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?


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.

What is a credit card "deal"!?

Incentives. A matter of perspective, I suppose. But they seem to be falling over themselves lately to get my business. I guess the plan is instead of throwing credit at everyone and his dog (pre-subprime) they're all now competing to milk those remaining who they still think have a few pennies left under the mattress.

Burn the top one, then one each clockwise round the table starting on your left.

They've been doing it this way for years now. Credit check is a test of willingness to toss the house keys in.

Capital One are a good example. they currently have this thing on Facebook and elsewhere, click on this and we'll tell you in 60 seconds if your credit card is approved. they bumf then says the interest rate is something like 39% which given that Bank rate is about a millionth of a percent seems like decent business if anyone falls for it.

I have no clue how many they issue, but it must surely be a right shedload, as else why would they spend all the dosh on advertising it?

Precisely! There seems a strong positive correlation between businesses who offer "deals" and rip off merchants. Mobile 'phone charges spring to mind too.