Pyrpolyzer:
I side with Paphits that money taken as a loan is fully backed up by the collateral itself, in fact that was the meaning behind my term "sleeping money". Therefore Paphitis was not alone in this and even you RH confirmed your agreement by saying:
RH wrote: How about........ the USA itself!!!! The collateral for all these dollar IOU’s is the lands, resources and infrastructure of the US and the wealth of the American people.
As I previously said to Paphitis the collateral is nothing more than insurance. The collateral only becomes significant when things go wrong! The ‘
sleeping value’ does not appear on any books; it does not appear in circulation as New Money; it does not reduce the New money in circulation but, the creation of
new money by granting credit does appear on the books.
The money created is not ‘
existing money’ that has been transferred or converted it is
NEW Money as in:
NEW = Adjective, as in produced, introduced, or discovered recently or now for the first time; not existing before. It came into existence because of a loan, it is the provision of the loan that requires collateral ...... so until that point it did not exist ..... so therefore it has to be something
NEW that came from ?????? ...... nowhere.
What created it was granting the loan, it cannot be any other way because until the loan it did not exist, without the loan it would not exist and the collateral requirement is for the loan ..... not the creation of
NEW money ..... that was the result of the loan.
Btw before continuing let me say the post from which I took the above extract was a really great post, well done
Thank you. To me that is why I think we all need to recognise how the monetary system works is all pervasive. and truly is the root of all evil!
However I also agree with you RH that those money that the Bank gives to the borrower is drawn out of thin air. To start with It’s not even their own money. A part of it (~10%) is money that belongs to their depositors, and itself has it’s own saved value from the depositors’ labor. The other 90% is thin air.
Again not strictly true. The 10% is the banks reserve with the CB, that reserve cannot be loaned out. As the BoE says every time a loan is made it creates the same amount of new money in another account. Banks by law cannot lend heir reserves, except within the CB system, but never to ordinary borrowers. So a loan is 100% new money.
It’s like it prints it’s own money. From this side of the equation everything is fraud. The bank may go bankrupt and eat away the savings of her clients without anyone noticing early enough to stop it.
The bank does, metaphorically speaking, create its own money, but only as a loan. It only really appears as new money when it is paid into another account, where it becomes a deposit, is then borrowed by the receiving bank ..... and thus becomes a liability for that bank. The banks cannot create this new money for themselves, that
WOULD be fraud.
The correct procedure would be that the state itself should print new money to reflect the "waken up value" of the asset. However this will be true for a limited time -up until the loan gets paid off in which the newly created money should be withdrawn. In reality and because of the volume of loans the Central Bank would only have to issue some limited number of extra currency to do that.
I agree with you that it should be the Central Bank that is the origin of ALL money. With private debt/loan only the origin of the money the bank loans changes.... nothing would visibly change to the borrower. The Central Bank would not need the ‘
wake-up value’ in the case of funding government, the CB would create the ‘
sleeping value’ by investing funds to provide an asset that had value .... a hospital, a school etc. or anything that provided real jobs. This is why Corbyn refers to it as an 'Investment' ..... the State is providing its own asset. You would not need to withdraw the funding, as there is no loan involved. As you say there has to be some sort of limit to the total supply of money or you would just have an ever expanding, ‘
out –of-control’ money supply. To me that control is best provided by the CB and the government, not the private banks.
The Banks should therefore get their money for loans directly from the Central Bank, probably at zero interest, and the client’s securities assigned directly to the Central Bank.
In theory I agree but it would be far more convenient to just make sure the banks had the ‘
insurance’ by laying down the appropriate legislation, than it would be to get the CB involved in the trivia.
I am almost certain it will not solve the problem of the boom-bubble circles, it will most certainly solve other problems though.
It would solve, to a large degree, the boom-and-bust associated with private loans because the CB would now control the purse strings. With government ....... austerity becomes a thing of the past, the government would no longer need to take from the poor to give to the rich, because there would be no government debt. The taxes we now use to repay loans provided by commercial banks would be recycled into the treasury to be re-spent into the economy.
NB. To make myself clear: money waken up from an asset's sleeping value is not thin air it's real/true and honest money. However the money the Banks give to the borrower is not real, it's just thin air drawn out from fraudulent procedures.
Yes they are fraudulent and illegal but banks seem to be exempt from the laws that govern the rest of society. How many of these bankers that have committed these frauds have never or will ever be brought before the courts? (
Unless there is a revolution 
!!!!) The same argument applies to the untouchable politicians like Blair, Bush, Hollande, Sarcozy, Netanyahu, Poroshenko etc. they all commit war crimes that are well proven but, if you have friends in high places or are from some powerful State...... you will never see the inside of the ICC in the Haig, to pay for your crimes.
. The IOU from B to A is not 'money' in the sense that it can not be widely used to pay for services to other. The IOU from the bank if used can be used to pay for services to others and thus can be considered money.
