Re: Debt Slavery : Thu Nov 17, 2011 1:22 pm  

El Barbudo wrote:

But that shortage in supply, what is the root cause?
Builders aren't building, but that's not the cause, that's a symptom.

The cause is the fact that first-time buyers (on whom the whole structure depends) can't get mortgages.
If they could get mortgages, builders would be building homes a whole lot cheaper than the existing stock is currently selling for.

Spot on.

El Barbudo wrote:

One thing that Dally did get right is that house prices will erode but IMHO that will be slow..

Can't see it. Latest forecasts have UK population up from 70m to 90m within about 30 years. Gotta live somewhere and sales of tents are static.

Re: Debt Slavery : Thu Nov 17, 2011 1:33 pm  

Chris28 wrote:

That average will really help businesses who are struggling to get finance to expand and boost growth.

Banks do have a choice. They chose to throw money around and now they choose not to. My main problem with the latter (whether it's better for the economy or not) is that banks' profligacy and bad decisions led in part to their problems, yet when the taxpayer helps them out, keeping them in jobs and bonuses, their answer to the taxpayer seeking to borrow money (not asking for it back - BORROW) is almost always NO.

Would Gideon's growth forecasts and figures be as bad if the banks were made to lend at least some of it back?

They chose to throw money around because they were given the ability to. Being forced to now hold more capital to help avoid future bail outs has now removed that ability.

Ufortuanately we can't have it both ways.

Re: Debt Slavery : Thu Nov 17, 2011 1:36 pm  

Chris28 wrote:

That average will really help businesses who are struggling to get finance to expand and boost growth.

Banks do have a choice. They chose to throw money around and now they choose not to. My main problem with the latter (whether it's better for the economy or not) is that banks' profligacy and bad decisions led in part to their problems, yet when the taxpayer helps them out, keeping them in jobs and bonuses, their answer to the taxpayer seeking to borrow money (not asking for it back - BORROW) is almost always NO.

Would Gideon's growth forecasts and figures be as bad if the banks were made to lend at least some of it back?

We had strong 'growth' during the period when boom and bust ended but debt was racked up to such a degree that it's more or less brought the country and large parts of the world to its knees. We need a slightly better approach that debt fuelled growth to solve this. How about hard graft and an acceptance of lower living standards?

Re: Debt Slavery : Thu Nov 17, 2011 3:02 pm  

LeighGionaire wrote:

blah blah blah

Gotta love LeighGionaire's periodic 'I dont understand the banking system' threads

If banks create money completely out of thin air, in the way you've just described, how in 2007/8 did we end up in a position in which banks suffered from a liquidity crisis resulting in a run on Northern Rock etc. Were all the people responsible for adding zeros to the banks balance sheet off sick or something?

LeighGionaire wrote:

And what do you think of the fact that the money for said loans was created out of thin air? I used to think that when I got a loan for my mortgage it was some pensioners hard earned savings being handed over to me and so I had a moral obligation to pay it back with a little interest on top.

The global financial crisis was partly a result of US' problems with the sub-prime mortgage industry. Banks were lending money to people who weren't credit worthy, and were fairly likely to default on their repayments. If banks simply create the money out of thin air in the way you describe, with none of this lent out money actually coming from the banks income, how could the sub-prime lenders defaulting on their repayments be a problem?

If a bank creates 100k completely out of thin air to give to you to buy a house, you repay 10k before going bankrupt, even if by this point the value of the house has crashed surely the banks have still made a profit?
Also why were these debts being sold on in the form of CDO's? Surely if the banks funded new mortgages by creating money out of thin air, and not from 'real' money from the banks income, they would have absolutely no need to do so.

Re: Debt Slavery : Fri Nov 18, 2011 2:58 pm  

Widnes 'till i die wrote:

Gotta love LeighGionaire's periodic 'I dont understand the banking system' threads

If banks create money completely out of thin air, in the way you've just described, how in 2007/8 did we end up in a position in which banks suffered from a liquidity crisis resulting in a run on Northern Rock etc. Were all the people responsible for adding zeros to the banks balance sheet off sick or something?

Banks create money out of nothing. However they need a borrower's signature to create the money. That's the trick. They can't just sit there all day and night creating money willy-nilly.

If banks don't create money then how do you explain a comment like this?

Martin Wolf, one of the experts who sat on the independent commission on banking, put it bluntly, saying in the Financial Times that "the essence of the contemporary monetary system was the creation of money, out of nothing, by private banks' often foolish lending".

Re: Debt Slavery : Fri Nov 18, 2011 3:01 pm  

tb wrote: Letting nutters from the Occupy movement take over CiF is probably one of the silliest things the Grauniad has ever done. The fact that the Gruadian chose to do it does not mean that 'mainstream media' have suddenly become converted to their idiot ideas. There's a good repost to the whole nonsense here The link you provided doesn't mention the article I linked so how can it be a 'repost to the whole nonsense'? Now here is a link that discusses the issues addressed in the Guardian article, it's from the Financial Times. However they don't slate the Guardian article for being wrong about money creation, they instead lampoon the author for only just finding out how the system works! Congratulations to Ben Dyson, self-professed “money and banking specialist” for finally discovering, err, money. Or, how money works. In a column in the Guardian on Tuesday, Dyson recounts in grand revelatory style how the solution to the system’s current ails is nothing other than recognition of the fact that “money has been privatised”. Shock, horror! http://ftalphaville.ft.com/blog/2011/11 ... /#comments

tb wrote: Letting nutters from the Occupy movement take over CiF is probably one of the silliest things the Grauniad has ever done. The fact that the Gruadian chose to do it does not mean that 'mainstream media' have suddenly become converted to their idiot ideas. There's a good repost to the whole nonsense here The link you provided doesn't mention the article I linked so how can it be a 'repost to the whole nonsense'? Now here is a link that discusses the issues addressed in the Guardian article, it's from the Financial Times. However they don't slate the Guardian article for being wrong about money creation, they instead lampoon the author for only just finding out how the system works! Congratulations to Ben Dyson, self-professed “money and banking specialist” for finally discovering, err, money. Or, how money works. In a column in the Guardian on Tuesday, Dyson recounts in grand revelatory style how the solution to the system’s current ails is nothing other than recognition of the fact that “money has been privatised”. Shock, horror! http://ftalphaville.ft.com/blog/2011/11 ... /#comments

Re: Debt Slavery : Fri Nov 18, 2011 3:08 pm  

http://www.neweconomics.org/publication ... -come-from

http://www.neweconomics.org/publication ... -come-from

[Kosh]

Re: Debt Slavery : Fri Nov 18, 2011 8:44 pm  

LeighGionaire wrote: Now here is a link that discusses the issues addressed in the Guardian article, it's from the Financial Times. However they don't slate the Guardian article for being wrong about money creation, they instead lampoon the author for only just finding out how the system works! http://ftalphaville.ft.com/blog/2011/11 ... /#comments Oh dear. You've misunderstood the article you link to above. Here - a simple explanation of why Dyson's article was 'bollox on stilts' lifted from the comments section... No. No, no no no no, with cherries on top. This is the worst (mis)explanation of fractional reserve banking I have ever read. When you borrow money from the bank, that money is not "created" by the bank. The bank has to fund it - either from deposits (the "prudent grandmother's life savings") or from borrowing it from someone else (the wholesale funding market). The "creation of money" that everyone goes on about is quite different, very simple, and not at all sinister. It results from the fact that when a bank takes a deposit and lends it out again, both the depositor and the borrower treat themselves as having the money in question. Of course that's not actually true - the depositor does not have any money, just a debt owed to him or her by the bank - but because bank deposits are treated as equivalent to cash by almost everyone, the illusion is convincing. Even then the banks cannot "create" an infinite amount of money, because the government does not allow them to lend out ever penny they receive in deposits. They have to keep a set percentage as reserves. So for example, thrifty grandma Mrs Bloggs saves GBP100,000 with Megabank. The bank has to keep (say) 8% of this as reserves, but can lend out GBP92,000 to Mr Flatbuyer. Now Mr Flatbuyer thinks he has GBP92,000 and Mrs Bloggs thinks she has GBP100,000, so the total amount of money in the economy appears to have gone up by GBP192,000. But of course it hasn't really. You can see that because eventually Mr Flatbuyer has to pay back his GBP92K and Mrs Bloggs withdraws her GBP100K, which leaves you back to where you began (give or take a little interest). Further because the capital ratio is always positive, the total amount of money that can be "created" in this way is limited. For example, instead of buying a house Mr Flatbuyer could deposite his GBP92K back into a bank, which could then lend out 92% of that (GBP84,640), and so one. Which (for an 8% capital ratio) works out at a maximum of GBP4 being "created" for each GBP1 of "real" money. How you gonna change the world if you don't understand it?

LeighGionaire wrote: Now here is a link that discusses the issues addressed in the Guardian article, it's from the Financial Times. However they don't slate the Guardian article for being wrong about money creation, they instead lampoon the author for only just finding out how the system works! http://ftalphaville.ft.com/blog/2011/11 ... /#comments Oh dear. You've misunderstood the article you link to above. Here - a simple explanation of why Dyson's article was 'bollox on stilts' lifted from the comments section... No. No, no no no no, with cherries on top. This is the worst (mis)explanation of fractional reserve banking I have ever read. When you borrow money from the bank, that money is not "created" by the bank. The bank has to fund it - either from deposits (the "prudent grandmother's life savings") or from borrowing it from someone else (the wholesale funding market). The "creation of money" that everyone goes on about is quite different, very simple, and not at all sinister. It results from the fact that when a bank takes a deposit and lends it out again, both the depositor and the borrower treat themselves as having the money in question. Of course that's not actually true - the depositor does not have any money, just a debt owed to him or her by the bank - but because bank deposits are treated as equivalent to cash by almost everyone, the illusion is convincing. Even then the banks cannot "create" an infinite amount of money, because the government does not allow them to lend out ever penny they receive in deposits. They have to keep a set percentage as reserves. So for example, thrifty grandma Mrs Bloggs saves GBP100,000 with Megabank. The bank has to keep (say) 8% of this as reserves, but can lend out GBP92,000 to Mr Flatbuyer. Now Mr Flatbuyer thinks he has GBP92,000 and Mrs Bloggs thinks she has GBP100,000, so the total amount of money in the economy appears to have gone up by GBP192,000. But of course it hasn't really. You can see that because eventually Mr Flatbuyer has to pay back his GBP92K and Mrs Bloggs withdraws her GBP100K, which leaves you back to where you began (give or take a little interest). Further because the capital ratio is always positive, the total amount of money that can be "created" in this way is limited. For example, instead of buying a house Mr Flatbuyer could deposite his GBP92K back into a bank, which could then lend out 92% of that (GBP84,640), and so one. Which (for an 8% capital ratio) works out at a maximum of GBP4 being "created" for each GBP1 of "real" money. How you gonna change the world if you don't understand it?

Re: Debt Slavery : Mon Nov 21, 2011 10:28 am  

Kosh - the Financial Times could have ripped the Guardian article to pieces if the overall premise about how banks create money had been wrong. The fact that it doesn't and instead focuses on defending debt speaks volumes to me. Notice how you have to find a random reply in the comments section to try and debunk my reasoning. Three people have attacked my reasoning on this thread so far yet none have explained how the Martin Wolf quote mentioned a few posts up is wrong.

Re: Debt Slavery : Sun Jan 22, 2012 1:11 am  

Why do banks make so much money?

No direct YouTube links please