Simple Fractional Reserve/loan Default Question

[AteMoose]

http://books.google.co.uk/books?id=cV0EZuJ...8&ct=result

http://www.ccmj.org/fsc/040225-edm323-sudeley.htm

http://en.wikipedia.org/wiki/Money_creation

http://search.bankofengland.co.uk/search?q...ault_collection

http://www.bankofengland.co.uk/publication...in/qb070302.pdf

http://www.bankofengland.co.uk/contact.htm

the fact that the banking sector plays such

an important role in the creation of money.

And also go and check it out at your local branches, for the love of god.

Thanks Injin

Banks create money in very subtle way, but I can do the same by taking money off one mate loaning it to somone else and charging interest. If you got rid of all banks tomorrow, I could still 'expand' money by lending money to my mate Dave and demanding more money back in the future (although I would end up with all the money unless someone monitorizes it). The problem isn't just limited to banks? IMHO its the entire process of money going round a full circle from saver to borrower to saver that makes the everything bigger. The problem is a system that is bigger than all men and all governments put together and a system that cannot be replaced because it will create itself again.

I understand your point of view and I understand aliveandkickings point of view, and I think everyone is right. I also know your right when you say it depends on your version of reality. Being literal your right and nothing exists, people believe and that is all that matters.

We are in uncharted waters because we have digital money which makes things a little easier, its really easy to solve the problem but there is a risk it can run away with us...

Edited August 28, 2008 by moosetea

[aliveandkicking]

http://books.google.co.uk/books?id=cV0EZuJ...8&ct=result

http://www.ccmj.org/fsc/040225-edm323-sudeley.htm

http://en.wikipedia.org/wiki/Money_creation

http://search.bankofengland.co.uk/search?q...ault_collection

http://www.bankofengland.co.uk/publication...in/qb070302.pdf

http://www.bankofengland.co.uk/contact.htm

the fact that the banking sector plays such

an important role in the creation of money.

And also go and check it out at your local branches, for the love of god.

Once again you imagine you have an authority to lecture me that you are right and i am wrong but you also say there are no authorities. And what is it with the love of god? An authority? You told me explicitly that you definately know there is no god.

Obviously a banking system creates money. There is obviously more money existing now than existed than let us say in 1990.

But ordinary banks do not create money.

No amount of links or pleading to your own self declared none existant higher authorities will change that.

I must admit this conversation has confused me.

I say 'ordinary banks' and people talk to me as if they cannot read the words 'ordinary banks'

I really dont get it.

It is truelly as i entered an alternate reality where ordinary language has no meaning at all

Perhaps i entered the internet and did not realise the nature of the alternate reality that exists here!

More fool me i suppose

[Injin]

Once again you imagine you have an authority to lecture me that you are right and i am wrong but you also say there are no authorities. And what is it with the love of god? An authority? You told me explicitly that you definately know there is no god.

I'm right not because I am an authority, I am right because I am right. That is my opinion and the facts align. The sentence -

Commercial banks create money.

Is completely 100% accurate no matter who says it or where. It is correct when measured against reality. Reality determines truth and falsehood, not the authority of the speaker of the sentence.

This is also objectively true in reality.

Obviously a banking system creates money. There is obviously more money existing now than existed than let us say in 1990.

But ordinary banks do not create money.

No amount of links or pleading to your own self declared none existant higher authorities will change that.

The bank of england say that the commercial banks create money. The commerical banks say they create money. I've been to the commerical banks and watched them do it. I suggest you do the same so that you can prove it empirically for yourself. The reason they can do this is because they are merely extensions of the bank of england. They are franchises, not seperate entities.

Not only that,but I can create money and it's not exactly difficult. -

£1,000,000

I must admit this conversation has confused me.

I say 'ordinary banks' and people talk to me as if they cannot read the words 'ordinary banks'

I really dont get it.

It is truelly as i entered an alternate reality where ordinary language has no meaning at all

Perhaps i entered the internet and did not realise the nature of the alternate reality that exists here!

More fool me i suppose

You have a few incorrect ideas. The struggle of matching your incorrect ideas with reality is casuing you confusion and will do so until you abandon them.

That's about all there is ot say on it, really.

[aliveandkicking]

Thanks Injin

Banks create money in very subtle way, but I can do the same by taking money off one mate loaning it to somone else and charging interest. If you got rid of all banks tomorrow, I could still 'expand' money by lending money to my mate Dave and demanding more money back in the future (although I would end up with all the money unless someone monitorizes it).

I dont get this at all.

Can you break this down so i can understand it? do you borrow the money from your mate or do you steal it?

What is money in this example? Have you created an entire alternate money system here and not mentioned it? How do you expand the money by demanding more money? Where does Dave get this money? How do you monetize money in this system so that you have even more money? What do you mean you would get all of the money unless you 'monetize it' when you already said you could 'expand' money? but now say you can only get all of the money in the system unless you monetize?

Not at all following you here.

[AteMoose]

I dont get this at all.

Can you break this down so i can understand it? do you borrow the money from your mate or do you steal it?

What is money in this example? Have you created an entire alternate money system here and not mentioned it? How do you expand the money by demanding more money? Where does Dave get this money? How do you monetize money in this system so that you have even more money? What do you mean you would get all of the money unless you 'monetize it' when you already said you could 'expand' money? but now say you can only get all of the money in the system unless you monetize?

Not at all following you here.

I think your being silly I think you get it.. but here I go again:

Dave gets his money buy borrowing more money from someone else, I get my money by borrowing from someone else... everyone ends up in debt to each other, countries, people companies, but everyone gets paid more and everything costs more so it doesn't matter because we can buy stuff and service the debts (just as long and money supply increases at a sensible rate and interest rates are a sensible rate) ;p

More specifically answering your main points

1. To all intensive purposes Money is Debt and Debt is money

2. Yes I am asking for more money from the future, which can be borrowed from me or another bank in the future by someone else paid to the original person in the form of wages just to pay me back. The money doesn't actually exist in form but people think it exists because it is in there banks and pockets therefore it exists....

Edited August 28, 2008 by moosetea

[aliveandkicking]

I'm right not because I am an authority, I am right because I am right. That is my opinion and the facts align. The sentence -

Commercial banks create money.

Is completely 100% accurate no matter who says it or where. It is correct when measured against reality. Reality determines truth and falsehood, not the authority of the speaker of the sentence.

This is also objectively true in reality.

The bank of england say that the commercial banks create money. The commerical banks say they create money. I've been to the commerical banks and watched them do it. I suggest you do the same so that you can prove it empirically for yourself. The reason they can do this is because they are merely extensions of the bank of england. They are franchises, not seperate entities.

Not only that,but I can create money and it's not exactly difficult. -

£1,000,000

You have a few incorrect ideas. The struggle of matching your incorrect ideas with reality is casuing you confusion and will do so until you abandon them.

That's about all there is ot say on it, really.

1. How exactly are you defining commercial bank?

And please explain to me step by step how they create money in a practical example

2. If i write a cheque i am not creating money. All i create is a claim to my money

So how do you create your 1000,000?

A bank transmits money because it has recognised authority and a claim is entered into some ledger somewhere that the money held by the new bank was an assett of the previous bank. An examiner looking at the second bank oks that money because of the previously recognised and validated authority of the earlier bank.

But no money was created

I realise these are just details

But without these details why do you believe you can create 1000,000 and give it to me and i will take you seriously?

You act like you are an authority but nothing you say tells me you know what you are talking about

And for some reason i am waiting to be show you do know what you are talking about!

The internet again!

And more fool me again!

[aliveandkicking]

I think your being silly I think you get it.. but here I go again:

Dave gets his money buy borrowing more money from someone else, I get my money by borrowing from someone else... everyone ends up in debt to each other, countries, people companies, but everyone gets paid more and everything costs more so it doesn't matter because we can buy stuff and service the debts (just as long and money supply increases at a sensible rate and interest rates are a sensible rate) ;p

More specifically answering your main points

1. To all intensive purposes Money is Debt and Debt is money

2. Yes I am asking for more money from the future, which can be borrowed from me or another bank in the future by someone else paid to the original person in the form of wages just to pay me back. The money doesn't actually exist in form but people think it exists because it is in there banks and pockets therefore it exists....

I do not get it.

You talk about money creation but none is created in your examples

You talk about money expansion but you mean actually money that exists already is accumulated

And you mention the money supply increasing but you do not mention how it increases.

But you say:

"The money doesn't actually exist in form but people think it exists because it is in there banks and pockets therefore it exists...."

how is the money that does not exist, in the bank and pockets before it exists??

I totally dont follow you.

But what i do know so far is that you use language differently to the way i use language.

I honestly do not understand what on earth you are talking about

[Injin]

1. How exactly are you defining commercial bank?

And please explain to me step by step how they create money in a practical example

Okidoki.

Money, as we all know is a medium of exchange. if I have a reputation for having lots of legal tender I can pretend to give it to people and they will use this as a medium of exchange. Lo, we have now created money.

I have £10,000 in my vault and the first person comes in and asks to borrow it. "No problem" I say - "but it's dangerous to walk around with that sort of cash on you. how about I write you an IOU instead?"

You agree and go off and spend that IOU, which is accepted for value because everyone knows the bank is good for it. The IOU is now money, because it is being used as a medium of exchange.

Then Moosetea walks in and asks to borrow £10,000. "No problem" I say - "but it's dangerous to walk around with that sort of cash on you. how about I write you an IOU instead?"

Moosetea agrees and he goes off and spends that IOU. We just created £20,000 on top of the initial £10,000. A bank can create money like this all day, as long as no one actually asks for the £10,000 to take out of the bank.

[AteMoose]

1. How exactly are you defining commercial bank?

And please explain to me step by step how they create money in a practical example

2. If i write a cheque i am not creating money. All i create is a claim to my money

So how do you create your 1000,000?

A bank transmits money because it has recognised authority and a claim is entered into some ledger somewhere that the money held by the new bank was an assett of the previous bank. An examiner looking at the second bank oks that money because of the previously recognised and validated authority of the earlier bank.

But no money was created

I realise these are just details

But without these details why do you believe you can create 1000,000 and give it to me and i will take you seriously?

You act like you are an authority but nothing you say tells me you know what you are talking about

And for some reason i am waiting to be show you do know what you are talking about!

The internet again!

And more fool me again!

Your almost there, ive had an idea that might explain it:

Bank 'has' 100 quid

Person A charges 10 quid for something and Person B buys it with a loan (the cost is to pay a lump sum of 11 quid in 2 years time), person A puts 10 quid in bank

Bank 'has' 100 quid

two years time

Person B charges 12 quid for something and Person C buys it with a loan (the cost is to pay a lump sum of 13 quid in 2 years time). Person B pays the 13 quid back to the bank and keep the 1 quid profit

bank has

Bank 'has' 101 quid

two years time

Person C charges 14 quid for something and Person D buys it with a loan (the cost is to pay a lump sum of 15 quid in 2 years time), Person C pays the 15 quid back to the bank and keep the 1 quid profit

Bank 'has' 102 quid

two years time

Person D charges 16 quid for something and Person E buys it with a loan (the cost is to pay a lump sum of 17 quid in 2 years time), Person D pays the 15 quid back to the bank and keep the 1 quid profit

Bank 'has' 103 quid

Voila, money supply/creation and inflation, no money is being physically printed, these things that are being bought and sold can be anything but people often use houses because there big and expensive. As you can see in my example no central bank is stepping in but everything is going up and up in price and there is more money in the bank, more money exists, where does it come from? (see end of post for answer)

If you fallow this example the bank now has lots of 'money' in the bank and can pay savers interest rates, pay taxes and anything else really as long as inflation and money supply and interest rates run at just the right rates this system can carry on for ever, with each generation borrowing money to pay off there debts and give there parents a retirement on there investments, the system feeds on itself like a perpetual machine.

Answer : The money to pay the loans comes from the future money that doesn't exist, therefore we can assume that money is being created when it is loaned out in the system

Edited August 28, 2008 by moosetea

[roadtoruin]

Once again you imagine you have an authority to lecture me that you are right and i am wrong but you also say there are no authorities. And what is it with the love of god? An authority? You told me explicitly that you definately know there is no god.

Obviously a banking system creates money. There is obviously more money existing now than existed than let us say in 1990.

But ordinary banks do not create money.

No amount of links or pleading to your own self declared none existant higher authorities will change that.

I must admit this conversation has confused me.

I say 'ordinary banks' and people talk to me as if they cannot read the words 'ordinary banks'

I really dont get it.

It is truelly as i entered an alternate reality where ordinary language has no meaning at all

Perhaps i entered the internet and did not realise the nature of the alternate reality that exists here!

More fool me i suppose

I think people understand 'ordinary banks' AAK. But you assume that these guys (perhaps most of us) will be prepared to discuss things on your terms rather than sitting dogmatically in their philosophical silos. We all do that a bit, and I only dip into these threads sporadically because otherwise I get too aggravated and/or abusive which doesn't help my blood pressure or the thread. It is an alternate reality, but perhaps it's the case that most people will only discuss 80% around any topic while 20% is rigidly not up for discussion. In Injins case the ratios are reversed which always adds to the agitation or amusement depending on whether you're an observer or a participant...

[Mr Nice]

I think you need to all listen to the debt is money video again and again until you finally all get it that the debt is money video says all that you need to know but actually just confuses you with the idea that ordinary banks create money.

From memory:

1111.11 of high powered money enables a loan of 9 times that = 10,000

and 10,000 of depositors money allows a loan of .9 of that

The bank having 1111.11 can lend out 10,000 if it has 10,000 - 1111.11 in deposits.

Somehow the debt is money video leads you to believe that banks multiple what they can loan without them needing deposits but early in the video they make it very clear the bank cannot do that

Just watch the damn thing please and realise you are wrong.

the main trouble with the debt is money video is that it kind of makes up it's own words for things (like "high powered money").

it creates further confusion when it really doesn't have to.

Edited August 28, 2008 by Mr Nice

[aliveandkicking]

I think people understand 'ordinary banks' AAK. But you assume that these guys (perhaps most of us) will be prepared to discuss things on your terms rather than sitting dogmatically in their philosophical silos. We all do that a bit, and I only dip into these threads sporadically because otherwise I get too aggravated and/or abusive which doesn't help my blood pressure or the thread. It is an alternate reality, but perhaps it's the case that most people will only discuss 80% around any topic while 20% is rigidly not up for discussion. In Injins case the ratios are reversed which always adds to the agitation or amusement depending on whether you're an observer or a participant...

I think you are onto something there.

By the way i spent the first 20 years of my life in Havant from being a new born and my mum and dad stayed there till they died 50 years later! Maybe that makes us share a similar reality! Certainly feels like it already! Thanks for dropping in:-)

[aliveandkicking]

Your almost there, ive had an idea that might explain it:

Person A charges 10 quid for something and Person B buys it with a loan (the cost is to pay a lump sum of 11 quid in 2 years time)

two years time

Person B charges 12 quid for something and Person C buys it with a loan (the cost is to pay a lump sum of 13 quid in 2 years time). Person B pays the 13 quid back to the bank and keep the 1 quid profit

two years time

Person C charges 14 quid for something and Person D buys it with a loan (the cost is to pay a lump sum of 15 quid in 2 years time), Person C pays the 15 quid back to the bank and keep the 1 quid profit

two years time

Person D charges 16 quid for something and Person E buys it with a loan (the cost is to pay a lump sum of 17 quid in 2 years time), Person D pays the 15 quid back to the bank and keep the 1 quid profit

Voila, money supply/creation and inflation, no money is being physically printed, these things that are being bought and sold can be anything but people often use houses because there big and expensive. As you can see in my example no central bank is stepping in but everything is going up and up in price and there is more money in the bank, more money exists, where does it come from? (see end of post for answer)

If you fallow this example the bank now has lots of 'money' in the bank and can pay savers interest rates, pay taxes and anything else really as long as inflation and money supply and interest rates run at just the right rates this system can carry on for ever, with each generation borrowing money to pay off there debts and give there parents a retirement on there investments, the system feeds on itself like a perpetual machine.

Answer : The money to pay the loans comes from the future money that doesn't exist, therefore we can assume that money is being created when it is loaned out in the system

I am sorry i just cant follow what you are saying

You appear to be saying that a bank loan creates money via interest that comes from the future payments?

And this future interest money does not yet exist in the economy but no organisation needed to create it?

I really do not follow what you are getting at here.

I think one of the arguments put forward by "debt = money" is that interest payments eventually cripple the economy but it seems you have solved that one in your system in a way that i cannot understand.

[AteMoose]

I am sorry i just cant follow what you are saying

You appear to be saying that a bank loan creates money via interest that comes from the future payments?

Yes

And this future interest money does not yet exist in the economy but no organisation needed to create it?

Yes

I really do not follow what you are getting at here.

It shows EXACTLY how money is created over time as a simplified example, tell me why this wouldn't work?

I think one of the arguments put forward by "debt = money" is that interest payments eventually cripple the economy but it seems you have solved that one in your system in a way that i cannot understand.

ARGHHHHHHHH! how can I make it simpler, what dont you understand? Try reading through the example above because it shows in detail how lending money/borrowing from the future creates 'money'. This example system will be crippled eventually because 1 person (the bank) will have most of the money and everyone else will be a slave, if there is lots of money and one person owns it all they will be able to afford anything and do anything they like whilst the population starves. When this happens the population revolts a new currency is created and the system resets. Governments attempt to balance the system through taxation, and gordon brown says silly things like 'no more boom and bust' because he thought he had balanced the system perfectly for the UK.

Edited August 28, 2008 by moosetea

[AteMoose]

Oh dear. Moosetea - that's not it.

Interest creates liabilities for which no money has been created. It is NOT the method of money creation.

But to avoid being called patronising again despite having wasted my time trying to explain things to aliveandkicking I shall now bow out of this discussion.

Galbraith: 'The process by which banks create money is so simple the mind is repelled.'

So it seems.

Yeah I know its more involved, but I'm trying to make it as simple as possible with one bank as an example... IMHO its simplified it uses one bank and but in essence its right... but I will read your posts to double check...

@Injin: does it fit with your thinking

@aliveandkicking : in my example try and figure out where the extra money is coming from and why the price of stuff goes up. I'm really trying to keep it as simple as possible, cutting out extra complications to show you how lending money creates money over time and cutting out the fractional lending bit...

Edited August 28, 2008 by moosetea

[benj]

"High powered money" is really just another word for M0 - it's quite a common piece of terminology among macroeconomists.

"Ordinary banks" create money by carrying more debts than they actually have the wherewithall to fulfill. This is only money creation because their debts are counted as money.

Many people wrongly believe that for every pound in their bank accounts, there is some sort of physical counterpart that would be passed around when they transfer money from one account to another, but this simply isn't true.

Interest payments do not come into it.

The analogy to a private individual, if you want to try creating money yourself, is to write "I promise to pay the bearer on demand the sum of £X" on a piece of paper, sign it, and try to buy something with it. You'll notice straight away that your close family and friends will probably accept this method of payment, but the local department store almost certainly won't. It's because few people know who you are and will trust your promise. If Richard Branson did the same thing, chances are he would get much further - he has "better credit". Banks have the best credit of all - their promises to pay are so widely accepted that they are in fact used as money. But instead of being written on a piece of paper, they are mostly just numbers on a screen. Your bank balance of £100 says "the bank promises to pay me £100". It does not mean "the bank has £100 of my money squirrelled in a vault somewhere with my name on it".

This is not magic. This is not a secret. All you need to do is borrow a good economics textbook from your local library and read it until you understand.

[Injin]

"High powered money" is really just another word for M0 - it's quite a common piece of terminology among macroeconomists.

"Ordinary banks" create money by carrying more debts than they actually have the wherewithall to fulfill. This is only money creation because their debts are counted as money.

Many people wrongly believe that for every pound in their bank accounts, there is some sort of physical counterpart that would be passed around when they transfer money from one account to another, but this simply isn't true.

Interest payments do not come into it.

The analogy to a private individual, if you want to try creating money yourself, is to write "I promise to pay the bearer on demand the sum of £X" on a piece of paper, sign it, and try to buy something with it. You'll notice straight away that your close family and friends will probably accept this method of payment, but the local department store almost certainly won't. It's because few people know who you are and will trust your promise. If Richard Branson did the same thing, chances are he would get much further - he has "better credit". Banks have the best credit of all - their promises to pay are so widely accepted that they are in fact used as money. But instead of being written on a piece of paper, they are mostly just numbers on a screen. Your bank balance of £100 says "the bank promises to pay me £100". It does not mean "the bank has £100 of my money squirrelled in a vault somewhere with my name on it".

This is not magic. This is not a secret. All you need to do is borrow a good economics textbook from your local library and read it until you understand.

The bit that's mising from this is that when you go to a bank for a loan, you sign a form "I promise to pay the bearer£x" and the bank accepts it as valuable.

You extend your credit to the bank and the bank accepts it, placing it as an asset. Then the bank returns your credit to you.

Actual cash is itself a promissory note in this fashion - they still say "I promise to pay the bearer" on them, but there is no thing at the end of the promise. A promise is a promise is a promise and so it all balances out because the ultimate creditor (the bank of england or similar) is a proven deadbeat - they got no gold, just promises.

[Bloo Loo]

The bit that's mising from this is that when you go to a bank for a loan, you sign a form "I promise to pay the bearer£x" and the bank accepts it as valuable.

You extend your credit to the bank and the bank accepts it, placing it as an asset. Then the bank returns your credit to you.

Actual cash is itself a promissory note in this fashion - they still say "I promise to pay the bearer" on them, but there is no thing at the end of the promise. A promise is a promise is a promise and so it all balances out because the ultimate creditor (the bank of england or similar) is a proven deadbeat - they got no gold, just promises.

whilst what you say is true, you are, having monetised your house, able to spend a part of its value at Sainscos.

yes, both the house and your credit at the bank remain yours, while you pay interest and keep up the agreed repayments.

If you fail to keep up payments, the house is never owned by the bank, but possessed for sale. The Bank gets some or all its money back and you get to keep the difference.

True, all the bank has done is issue you with receipts or recorded such receipts on a screen, but it was you who thought it was a good idea to pledge your house for some bits of paper a bank has made.

Its your lookout, as a borrower, if you beleive bits of paper are worth anything at all. Better just hope everyone else beleives the same!

[aliveandkicking]

whilst what you say is true, you are, having monetised your house, able to spend a part of its value at Sainscos.

yes, both the house and your credit at the bank remain yours, while you pay interest and keep up the agreed repayments.

If you fail to keep up payments, the house is never owned by the bank, but possessed for sale. The Bank gets some or all its money back and you get to keep the difference.

True, all the bank has done is issue you with receipts or recorded such receipts on a screen, but it was you who thought it was a good idea to pledge your house for some bits of paper a bank has made.

Its your lookout, as a borrower, if you beleive bits of paper are worth anything at all. Better just hope everyone else beleives the same!

Bloo Loo

Are you saying that if i go to a high street bank with my property deeds that they can place those deeds in their bank as an assett and release cash to me for the value of the loan **and** this does not change their reserve ratio of money available to lend?

Are you saying that one single high street bank can indefinately lend to every borrower in the world and remain within the bank regulations while keeping possession of the deeds? Obviously you cannot be saying that.

Seems to me that they now have to find the money they lent to me if they want to continue lending and it was for this reason that securitization was developed in that the bank can collect fees and service charges for an indefinate number of houses if an indefinate number of investors around the world can be found.

Can you add some flesh to what you are saying please so i can follow it thru?

Thanks

[aliveandkicking]

The bit that's mising from this is that when you go to a bank for a loan, you sign a form "I promise to pay the bearer£x" and the bank accepts it as valuable.

You extend your credit to the bank and the bank accepts it, placing it as an asset. Then the bank returns your credit to you.

Actual cash is itself a promissory note in this fashion - they still say "I promise to pay the bearer" on them, but there is no thing at the end of the promise. A promise is a promise is a promise and so it all balances out because the ultimate creditor (the bank of england or similar) is a proven deadbeat - they got no gold, just promises.

Injin

You are confused.

If i go to the pub and ask for a drink generally i am expected to pay cash. Possibly i might be able to work for my beer but generally if i want something now then i have to pay cash.

If i go to the bank and i sign the document you mention then i promise to devote a fraction of the profit of my labour over the course of the loan in the job i begin tommor until the bank is paid back. In return the bank gives me cash *now* that i can spend down the pub.

Your example is just wrong. In your example you offer to give your labour but then promptly take your labour back and the bank is left with nothing. Your procedure achieves nothing. You offer them the credit of your labour but then want it back as you leave. Naturally you see the bank gave you nothing in return.

[aliveandkicking]

Galbraith: 'The process by which banks create money is so simple the mind is repelled.'

So it seems.

Galbraith is highly quotable to show that nothing comes from nothing.

"For handling problems such as those facing the British or French treasuries during the war, there are not miracle men. Either current earnings from exports, seleable assets, loans or credits of one kind or another or gold exist for paying foreign suppliers, in which case the officials involved are a success. Or these assets do not exist, in which case those involved are a failure. However, nothing comes so easily to the press and public mind as the vision of financial genius. Both wish to believe that, where such important matters are involved, there are individuals of transcendental insight and power, men who can make something out of nothing."

"Faced with the choice between changing one's mind and proving there is no need to do so, almost everyone gets busy on the proof.

"One of the greatest pieces of economic wisdom is to know what you do not know."

[Injin]

whilst what you say is true, you are, having monetised your house, able to spend a part of its value at Sainscos.

yes, both the house and your credit at the bank remain yours, while you pay interest and keep up the agreed repayments.

If you fail to keep up payments, the house is never owned by the bank, but possessed for sale. The Bank gets some or all its money back and you get to keep the difference.

The bank doesn't give you any money. You give the bank money and then they return it to you.

True, all the bank has done is issue you with receipts or recorded such receipts on a screen, but it was you who thought it was a good idea to pledge your house for some bits of paper a bank has made.

And so did the banks. They can't say your form isn't of equal value to the money they gave you, because the accounting proves them liars.

Its your lookout, as a borrower, if you beleive bits of paper are worth anything at all. Better just hope everyone else beleives the same!

You don't owe them anything - if you made any "repayments" then they owe you those "repayments."

[aliveandkicking]

The bank doesn't give you any money. You give the bank money and then they return it to you.

Injin

You are correct but also entirely missing something.

If you get a bank loan you agree to give a portion of your earnings/labour to the bank plus interest to cover the cost of the banks labour.

And so you leave the bank after that agreement with the banks money which represents saved labour that can be used to multiply your own labour if you so desire or it can be spent as labour to help you live while you are not working.

When you spend that money or use that labour it then returns to the bank as the deposits as somebody elses saved labour. **That is the part that keeps going around and around.** But the bank acts a labour exchange for a fee.

They do work and get interest.

[Injin]

Injin

You are correct but also entirely missing something.

If you get a bank loan you agree to give a portion of your earnings/labour to the bank plus interest to cover the cost of the banks labour.

No, you agree that if the bank loans you money, then you will return it. As this isn't what happens, then the banks are engaged in fraud.

And so you leave the bank after that agreement with the banks money which represents saved labour that can be used to multiply your own labour if you so desire or it can be spent as labour to help you live while you are not working.

Not really- you give the banks money, then they hand it you back and claim that this is a loan. It isn't, it's accounting fraud and misrepresentation for gain.

When you spend that money or use that labour it then returns to the bank as the deposits as somebody elses saved labour. **That is the part that keeps going around and around.** But the bank acts a labour exchange for a fee.

They do work and get interest.

peopel work because they have been mislead, I agree. They actually owe nothing and the bankers should all be in prison.

[betterToDo]

Actual cash is itself a promissory note in this fashion - they still say "I promise to pay the bearer" on them, but there is no thing at the end of the promise. A promise is a promise is a promise and so it all balances out because the ultimate creditor (the bank of england or similar) is a proven deadbeat - they got no gold, just promises.

Promises can be implemented.