FORUMS > The Sin Bin > Money For Nothing |
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Feb 2002 | 22 years | |
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995.gif "If the American people knew tonight, exactly how the monetary and banking system worked, there would be a revolution before tomorrow morning."
-Abraham Lincoln:995.gif |
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Quote: Cookridge_Rhino "If money is simply created by banks, as you seem to think, completely out of nothing, how is a run on a bank possible?
If tomorrow i go to any bank in the UK with a £1000 deposit, and i wish to buy a £100k house, and ask for a 200% mortgage (i want to buy a nice car and do up the house etc), they would say no. Why?
In your version of reality it costs them nothing to give me the mortgage, the money is created out of thin air. From their point of view absolute worst case scenario
In your scenario the bank have loaned out £200,000 which the customer then spent into the economy by buying a house and £100,000 worth of consumer goods.
The bank got £1000 and the deeds to a £100,000 house. However they have to cover this loan by holding extra reserves of Central Bank money, say 10% so £20,000.
But what if nobody will loan the bank this money on the interbank lending markets? Sure they have a house worth (in theory) £100,000 but a house isn't a 'liquid' asset so they are now £19,000 short causing liquidity difficulties.
News of this gets out and there is a run on the bank as people want 'their' money, causing a liquidity crisis.
www.positivemoney.org.uk/2012/07 ... went-bust/
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Quote: Cookridge_Rhino "If money is simply created by banks, as you seem to think, completely out of nothing, how is a run on a bank possible?
If tomorrow i go to any bank in the UK with a £1000 deposit, and i wish to buy a £100k house, and ask for a 200% mortgage (i want to buy a nice car and do up the house etc), they would say no. Why?
In your version of reality it costs them nothing to give me the mortgage, the money is created out of thin air. From their point of view absolute worst case scenario
In your scenario the bank have loaned out £200,000 which the customer then spent into the economy by buying a house and £100,000 worth of consumer goods.
The bank got £1000 and the deeds to a £100,000 house. However they have to cover this loan by holding extra reserves of Central Bank money, say 10% so £20,000.
But what if nobody will loan the bank this money on the interbank lending markets? Sure they have a house worth (in theory) £100,000 but a house isn't a 'liquid' asset so they are now £19,000 short causing liquidity difficulties.
News of this gets out and there is a run on the bank as people want 'their' money, causing a liquidity crisis.
www.positivemoney.org.uk/2012/07 ... went-bust/
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Rank | Posts | Team |
International Board Member | 1437 | No Team Selected |
Joined | Service | Reputation |
Feb 2002 | 22 years | |
Online | Last Post | Last Page |
Apr 2017 | Mar 2017 | LINK |
Milestone Posts |
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Milestone Years |
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995.gif "If the American people knew tonight, exactly how the monetary and banking system worked, there would be a revolution before tomorrow morning."
-Abraham Lincoln:995.gif |
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| Quote: Charlie Sheen "Do the bank get chicks for free though?'"
Yes.
They get to buy their services with their big, tax payer funded, bonus payouts. So they do indeed get the chicks for free because you are paying for them instead.
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Rank | Posts | Team |
International Board Member | 1437 | No Team Selected |
Joined | Service | Reputation |
Feb 2002 | 22 years | |
Online | Last Post | Last Page |
Apr 2017 | Mar 2017 | LINK |
Milestone Posts |
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Milestone Years |
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Signature |
995.gif "If the American people knew tonight, exactly how the monetary and banking system worked, there would be a revolution before tomorrow morning."
-Abraham Lincoln:995.gif |
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| Quote: Cookridge_Rhino "I agree with your explanation of fractional reserve banking but the OP doesnt, he (because he has misunderstood things he has read and heard) thinks that they need no money at all in their reserves in order to lend money, he thinks they literally lend as much money as they want because it all compeletely comes from nowhere.'"
Forget the fractional reserve system, thats from yesteryear.
Banks now just create money from nothing, then go into the interbank lending markets and loan the money needed to cover their reserve ratios. That's how Northern Rock was sunk, nobody would lend them the money.
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Rank | Posts | Team |
International Chairman | 14845 | No Team Selected |
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Dec 2001 | 23 years | |
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Oct 2021 | Jul 2021 | LINK |
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143_1357419061.jpg :d7dc4b20b2c2dd7b76ac6eac29d5604e_143.jpg |
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| Quote: LeighGionaire "Forget the fractional reserve system, thats from yesteryear.
Banks now just create money from nothing, then go into the interbank lending markets and loan the money needed to cover their reserve ratios. That's how Northern Rock was sunk, nobody would lend them the money.'"
They were borrowing money on the markets. That's just the same as me borrowing a fiver from you.
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Rank | Posts | Team |
International Board Member | 1437 | No Team Selected |
Joined | Service | Reputation |
Feb 2002 | 22 years | |
Online | Last Post | Last Page |
Apr 2017 | Mar 2017 | LINK |
Milestone Posts |
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Milestone Years |
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995.gif "If the American people knew tonight, exactly how the monetary and banking system worked, there would be a revolution before tomorrow morning."
-Abraham Lincoln:995.gif |
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| Quote: tb "Haven't we done the 'let's return to the 14th Century and pretend the Lombards never existed" to death now? Can we move on from "money for nothing" and discuss the more intriguing topic of chicks for free?'"
In my opinion understanding how money is created and destroyed is the number one political question.
Why do we let private banks control the money supply? Why do governments continue to borrow debt based money from private banks when they could create the money themselves?
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Rank | Posts | Team |
International Board Member | 1437 | No Team Selected |
Joined | Service | Reputation |
Feb 2002 | 22 years | |
Online | Last Post | Last Page |
Apr 2017 | Mar 2017 | LINK |
Milestone Posts |
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Milestone Years |
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Location |
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Signature |
995.gif "If the American people knew tonight, exactly how the monetary and banking system worked, there would be a revolution before tomorrow morning."
-Abraham Lincoln:995.gif |
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