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Is This The End Of Britain?

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Re: Is This The End Of Britain?

Postby Paphitis » Wed Jan 08, 2014 4:02 am

Robin Hood wrote:Paphitis:
Interest Only Loans are not for home buyers at all. These products do not suit the needs of Home Buyers. If these borrowers can only afford Interest only, then they shouldn't be getting a loan in the first place.

I think your conception is wrong on that! I bought my first house in the UK with an interest only mortgage in 1970. I moved four times, each time raising the level of mortgage, before quitting to live in Cyprus in 1994. The principal is not just that you don’t pay back the capital but it was a case of getting tax-relief on the interest and using that as the premium payment (or part of) on Whole Life Insurance Policies that had a final value including predicted bonuses, equal to or greater than the capital sum borrowed. In my case I sold the house in ‘94, paid off the mortgage (easily) and then later the policies paid out considerably more than the policy life assured value.

However, what I would say is that it would not work now as the returns are insufficient/unstable and this will hit many who took out mortgages on an interest only basis some years after I did.

BTW: This is an interesting thread and my answer to the original question would be YES .......... but the UK will not be alone and neither will they be the first to go under. What seems to be missed on here is the fact that all these ‘expert’ predictions are being made by the same people that, in spite of their abundant knowledge and crystal ball gazing, just managed to miss ..........Lehman Bros failure, Sub-Prime Mortgages, the Dot.Com bubble; the housing bubble, LIBOR rate fixing, the risk to the world economy of Derivatives and the even greater risk to the world economy of an out-of-control banking and financial 'industry'! An ‘industry’ which has managed to turn a service sector provider for wealth creation, into a dysfunctional ‘industry’ that has proved that wealth creation is no longer necessary to get rich!!! So their opinion is as valid as predicting the future using Tarot Cards!

Until these ‘experts’ get together and completely re-structure the banking and financial sector and put the creation of ‘money’ in the hands of Central Banks that belong to the people (Governments) and not the Bankers ........ the slippery slope will just get steeper and more slippery! :(


Hi Robin,

thanks for posting.

Interest only would have different terms and conditions in each country. It sounds like tax benefits can be derived from Interest Only when buying your home. The general rule is that if this suits your needs then all is fine. In fact, Interest Only has more benefits such as the added flexibility of reducing your payments to Interest Only when things are tight.

In Australia, the Banks are not permitted under the Financial Services Act to offer Interest Only Loans to first home buyers. Interest Only products are generally Business and Investment loans but the interest rate is also about 1% higher. The advantage is that the products are fully tax deductible, hence these types of debts are termed as "good" debt.

As stated, there is a Financial Services Act. It is very strict and there are severe penalties for any breach.

The main aim of this act is:
1) to ensure consumers' financial needs are met as best as possible. The obligation here falls on the Bank more so than the consumer,
2) there is a requirement that Banks must prove the consumer's ability to afford and service any lending, and if they do not do this properly, the Bank can become liable should there be any default.

This Act just got a lot more strict since the Cypriot banking collapse. The Government watched these developments closely and used it as a pretext to tighten laws even further.

But anyway, I disagree that the system needs to change and that countries such as Britain will meet their end. At the worst case scenario, countries will go in and out of recession. The Banking System really does work and I have never really had many bad experiences with them. I generally find that they are actually doing their best to ensure their customers have the right products and they do assist their customers as much as possible as long as there is communication.

They are regulated strictly. It is the Low Doc Lenders and high interest loan sharks people should worry about. STAY AWAY FROM THEM AT ALL COSTS!
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Re: Is This The End Of Britain?

Postby Flying Horse » Sat Jan 11, 2014 12:07 pm

Those quick to say Britain was on a great recovery, were a bit disappointed when official data came out recently.....

http://www.ft.com/cms/s/0/e04565b6-79dc ... z2q5CBKkmy
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Re: Is This The End Of Britain?

Postby Flying Horse » Sat Jan 11, 2014 12:12 pm

Also according to a dodgy news source Cypriots are the biggest borrowers in Europe!!!

http://cyprus-mail.com/2014/01/11/cypri ... in-europe/
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Re: Is This The End Of Britain?

Postby GreekIslandGirl » Sat Jan 11, 2014 12:40 pm

Flying Horse wrote:Also according to a dodgy news source Cypriots are the biggest borrowers in Europe!!!

http://cyprus-mail.com/2014/01/11/cypri ... in-europe/


Typically, it seems CM are not telling the whole truth. From the very first sentence they switch from figures of "loans" (which could include everything, mortgage etc) to "consumer credit" which doesn't include mortgages, thus:

Cypriots are the biggest borrowers in Europe, with average loans of €4,000 per person, a report by the European Commission is expected to show. In contrast, the country with the lowest consumer credit per capita in Europe is Lithuania with just €200,


Also, maybe the CM does not consider Britain as being in the EU? :? This article is much clearer:

(Since 2012, the debt has risen in the UK.)


Average debt per person in the UK (excluding mortgages)
The average household debt in the UK in March this year was £7,903, which doesn't include mortgages.
However, the average individual debt in the UK was £4,231. This also doesn't include mortgages - rather car finance deals, credit cards, store cards, overdrafts and unsecured loans.
The average amount of debt per person in the UK has increased between February and March this year (2012).
Average household debt in the UK (including mortgages)
The average amount of household debt in the UK, including mortgages, was £55,436 in March this year (2012). However, this average figure includes households without mortgages. Of the households that do have mortgage debt, the average amount still owed was £111,419 in March.


http://www.allaboutmoney.com/debt-advic ... 0-5549.htm
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Re: Is This The End Of Britain?

Postby Paphitis » Sat Jan 11, 2014 12:46 pm

Flying Horse wrote:Those quick to say Britain was on a great recovery, were a bit disappointed when official data came out recently.....

http://www.ft.com/cms/s/0/e04565b6-79dc ... z2q5CBKkmy


On the contrary.

The figures are quite positive. Any country that will see this level of GDP growth in today's reality is doing very well! On these projections, a surplus should occur by 2018.

But you are kidding yourself if you expect to suddenly wake up in the morning to see things become much easier after 5 years of recession.
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Re: Is This The End Of Britain?

Postby Paphitis » Sat Jan 11, 2014 12:56 pm

GreekIslandGirl wrote:
Flying Horse wrote:Also according to a dodgy news source Cypriots are the biggest borrowers in Europe!!!

http://cyprus-mail.com/2014/01/11/cypri ... in-europe/


Typically, it seems CM are not telling the whole truth. From the very first sentence they switch from figures of "loans" (which could include everything, mortgage etc) to "consumer credit" which doesn't include mortgages, thus:

Cypriots are the biggest borrowers in Europe, with average loans of €4,000 per person, a report by the European Commission is expected to show. In contrast, the country with the lowest consumer credit per capita in Europe is Lithuania with just €200,


Also, maybe the CM does not consider Britain as being in the EU? :? This article is much clearer:

(Since 2012, the debt has risen in the UK.)


Average debt per person in the UK (excluding mortgages)
The average household debt in the UK in March this year was £7,903, which doesn't include mortgages.
However, the average individual debt in the UK was £4,231. This also doesn't include mortgages - rather car finance deals, credit cards, store cards, overdrafts and unsecured loans.
The average amount of debt per person in the UK has increased between February and March this year (2012).
Average household debt in the UK (including mortgages)
The average amount of household debt in the UK, including mortgages, was £55,436 in March this year (2012). However, this average figure includes households without mortgages. Of the households that do have mortgage debt, the average amount still owed was £111,419 in March.


http://www.allaboutmoney.com/debt-advic ... 0-5549.htm


They are talking about Credit Card Debt which still doesn't make the figures reliable.

On the same token, comparing mortgages between countries is not accurate. Buying property in London for instance would mean a bigger mortgage by default since property prices in the UK are higher than in Cyprus.

Just like if you were to compare mortgages in Hong Kong. A square box 2 bedroom apartment will set you back about 2 million euros. Therefore you would expect HK to have much higher mortgages with terms spanning 80 years.
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Re: Is This The End Of Britain?

Postby Robin Hood » Sat Jan 11, 2014 7:12 pm

Paphitis:
But anyway, I disagree that the system needs to change and that countries such as Britain will meet their end. At the worst case scenario, countries will go in and out of recession. The Banking System really does work and I have never really had many bad experiences with them. I generally find that they are actually doing their best to ensure their customers have the right products and they do assist their customers as much as possible as long as there is communication.

I admire your faith in the banking system but ...................... :?

Take your mind back to 2008 when Lehman Bros went to the wall with insurmountable debts that massively exceeded their reserves. Within almost hours (if not minutes) a whole bunch of Banks leapt onto the band wagon, all in the same trouble and told various Government(s) ...... ‘You have to bail us out as we are too big to fail!’ :cry: :cry: :cry:

Now answer two questions:

a) How can a bank loose more money than the sum total in its depositor’s accounts and the money paid out by the original share holders? Where did the rest of the money come from that they have supposedly lost?

b) How do these Government’s, who rely upon the banks to provide the loans they need to operate, get all this money from that they use to bail out the banks, when it is the same banks that they would normally borrow from?

The answer............ is the reason why the banking system will change or there will be a complete global financial/banking meltdown.

As for the UK ........ the GDP is based on income Vs outgoings and does not reflect the difference between making money as the banks do, and creating wealth as the real economy does. Unemployment is about double the declared level and most of the jobs being created are either low paid and/or part time.

Money is a commodity that originates from the banks as debt and returns to the bank to redeem the debt ..... plus interest of course. Before the bank created the debt the money did not exist. Britain’s GDP is dominated by the financial and banking sectors, it has little industry to create wealth and an inevitable collapse of the financial system, will take the UK and most countries down with it. The countries that will be least affected will be those where the Government creates the money and not the banks. However, there are very few of them left that work that way. :roll:
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Re: Is This The End Of Britain?

Postby Paphitis » Sun Jan 12, 2014 4:20 pm

Robin Hood wrote:Paphitis:
But anyway, I disagree that the system needs to change and that countries such as Britain will meet their end. At the worst case scenario, countries will go in and out of recession. The Banking System really does work and I have never really had many bad experiences with them. I generally find that they are actually doing their best to ensure their customers have the right products and they do assist their customers as much as possible as long as there is communication.

I admire your faith in the banking system but ...................... :?

Take your mind back to 2008 when Lehman Bros went to the wall with insurmountable debts that massively exceeded their reserves. Within almost hours (if not minutes) a whole bunch of Banks leapt onto the band wagon, all in the same trouble and told various Government(s) ...... ‘You have to bail us out as we are too big to fail!’ :cry: :cry: :cry:


That's not completely true.

The Banks were calling in Capital Guarantees to cover some of their liabilities which were depositor accounts held by individuals like you and me.

They used those funds and made bad investments by lending the money to people in order to buy homes despite not being very credit worthy. Because these loans defaulted, Lehman Brothers was in the position of not honoring depositor funds and needed a bailout to cover those accounts before going bankrupt which is what happened. The bailout was not to save the company which they would have liked I am sure.

There are much bigger companies in the US. Apple, Microsoft, Boeing amongst others. They are even bigger to fail, but the US Government will not write them an open check should they go to the wall.

We are talking about Capital Guarantees designed to protect consumers who park their money within these Financial Services Institutions.

Robin Hood wrote:Now answer two questions:

a) How can a bank loose more money than the sum total in its depositor’s accounts and the money paid out by the original share holders? Where did the rest of the money come from that they have supposedly lost?


They didn't!

They would have had some of the funds. Could be 20, 30, 40 or 50 cents in the dollar. Don't know what the figure is and neither did they at the time.

But the funds to cover 100% of all deposits as would be expected from all depositors were not there hence a bail out request from the Federal Reserve.

You can get all the information you need here:
http://www.federalreserve.gov/bankinfor ... tation.htm

Robin Hood wrote:b) How do these Government’s, who rely upon the banks to provide the loans they need to operate, get all this money from that they use to bail out the banks, when it is the same banks that they would normally borrow from?


It is the Federal reserve that is responsible for providing Capital Guarantees.

They provide the Financial Institution with a license provided they meet all the requirements and in return operate under the US Federal Reserve Capital Guarantee framework.

Robin Hood wrote:The answer............ is the reason why the banking system will change or there will be a complete global financial/banking meltdown.


That is what you might hope for.

Unfortunately for you, a global financial meltdown is unlikely.

Robin Hood wrote:As for the UK ........ the GDP is based on income Vs outgoings and does not reflect the difference between making money as the banks do, and creating wealth as the real economy does. Unemployment is about double the declared level and most of the jobs being created are either low paid and/or part time.


The British Unemployment figure is 7.5%. Whilst it might be the case that it is slightly higher than that, I cannot accept it is double the figure or 15%.

Robin Hood wrote:Money is a commodity that originates from the banks as debt and returns to the bank to redeem the debt ..... plus interest of course. Before the bank created the debt the money did not exist. Britain’s GDP is dominated by the financial and banking sectors, it has little industry to create wealth and an inevitable collapse of the financial system, will take the UK and most countries down with it. The countries that will be least affected will be those where the Government creates the money and not the banks. However, there are very few of them left that work that way. :roll:


Completely wrong.

Some conservative Banks actually rely on depositors. They then invest this pool of money by lending it to consumers to buy homes or to business at a higher interest rate. They rely on the mark up and account fees to derive a profit which they can then leverage to borrow more money to add to the lending portfolio.

The key is to operate within the Financial Services Act (Australia) and make sure that borrowers are selected through a rigorous qualification process rather than do what happened in the US and lend money to unemployed people even because they are able to hand in their keys upon default.
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Re: Is This The End Of Britain?

Postby Robin Hood » Tue Jan 14, 2014 4:00 pm

Paphitis,
Thank you for your reply ......I appreciate the detail. I find the subject fascinating and realised a long time ago that most people don’t have a clue where money comes from nor the basis of its creation.

However in reply I have to say that I think your concept of money creation and banking is completely wrong.

My answer would be considerably different from yours because you have not included, nor mentioned, the crucial and global banking practice called ‘Fractional Reserve Banking’ (FRB). It is this concept that will be the systems downfall and if you are not aware of the practice and how it works then you will never understand the flaw that will eventually collapse the Global banking and financial sector. It is a house of cards and based on an illusion of imaginary wealth by their creation of money from nothing.

You deserve a detailed explanation, albeit simplistic in content: :roll:

When you deposit say $1000 with the bank, it ceases to be your money, it is now the property of the Bank and their only obligation to you is to refund the money when you ask for it ........ well .............. that’s the idea providing you haven’t read the small print or happen to live in Cyprus! :o

Banks are required by Law to hold a fraction of the deposited amount as ‘reserves’ and the rest they are free to lend. Until quite recently that reserve has been as little as 3% but in Cyprus and more generally I believe the reserve requirement is now 10%.

So, of your deposit into your account of $1000, 10% ($100) the bank puts on a shelf as their ‘reserve’ and the remaining 90% ($900) they can loan out. When the bank loans the 90% to another customer it is paid into another bank account, (that may even be with the same bank) and again they hold 10% ($90) and can loan 90% ($810). Now, they have re-created your remaining $900 ($1000-$100) as new money in another account. That money did not exist until the loan was created by the bank. Your personal account will still credit you with the full deposit of $1000, a liability on the bank because they have to repay that money when you ask for it.

This process is repeated time and time again. The next time it goes through a bank account the deposit of $810 will be, 10% on the shelf ($81) and lend out 90% ($729). By this process, on a 10% fractional reserve the original $1000 will be increased to around nine times its original value. The original deposit now has a monetary value of $10,000 and ........... 90% of that is new money created as debt. Any ‘reserves’ held in excess of the required 10% amount, (i.e. not loaned out) are known as ‘excess reserves’ and are deposited with the Central Bank where the bank gets paid interest. These deposits, along with the Gold reserves and foreign currency reserves now form part of the Central Banks National Reserves. All this from an initial deposit by you of $1000, not bad going on the ‘something for nothing’ scale?

This works fairly well on a small scale when it is used within the commercial banking system. The Glass-Steagall Act of 1933 kept the commercial banks and the ‘Investment’ Banks as separate entities but, in 1999 this act was repealed by Pres. Clinton and the two completely different banking structures became a single entity. The investment banks now had access to the commercial bank vaults! The same thing happened to building societies when they were bought up by the banks.

This allowed the ‘Investment’ (Casino?) arm of the banks to use this money as investment capital but with the protection afforded to commercial bank deposits. In other worlds your $900 now multiplied by FRB to $9000 is now used as the stake to gamble on various ‘Products’ developed by the financial system such as hedge funds, commodities, derivatives, futures and a whole host of similar products. All the time they are winning the bankers pocket the profits, when things go wrong ...... the tax payer picks up the losses. In Cyprus the depositors picked up the tab and this is now being introduced as the ‘Norm’ for bank failures in the EU and other countries and re-titled a ‘bail-in’......... New Zealand being one, I don’t know whether Australia has followed suit.

The banks can now use your money to make the Bankers and traders rich but, when the Markets/Product goes tits-up they can lose enormous amounts of money, way beyond anything their reserves could possibly handle ......... the Sub-Prime fiasco being just one example ......... now they need bailing-out to replenish the reserves so that the whole system can start all over again. The losers? You and me as tax payers and/or bank depositors! :x

The second question:

The banks scream ‘We are too big to fail .... we must be bailed out!’...................

The Government response is to ask the Central Bank for the Billions it needs for the bank bail-out. The Government issues Government Bonds to the CB for the amount needed, effectively these are dated IOU’s, and in return the CB transfers the same face value by electronic transfer for the Treasury to use ........... to bail out the very same banks! This bail-out replenishes the bank’s reserves and allows them to create more money out of thin air. :shock:

So the Government has now increased its debt and has to pay the CB interest on this ‘loan’. This loan is all New Money and did not exist until the Banks created it as debt. If you or I tried to do this we would end up serving a lot of time for fraud ........ but hey, these are banks so that’s OK then? You couldn’t make this up if you tried! :wink:

The money generated by the casino banks is used to create even more money, it does not circulate through a natural wealth creating system. Therefore when financial services and banking are included as part of the equation for calculating GDP it is misleading, as this is simply ‘money’ stored on micro-chips and is in the main circulating through the financial system and not through the wealth creation system. The investment capital REAL Industry needs to grow normally comes from the commercial banks and gives a poor return for Bankers when compared with the likely returns from the ‘investment’ side, hence the difficulty many smaller businesses have in acquiring capital from the bank through loans, even though that is the primary function of a commercial bank.

This creation of new money evokes a continuous cycle of boom-and-bust and an ever expanding spiral of debt. This debt can never be repaid because, ..................... if it were even possible to pay off all the debt, which it is not ................. there would be no money for anyone to spend! As an example of the danger ............ the current liability of the derivatives market, when it fails, is 20 times the Worlds total GDP and that is just one financial ‘product’!!!!! The UK and most countries in general where the Central Bank is associated with the World Bank, IMF and The Bank of International Settlement, are all operating in the same way, including Australia.

This is just the tip of the iceberg ................. look up Fractional Reserve Banking or Creation of Money on YouTube, there are a whole host of examples.


However ............ there IS a solution which favours The People but will ruin a nice little earner for the Bankers and the Top 1%!

If Glass-Steagall was reinstated and the Central Banks were owned and controlled by the People (The Government) instead of Private Banks, then any money is created without debt and does not attract interest. It also circulates from Government back to Government in the way of capital projects/purchases and wages, through the normal circulating currency system as companies/people spend, through taxes on purchases and finally it then returns to the Government and is re-spent to circulate ad-infinitum through the expenditure/tax cycle again, instead of going back to the banks to pay off loans and interest. This monetary system also requires no imposition of income tax on earnings, as was the case in the USA before the creation of the Federal Reserve Bank in 1912(?) the taxes are all on purchasing/expenditure.

The financial system is Global and includes not just the banking system but the Stock Markets, where receipts for the initial purchase value (shares) can change hands at the rate of thousands of times a second. Share values have no direct relationship to the performance of wealth creating industry, merely the performance of The Markets.


Although primarily dealing with the USA, this documentary applies to all capitalist societies. It is well directed and is not a ‘let’s blame the banks’ type of video. Those that contribute their knowledge (23 of them) have the background and qualifications to be taken as well informed and as such the whole documentary has credibility. It is a very good informative dialogue. I think you will find it both informative and interesting.

http://www.youtube.com/watch?v=5fbvquHSPJU
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Re: Is This The End Of Britain?

Postby supporttheunderdog » Tue Jan 14, 2014 8:02 pm

Robin Hood wrote:Paphitis,
Thank you for your reply ......I appreciate the detail. I find the subject fascinating and realised a long time ago that most people don’t have a clue where money comes from nor the basis of its creation.

However in reply I have to say that I think your concept of money creation and banking is completely wrong.

My answer would be considerably different from yours because you have not included, nor mentioned, the crucial and global banking practice called ‘Fractional Reserve Banking’ (FRB). It is this concept that will be the systems downfall and if you are not aware of the practice and how it works then you will never understand the flaw that will eventually collapse the Global banking and financial sector. It is a house of cards and based on an illusion of imaginary wealth by their creation of money from nothing.

You deserve a detailed explanation, albeit simplistic in content: :roll:

When you deposit say $1000 with the bank, it ceases to be your money, it is now the property of the Bank and their only obligation to you is to refund the money when you ask for it ........ well .............. that’s the idea providing you haven’t read the small print or happen to live in Cyprus! :o

Banks are required by Law to hold a fraction of the deposited amount as ‘reserves’ and the rest they are free to lend. Until quite recently that reserve has been as little as 3% but in Cyprus and more generally I believe the reserve requirement is now 10%.

So, of your deposit into your account of $1000, 10% ($100) the bank puts on a shelf as their ‘reserve’ and the remaining 90% ($900) they can loan out. When the bank loans the 90% to another customer it is paid into another bank account, (that may even be with the same bank) and again they hold 10% ($90) and can loan 90% ($810). Now, they have re-created your remaining $900 ($1000-$100) as new money in another account. That money did not exist until the loan was created by the bank. Your personal account will still credit you with the full deposit of $1000, a liability on the bank because they have to repay that money when you ask for it.

This process is repeated time and time again. The next time it goes through a bank account the deposit of $810 will be, 10% on the shelf ($81) and lend out 90% ($729). By this process, on a 10% fractional reserve the original $1000 will be increased to around nine times its original value. The original deposit now has a monetary value of $10,000 and ........... 90% of that is new money created as debt. Any ‘reserves’ held in excess of the required 10% amount, (i.e. not loaned out) are known as ‘excess reserves’ and are deposited with the Central Bank where the bank gets paid interest. These deposits, along with the Gold reserves and foreign currency reserves now form part of the Central Banks National Reserves. All this from an initial deposit by you of $1000, not bad going on the ‘something for nothing’ scale?

This works fairly well on a small scale when it is used within the commercial banking system. The Glass-Steagall Act of 1933 kept the commercial banks and the ‘Investment’ Banks as separate entities but, in 1999 this act was repealed by Pres. Clinton and the two completely different banking structures became a single entity. The investment banks now had access to the commercial bank vaults! The same thing happened to building societies when they were bought up by the banks.

This allowed the ‘Investment’ (Casino?) arm of the banks to use this money as investment capital but with the protection afforded to commercial bank deposits. In other worlds your $900 now multiplied by FRB to $9000 is now used as the stake to gamble on various ‘Products’ developed by the financial system such as hedge funds, commodities, derivatives, futures and a whole host of similar products. All the time they are winning the bankers pocket the profits, when things go wrong ...... the tax payer picks up the losses. In Cyprus the depositors picked up the tab and this is now being introduced as the ‘Norm’ for bank failures in the EU and other countries and re-titled a ‘bail-in’......... New Zealand being one, I don’t know whether Australia has followed suit.

The banks can now use your money to make the Bankers and traders rich but, when the Markets/Product goes tits-up they can lose enormous amounts of money, way beyond anything their reserves could possibly handle ......... the Sub-Prime fiasco being just one example ......... now they need bailing-out to replenish the reserves so that the whole system can start all over again. The losers? You and me as tax payers and/or bank depositors! :x

The second question:

The banks scream ‘We are too big to fail .... we must be bailed out!’...................

The Government response is to ask the Central Bank for the Billions it needs for the bank bail-out. The Government issues Government Bonds to the CB for the amount needed, effectively these are dated IOU’s, and in return the CB transfers the same face value by electronic transfer for the Treasury to use ........... to bail out the very same banks! This bail-out replenishes the bank’s reserves and allows them to create more money out of thin air. :shock:

So the Government has now increased its debt and has to pay the CB interest on this ‘loan’. This loan is all New Money and did not exist until the Banks created it as debt. If you or I tried to do this we would end up serving a lot of time for fraud ........ but hey, these are banks so that’s OK then? You couldn’t make this up if you tried! :wink:

The money generated by the casino banks is used to create even more money, it does not circulate through a natural wealth creating system. Therefore when financial services and banking are included as part of the equation for calculating GDP it is misleading, as this is simply ‘money’ stored on micro-chips and is in the main circulating through the financial system and not through the wealth creation system. The investment capital REAL Industry needs to grow normally comes from the commercial banks and gives a poor return for Bankers when compared with the likely returns from the ‘investment’ side, hence the difficulty many smaller businesses have in acquiring capital from the bank through loans, even though that is the primary function of a commercial bank.

This creation of new money evokes a continuous cycle of boom-and-bust and an ever expanding spiral of debt. This debt can never be repaid because, ..................... if it were even possible to pay off all the debt, which it is not ................. there would be no money for anyone to spend! As an example of the danger ............ the current liability of the derivatives market, when it fails, is 20 times the Worlds total GDP and that is just one financial ‘product’!!!!! The UK and most countries in general where the Central Bank is associated with the World Bank, IMF and The Bank of International Settlement, are all operating in the same way, including Australia.

This is just the tip of the iceberg ................. look up Fractional Reserve Banking or Creation of Money on YouTube, there are a whole host of examples.


However ............ there IS a solution which favours The People but will ruin a nice little earner for the Bankers and the Top 1%!

If Glass-Steagall was reinstated and the Central Banks were owned and controlled by the People (The Government) instead of Private Banks, then any money is created without debt and does not attract interest. It also circulates from Government back to Government in the way of capital projects/purchases and wages, through the normal circulating currency system as companies/people spend, through taxes on purchases and finally it then returns to the Government and is re-spent to circulate ad-infinitum through the expenditure/tax cycle again, instead of going back to the banks to pay off loans and interest. This monetary system also requires no imposition of income tax on earnings, as was the case in the USA before the creation of the Federal Reserve Bank in 1912(?) the taxes are all on purchasing/expenditure.

The financial system is Global and includes not just the banking system but the Stock Markets, where receipts for the initial purchase value (shares) can change hands at the rate of thousands of times a second. Share values have no direct relationship to the performance of wealth creating industry, merely the performance of The Markets.


Although primarily dealing with the USA, this documentary applies to all capitalist societies. It is well directed and is not a ‘let’s blame the banks’ type of video. Those that contribute their knowledge (23 of them) have the background and qualifications to be taken as well informed and as such the whole documentary has credibility. It is a very good informative dialogue. I think you will find it both informative and interesting.

http://www.youtube.com/watch?v=5fbvquHSPJU


A simpler explanation


Economic recovery

It is a slow day in the small Minnesota town of Marshall , and streets are deserted. Times are tough, everybody is in debt, and everybody is living on credit.

A rich tourist visiting the area drives through town, stops at the motel, and lays a $100 bill on the desk saying he wants to inspect the rooms upstairs to pick one for the night.

As soon as he walks upstairs, the motel owner grabs the bill and runs next door to pay his debt to the butcher.

The butcher takes the $100 and runs down the street to retire his debt to the pig farmer.

The pig farmer takes the $100 and heads off to pay his bill to his supplier, the Farmer's Co-op.

The guy at the Farmer's Co-op takes the $100 and runs to pay his debt to the local prostitute, who has also been facing hard times and has had to offer her "services" on credit.

The hooker rushes to the hotel and pays off her room bill with the hotel owner.

The hotel proprietor then places the $100 back on the counter so the rich traveler will not suspect anything.

At that moment the traveler comes down the stairs, states that the rooms are not satisfactory, picks up the $100 bill and leaves town.

No one produced anything. No one earned anything... However, the whole town is now out of debt and now looks to the future with a lot more optimism.

And that, ladies and gentlemen, is how the United States government is conducting business today.

PEACE,
RK
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