Well well, who'd have thought it. IMF report highlights the fundamental problem of allowing banks to create debt based IOU money and how we could solve the current economic crisis. www.telegraph.co.uk/finance/comm ... nkers.html

Well well, who'd have thought it. IMF report highlights the fundamental problem of allowing banks to create debt based IOU money and how we could solve the current economic crisis. www.telegraph.co.uk/finance/comm ... nkers.html

Quote ="LeighGionaire"Well well, who'd have thought it. IMF report highlights the fundamental problem of allowing banks to create debt based IOU money and how we could solve the current economic crisis. www.telegraph.co.uk/finance/comm ... nkers.html'" There is too much vested interest in the the way the current system works for this to happen IMO. I think the whole thing would have to come crashing completely down for it to be even considered. So long as they can keep kicking the can down the road to maintain the current system they will IMO.

Quote ="LeighGionaire"Well well, who'd have thought it. IMF report highlights the fundamental problem of allowing banks to create debt based IOU money and how we could solve the current economic crisis. www.telegraph.co.uk/finance/comm ... nkers.html'" There is too much vested interest in the the way the current system works for this to happen IMO. I think the whole thing would have to come crashing completely down for it to be even considered. So long as they can keep kicking the can down the road to maintain the current system they will IMO.

First line of the paper: This Working Paper should not be reported as representing the views of the IMF.

Problem with this is it puts enormous power in the hands of the state.

Can't argue with that but they are reaching the end of the road IMO, there isn't much further the can can be kicked.

Quote ="Cookridge_Rhino"First line of the paper: This Working Paper should not be reported as representing the views of the IMF.'" Whilst true just the fact that there is a working paper based on this issue circulating within the IMF is a massive step forward for anybody like me who believe's the current debt based system is fundamentally flawed. This position is becoming slightly more mainstream every day. At one time the only people talking about bank created debt based money were conspiricy sites and obscure economic publications. Now we have a think tank devoted to the issue called Positive Money, several well know economists highlighting the flaws and now an IMF paper. The problems with debt based money even got mention on Radio 4 recently - you can listen to the 15 minute programme here. www.bbc.co.uk/programmes/b01ngmjr

Quote ="Cookridge_Rhino"First line of the paper: This Working Paper should not be reported as representing the views of the IMF.'" Whilst true just the fact that there is a working paper based on this issue circulating within the IMF is a massive step forward for anybody like me who believe's the current debt based system is fundamentally flawed. This position is becoming slightly more mainstream every day. At one time the only people talking about bank created debt based money were conspiricy sites and obscure economic publications. Now we have a think tank devoted to the issue called Positive Money, several well know economists highlighting the flaws and now an IMF paper. The problems with debt based money even got mention on Radio 4 recently - you can listen to the 15 minute programme here. www.bbc.co.uk/programmes/b01ngmjr

This same power is currently in the hands of international banking cartels. At least with the state controling the money supply in theory government policies that we vote for will determine where any extra money created gets spent into the economy and at least it stops banks leeching off the tax payer via the National Debt.

Just think about this for a moment. Governments go to banks to borrow money. The banks create this money OUT OF NOTHING and loan it to the government at interest. Why didn't the Government just create the money itself and spend it into the economy?

So you're suggesting making banks (as we know them) illegal, and making the government the only organization allowed to be a fractional reserve bank?

Also banks cannot buy assets (such as government bonds) with money created out of nothing. If they could do this why would governments ever struggle to sell bonds, there would be a limited supply of gov't bonds and a limitless demand (because hey, there's absolutely no risks involved because they can create as much money as they want and buy as many bonds as they want - even if some get defaulted on they haven't lost anything).

Cookridge Rhino is right. What you are thinking about in terms of 'creating money from nothing' is banks lending out more money than they have to cover their depositors' deposits, counting on the fact that
a) their depositors will not all demand their deposits back at once
b) if they are in a situation where they have to raise cash quickly to meet depositors' demands, they will be able to borrow off another bank

Whilst I agree there are risks in this model and it needs to be carefully regulated, banks cannot create money from thin air.

There would have been no reason for Lehman brothers, RBS etc to go under - surely they could have just created $1000 trillion from thin air and then they would have been solvent again.

In reality money creation is what the Central Bank does - quantitative easing is the central bank creating money out of thin air to buy government bonds so this is effectively what you are advocating.

You'll never convince Legionnaire.

Nobody will do that.

Quote ="sally cinnamon"Cookridge Rhino is right. What you are thinking about in terms of 'creating money from nothing' is banks lending out more money than they have to cover their depositors' deposits, counting on the fact that a) their depositors will not all demand their deposits back at once b) if they are in a situation where they have to raise cash quickly to meet depositors' demands, they will be able to borrow off another bank Whilst I agree there are risks in this model and it needs to be carefully regulated, banks cannot create money from thin air. There would have been no reason for Lehman brothers, RBS etc to go under - surely they could have just created $1000 trillion from thin air and then they would have been solvent again. In reality money creation is what the Central Bank does - quantitative easing is the central bank creating money out of thin air to buy government bonds so this is effectively what you are advocating.'" If banks don't create money why would Bank Of England chairman Mervyn King say this in a speech last week? Quote When banks extend loans to their customers, they create money by crediting their customers’ accounts. The usual role of a central bank is to limit this rate of money creation, so that an excessive expansion of money spending does not lead to inflation.'" You can find the quote on p3 of the document. www.bankofengland.co.uk/publicat ... ech613.pdf If Banks don't create money how has the money supply doubled in the past 8 years? If banks can create money how can a bank go bust? www.positivemoney.org.uk/2012/07 ... went-bust/ As to Dally and Mintball, I can easily see why you might not agree with some random internet poster, but when the Bank Of England Chairman backs up my claims surely that gives my opinion some credibility? Please watch this documentary - it's only an hour long. If you can see any fatal flaws in the thinking behind it I'd be interested to see you point them out. www.positivemoney.org.uk/97perce ... cumentary/

Quote ="sally cinnamon"Cookridge Rhino is right. What you are thinking about in terms of 'creating money from nothing' is banks lending out more money than they have to cover their depositors' deposits, counting on the fact that a) their depositors will not all demand their deposits back at once b) if they are in a situation where they have to raise cash quickly to meet depositors' demands, they will be able to borrow off another bank Whilst I agree there are risks in this model and it needs to be carefully regulated, banks cannot create money from thin air. There would have been no reason for Lehman brothers, RBS etc to go under - surely they could have just created $1000 trillion from thin air and then they would have been solvent again. In reality money creation is what the Central Bank does - quantitative easing is the central bank creating money out of thin air to buy government bonds so this is effectively what you are advocating.'" If banks don't create money why would Bank Of England chairman Mervyn King say this in a speech last week? Quote When banks extend loans to their customers, they create money by crediting their customers’ accounts. The usual role of a central bank is to limit this rate of money creation, so that an excessive expansion of money spending does not lead to inflation.'" You can find the quote on p3 of the document. www.bankofengland.co.uk/publicat ... ech613.pdf If Banks don't create money how has the money supply doubled in the past 8 years? If banks can create money how can a bank go bust? www.positivemoney.org.uk/2012/07 ... went-bust/ As to Dally and Mintball, I can easily see why you might not agree with some random internet poster, but when the Bank Of England Chairman backs up my claims surely that gives my opinion some credibility? Please watch this documentary - it's only an hour long. If you can see any fatal flaws in the thinking behind it I'd be interested to see you point them out. www.positivemoney.org.uk/97perce ... cumentary/

Another link - an interesting twelve minute video interview asking 'Who Allocates Our Money' Quote Prof R Werner is an economist and professor at the University of Southampton. He is noted as a monetary and development economist. Richard is Director of the Centre for Banking, Finance and Sustainable Development at the University of Southampton; and is also a member of the Southampton Management School’s Executive Board. Having studied monetary economics and banking in Japan he has held numerous positions in Japan’s finance sector institutions as well as working as chief economist at Jardine Fleming Securities (Asia) Ltd. Prof Werner - “I’ve recently conducted a poll of almost thousand people, randomly selected. And one of the questions I asked was “Who do you think creates and allocates the majority of money supply?” And 85% of respondents answered: “it’s the government or central bank, isn’t it?”. “ Second question I asked was: “Would you agree to a system whereby the majority of the money supply is created and allocated by profit-oriented enterprises?” And of course, the majority answered “No, they wouldn’t agree.”'" www.positivemoney.org.uk/2012/05 ... tes-money/

Another link - an interesting twelve minute video interview asking 'Who Allocates Our Money' Quote Prof R Werner is an economist and professor at the University of Southampton. He is noted as a monetary and development economist. Richard is Director of the Centre for Banking, Finance and Sustainable Development at the University of Southampton; and is also a member of the Southampton Management School’s Executive Board. Having studied monetary economics and banking in Japan he has held numerous positions in Japan’s finance sector institutions as well as working as chief economist at Jardine Fleming Securities (Asia) Ltd. Prof Werner - “I’ve recently conducted a poll of almost thousand people, randomly selected. And one of the questions I asked was “Who do you think creates and allocates the majority of money supply?” And 85% of respondents answered: “it’s the government or central bank, isn’t it?”. “ Second question I asked was: “Would you agree to a system whereby the majority of the money supply is created and allocated by profit-oriented enterprises?” And of course, the majority answered “No, they wouldn’t agree.”'" www.positivemoney.org.uk/2012/05 ... tes-money/

Quote ="LeighGionaire"snip'" Firstly there is no way I'm watching an hour long video about this crap, I have FAR better things to do - I've got a busy day watching paint dry and waiting for grass to grow. Do you even bother to read the links that you post? because this one: (www.positivemoney.org.uk/2012/07 ... went-bust/), seems to back up my point exactly. Yes a bank could deposit £1,000,000 in my account right now and it would cost them nothing, BUT as soon as I tried to actually spend it (say on a house) they would have to transfer £1,000,000 of 'central bank money' to the bank of whoever I bought the house from. So yes, in theory they can create money willy nilly out of thin air and deposit as much money into my account (and everyone else's accounts) as they like, but if they want to stay solvent they can only deposit enough money in people's accounts that they can afford to back up with 'central bank money' which they are not able to create. You claim Mervyn King backs up your point, but can you please explain in what way Mervyn King's statement is incompatible with the explanation I've given above.

Quote ="LeighGionaire"snip'" Firstly there is no way I'm watching an hour long video about this crap, I have FAR better things to do - I've got a busy day watching paint dry and waiting for grass to grow. Do you even bother to read the links that you post? because this one: (www.positivemoney.org.uk/2012/07 ... went-bust/), seems to back up my point exactly. Yes a bank could deposit £1,000,000 in my account right now and it would cost them nothing, BUT as soon as I tried to actually spend it (say on a house) they would have to transfer £1,000,000 of 'central bank money' to the bank of whoever I bought the house from. So yes, in theory they can create money willy nilly out of thin air and deposit as much money into my account (and everyone else's accounts) as they like, but if they want to stay solvent they can only deposit enough money in people's accounts that they can afford to back up with 'central bank money' which they are not able to create. You claim Mervyn King backs up your point, but can you please explain in what way Mervyn King's statement is incompatible with the explanation I've given above.

Here's another one of those nutters who thinks banks craete money - Economist Steve Keen talking on Hardtalk. “We have two sources of money in the economy: (1.) The banks can create money by extending loans and (2.) The government create money by running a deficit. We had back in the early sixties the ratio of government created money to the overall money supply of about 15%. It’s fallen so far that we’ve got the entirely debt-based system.” Don't worry it's only three minutes long and he states the fact right at the beginning of the clip. news.bbc.co.uk/1/hi/programmes/h ... m?mid=5381 I take it he's talking out of his backside?

Here's another one of those nutters who thinks banks craete money - Economist Steve Keen talking on Hardtalk. “We have two sources of money in the economy: (1.) The banks can create money by extending loans and (2.) The government create money by running a deficit. We had back in the early sixties the ratio of government created money to the overall money supply of about 15%. It’s fallen so far that we’ve got the entirely debt-based system.” Don't worry it's only three minutes long and he states the fact right at the beginning of the clip. news.bbc.co.uk/1/hi/programmes/h ... m?mid=5381 I take it he's talking out of his backside?

ok I'll sum up the situation for you, see if you can work out why we disagree:
(please excuse my paraphrasing)

You claim: banks create money - they willy nilly create as much as they like whenever they like, it is a money out of nothing scam.

Sally Cinnamon claims: banks create money - they create money by lending out more than is deposited, this is fine as long as everyone doesn't try to withdraw their money at once.

Economist 1 says: banks create money.
Economist 2 says: banks create money.

Therefore you are correct, because the economists have backed up your argument?

Can you not see how ridiculous this is?

Banks can create money (credit) out of nothing but they need a willing borrower to take out a loan for the money to be created. In theory it isn't money it's just 'credit', but the reality is these bank credits are used as legal tender so it is real money created with a debt attached (plus the interest needed to repay the loan in full). IMO Private Banks inflating the money supply by 100% in the past 8 years is legalised counterfeiting - have you seen any of this newly created money in your wage packet?



I agree with the first part but the flaw in the system IMO is that there is NEVER enough Money/Credit in the system to pay back all the loans because the extra money needed to pay the interest isn't created at the same time as the loan. Thats why every government, almost all multinational corporations and a vast chunk of the general population are drowning in debt.

Also when you pay back a loan the bank destroys the money, keeping the interest. To keep the system functioning somebody somewhere has to be taking on ever increasing debt, be it government spending, student loans, credit cards, inflated mortgages etc. Once it dawns on people that this mountain of debt is unpayable the system starts to collapse.

If we try the reverse and stop taking on debt (austerity) money dissapears out of the system and people find it harder to pay their existing loans, recession kicks in and another domino effect takes place, this time in reverse.

This is why both Labour and Lib/Con policy are wrong IMO - until somebody in power addresses the flaws inherent in debt based money we are going to be in this economic quagmire indefinately.

NOTE - I suppose if they gave every person in China a credit card and told them to start spending we could have a global economic debt based boom but it would only be 'kicking the can down the road'.