Cyprus-Forum.com

[erolz66]

Greece's debt is not quite so cut and dried as we are made to believe ...... and the same goes for the other EZ countries in debt.

Actually I do understand as well as most and possibly more than most how the modern worlds fractional reserve banking system operates and your description is generally right - except this idea that note and coin are 'real money'. Money IS debt or most of it at least. When I hold a £10 note in my hand what I am actually holding is a note where maybe £1 of it represents some real tangible asset somewhere (building, mineral or some other physical 'thing') and what the other £9 represents is someone else's promise to pay back a bank somewhere - IE debt. I do understand this reasonably well I think.

To be fair to me the original point I was making was much simpler and I was trying to explain much simpler concepts of the basics of how loans work in terms of capital sum and repayments made up in part of interest and in part of paying down part of the capital sum.

YV problem was that he was trying to talk economics (as a 'science') when actually the discussion was much more about politics imo.

[Lordo]

what greek peebol have or not do not have does come into this consideration. griik government borrowed money from the private banks and could not pay it back. they borrowed more money to pay them back. now they want to borrow even more to pay the last ones back. if they could not afford to pay the first lot or the second lot what makes anybody think that they can pay the third lot back. it aint rocket science that this aint working.
what they should do is go to wonga and consolidate all their loans into one loan. that will solve it.

they have no hidden charges, and you can decide how long you pay it back and they will not penilse you if you pay back early not that there is much chance of that happening.

But they do penilise me I'm sorry for hijacking this forum for my own interests, every time I open my mouth they ask me what I know

have you contacted wonga.

[Lordo]

what greek peebol have or not do not have does come into this consideration. griik government borrowed money from the private banks and could not pay it back. they borrowed more money to pay them back. now they want to borrow even more to pay the last ones back. if they could not afford to pay the first lot or the second lot what makes anybody think that they can pay the third lot back. it aint rocket science that this aint working.
what they should do is go to wonga and consolidate all their loans into one loan. that will solve it.

they have no hidden charges, and you can decide how long you pay it back and they will not penilse you if you pay back early not that there is much chance of that happening.

But they do penilise me I'm sorry for hijacking this forum for my own interests, every time I open my mouth they ask me what I know

have you contacted wonga.

[Robin Hood]

Erolz66:

......... except this idea that note and coin are 'real money'.

Thank you for a polite and reasoned reply .... believe me it makes a change.

I say ‘real money’ as the banks description is base money or vault/draw money which I don’t think describes it very well.

I agree with you that most money is debt but note and coin are different. Notes are perpetual (sort of .... except they get replaced when they wear out!) and continually circulate but the money, 98% of it that is created by the banks is also destroyed by them as the debt is repaid. Your account at the bank is all money you can take as note and coin, it was all paid to your account as part of the wealth creation process ...... but you can’t do that en-mass as 98% was never produced as note and coin, it was originally created by the bank as debt simply as an account entry. They don’t have this ‘real money’and thus a bank run ensues.

To be fair to me the original point I was making was much simpler and I was trying to explain much simpler concepts of the basics of how loans work in terms of capital sum and repayments made up in part of interest and in part of paying down part of the capital sum.

Absolutely ........ I just noted that in reality all this €350bn the Greeks owe to various banking institutions never actually existed and would cease to exist if Greece paid it off tomorrow. Nobody would be any richer in that case, no more than they will lose money if it is not repaid. Melvin King (Gov, BoE) once said that of all the ways we could operate the banking system .... we have the worst possible system.

If Greece reverted to a sovereign currency or a parallel currency, the money they create is perpetual, debt free and interest free ..... to me that just has to be the better choice.

I have to agree with Lordo ..... the Greeks are borrowing money to pay back previous debts ..... which they borrowed to pay another previous debt .... and so on. Any person with a grain of intelligence would understand that if you borrow to pay off debt you incur which you cannot pay, you just create more debt. So why do the banks still lend them money and then bitch when Greece says it can’t pay as the debt is continually rising above their ability to repay. It’s not the capital that is the problem .... it is the interest!

As I see it and you can see this happening in Greece and Cyprus, the banks need to force people into unrepayable debt so that they can convert their worthless money into wealth ...... i.e. taking the collateral (Wealth) offered as security for the ‘loaned’ amount. This has to be the classic example of ‘something for nothing’?

[Robin Hood]

This lady puts it far better than I can ............. how to solve the Greek problem!

http://www.globalresearch.ca/grexit-or-jubilee-how-greek-debt-can-be-annulled/5462569

[erolz66]

Absolutely ........ I just noted that in reality all this €350bn the Greeks owe to various banking institutions never actually existed and would cease to exist if Greece paid it off tomorrow. Nobody would be any richer in that case, no more than they will lose money if it is not repaid.

You do not know how much I wish I could tell this to the banks that I owe money too

Also I am not sure it is entirely correct. Yes it is correct (as I understand it) that the money (or ledger entry if you prefer) that is created 'out of thin air' disappear again as the loan is repaid and as I understand the system therefore requires a constant issuing on new loans / debt to replace that which is paid off. You say no one is any richer when a debt is paid, but is the lender not richer by the interest accrued up until the point the loan is paid off ? You also say that if it is not paid off, no one looses any money. I am struggling with this one too. Given that of the £10 note in my pocket £9 of it represents 'someone else's promise to pay back £9 of lending to them' surely the non payment of such a 'promise' has to affect my £9 ?

[Robin Hood]

Erolz66:

You do not know how much I wish I could tell this to the banks that I owe money too!

Dealing with the banks is what first raised my interest in money creation and the banking system in 2002-3. First lesson I learned (the hard way) was NEVER borrow money, especially from a bank!

Also I am not sure it is entirely correct. Yes it is correct (as I understand it) that the money (or ledger entry if you prefer) that is created 'out of thin air' disappear again as the loan is repaid and as I understand the system therefore requires a constant issuing on new loans / debt to replace that which is paid off.

OK …. We agree on that.

You say no one is any richer when a debt is paid, but is the lender not richer by the interest accrued up until the point the loan is paid off ? You also say that if it is not paid off, no one loses any money.

Repaying the debt and the interest are two separate entities. The debt comes into the banks trading account ….. the interest is part of the banks Profit and loss account. Because they are separate, unlike the ‘loan’ amount the interest is not an asset to the bank. The interest is the only money the bank makes out of a loan.

The capital starts as zero, is created into the economy as a number and is written off when the borrower repays the loan. The 'loan' is regarded by the accountants at the bank as 'assets'. Payment or non repayment does not impact the bank’s capital situation ….. what it does do is turn an asset into a ‘toxic’ asset when the borrower defaults. The assets then decrease by that amount and the balance between ‘asset’ and ‘liabilities’ is compromised. The banks scream “LOSSES” but it is bull sh*t ……... how can you lose something that you never had and never existed until you created it?

I am struggling with this one too. Given that of the £10 note in my pocket £9 of it represents 'someone else's promise to pay back £9 of lending to them' surely the non payment of such a 'promise' has to affect my £9?

I see the ‘note’ as perpetual currency that was not borrowed and is spent into the economy. It represents only 2% of the money in circulation, it is tangible and it is worth its face value. The promise to ‘pay back’ is what you have in your account because the banks borrow your deposits and use them as their reserves. What you see is a promise to pay you something the banks do not have. As I said previously ; if banks had to repay all the depositors their money in note and coin ….. i.e. service their debt …….. they couldn’t, they don’t have it! The only money the banks have is our accounts …. which they see as a liability as they are required to repay it to the depositors .....well that’s the general idea!!!! Their assets are the money they created as debt, which means if their loans are written off, they have no assets , only the depositors liabilities.

Now, if you have a 1 Euro coin and a 9 Euro note, I too would be worried …….…in that case my advice would be to change banks!

[erolz66]

Robin Hood

Had a chance to at least skim read the link you pasted. From what I understand, there is a 'cost' to simply cancelling such debt, which is inflationary pressure. It does affect (as I understand the article) the £10 in my pocket (or bank account if you prefer) - it creates a potential for me to be able to get less 'stuff' (bread, petrol, wine, women, song, whatever) for my £10 relative to before the write off. I also understand that according to the author of the article you posted, such inflationary pressure is 'relatively painless' right now because as it pushes up (effectively) the cost of whatever I might want to buy with it, the cost of producing such 'things' is also getting cheaper. This is what I understand from the part below

Quantitative Easing [which is the equivalent of writing off greek debt with an accounting ledger entry] has only been possible because it has occurred at a time when Globalization is driving down the price of labor and industrial goods. The combination of fiat money and Globalization creates a unique moment in history where the governments of the developed economies can print money on an aggressive scale without causing inflation.

[Robin Hood]

Robin Hood

Had a chance to at least skim read the link you pasted. From what I understand, there is a 'cost' to simply cancelling such debt, which is inflationary pressure. It does affect (as I understand the article) the £10 in my pocket (or bank account if you prefer) - it creates a potential for me to be able to get less 'stuff' (bread, petrol, wine, women, song, whatever) for my £10 relative to before the write off. I also understand that according to the author of the article you posted, such inflationary pressure is 'relatively painless' right now because as it pushes up (effectively) the cost of whatever I might want to buy with it, the cost of producing such 'things' is also getting cheaper. This is what I understand from the part below

Quantitative Easing [which is the equivalent of writing off greek debt with an accounting ledger entry] has only been possible because it has occurred at a time when Globalization is driving down the price of labor and industrial goods. The combination of fiat money and Globalization creates a unique moment in history where the governments of the developed economies can print money on an aggressive scale without causing inflation.

I am not sure I fully understand her logic that writing off the debt is the same as quantitative easing? They are of course both ledger entries. Without inflation capitalism ceases to exist. Prof. David Harvey (LSE) said on a TV interview some years ago that capitalism needs a minimum of 3% inflation ..... and that is on everything, (people/natural resources/energy/waste disposal etc.) not just the economy ...... to survive. So I suppose inflation could be regarded as a cost as it devalues money but increases the value of wealth (?).