Wednesday, October 10, 2007

Banks and drunk, an ex-con freed on a technicality – Both created money

How mortgage banks magically create money

I was searching for explanations of M1, M2, M3 and M4 money supplies and discovered this article. It supports the idea that the house price boom has been engineered by the Banks who have quietly made cheap credit easily available. Some answers to the question at the end would be appreciated ...

Posted by talking rot @ 04:23 PM (923 views)
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4 thoughts on “Banks and drunk, an ex-con freed on a technicality – Both created money

  • “Loans are called “assets”, but cash-on-deposit is a “liability”. So the more money the banks lend, the greater their assets. The less cash they accept from savers, the smaller their liabilities!”

    Yep, it’s a total fraud being committed by respectable looking guys in suits. And what’s the result?

    “…private households and businesses in Britain now owe the banks 39% more in debt than actually exists in cash, bank savings and near-cash equivalents added together.”

    Nice.

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  • If the real figures came it it would devalue the dollar. The trouble is the economy needs exponentially larger injections of ‘money’ in the form of credit just to keep moving. Learning a lesson from Zimbabwe?

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  • This article has been written by an idiot.

    He ignores the fact that mortgage lending is funded by both customer deposits *and* loans from other banks.

    Fact: deposits + loans from other banks = lending + reserves.

    He fails to understand double entry book keeping too…

    “Loans are called “assets”, but cash-on-deposit is a “liability”. So the more money the banks lend, the greater their assets. The less cash they accept from savers, the smaller their liabilities!”

    Fact : assets = liabilities ( that’s why it’s called a balance sheet )

    Fact: banks want more saver’s cash not less, it’s much more reliable than short term borrowing from other banks. ( see Northern Rock for an example)

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  • 1) To get your head round the M numbers, if you haven’t done so before, check out Wiki

    2) Don’t forget that different countries define the M numbers in very different ways.

    3) This is a ticking time bomb..

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