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BBC – THE SUPER-RICH ..... and us!

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Re: BBC – THE SUPER-RICH ..... and us!

Postby Paphitis » Thu Apr 14, 2016 5:59 pm

erolz66 wrote:
Paphitis wrote:No no Erolz. I'm sorry but I didn't come down in yesterday's shower.


I do not think you had (come dopwn in yesterdays shower). I am in fact trying to find some 'common ground' here - something we can agree on.

Paphitis wrote:The BoE also refers to money creation but then it goes on and explains how this is done. It makes it abundantly clear they are talking about IOUs or Broad Money, not physical money. When the Bank makes a loan, they issue an IOU or credit. that is what this statement is referring to.


What do you mean by 'physical money' ? Actual notes and coins ?

Why do you insist that 'Broad Money' (in the form of an entry in a banks computer system that says I have £2307 credit) is not 'money' but is only in fact an 'IOU' ? Can I convert this 'ledger entry', this 'IOU', this 'not money' (according to you), into notes and coins at will by visiting my Bank ? Yes I can. Can I buy anything I want with it ? Yes I can ? Can I pay my taxes with it, without first having to change it into 'physical money' ? Yes I can. If I were to transfer £500 of it to your account would you really say I had not given you money but in fact have just given you an IOU from my bank ? The non physical ledger entry for my account with my Bank can and does do everything that 'physical money' can do, yet you insist it is NOT money ? That is what I am struggling with.

Is money in the form of physical notes and coins different from 'money' in the form of 'ledger entries in bank accounts' ? Yes it is but that does not mean that such ledger entries are NOT money. It just means (to me at least) that they are a different FORM of money. A less 'physical one (than notes and coins) but money none the less in the sense that I can do anything with them that I can do with notes and coins and I can change them into notes and coins (and back from such) at will.

Can private banks create money in the form of notes and coins ? No they can not, only the central bank can do that. Can they create money in the form of Central bank reserves ? No they can not, only the central Bank can do that. Can they create something (a ledger entry in my account) that I can then use to pay for things, to change into notes and coins and back again at will if I want and that allows me to do exactly the same as I can with notes and coins ? Yes they can and what I am struggling with is why you insist that such 'ledger entries' are NOT money. It (the ledger entry) can be used by me to do anything and everything that I can do with 'physical money' and can be changed into 'physical money' and back again without cost or let or hindrance to me - yet you claim it is NOT money ?

Can you see what I am saying / trying to say ?

I would like to also try this extract from the same document

And for this reason,banks are after all decisively different from other intermediaries


I think it clearly states that banks and only banks, are not just 'intermediaries' no different from no bank intermediaries - that actually they are decisively different for non bank intermediaries. What do you think ?


Because that is what it is. An IOU!

Once you deposit into the Bank, the Bank issues you with an IOU. The bank has your $2307 dollars and can do anything it wants with it. It can even lend it out.

In fact, the bank is only obligated to keep a very small proportion of your $2307 as a cash reserve. Some say only 3%. But it can vary. In the USA it is actually 10%

The rest doesn't exist even though you may have handed it in over the counter. It's disappeared into the Banking abyss doing its bit to make the world spin around its axis.

Basically, you have lent the Bank $2307. They have your money. You now only have a promissory note saying that the Bank owes you $2307 + interest calculated daily. So it's an IOU.

Can it get any simpler?
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Re: BBC – THE SUPER-RICH ..... and us!

Postby erolz66 » Thu Apr 14, 2016 6:14 pm

Paphitis wrote:Because that is what it is. An IOU!

Once you deposit into the Bank, the Bank issues you with an IOU. The bank has your $2307 dollars and can do anything it wants with it. It can even lend it out.

In fact, the bank is only obligated to keep a very small proportion of your $2307 as a cash reserve. Some say only 3%. But it can vary. In the USA it is actually 10%

The rest doesn't exist even though you may have handed it in over the counter.

Basically, you have lent the Bank $2307. They have your money. You now only have a promissory note saying that the Bank owes you $2307. So it's an IOU.

Can it get any simpler?


And when I transfer £500 of this 'not money' to you to pay for something from you or because I think you are a cool guy and would like it, is it still 'not money' in your account ? Do you really say to anyone I have £2078 of IOUS from the bank in my current account or do you just say I have 2078 pounds in my current account ? Do you really think that the only money you have is what you physically hold in notes and coins ? If you were claiming a state means tested benefit do you really think the state would accept an argument that you only had £32 because this was all you had in cash and that the £238,000 'IOU' from the bank to you in your current account was not money and thus should not be included in the 'means testing ? Seriously ?

For me if something barks like a dog, looks like a dog, smells like a dog, can and does do all the things a dog can do and none of the things a dog can not do, then it is probably a dog and fair to call it a dog.
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Re: BBC – THE SUPER-RICH ..... and us!

Postby Robin Hood » Thu Apr 14, 2016 6:16 pm

Indulge me? :roll: :wink:

There are three theories on banking, going back hundreds of years. Until 2014 they had never actually been tested out. Prof. Dr. Richard Werner did the test, has laid down all the parameters, the method and the achieved results and the Bank of England, The FED, Bundessbank and a whole string of eminent economists and bankers agree with him ..... private commercial banks do create money out of nothing!
1. The ‘Intermediary Theory’ where it considers that banks act as intermediaries between the depositor and the borrower.

2. The ’Multiplier Theory’ were the process of ‘Fractional Reserve methodology’ is used to multiply the original deposit through a series of loan transfers.

3. The ‘Creation Theory’ where banks are considered to have created the currency by extending credit, thus creating 'New Currency (Money) ’ in another account every time they do so.

The first two have both been proved not to be accurate as a description of the means by which banks create currency.

The third has been proved to be the only theory that fits empirical evidence, that banks do create currency out of thin air every time they give credit. In other words the results of a live experiment supported the theory.....completely!

Henry Ford said “It is well enough that people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning.”

He was right ....... but so simple it is difficult to believe the masses have yet to work it out, even the relatively intelligent find it difficult to believe.

So how do commercial banks create money out of nothing? (Suitable explanation for age groups 12yrs and above.) :roll:

Mr. A decides he wants to borrow €50k to buy a new car. He has a bank account, has seen the Manager of his branch and discussed the terms; has satisfied the Manager that he meets the necessary bank conditions as to his ability to repay the ‘loan’ ......... and, having met all the conditions, the ‘loan’ has been approved. After or maybe even during the meeting ............

Step 1 – The manager opens a credit account. It contains three pieces of numerical data:

• An account number – for identity.

• A credit limit, which will be more than the agreed and approved amount to allow for the automatic addition of compound interest, which will initially increase the debt beyond the agreed sum.

• An account balance – which at this point in time will be €0, as nothing has been entered into the account.

The first two numbers remain constant, the third will initially increase but should decrease over time.

Step 2 – The manager gives Mr. A a bank transfer document known as a Bankers Draught. This is made out to Mr.B, who Mr.A wishes to purchase the car from. This banker’s draught is drawn on the new credit account in Mr A’s name. It is a form of currency (a medium of transfer) that will be readily accepted by another bank.

Step 3 – Mr. A gives Mr. B the bankers draught and B hands over the keys to the car. B trusts A and accepts his banker draught as payment.

Step 4 – Mr.B pays the bankers draught into his account. Because it is drawn on a recognised and accredited bank, it is an immediate credit to his current account. It is accepted a being as good as..... cash! Had it been a cheque from Erol’s Granny, it would have needed to be cleared through the banks clearing system which takes 4-5 days usually. :wink:

NOTE WELL PAPHITIS .......

At this moment in time a new deposit has appeared in Mr.B’s account, it is NEW MONEY!

This becomes a liability to Mr.B’s bank because the bank now has acquired Mr.B’s new deposit of €50k to use as their money. It appears as a liability in the accounts because Mr.B holds the banks IOU.

The bankers draught, which Mr.B’s bank accepted as being the equivalent of currency/cash, was drawn on Mr.A’s empty credit account. When the draught returns to Mr.A’s bank for clearing, it goes straight to his new account where it becomes a DEBT liability of €50K. to Mr.A. The bank has Mr.A’s IOU in the form of a ‘loan’ Contract and the €0 in the balance column becomes €50k DR ...... i.e. a negative value, a debt!

From that day, and on a daily basis, compound interest is attached to the account and the debt increases daily.

This debt is now entered on Mr.A’s banks accounts as an asset as they hold Mr.A’s IOU. It can ONLY be an asset to the bank if the bank has no liability, i.e. there is no liability for them to repay that amount to another entity. As the bank created it out of thin air when they created the debt for Mr.A. ......... there is NO liability. So it IS an asset!

Not once in this sequence of events has currency changed hands ...... because there is none involved! There are only two IOU’s, one for Mr.B’s bank and one for Mr.A ..... not his bank! Therefore the bank has loaned Mr.A nothing, all they did was to facilitate credit, which in turn became a direct debt for which Mr.A has a liability to repay.

The NEW MONEY was created in it’s entirety out of thin air.


Step 5 – Mr.A now makes his agreed payments, on time and in full. At the end of the contracted ‘loan’ duration, the balance in Mr.A’s credit account drops to €0. The debt is repaid in full including interest and Mr.A’s IOU to the bank is redeemed.

We know that the interest has gone into the banks Profit and Loss account but ...... where did the capital repayments go? :o

Mr.A took money out of circulation, to repay his debt through his current account. Over time he recovered the NEW MONEY his debt created and the bank adds this to his account thus writing down his debt every time he makes a payment. This also has the effect of reducing the bank’s assets.

Remember ......... this debt was an asset ONLY because the bank had no liability to make a repayment to any other entity. The capital repayments have in effect and in reality, destroyed the NEW MONEY his original debt created. As the BoE says “... repayment of debt destroys new money”.

Paphitis:
In short: Your opinion that banks do not in any way, shape or form create money out of thin air ............ is in itself a load of hot air. Slam dunk case .......... proved beyond all doubt ............ private commercial banks do create money out of thin air! :shock:
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Re: BBC – THE SUPER-RICH ..... and us!

Postby Paphitis » Thu Apr 14, 2016 6:19 pm

erolz66 wrote:
Paphitis wrote:Because that is what it is. An IOU!

Once you deposit into the Bank, the Bank issues you with an IOU. The bank has your $2307 dollars and can do anything it wants with it. It can even lend it out.

In fact, the bank is only obligated to keep a very small proportion of your $2307 as a cash reserve. Some say only 3%. But it can vary. In the USA it is actually 10%

The rest doesn't exist even though you may have handed it in over the counter.

Basically, you have lent the Bank $2307. They have your money. You now only have a promissory note saying that the Bank owes you $2307. So it's an IOU.

Can it get any simpler?


And when I transfer £500 of this 'not money' to you to pay for something from you or because I think you are a cool guy and would like it, is it still 'not money' in your account ? Do you really say to anyone I have £2078 of IOUS from the bank in my current account or do you just say I have 2078 pounds in my current account ? Do you really think that the only money you have is what you physically hold in notes and coins ? If you were claiming a state means tested benefit do you really think the state would accept an argument that you only had £32 because this was all you had in cash and that the £238,000 'IOU' from the bank to you in your current account was not money and thus should not be included in the 'means testing ? Seriously ?

For me if something barks like a dog, looks like a dog, smells like a dog, can and does do all the things a dog can do and none of the things a dog can not do, then it is probably a dog and fair to call it a dog.


That's right. And I am a cool guy and so you should do this at once!

But when you have transferred $500 into my account because I am a cool guy, the Banks IOU to you reduces by $500 and the Banks IOU to me increases by $500.

I like it and it works for me.

I even told you how you can pay a liability with a liability. Remember the cheque you had for $100 which you transferred over to the grocer because you owed him $100?

None of this has anything to do with money creation though because it is in fact a money ledger. One ledger goes down because the other ledger goes up by the same amount. Or a liability is transferred from one to the other.
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Re: BBC – THE SUPER-RICH ..... and us!

Postby Paphitis » Thu Apr 14, 2016 6:22 pm

Robin Hood wrote:Indulge me? :roll: :wink:

There are three theories on banking, going back hundreds of years. Until 2014 they had never actually been tested out. Prof. Dr. Richard Werner did the test, has laid down all the parameters, the method and the achieved results and the Bank of England, The FED, Bundessbank and a whole string of eminent economists and bankers agree with him ..... private commercial banks do create money out of nothing!
1. The ‘Intermediary Theory’ where it considers that banks act as intermediaries between the depositor and the borrower.

2. The ’Multiplier Theory’ were the process of ‘Fractional Reserve methodology’ is used to multiply the original deposit through a series of loan transfers.

3. The ‘Creation Theory’ where banks are considered to have created the currency by extending credit, thus creating 'New Currency (Money) ’ in another account every time they do so.

The first two have both been proved not to be accurate as a description of the means by which banks create currency.

The third has been proved to be the only theory that fits empirical evidence, that banks do create currency out of thin air every time they give credit. In other words the results of a live experiment supported the theory.....completely!

Henry Ford said “It is well enough that people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning.”

He was right ....... but so simple it is difficult to believe the masses have yet to work it out, even the relatively intelligent find it difficult to believe.

So how do commercial banks create money out of nothing? (Suitable explanation for age groups 12yrs and above.) :roll:

Mr. A decides he wants to borrow €50k to buy a new car. He has a bank account, has seen the Manager of his branch and discussed the terms; has satisfied the Manager that he meets the necessary bank conditions as to his ability to repay the ‘loan’ ......... and, having met all the conditions, the ‘loan’ has been approved. After or maybe even during the meeting ............

Step 1 – The manager opens a credit account. It contains three pieces of numerical data:

• An account number – for identity.

• A credit limit, which will be more than the agreed and approved amount to allow for the automatic addition of compound interest, which will initially increase the debt beyond the agreed sum.

• An account balance – which at this point in time will be €0, as nothing has been entered into the account.

The first two numbers remain constant, the third will initially increase but should decrease over time.

Step 2 – The manager gives Mr. A a bank transfer document known as a Bankers Draught. This is made out to Mr.B, who Mr.A wishes to purchase the car from. This banker’s draught is drawn on the new credit account in Mr A’s name. It is a form of currency (a medium of transfer) that will be readily accepted by another bank.

Step 3 – Mr. A gives Mr. B the bankers draught and B hands over the keys to the car. B trusts A and accepts his banker draught as payment.

Step 4 – Mr.B pays the bankers draught into his account. Because it is drawn on a recognised and accredited bank, it is an immediate credit to his current account. It is accepted a being as good as..... cash! Had it been a cheque from Erol’s Granny, it would have needed to be cleared through the banks clearing system which takes 4-5 days usually. :wink:

NOTE WELL PAPHITIS .......

At this moment in time a new deposit has appeared in Mr.B’s account, it is NEW MONEY!

This becomes a liability to Mr.B’s bank because the bank now has acquired Mr.B’s new deposit of €50k to use as their money. It appears as a liability in the accounts because Mr.B holds the banks IOU.

The bankers draught, which Mr.B’s bank accepted as being the equivalent of currency/cash, was drawn on Mr.A’s empty credit account. When the draught returns to Mr.A’s bank for clearing, it goes straight to his new account where it becomes a DEBT liability of €50K. to Mr.A. The bank has Mr.A’s IOU in the form of a ‘loan’ Contract and the €0 in the balance column becomes €50k DR ...... i.e. a negative value, a debt!

From that day, and on a daily basis, compound interest is attached to the account and the debt increases daily.

This debt is now entered on Mr.A’s banks accounts as an asset as they hold Mr.A’s IOU. It can ONLY be an asset to the bank if the bank has no liability, i.e. there is no liability for them to repay that amount to another entity. As the bank created it out of thin air when they created the debt for Mr.A. ......... there is NO liability. So it IS an asset!

Not once in this sequence of events has currency changed hands ...... because there is none involved! There are only two IOU’s, one for Mr.B’s bank and one for Mr.A ..... not his bank! Therefore the bank has loaned Mr.A nothing, all they did was to facilitate credit, which in turn became a direct debt for which Mr.A has a liability to repay.

The NEW MONEY was created in it’s entirety out of thin air.


Step 5 – Mr.A now makes his agreed payments, on time and in full. At the end of the contracted ‘loan’ duration, the balance in Mr.A’s credit account drops to €0. The debt is repaid in full including interest and Mr.A’s IOU to the bank is redeemed.

We know that the interest has gone into the banks Profit and Loss account but ...... where did the capital repayments go? :o

Mr.A took money out of circulation, to repay his debt through his current account. Over time he recovered the NEW MONEY his debt created and the bank adds this to his account thus writing down his debt every time he makes a payment. This also has the effect of reducing the bank’s assets.

Remember ......... this debt was an asset ONLY because the bank had no liability to make a repayment to any other entity. The capital repayments have in effect and in reality, destroyed the NEW MONEY his original debt created. As the BoE says “... repayment of debt destroys new money”.

Paphitis:
In short: Your opinion that banks do not in any way, shape or form create money out of thin air ............ is in itself a load of hot air. Slam dunk case .......... proved beyond all doubt ............ private commercial banks do create money out of thin air! :shock:


Believe what you want Robin Hood. No skin off my back. However, doesn't change the fact you're quite deluded over this subject.

You just continue with your false narrative, and I will continue living in the real world.
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Re: BBC – THE SUPER-RICH ..... and us!

Postby erolz66 » Thu Apr 14, 2016 6:30 pm

Paphitis wrote:None of this has anything to do with money creation though because it is in fact a money ledger. One ledger goes down because the other ledger goes up by the same amount. Or a liability is transferred from one to the other.


If I deposit £500 cash into my account and then transfer it to your account, I have not transferred money to you but have just in fact changed an IOU from my bank to me (created when I deposited the cash)to an IOU from your bank to you ? This is what you are saying right ? That If gave you the cash directly I would have given you money, but if I first deposit it into a bank account and then transfer it to you I have not given you money, I have given you and IOU from your bank to you ? Is that right as you see it ?

When customers come to pay you for something do you ask them 'How would you like to pay sir? With money or with a change of an IOU for the relevant amount from your bank to you , to my bank to me ?' :)
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Re: BBC – THE SUPER-RICH ..... and us!

Postby Robin Hood » Thu Apr 14, 2016 7:05 pm

Paphitis:
Believe what you want Robin Hood. No skin off my back. However, doesn't change the fact you're quite deluded over this subject.

You just continue with your false narrative, and I will continue living in the real world.


I live very much in the real world. I have given you a step-by-step explanation, which is fully supported by the BoE bulletin. Now is you opportunity to explain in the same detailed step-by-step manner the way YOU think money/currency is created. Prove .... that you actually know what you are talking about instead of expecting every body to accept what you say as the definitive explanation, mostly without any back-up from a valid source.

Will you take the challenge ?.....No, of course not! Just like the apples! You spout a lot of irrelevant rubbish but faced with having to explain your views .... you can't because you don't have clue what you are talking about. Conquer the basics first THEN go on to the more complex stuff!
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Re: BBC – THE SUPER-RICH ..... and us!

Postby Robin Hood » Thu Apr 14, 2016 7:37 pm

Worth reading ….. explains the problem with Paphitis’ explanation! Note the qualifications of those quoted! Should meet his high standards of recognisable expertise and credibility. :roll:

• When some economists finish their degrees and subsequently go on to specialise in the monetary system and finally learn the full details of the process, they occasionally have some choice words to say about the undergraduate textbook model: “The way monetary economics and banking is taught in many, maybe most, universities is very misleading”. Professor David Miles, Monetary Policy Committee, Bank of England.

• “The old pedagogical analytical approach that centred around the money multiplier was misleading, atheoretical and has recently been shown to be without predictive value. It should be discarded immediately.” Professor Charles Goodhart CBE, FBA, ex Monetary Policy Committee, Bank of England.

• “The textbook treatment of money in the transmission mechanism can be rejected”. Michael Kumhof, Deputy Division Chief, Modelling Unit, Research Department, International Monetary Fund.

• “Textbooks assume that money is exogenous.” … “In the United Kingdom, money is endogenous” Mervyn King, Governor of the Bank of England.

Notice the extremely high calibre of the economists being quoted. These are all economists that specialise in the workings of our monetary system.

Is this issue controversial? Well yes and no (but mainly no)… let me explain. The issue is only controversial in as much as non-experts (that have just learned the textbook story) may say things that contradict the experts that have a detailed knowledge of the system in reality. But amongst the experts, it is not controversial at all.

http://positivemoney.org/2013/06/banks-dont-lend-money-guest-post-by-michael-reiss/


Can it be explained any simpler or by more esteemed academics? I don't find it controversial but then I have had an interest in the subject for over a decade! Am I an expert? No, I would never claim that but I am well informed and agree with the experts, controversial or not, they know what they are talking about. :roll:
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Re: BBC – THE SUPER-RICH ..... and us!

Postby Paphitis » Fri Apr 15, 2016 9:56 am

erolz66 wrote:
Paphitis wrote:None of this has anything to do with money creation though because it is in fact a money ledger. One ledger goes down because the other ledger goes up by the same amount. Or a liability is transferred from one to the other.


If I deposit £500 cash into my account and then transfer it to your account, I have not transferred money to you but have just in fact changed an IOU from my bank to me (created when I deposited the cash)to an IOU from your bank to you ? This is what you are saying right ? That If gave you the cash directly I would have given you money, but if I first deposit it into a bank account and then transfer it to you I have not given you money, I have given you and IOU from your bank to you ? Is that right as you see it ?

When customers come to pay you for something do you ask them 'How would you like to pay sir? With money or with a change of an IOU for the relevant amount from your bank to you , to my bank to me ?' :)


No you have not transferred money. Not in the strictest of sense as far as the Banks are concerned. You have transferred a liability. You got to be careful with the concepts here because the actual sums of all IOUs in the Bank do not exist. We all know this.

You have just transferred the Banks liabilities to the tune of $500! Nevertheless, it works almost the same as you giving me $500 in cash. But not quite. Cash in the hand is always better, it's just very inconvenient and unsafe carrying big sums.

You see, the Banks never claim these deposits to be actual money. It is a credit hence the references to credit and IOU. The Banks are also very upfront about the Banking industry at large. There is no mystery or conspiracy. It's just most people don't know because they find the subject boring. What the Banks are effectively doing is multiplying their money supply by a factor of 30. It's profitable for them because they make interest from lending money that does not exist and it works for as long as they meet money supply demand.

What does it mean to its customers? Wealth, consumerism, investment, business activity, buying things with money you too don't have.
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Re: BBC – THE SUPER-RICH ..... and us!

Postby Robin Hood » Fri Apr 15, 2016 1:09 pm

Paphitis wrote:
erolz66 wrote:
Paphitis wrote:None of this has anything to do with money creation though because it is in fact a money ledger. One ledger goes down because the other ledger goes up by the same amount. Or a liability is transferred from one to the other.


If I deposit £500 cash into my account and then transfer it to your account, I have not transferred money to you but have just in fact changed an IOU from my bank to me (created when I deposited the cash)to an IOU from your bank to you ? This is what you are saying right ? That If gave you the cash directly I would have given you money, but if I first deposit it into a bank account and then transfer it to you I have not given you money, I have given you and IOU from your bank to you ? Is that right as you see it ?

When customers come to pay you for something do you ask them 'How would you like to pay sir? With money or with a change of an IOU for the relevant amount from your bank to you , to my bank to me ?' :)


No you have not transferred money. Not in the strictest of sense as far as the Banks are concerned. You have transferred a liability. You got to be careful with the concepts here because the actual sums of all IOUs in the Bank do not exist. We all know this.

You have just transferred the Banks liabilities to the tune of $500! Nevertheless, it works almost the same as you giving me $500 in cash. But not quite. Cash in the hand is always better, it's just very inconvenient and unsafe carrying big sums.

You see, the Banks never claim these deposits to be actual money. It is a credit hence the references to credit and IOU. The Banks are also very upfront about the Banking industry at large. There is no mystery or conspiracy. It's just most people don't know because they find the subject boring. What the Banks are effectively doing is multiplying their money supply by a factor of 30. It's profitable for them because they make interest from lending money that does not exist and it works for as long as they meet money supply demand.

What does it mean to its customers? Wealth, consumerism, investment, business activity, buying things with money you too don't have.


Sorry but you don't have clue about how this works! Erolz knows a lot more about the subject than you do! Because you do not understand the very basics, you confuse yourself and every one else.

Banks do NOT create IOU's!!!!! The 'loan' sequence is ...... Loan agreement ....... line of credit ........ transfer (of agreed credit)........ new money is created in another account ...... return transfer document for clearance ...... bank clears it as a debt to borrowers account ........ the agreement has been initiated and thus an IOU exists between the borrower (Liability) and the bank as the lender (Asset). The IOU is the very last part of the sequence and can only arise once there is a debt!.

Banks accept a liability when they transfer the depositors currency to their 'custody' ..... (they borrow it) and have created a liability to repay the 'loan'..... thus the depositor has the banks IOU by contract ..... that thing you sign when you open an account ..... did YOU ever read the small print? .... I didn't and I don't think many people do.

When banks create credit, there is no liability on the part of the bank. Banks do not 'create' IOU's ..... they extend credit! The IOU exists because there is a debt.

The Bank of England explains this more than adequately for most people to understand in principal, maybe not to easily understood in detail. That is how it works .... believe me...... The Bank of England, Monetary Policy Committee says so!

When Erol transfers, he transfer currency! Banks do not create IOU's, thy arise from debt. In Erols example he transfer currency to you from his account which the banks owes him. When it is redeemed as currency, that amount as currency transferred by the bank to Erol's account cancels that same amount of the Banks IOU to Erol. Erol transfers to you currency, whether it is done as a cheque/electronically/cash ....... he does not transfer an IOU. The Banks IOU is cancelled when the bank returns the currency to his account. Exactly in the same way as an IOU in favour of the bank is cancelled when the debt is repaid ..... and negates/cancels the IOU.

The Banks claim customers deposits as electronic currency, it has a defined value ..... a number! So in your World it doesn't exist but it does exist but only as a piece of data in an accounting system. But it can be immediately converted as cash at the desk/ATM or as an electronic currency transmission. The banks hide their operations behind complexity, obfuscation and by referring to the same thing in different ways, this makes it difficult (and boring) for most people to understand but understandable by most as a principle that, when you work it out, is fundamentally very simple.

Banks are definitely NOT multiplying money .... the BoE refutes that very clearly .....and fractional reserve, that you still keep referring to, has been proved to be a wrong conception ........ the BoE also explains that fact as well.

You got to be careful with the concepts........
Are you serious????
Robin Hood
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