving up the cost of money or arguably the cost of money is being forced to return to the market cost of money. And there is nothing that can be done to change that which is not massively inflationary.

In my world i am looking to protect myself.

Meanwhile commercial banks dont create money out of thin air and each loan that is made represents money that is due back to them. If loans go bad that represents real money that has to be found to cover the loss.

What are we to believe here? That the whole ******ing mess is not really happening and that banks are not under pressure to raise more long term financing to cover their current obligations and set aside reserves for expected losses on money lent out??

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HOLA4416
You create your own facts. They do not monetize your promise. Instead your promise to pay back to them the 100 they give you becomes an assett for them in the books. That is the part that *begins* this process. And it *depends* on the money already existing *before it begins* and *then* after the loan document is created by them they pay the money they had *already* into your account.

The money in your account is ***only**** a deposit while it is ***in*** your account. It is part of a loan for ******s sake! not a deposit that you intend to hold on deposit while paying the bank for the privelidge!!!!

In your example if one single ******ing penny gets moved to another bank electronicly then the loan held is in violation of banking law by one penny.

To be compliant they have to receive a penny first.

There is no magic machine working here. Deposits come in and the loans go out.

And whats more as the loan amounts increase the capital requirements must also increase!!!!

It is absolutely pointless pointing people to text books and central bank documents and wiki if you invent your own facts and totally ignore the facts held in the very documents you get others to read.

And pointless suggesting others contact their bank and ask for account details to get information about your facts as you did when the end result of your own mission was the likely one that they close your account and ban you from the premises after you endlessly hassling them with the facts you invent!!!

It is a useless thing to do to provide account details to support a theory when there are no accounting based facts supporting your theory.

But to you it is not a theory just facts.

And based on what??

Nothing. Absolutely nothing.

Still no apology or retraction.

I get that, and I'll answer your points.

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HOLA4417
Qn for Injin.

Why do banks care if a loan it has granted is not repaid (i.e. the borrower defaults)?

(Presumably you believe they couldn't care less as it doesn't matter, since they magicked the money into existence in the first place.)

Looking forward to your unique perspective. Don't hold back, tell us how it really works.

They care because banking is mechanism for turning worthless paper into real assets, labour and services.

They want bankrupcies and repossessions. They create recessions and depressions on purpose, it is why they exist.

Money is hard for the average person to acquire and once they have the taxman and others are constantly trying to take it off them (which is the only reason it has any value at all.) The bankers just prints it or types it out. it costs them next to nothing.

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HOLA4418
Can you throw more light on it? You sound knowledgeable and your avatar looks wise and venerable! :)

There are two ki9nds of "money" in the system -

1) legal tender, which cannot be refused if offered as payment.

2) Bank credit - numbers ona screen, accounting slips, bankers drafts, cheques and the like. It has £ signs on it and numbers and people think it represents legal tender.

Bank credit only works if the majority of people mistake legal tender for bank credit money. if a bank runs out of it and people refuse it's bank credit then it will go pop.

Analogy?

lets say you have an orchard and you grow apples. You only have about 1 apple for every 96 owed. You owe lots and lots of apples to people, but generally speaking they are happy to accept pictures of apples, promises for apples, statements saying "I have 35 apples" and PC screens with an apple on them instead of a real physical apple.

One day people start asking for apples instead of pictures and you run out of them by dinnertime. You are now bankrupt.

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HOLA4419

Injin

I never said you were a fraud because you were not admitting to distributing the money as debt video.

I said you were a fraud because you apparently produce real world examples to illustrate your beliefs but when you are challenged to explain how it actually works via these "real world examples" you apparently produce, it is impossible to understand how it works.

And your answer is then more of the same.

Your answer is essentially you know and the rest of us are ignorant.

And yet you provide us with your accounting examples to illustrate your superiority

but none of what you say actually makes sense and is comparible to the way the system is actually practicised in the real world.

As for the point about the video you clearly suggested that video could be used to illustrate the banking fraud.

And yet that video shows no evidence of fraud. What it shows is the directors confusion.

But you wont discuss that.

You wont provide any information that helps us to understand why you think this video can be used to illustrate the banking fraud you believe exists in the commercial banking world.

It is all very circular.

And pointless.

And then you say i work for JP morgan and i am a banking VI.

In your world you are so important that a banking expert comes to talk to you!

Classic!

But you are not entirely wrong in the bigger picture sense. It is in the mechanics of the process that you are totally wrong.

Your claim that commercial banks are functioing as central banks is i believe just wrong

And yet in the overall sense of what you are saying i am not convinced you are wrong.

I find you annoy the crap out of me that i have spent so much time with you trying to understand your point of view but the best you can come up with is of an example of a bank that cannot even lend me 50P

In that sense you are a total fraud time waster and fantasist.

On the other hand you are confused and might be able to work it all out correctly one day!

Just like the rest of us are attempting to go i would guess?

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HOLA4420
Injin

I never said you were a fraud because you were not admitting to distributing the money as debt video.

I can't admit to things that I do not do.

You are impossible.

On your blog you say the video "money is debt" should be distributed to show the banking fraud.

Dishonesty and fraud seem to be your modus operandi

""1) Expose the other banker

This one is pretty simple - there are many ways to expose a fraudster, not just by releasing money as debt videos" "

You are clearly saying that banking fraudsters can be exposed by releasing debt as money videos

You consistantly keep quoting whatever suits you but you wont stand by what it says to support your argument

You are a total fraud.

You even quote the only place where I mention the money as debt video on my blog, the place that completely disproves your comment that I am advocating it's distribution and then call me a fraud for not admitting I am advocating it's distribution.

An apoliogy and a retraction is in order.

What I actually suggest in my blog is that the money as debt has been released by bankers. (This makes sense because it's solution is the same as the solution the bankers sold to people in the US in 1907-1913, state control of the money supply or more of what we have now.) Nowhere do I advocate it's distribution.

just read what I wrote, admit you are wrong and apologise. It won't kill you and we can move on.

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HOLA4421
There are two ki9nds of "money" in the system -

1) legal tender, which cannot be refused if offered as payment.

2) Bank credit - numbers ona screen, accounting slips, bankers drafts, cheques and the like. It has £ signs on it and numbers and people think it represents legal tender.

Bank credit only works if the majority of people mistake legal tender for bank credit money. if a bank runs out of it and people refuse it's bank credit then it will go pop.

Analogy?

lets say you have an orchard and you grow apples. You only have about 1 apple for every 96 owed. You owe lots and lots of apples to people, but generally speaking they are happy to accept pictures of apples, promises for apples, statements saying "I have 35 apples" and PC screens with an apple on them instead of a real physical apple.

One day people start asking for apples instead of pictures and you run out of them by dinnertime. You are now bankrupt.

This is not a real world example. Therefore you cannot use it prove your theory.

In the real world people expect delivery of apples. And apples get consumed and rot. In the real world nobody is trading a picture of apples for pictures of apples without an expectation that real apples are going to be delivered.

Cash does not represent a picture of a thing of value. Cash is itself demonstrably valueable.

Digits in my bank are demonstrably value. I can transfer these digits all around the globe and use the power of those digits.

Why would a country the other side of the globe allow me to have power in their juridiction if my digits did not have real power?

You can argue as you do that there are no countries.

But in the real world we see something different.

If you want to illustrate your truth you need to provide real world examples.

So far you have not done that. Instead we get unreal apple markets and banks that cannot loan 50P

If your version is true then you need to demonstrate its truth in the way it works by a real life example

This is not an unreasonable request that people have asked of you?

But you avoid the answer.

By any means possible you cling to your truth.

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HOLA4422
This is not a real world example. Therefore you cannot use it prove your theory.

In the real world people expect delivery of apples. And apples get consumed and rot. In the real world nobody is trading a picture of apples for pictures of apples without an expectation that real apples are going to be delivered.

Richard Branson has more in his bank account than has ever been printed.

There are £50bn (roughly) in notes and coing and trillions in debts and accounts. if you go to a bank and ask for a withdrawl they might tell you that those funds are not available and you have to come back in a few days. At the same time, they will be lending someone else many times that in another cubicle.

Cash does not represent a picture of a thing of value. Cash is itself demonstrably valueable.

No, it isn't. it's just paper with numbers on it. however, if you offer them to people and they refuse, they lose access to the court system and you don't have to pay them anything.

Digits in my bank are demonstrably value. I can transfer these digits all around the globe and use the power of those digits.

They are not valuable. People can refuse them and when they do, banks go bust.

Why would a country the other side of the globe allow me to have power in their juridiction if my digits did not have real power?

They have contractual arrangements that require them to do so.

You can argue as you do that there are no countries.

But in the real world we see something different.

Wrong. In the real world there are no countries. They are a fiction, a nonsense, entirely imaginary. This is just a fact. Countries do not now, never have and never will exist.

If you want to illustrate your truth you need to provide real world examples.

So far you have not done that. Instead we get unreal apple markets and banks that cannot loan 50P

If your version is true then you need to demonstrate its truth in the way it works by a real life example

This is not an unreasonable request that people have asked of you?

But you avoid the answer.

By any means possible you cling to your truth.

I've answered this many times. I prefer analogy and real objects because people see "money" and the confusion that has been long propogated by the banksters gets in the way. I'm just going to pay you in the same substance that the banks do and hope you get it -

£1,000,000

Spend it wisely.

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HOLA4423

Qn for Injin.

Why do banks care if a loan it has granted is not repaid (i.e. the borrower defaults)?

They care because banking is mechanism for turning worthless paper into real assets, labour and services.

How do you know that's why they care? How would you test your hypothesis?

Occam's razor leaves me with the conclusion that they care because it hurts them. They care because any loss comes out of their P&L account (the clue is in the name) and therefore reduces the periodic business surplus which adds to their equity. Reduced equity means a shrinking business.

They got the risk wrong and the loan did not perform. It comes out of their pocket. It is real. It hurts them.

They want bankrupcies and repossessions. They create recessions and depressions on purpose, it is why they exist.

Don't expand the subject until you understand how it works in normal times. You've heard about the Rothschilds no doubt, but you don't understand how a High St bank works on a day to day basis. Don't move on until you understand why a bad debt hurts a bank and its shareholders.

Money is hard for the average person to acquire and once they have the taxman and others are constantly trying to take it off them (which is the only reason it has any value at all.) The bankers just prints it or types it out. it costs them next to nothing.

What do you mean it costs them next to nothing? If the money does not return to them it costs them 100% from their capital base. They are taking this risk and are compensated naturally for doing so.

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HOLA4424
Qn for Injin.

Why do banks care if a loan it has granted is not repaid (i.e. the borrower defaults)?

How do you know that's why they care? How would you test your hypothesis?

Simple. Check past behaviour. They always create booms and they always personally mop up in the bust.

Occam's razor leaves me with the conclusion that they care because it hurts them. They care because any loss comes out of their P&L account (the clue is in the name) and therefore reduces the periodic business surplus which adds to their equity. Reduced equity means a shrinking business.

They got the risk wrong and the loan did not perform. It comes out of their pocket. It is real. It hurts them.

It doesn't. It cannot. They might lose a part of the hydra here and there but the system lives on.

Don't expand the subject until you understand how it works in normal times. You've heard about the Rothschilds no doubt, but you don't understand how a High St bank works on a day to day basis. Don't move on until you understand why a bad debt hurts a bank and its shareholders.

There is only one bank for each territory. No doubt they encourage competition between the variosu franchises but they are part of the same operation.

What do you mean it costs them next to nothing? If the money does not return to them it costs them 100% from their capital base. They are taking this risk and are compensated naturally for doing so.

Risk of what?

It's paper and ink. Numbers on a screen. This is the failure of empathy I see. Ordinary folks have tax bills they have to pay and they have to acquire said paper, ink and pc numbers from banks, working for the government etc it can cost a lot of time, effort and energy to get.

Bankers just print it or type it. To them it's only value is as a vehicle to acquire real stuff and real labour. They have infinite amounts of money.

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HOLA4425
Risk of what?

It's paper and ink. Numbers on a screen. This is the failure of empathy I see. Ordinary folks have tax bills they have to pay and they have to acquire said paper, ink and pc numbers from banks, working for the government etc it can cost a lot of time, effort and energy to get.

Bankers just print it or type it. To them it's only value is as a vehicle to acquire real stuff and real labour. They have infinite amounts of money.

Goodbye Injin. I hope you get well soon.

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