Cyprus-Forum.com

[Robin Hood]

RH said .......The BoE does not create ''money' that goes into circulation, only private banks do that and do so from your local Branch right through to Head Office. Every bank has a hypothetical money tree growing in the back yard!

Maximus said .......You brought your knowledge into question

On the contrary YOU have exposed your own ignorance on the subject. I suggest you read the BoE Article. What I explained IS correct.

Maximus

Can banks create as much money as they like? No, they can’t.

Of course they can’t and I did not suggest they could ..... you are trying to expand the envelope.

Maximus

Regulation limits how much money banks can create. For example, they have to hold a certain amount of financial resources, called capital, in case people default on their loans. These limits have become stricter since the financial crisis.

I suggest, once again you check up and find out what LIBOR is as that explains how each day the bank’s balance the books. They lend to each other within the deposits they hold in the BoE! Hence “London Interbank Offer Rate”.

Banks also risk going bust if they lend out money left, right and centre. For instance, people borrowing money will probably spend it. If they make payments to people who have accounts at other banks, their bank will need to transfer the money to that other bank by sending it some of its electronic central bank money. So if one bank lends out too much money, at some point it will not have enough electronic money in its account with us to pay the other banks.

That is why there are limitations. Look up LIBOR!

https://www.bankofengland.co.uk/explain ... ey-created

You need money to make money!

Wrong! Private bank’s create New Money by giving credit to one customer to pay into another customers bank account as a deposit of New Money. The source account then goes negative by that amount ..... the New Money deposited in one bank is created as debt in another. That is just what it says above!

[Robin Hood]

Here is an interesting question.

If a firm pays 10% increase to the workers, how much would this increase their product prices?

If the cost of salaries represented 25% of the product cost ..... I would guess 2.5%?

[Maximus]

OK, RH

So lets say you are the bank and I come and ask you to borrow $100 with 10% interest.

You "create" $100 out of thin air from your hypothetical money tree and credit my account.

Then I spend it on cloths and Marks & Spencer wants you to transfer $100 to their account.

Which you do from your reserves.

Now, I have to find that $100 again to pay of the debt to you (which you delete as I repay) as well as another $10 for your profit in the form of interest payment.

How much money was created?

[Robin Hood]

I find it strange how relatively intelligent people miss the obvious.

What I have suggested is simply to remove from private Banks the ability to create New Money, and give that authority to the Central Bank ..... The Bank of England. The Banks can still lend BUT to lend THEY have to borrow. and that they will do through the BoE. Much easier to control inflation and all the other problems if the control is from a single Authority?

The only ones that will miss out will be the banks as they will no longer be able to profit from interest on lending money they never had in the first place. Now their assets all become liabilities ..... and that is why this solution is never voiced.

Why should we protect the banks ...... do the Banks give a shit about the effect their lining their pockets by taking more interest, has on their customers?

[Maximus]

I find it strange how relatively intelligent people miss the obvious.

What I have suggested is simply to remove from private Banks the ability to create New Money, and give that authority to the Central Bank ..... The Bank of England. The Banks can still lend BUT to lend THEY have to borrow. and that they will do through the BoE. Much easier to control inflation and all the other problems if the control is from a single Authority?

The only ones that will miss out will be the banks as they will no longer be able to profit from interest on lending money they never had in the first place. Now their assets all become liabilities ..... and that is why this solution is never voiced.

Why should we protect the banks ...... do the Banks give a shit about the effect their lining their pockets by taking more interest, has on their customers?

But private banks are not really creating new money.

They are providing a service and make their profit from the margins on top of what the bank of England sets as interest rate.

I am not angling to protect the banks, even though they are a necessity.

[Robin Hood]

OK, RH

So lets say you are the bank and I come and ask you to borrow $100 with 10% interest.

You "create" $100 out of thin air from your hypothetical money tree and credit my account.

Then I spend it on cloths and Marks & Spencer wants you to transfer $100 to their account.

Which you do from your reserves.

Now, I have to find that $100 again to pay of the debt to you (which you delete as I repay) as well as another $10 for your profit in the form of interest payment.

How much money was created?

You don't get 'it' do you?

Firstly .... that would be an overdraft, I doubt it would be worth setting up a debit account for $100!

Your bank will create a credit account with a limit .....let's say $10,000. They do not put $10,000 into your account. They give you their consent to spend $10,000 you do not have ...... neither do they! If you or I were to do this it would be called FRAUD!

Say you buy a car and pay $10,000 to the seller? You give him a cheque or transfer $10,000 to his account. That is New Money that only came into being when it appeared as a credit in the sellers account.

Instead of bouncing your cheque because there is NOTHING in your credit account, the Bank shows your credit account as a negative of %10.000 as agreed. You now have a debt of $10,000 you owe to the Bank! Who does the Bank owe it to? Nobody! As you pay off the debt the Bank destroys the payments until your account returns to zero S

Do you see how easy it is for Banks to screw people by saying that are granting a loan, when what they are doing is creating a debt for you and New Money your transaction created in another bank.

Is it really THAT difficult to understand something so simple? It's all in the BoE Article.

[Maximus]

Why would that be an overdraft and not a loan?

I want to by cloths from Marks and Spensers for $100 with %10 interest.

The bank lends me $100.

how much new money was created by the bank?

[Robin Hood]

Why would that be an overdraft and not a loan?

I want to by cloths from Marks and Spensers for $100 with %10 interest.

The bank lends me $100.

how much new money was created by the bank?

Because it is such a small sum of money and they would laugh at you if you tried to create a credit account for £100.

In the more practical example I gave, £10k of New Money ...... as explained ....... was created in the other guys bank account when he cashed your cheque/payment. Your bank plunged you £10k into the red on your credit account and gave you £10k of debt, But the bank has zero liability to repay that £10k to any other entity because THEY created it from thin air ..... and it will return to thin air when you pay it off. The 10% interest YOU provide as it was probably added to your credit limit + arrangement fees and costs.

[Lordo]

I find it strange how relatively intelligent people miss the obvious.

What I have suggested is simply to remove from private Banks the ability to create New Money, and give that authority to the Central Bank ..... The Bank of England. The Banks can still lend BUT to lend THEY have to borrow. and that they will do through the BoE. Much easier to control inflation and all the other problems if the control is from a single Authority?

The only ones that will miss out will be the banks as they will no longer be able to profit from interest on lending money they never had in the first place. Now their assets all become liabilities ..... and that is why this solution is never voiced.

Why should we protect the banks ...... do the Banks give a shit about the effect their lining their pockets by taking more interest, has on their customers?

In fact if the banks did not lend more than 3 times the salaries of people, we would not have had the house prices go sky high. The government went along with it because the higher the price of a house the the more tax they collected from the sale of properties.

Nice ain it?

[Lordo]

Here is an interesting question.

If a firm pays 10% increase to the workers, how much would this increase their product prices?

If the cost of salaries represented 25% of the product cost ..... I would guess 2.5%?

So this idea that pay increase has a substantial effect on inflation is bullshit.