How the banks create money

[psionl0]

As I have pointed out many times, the government can create all the money we need interest free. Yet for some reason, it is believed that governments have to BORROW the money instead.

You are advocating lending at 0% interest.

Are you genuinely telling me that you can't tell the difference between what I posted and what you paraphrased?

 

[webb5]

[

Having money created when needed through loans, ie the system we have already is far more efficient and accurate than any of your fictitious scenarios could ever be with regards to under/over supply of currency. A government’s central bank already influences the cost of that money which has an effect on how many people borrow it.

The Common Wealth Bank (originally the 'People's bank') used the concept of Social Credit to provide the money required to finance the first world war and the Indian Pacific Railway System. This money was created almost debt-free for the use of Australia’s needs. There is nothing fictional about this.

The only way to increase the money supply in the current system is to further go into debt, triggering a debt fuel boom. If we all started paying our debts the money supply will shrink triggering a recession.

AS I have said before basic modern economic thinking is unsound because it's foundation relies on money that is created as debt.

*Sighs* for the hundredth time, central banks already do this. Not all money is created as debt. Central banks can create more money for free if they so choose. The reason they don’t do this is because it debases the currency and fuels inflation. Incorrect

The central banks are doing their best to increase our debts. They are part of the problem. Money can be created debt free without the boom and bust cycles that we presently have. But again it's too hard for you to understand that


Nice idea if you don’t understand anything about economics! Yeah, let’s tax people who never received any of the magical social credit money dust. That sounds fair.

The money supply must be continuely monitored to maintain a correct balance to the supply and demand needs of a nation. Its also fair to decrease the money supply through taxes as it is to increase it as it maintains the buying power of the curency.

But I notice you have no problems with higher interest rates from the banks. That's Okay right.

Your ideas are nonsense. You don’t understand banking or economics. Go back to school.

As I said before you have no understanding

 

[webb5]

How choosing a story from which real life inferences can't be drawn helps your case I don't know. In a large community the bank (in theory) could create successive bouts of inflation and deflation which would cause some borrowers to default and thereby lose their property to the bank. In the story you presented, this doesn't happen.

This story is written to explain how we the people are conned by the banking system. It has not added every scenero but I am sure most people can see this. There is only so much you can write before people loose interest, but I am sure most people got the idea from this story.

 

[Tippit]

You can save your bluster. I have absolutely no interest in anything you have to say on the topic of central banking.

Believe me, it was mutual long ago. My posts in response to you are to illustrate your abject lies and ignorance to the rest of the forum, as appropriate. You are beyond educating.

 

[Tippit]

Are you genuinely telling me that you can't tell the difference between what I posted and what you paraphrased?

He's obviously stupid or dishonest, probably just stupid in this case, and dishonest the rest of the time.

For the benefit of the forum, it was Thomas Edison who said:

If our nation can issue a dollar bond, it can issue a dollar bill. The element that makes the bond good, makes the bill good, also. The difference between the bond and the bill is the bond lets money brokers collect twice the amount of the bond and an additional 20%, whereas the currency pays nobody but those who contribute directly in some useful way. ... It is absurd to say our country can issue $30 million in bonds and not $30 million in currency. Both are promises to pay, but one promise fattens the usurers and the other helps the people.

 

[Sceptic-PK]

Are you genuinely telling me that you can't tell the difference between what I posted and what you paraphrased?

As many people have already pointed out, you have trouble stating exactly what you mean. I have forgotten how many times I've asked you to explain exactly what you're trying to say, and you're always dodging the question(s). 10 pages, and I'm still waiting.

But, to answer your question- you seem to be under the impression that the government could lend money at (much) lower rates than the banks, without there being a corresponding cost (ie inflation) to the economy. That is honestly all I have been able to glean from any of your posts on this topic. Commercial banks are "parasites" and the government can do their job for cheaper rates to consumers. How much cheaper I don't know, because you never get into specifics.

Now, if I am wrong in how I've characterised your position I am open to being corrected.

Believe me, it was mutual long ago. My posts in response to you are to illustrate your abject lies and ignorance to the rest of the forum, as appropriate. You are beyond educating.

Everyone that reads this part of the forum thinks you're a joke.

The Common Wealth Bank (originally the 'People's bank') used the concept of Social Credit to provide the money required to finance the first world war and the Indian Pacific Railway System. This money was created almost debt-free for the use of Australia’s needs. There is nothing fictional about this

If you are under the impression that the CBA could create all that money without there being any impact on the economy, you are (once again) horribly misinformed:

The Commonwealth Bank of Australia gradually developed into the central bank of Australia. In response to the disruption of trade during World War I (1914–1918) the Commonwealth Bank began to manage the debt of the Australian government. Nevertheless, at the end of the war, the Bank continued to have a primary role as a savings and trading bank. World War I had caused the currency of Australia to move away from the gold standard, in order to fund a great increase of government spending, as did the United Kingdom and other parts of the British Empire.

The value of the Australian pound remained tied to the pound sterling. Inflation in Australia thus increased, less than in Britain, but more than in the United States. The case for a central bank was increased by the need for the government to cut spending after the war to reduce its debt.

http://en.wikipedia.org/wiki/Reserve_Bank_of_Australia#History_.28Mid_19th_century.E2.80.931924.29

Like I keep saying, there's no such thing as a free lunch.

 

[psionl0]

you seem to be under the impression that the government could lend money at (much) lower rates than the banks, without there being a corresponding cost (ie inflation) to the economy.

Since absolutely nothing that I have ever posted even remotely says anything like that, Tippit must have your measure.

 

[Sceptic-PK]

Since absolutely nothing that I have ever posted even remotely says anything like that, Tippit must have your measure.

Once again I must point out it is the logical conclusion of your (extremely vague) nonsense. It is not our fault if you are unwilling to answer direct questions, leading to misunderstandings. If you ever grow the balls to answer those questions, let us know. Til then, we’ll lump you in with Webb & Tippit and the rest of the crazies.

10 characteristics of conspiracy theorists
A useful guide by Donna Ferentes

3. Inability to answer questions.
For people who loudly advertise their determination to the principle of questioning everything, they're pretty poor at answering direct questions from sceptics about the claims that they make.

 

[Tippit]

Once again I must point out it is the logical conclusion of your (extremely vague) nonsense. It is not our fault if you are unwilling to answer direct questions, leading to misunderstandings. If you ever grow the balls to answer those questions, let us know. Til then, we’ll lump you in with Webb & Tippit and the rest of the crazies.

10 characteristics of conspiracy theorists
A useful guide by Donna Ferentes

3. Inability to answer questions.
For people who loudly advertise their determination to the principle of questioning everything, they're pretty poor at answering direct questions from sceptics about the claims that they make.

Sometimes misunderstandings arise from the complete failure to understand, as opposed to any ambiguity on the speakers part. In your case, it seems to be most of the time.

 

[psionl0]

Til then, we’ll lump you in with Webb & Tippit and the rest of the crazies.

Is this a "Royal we" or are you the official spokesperson for all the skeptics on this forum?

I can't imagine that the majority of members here would want to be seen as followers of someone who resorts to false quotes and strawman arguments because he can't deal with what has actually been posted.

 

[Sceptic-PK]

Still unable to answer huh?

 

[psionl0]

Still unable to answer huh?

Nope.

False quotes such as, "You are advocating lending at 0% interest" require no answer of course.

As for the rest of it, I have reviewed your responses to previous posts of mine and I conclude that your cognitive development is at what Piaget describes as the Pre-Operational bordering on to Concrete Operational stages. This means that I can't explain complicated concepts like full reserve banking to you using words alone. I need sounds, pictures, videos and even physical objects (like monopoly money) that you can handle while being taught.

Naturally, a lesson like that takes time to prepare and I would need to be convinced that you want to learn before I went to the trouble.

 

[Sceptic-PK]

3. Inability to answer questions.
For people who loudly advertise their determination to the principle of questioning everything, they're pretty poor at answering direct questions from sceptics about the claims that they make.

 

[psionl0]

In your strange, imaginary world where money is provided for free to avoid the “parasitic” nature of banking, how do you prevent runaway inflation due to free money?

This is the only question that I could find of yours (since lomiller and I discussed the point at which money is created). It is difficult to give a sensible answer to some sneering remarks that are totally NOT what I have been discussing but since 'tis the season, I will give one more try.

First, understand that I am NOT advocating "social credit" (quiz webb5 on that) nor am I calling for a national LETS system (although it has been successful in small communities, there would need to be a lot of economic modelling before a national LETS could be advocated). I have only advocated full reserve banking as a workable (even beneficial) system.

If I remember rightly, your original question was along the lines of "where would we get the money to lend out if the banks could not create it"? In order to understand the answer you need to remember that under a fractional reserve system, there is a limit to how much money the banks can create and this limit is defined by the fractional reserve ratio. So, given that the banks have already created the maximum amount of money, the question remains the much the same: "how do we make more money available if the maximum money (as determined by the reserve ratio) has already been created"?

There are 3 possibilities:

1. The government/Fed creates the money to fund a deficit budget.
2. We import (borrow) money from overseas sources.
3. We lower the reserve ratio.

Under a full reserve system, only the third option is not available. I would prefer that the second option was not available either. Mortgaging a nation's sovereignty - especially without a plan to repay or service the debt in the long term (not an issue at the next election) - seems like the height of stupidity to me. Unfortunately, we have been so conditioned to believe that debt is "harmless" that we don't even believe that there are consequences if you can't make payments on our debts.

Assuming that there is enough money to meet a nation's needs, the question of who will lend money if the bank can't lend out money in transaction accounts is simply a question of who currently has money to spare and what interest rate will you have to offer to convince that person to risk lending out his money. Taxpayers and people who choose not to invest in lending institutions should not be forced to carry the risk that banks take when they create liabilities for themselves without having the reserves to pay them out.

If this answer does not make sense or satisfy you then you then this Money Morning Article might give you some further insight.

Happy Christmas.

 

[webb5]

But, to answer your question- you seem to be under the impression that the government could lend money at (much) lower rates than the banks, without there being a corresponding cost (ie inflation) to the economy. That is honestly all I have been able to glean from any of your posts on this topic. Commercial banks are "parasites" and the government can do their job for cheaper rates to consumers. How much cheaper I don't know, because you never get into specifics.

Now, if I am wrong in how I've characterised your position I am open to being corrected.



Everyone that reads this part of the forum thinks you're a joke.



If you are under the impression that the CBA could create all that money without there being any impact on the economy, you are (once again) horribly misinformed:



http://en.wikipedia.org/wiki/Reserve_Bank_of_Australia#History_.28Mid_19th_century.E2.80.931924.29

Like I keep saying, there's no such thing as a free lunch.

Remember these words common wealth. The Common Wealth Bank of Australia was created originally to take on the banking system, issuing credit instead of debt. Sir Denison Miller, Governor of the Bank from its creation in 1912 to 1923, was quoted in the Australian Press on July 7, 1921 as saying, “The whole of the resources of Australia are at the back of this bank, and so strong as this continent is, so strong is the Commonwealth Bank. Whatever the Australian people can intelligently conceive in their minds and will loyally support, that can be done.”

This was not just hype. In a 2001 article titled “How Money Is Created in Australia,” David Kidd wrote of the Bank’s early accomplishments:“Australia’s own government-established Commonwealth Bank achieved some impressive successes while it was ‘the peoples’ bank’, before being crippled by later government decisions and eventually sold.
At a time when private banks were demanding 6% interest for loans, the Commonwealth Bank financed Australia’s First World War effort from 1914 to 1919 with a loan of $700,000,000 at an interest rate of a fraction of 1%, thus saving Australians some $12 million in bank charges.

Harnessing the Secret Power of Banking for the Public Good The Commonwealth Bank was able to achieve so much with so little because both its first Governor, Denison Miller, and its first and most ardent proponent, King O’Malley, had been bankers themselves and knew the secret of banking: that banks create the “money” they lend simply by writing accounting entries into the deposit accounts of borrowers.

Yes it did make an impact on the economy, a very positive one.

 

[webb5]

We need to ask our selves who should have the right to create money?

The private institutions for profit or the government for the benefit of all the people

 

[Sceptic-PK]

Commonwealth is one word you illiterate buffoon.

 

[psionl0]

The Common Wealth Bank (originally the 'People's bank') used the concept of Social Credit to provide the money required to finance the first world war and the Indian Pacific Railway System. This money was created almost debt-free for the use of Australia’s needs. There is nothing fictional about this.

The early history of the Commonwealth Bank with Denison Miller at the helm is certainly an interesting one. However, in the interests of accuracy, it should be pointed out that the bank was not using "Social Credit". It was in fact practising fractional reserve banking. The only differences were that it was lending to the government and it was charging a very low interest rate.

 

[webb5]

The early history of the Commonwealth Bank with Denison Miller at the helm is certainly an interesting one. However, in the interests of accuracy, it should be pointed out that the bank was not using "Social Credit". It was in fact practising fractional reserve banking. The only differences were that it was lending to the government and it was charging a very low interest rate.

Sorry this is not true. This money did not come from deposits.“. . . By January, 1913 [Miller] had completed arrangements to open a bank in each State of the Commonwealth, and also an agency in London. . . . [O]n January 20th, 1913 he made a speech declaring the new Commonwealth Bank open for business. He said:

“‘This bank is being started without capital, as none is required at the present time, but it is backed by the entire wealth and credit of the whole of Australia.’

“In those few simple words was the charter of the Bank, and the creed of Denison Miller, which he never tired of reciting. He promised to provide facilities to expand the natural resources of the country, and it would at all times be a people’s bank. ‘There is little doubt that in time it will be classed as one of the great banks of the world,’ he added prophetically.

http://www.hinterlandvoice.com.au/t...commonwealth-bank-of-australia-by-ellen-brown

In the link below Jeremy Lee explains the creation of the commonwealth bank and how it could create money on the wealth of Australia. The video is not great but worth watching

http://www.youtube.com/watch?v=0lRm2Wwejaw

 

[Sceptic-PK]

Webb5 is of course, completely wrong. The CBA was evolving into our central bank and did nothing out of the ordinary that couldn't be done by the RBA today. They were gearing up for war. And it resulted in inflation. I have already explained this to him. Everything the CBA did then the RBA could do now. They don't do it often for obvious reasons that have also already been explained to him.