The debt hoax ...

[Anders Lindman]

And once again, you're focussing merely on the money counting, and not on the actual wealth creation enabled by that 100 billion dollar loan. If that 100 billion dollars creates 102 billion dollars worth of economic activity, in the form of new wealth creation, then we're actually 1 billion dollars ahead.

If we're falling behind, it's because we're not lending to the correct wealth producers, not because of some nefarious Banker's Plot.

But that's interesting. The exponential progress of technology will lead to massive increase in value and a LOWERING of the overall costs. So I wonder how that fits into fractional reserve banking. Ha, maybe the 1.5 quadrillion (seriously!) dollars of derivatives is already a sign of that trend, or is that a result of debt run amuck?

 

[Hans]

The banks lost money because of manipulating the rating of their assets. They created artificial collections of poor assets and boosted the ratings of those assets too much.

Again you avoided the question; the question you are avoiding is : how could the banks 'run out of money' if they can create it out of thin air?

You also must have missed these questions too:

Oh would you care to list the countries that don't have a central bank and don't use fractional banking?

Explain to us if you would the paradise that existed before the world switched to fractional banking and central banks...

 

[Anders Lindman]

Again you avoided the question; the question you are avoiding is : how could the banks 'run out of money' if they can create it out of thin air?

You also must have missed these questions too:

Not all banks run out of money. Only those who had speculated with their money. Financial speculations can be done regardless of what monetary system is used. If a bank buys 100 billion dollars of toxic papers and then the value of those papers drop to 1 billion dollars, the 100 billion dollars still exist in the overall fractional reserve banking system and it's just that someone else has them (the seller of those papers).

 

[twinstead]

Not all banks run out of money. Only those who had speculated with their money. Financial speculations can be done regardless of what monetary system is used. If a bank buys 100 billion dollars of toxic papers and then the value of those papers drop to 1 billion dollars, the 100 billion dollars still exist in the overall fractional reserve banking system and it's just that someone else has them (the seller of those papers).

So only some banks can make money out of "thin air", or can they all but some don't choose to?

 

[Anders Lindman]

So only some banks can make money out of "thin air", or can they all but some don't choose to?

No, financial speculation is a separate issue. A run on a bank is not the same thing. The recent problems for banks were because of financial speculations.

Short clip about toxic assets: http://www.youtube.com/watch?v=NJ_fx1rSE-s

 

[Hans]

Not all banks run out of money. Only those who had speculated with their money. Financial speculations can be done regardless of what monetary system is used. If a bank buys 100 billion dollars of toxic papers and then the value of those papers drop to 1 billion dollars, the 100 billion dollars still exist in the overall fractional reserve banking system and it's just that someone else has them (the seller of those papers).

So you are agreeing that your earlier statement is wrong, they cannot just create money any time they want......Thank you for the admission - now to the other two questions that you avoided

Oh would you care to list the countries that don't have a central bank and don't use fractional banking?

Explain to us if you would the paradise that existed before the world switched to fractional banking and central banks...

 

[Anders Lindman]

So you are agreeing that your earlier statement is wrong, they cannot just create money any time they want......Thank you for the admission - now to the other two questions that you avoided

In a way they they can, as I wrote is some post above, when the bank gets money directly from the Fed. Then the bank can multiply that money out of thin air. The other questions I don't have the stamina to answer right now.

 

[Hans]

Then the bank can multiply that money out of thin air.

Oh you mean credit

So you don't like credit, please go back to the ages before we had credit and explain how wonderful it was when nothing could be done unless you had physical gold or silver......

 

[Anders Lindman]

Oh you mean credit

So you don't like credit, please go back to the ages before we had credit and explain how wonderful it was when nothing could be done unless you had physical gold or silver......

All money in a fractional reserve banking system is created as debt. Today we have a monstrous debt bubble caused by fractional reserve banking. Probably some radical measure will be needed to get control over the runaway debt explosion.

 

[Patrick1000]

Safe?

That's how banking works, saggy. Why else would a bank be in business? It pays interest to people to be able to use their money, and gives them a safe place to keep it, with the promise that they can remove it whenever they want, subject to certain restrictions depending how much money they are paying the depositor to use his money.

Safe? Really?

Could have fooled me?

 

[Patrick1000]

Correct Anders, simply "forgiving" debt or devaluing by way of inflating....

All money in a fractional reserve banking system is created as debt. Today we have a monstrous debt bubble caused by fractional reserve banking. Probably some radical measure will be needed to get control over the runaway debt explosion.

Correct Anders, simply "forgiving" debt or devaluing by way of inflating, these are the radical measures available to us...

And indeed , we have done these things already and continue to do them as this silly "crisis" continues.......

 

[psionl0]

If you think they can create money out of nothing - how come they ran out of it? lol

Banks do create money out of "thin air" but it is misleading to think they can just type out numbers at will.

Banks create money by crediting borrowers' bank accounts. This means that the bank has an additional liability. The bank is promising to pay money to the account holder immediately on demand. This is just exactly a promissory note or IOU works.

So, when we say that banks "create money out of thin air" we really mean that they are effectively writing IOUs.

Any bank that creates additional liabilities for itself without gaining a corresponding asset (borrower's promissory note, government bond etc) will be putting its hand out for a rescue package in no time at all.

 

[ref]

But that's just for communication. What if one bank sends $100 to another bank without reducing their own reserve? The reserve is just numbers stored in computers stored locally at each bank, or is that information stored globally somewhere?

Banking is not as straightforward as one might think when reading these kind of discussions. The entire system is very complicated and regulated, and you just can't make "money out of thin air" or "just send money without reducing your reserve". The procedures are well documented and you just can't get in the industry by being a complete fraud.

My first language is not english so excuse me if I don't know all the right terms.

Banks need a banking permit in order to get in the business in the first place. These permits are given by the financial regulators in each country. One has to fulfill certain requirements in order to get the banking permit. One of the requirements is to have reliable systems in place. You don't do business with crappy and fraudulent software.

Now let me explain these systems a bit. You can't just type in an amount of your choosing without reducing any other account. They are built in a way, that a plus 1000 in one account is always a minus 1000 in some other account. So it a plus-minus-zero game. Normally, if you do transfers between customers, you take the money from one customer (-1000) and credit the other customer (+1000). If you just type in +1000 to some account, it doesn't mean that the money comes from nowhere. There are certain nominal ledger accounts (I looked the term in the dictionary, so I don't know if it's correct), that are debited in case no other debit account is given. And these nominal ledger accounts keep the record of your minuses.

So to put it simply, for every plus there is a minus somewhere else, and it is all being recorded. If you have no such systems in place, you are not getting a banking permit in the first place. The regulators do regular checks to and go through the finances and books of the banks, so you can't do bad business for long.

You are right in that SWIFT is for communication and messaging. It enables banks to do transactions easily and swiftly (I know). With SWIFT in place, the transactions are recorded and can be easily tracked (given a legal right to do so). For example, in the case of 9/11 attacks, SWIFT was used to track terrorist finances. That is to say, that everything is recorded and you just can't be a fraud in the business.

 

[ref]

Funny, looking at SWIFT, I wonder how I never hear CT proponents talk about it.

That's because they have no clue how the system works. As if that's any news.

 

[psionl0]

How the heck are transactions between banks done? If I move money from one bank to another bank electronically, then where is the control structure to make sure that the money is actual money?

Banks typically have accounts with the central bank which form part of their reserves (it's not all vault cash). So banks can transfer money between each other via the central bank (which ensures the integrity of the transaction).

Of course, there is nothing to stop banks having accounts at other banks and transferring money to each other directly. In that case, a record of the transfer request will exist in some form (cheque, letter of credit, electronic message etc) and once the transfer has been made, some form of record acknowledgement will be given to the bank that requested the transfer. A bank could not just say "the transfer has been done" and not make the appropriate entries in its books.

 

[KDLarsen]

That's because they have no clue how the system works. As if that's any news.

They can join the club then. It was a running joke when I was growing up, that whenever our family had to go somewhere, you'd be guaranteed that my mom would get the call that the SWIFT had broken down, and that she would need to go fix it asap.

There were only 3 of them who knew how the damn thing worked, in a IT company with 600 employees

 

[ref]

They can join the club then. It was a running joke when I was growing up, that whenever our family had to go somewhere, you'd be guaranteed that my mom would get the call that the SWIFT had broken down, and that she would need to go fix it asap.

There were only 3 of them who knew how the damn thing worked, in a IT company with 600 employees

I'm not trying to claim I know exactly how it works either

But at least I know some basics and at the very least I know that SWIFT exists. And I have experience using it.

CT's like to keep things simple, and are usually not a least bit aware of how things actually work, so they make simple claims that are not in any ways based on reality.

 

[psionl0]

I'm not trying to claim I know exactly how it works either

But at least I know some basics and at the very least I know that SWIFT exists. And I have experience using it.

CT's like to keep things simple, and are usually not a least bit aware of how things actually work, so they make simple claims that are not in any ways based on reality.

SWIFT - "Society for Worldwide Interbank Financial Telecommunication".

I don't see how knowledge of the existence of this piece of software is germane to understanding the fundamental principles of banking. After all, we already know that banks send each other money.

 

[ref]

SWIFT - "Society for Worldwide Interbank Financial Telecommunication".

I don't see how knowledge of the existence of this piece of software is germane to understanding the fundamental principles of banking. After all, we already know that banks send each other money.

It is germane to having some understanding of financial transactions. After all, the particular question was about financial transactions.

I wasn't trying to explain the fundamental principles of banking. But they are not as simple as some "money out of thin air" posts seem to suggest.

 

[psionl0]

It is germane to having some understanding of financial transactions. After all, the particular question was about financial transactions.

Not really. That would imply that before SWIFT, banks could not transfer money between each other (at least, not without loading it onto the truck first). What is germane is understanding that banks send each other information and, as a result, make changes to account balances.

I wasn't trying to explain the fundamental principles of banking. But they are not as simple as some "money out of thin air" posts seem to suggest.

Too true. The "money out of thin air" concept is very attractive for somebody looking for something to hang a CT on but as I explained above, banks don't get to create this money for free. It increases the banks' liabilities.