Who'd have thought it, a mainstream news source explaining how banks create money from nothing . . . . Quote It's common knowledge that printing your own £10 notes at home is frowned upon by Her Majesty's police. Yet there's a small collection of companies that are authorised to create – and spend – more new money than the counterfeiters have ever been able to print. In industry jargon, these companies are called "monetary and financial institutions", but you probably know them by their street name: "banks". The money that they create, effectively out of nothing, isn't the paper money that bears the logo of the government-owned Bank of England. It's the electronic money that flashes up on the screen when you check your balance at an ATM. Right now, this electronic money makes up over 97% of all the money in the economy. Only 3% of money is still in that old-fashioned form of real cash that can be touched. '" www.guardian.co.uk/commentisfree ... ed-stealth Just think about this as an example. Say it takes a days work for a bank employee to process a mortgage application for a customer. If the mortgage is over a period of 25 years and one days pay per week is needed to repay the mortgage, the customer is essentially giving up 5 YEARS of work for the initial days work it took the bank sorting out the paperwork to conjour up the money out of thin air in the first place! This is debt slavery in a nutshell.

Who'd have thought it, a mainstream news source explaining how banks create money from nothing . . . . Quote It's common knowledge that printing your own £10 notes at home is frowned upon by Her Majesty's police. Yet there's a small collection of companies that are authorised to create – and spend – more new money than the counterfeiters have ever been able to print. In industry jargon, these companies are called "monetary and financial institutions", but you probably know them by their street name: "banks". The money that they create, effectively out of nothing, isn't the paper money that bears the logo of the government-owned Bank of England. It's the electronic money that flashes up on the screen when you check your balance at an ATM. Right now, this electronic money makes up over 97% of all the money in the economy. Only 3% of money is still in that old-fashioned form of real cash that can be touched. '" www.guardian.co.uk/commentisfree ... ed-stealth Just think about this as an example. Say it takes a days work for a bank employee to process a mortgage application for a customer. If the mortgage is over a period of 25 years and one days pay per week is needed to repay the mortgage, the customer is essentially giving up 5 YEARS of work for the initial days work it took the bank sorting out the paperwork to conjour up the money out of thin air in the first place! This is debt slavery in a nutshell.

And which "mainstream news source" is that?

Bugger - link added.

It was always one of the major reasons behind Thatcher's "Right to Buy". There was no interest in allowing council house tenants to own their own homes just for the sake of it. It was however another way of ensuring a compliant workforce. From going into arrears on rent, with little fear of eviction, suddenly those who may have gone on strike realised that if they didn't pay the mortgage, they may not be reposessed immediately but their debts would rack up at an alarming rate and the fear of losing "their" home was ever present.

If people don't want to become debt slaves they shouldn't borrow money or at least unrealistic amounts. It's quite simple. The real reason asset prices increase is actually savings (esp. pension funds) - the constant flow of money into the investment system causes asset prices to go and periodically crash back.

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.

Now I realise I was basically scammed and 97% of our 'money' is infact bank created IOU's, so 97% of our money supply is backed by an equal debt (actually it's more when you include the interest). The only way to keep this debt pyramid going is by somebody somewhere taking on even more debt or the whole system collapses. This is why the European response to the sovereign debt crisis is to give the countries in trouble more debt!

Its not slavery its a voluntary transaction. If you lend someone money then you usually expect a price for deferring being able to consume now to being able to consume later. The interest rate is the price of that deferred consumption. As long as the lender and borrower both agree and its a voluntary transaction and both parties have full information then there isn't anything wrong with it.

I think you'd agree though, that only the initial borrowing is a voluntary transaction.
Thereafter, the actions of the banks and the vagaries of the financial markets etc. are outside the control of most of us.
Unfortunately, no-one ever has "full information", which is why the economists' favourite, the so-called "perfect market", is an unachievable fiction.

At the end of the day we're at the start of an adjustment. Probably 10 + years of so-called de-leveraging. By the end of that we'll have house prices, etc at about half of current levels in real terms and real family incomesdown dramatically. In o9ther words the debt fuelled frenzy will inevitably unravel and people will be back to roughly where they were before the frenzy. So in a longer time frame there is no problem. In the shorter term the pain could be enormous if governments and central banks fail to rig the markets to spread the pain over a decade. If they don't then we'll have banks and country's going under and there will be mayhem on a scale most of us cannot imagine. Worrying about the abstract will be the least of Legionnaire's and our problems.

Who has stolen Dally's login ID?
Come on, own up.


Phew, it's Dally all right.

That's true its outside most people's control but part of the voluntary transaction is that both parties accept some risk. The mortgage lender accepts the risk that the borrower may default. The borrower accepts the risk that the interest rate may vary or if he wants to insure himself from the risk, sign up to a fixed rate mortgage.

In fact in terms of mortgages a lot of people have benefited by paying lower mortgage rates than expected in recent years due to the low interest rates.

I think in terms of mortgage slavery the bigger problem is the shortage of supply of housing that is driving up house prices and meaning owners of property have a huge advantage in being able to make money off those that don't own property, because everybody needs somewhere to live.

... on the basis that if it goes pear shaped, the taxpayer will stump up a billion or two to see them right; the bankers can sack a few thousand staff to look as if they're doing something, and continue to trouser obscene pay packets. Trebles all round. Some risk.

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

Cameron says that it's planning regs and process that are the problem.
But Cameron is a lying n0bhead who wants to help the likes of Tesco to build on land they have stockpiled.

The last thing the BoE and Government want at the moment is a big increase in housing supply. Policy is aimed at trying to keep property prices artificially high for the medium term.

Quote ="LeighGionaire"Who'd have thought it, a mainstream news source explaining how banks create money from nothing . . . . www.guardian.co.uk/commentisfree ... ed-stealth Just think about this as an example. Say it takes a days work for a bank employee to process a mortgage application for a customer. If the mortgage is over a period of 25 years and one days pay per week is needed to repay the mortgage, the customer is essentially giving up 5 YEARS of work for the initial days work it took the bank sorting out the paperwork to conjour up the money out of thin air in the first place! This is debt slavery in a nutshell.'" 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 [url=http://ukhumanrightsblog.com/2011/11/15/freemen-of-the-dangerous-nonsense/here[/url

Quote ="LeighGionaire"Who'd have thought it, a mainstream news source explaining how banks create money from nothing . . . . www.guardian.co.uk/commentisfree ... ed-stealth Just think about this as an example. Say it takes a days work for a bank employee to process a mortgage application for a customer. If the mortgage is over a period of 25 years and one days pay per week is needed to repay the mortgage, the customer is essentially giving up 5 YEARS of work for the initial days work it took the bank sorting out the paperwork to conjour up the money out of thin air in the first place! This is debt slavery in a nutshell.'" 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 [url=http://ukhumanrightsblog.com/2011/11/15/freemen-of-the-dangerous-nonsense/here[/url

There is some very confused thinking on here. People bemoan the fact that we got into a mess due to credit being freely available and most policy suggestions involve growth via further deabt but at the same time bemoan the fact that mortgages for first time buyers are not given away!

But we appear to have gone from a situation where money was being thrown around, to one where it's kept under lock and key and nobody can have any. I guess banks have never heard of a happy medium?

They have no choice. Things went wrong now they need fixing. If we take, say, a 25 year period - previous 15 years and next 10 you will probably see there was a happy medium on average - just dramatically skewed between the first and second half of that period.

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



Banks [udo[/u 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?

Spot on.


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.

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.

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?

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.

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?