Cyprus-Forum.com

[Pyrpolizer]

Presumably very few people know that Banks do create new money by extending credit. (I leave aside the "out of thin air" part which has been discussed ad nauseum and I don't quite agree with .)
Good news is that not so few people know about it.
There was a university professor at RIK1 radio today at around 13 hours, who was actually saying exactly the same thing.

[Robin Hood]

Presumably very few people know that Banks do create new money by extending credit. (I leave aside the "out of thin air" part which has been discussed ad nauseum and I don't quite agree with .)
Good news is that not so few people know about it.
There was a university professor at RIK1 radio today at around 13 hours, who was actually saying exactly the same thing.

We are not alone!

[Robin Hood]

Pyrpolizer:

Presumably very few people know that Banks do create new money by extending credit. (I leave aside the "out of thin air" part which has been discussed ad nauseum and I don't quite agree with .)

I can understand your scepticism..... it took me a long time to work it out.

I did not understand a bit of Richard Werner’s paper, so I e-mailed him and queried it. He replied and attached two other paper’s .... they were a bit heavy! The example I gave as to how a bank created credit and thus debt (Page 31), is accurate, conforms to the 'Creation Theory' of banking operations and fits all the evidence in Werner’s paper as he went step-by-step through the computers data from start to finish.

In brief: he found that when the ‘debt’ was attached to the account as €200k DR, there was no other data that reduced by this amount, showing it to be the source and there were no external inputs either. Only the account balance changed from ‘0’ to’€200K’DR as a result of clearing the banks draught transfer paper. It was that clearing that created the debt.

I can find no evidence to there being ‘something’ that created the currency the bank was then recovering from the borrower. The fact that the bank regards this debt as an ‘asset’ says it has no liability attached to it, in other words the bank had no liability to repay anybody anything .... which makes sense, fits the evidence in the report and the evidence provided by the banks computer.

I am happy to stand corrected .......... if you have another view or some report that says otherwise.

[Pyrpolizer]

I am happy to stand corrected .......... if you have another view or some report that says otherwise.

I don't think I will find anything, considering I am so lazy that I never manage to end anything that is more than 30 pages long
I prefer to use my own logic and I explained what I think earlier in this topic by using the term dormant/sleeping money coming out from the value of the collateral. I later said someone has to create new money to reflect that value anyway. The question is should that someone be the Banks or the State/Central Bank? It's obvious to me that privilege should be removed from the Banks, because by their very nature, cannot use it to benefit the economy as a whole. Paphitis is adamant that Banks have proven to be beneficial, but he ignores the fact they also cause damage (by having this privilege) to create new money at times not needed, and not creating it at times it's needed. That's their nature as business anyway, we shouldn't blame them, the one's who've been stupid all along were the Governments themselves.



In accounting terms as you said the loan is indeed considered an asset by the Bank, but notice that even accounting systems are not perfect.
In reality the Bank has 2 interchangeable assets:a)the loan payable in cash b)the value of the collateral converted (if needed) to cash to pay the loan. Accounting systems permit only one of the two entries to balance, and they always refer to time zero-current time.

A real life example is when someone abducts the child of a millionaire asking for 1M ransom. In accounting terms the child is his only asset.
He cannot enter his books both the child and the 1M as assets.

[Robin Hood]

Pyrpolizer:

I prefer to use my own logic and I explained what I think earlier in this topic by using the term dormant/sleeping money coming out from the value of the collateral.

All I can say is that the collateral is not an integral part of the money creation process. It does not appear in the bank’s books at all. As I tried to explain before, it is a condition required to even be considered eligible for getting the loan. It is not part of the process of extending credit (a loan) which eventually becomes a debt.

The question is should that someone be the Banks or the State/Central Bank? It's obvious to me that privilege should be removed from the Banks, because by their very nature, cannot use it to benefit the economy as a whole.

So far the discussion seems to have revolved around the private loan aspect. Whether the currency is derived from nothing is really of no great relevance in that context. If you take the example I gave, all that would change with private loans would be the source. All the hype and fear stories that came from a certain source, of doom and gloom, were all a fantasy. The bankers draught would be drawn on a fund financed by Government with the Central Bank dictating the relevant interest (if any) to be charged to the borrower. Virtually nothing else changes.

At the moment I see this banker’s draught in my example as being created from nothing and if you then award the creation to the Central Bank, little would change. The only difference I see is that the Government would be in a much stronger position to direct those loans where they were needed. IMO: That is to put the loans into creating wealth like job creation and SME’s, rather than into ‘assets’ like property and bonds.

It is when you start to consider the impact such a transition would have on the financial affairs of the State, that the major benefits of making the creation of currency the sole prerogative of the Central Bank really has an impact. Corbyns Peoples QE is going in that direction and the banks fear losing their dominance over government and industry, if it ever got off the ground.

Since the very early days I could never understand why the Government had to borrow at interest from a private bank the most important commodity it needed to run the country, when it was within its power to create the currency itself through its own Central Bank. This just creates debt for the sake of the bank’s profits and it has nothing but a negative effect on the country. Issued free of both the burden of debt and compound interest by the Central Bank, so that taxes returned to the treasury rather than to the banks to pay off debt, seems a much better idea.

Then I found out that this was the way things were run before the creation of the FED in the US and how it was in the UK when all the money was created as note and coin by the State, although even then the banks were still creating ledger currency through currency creation i.e loans. But that did not affect the ordinary man in the street ..... because banks only lent to those with sufficient assets and income to ensure repayment. I never have found out why it stopped except that it was pushed for by the banks, just as they are now pushing for a cashless society. When banks are keen on anything it is a sure fire bet that it is their interest and not ours.

The one thing Paphitis said that had credibility was that “This was a very dangerous subject to pursue!” He is right! Can you imagine what would happen if the masses realised that commercial banks were lending the government money at interest, when the government could do it themselves and completely avoid debt ......... which they, through taxes (and austerity) have to repay? Henry Ford was right “ .... there would be a revolution by morning’ ! I think those that disproportionately benefit from the current system would resort to any means to prevent that happening.

He cannot enter his books both the child and the 1M as assets.

But in banking terms the child is a ‘liability’ as they have to return it but the one million is an asset because they expect to exchange one for the other. I think both cold be referred to as extortion!

[Pyrpolizer]

So far the discussion seems to have revolved around the private loan aspect. Whether the currency is derived from nothing is really of no great relevance in that context. If you take the example I gave, all that would change with private loans would be the source. All the hype and fear stories that came from a certain source, of doom and gloom, were all a fantasy. The bankers draught would be drawn on a fund financed by Government with the Central Bank dictating the relevant interest (if any) to be charged to the borrower. Virtually nothing else changes.

At the moment I see this banker’s draught in my example as being created from nothing and if you then award the creation to the Central Bank, little would change. The only difference I see is that the Government would be in a much stronger position to direct those loans where they were needed. IMO: That is to put the loans into creating wealth like job creation and SME’s, rather than into ‘assets’ like property and bonds.

It is when you start to consider the impact such a transition would have on the financial affairs of the State, that the major benefits of making the creation of currency the sole prerogative of the Central Bank really has an impact. Corbyns Peoples QE is going in that direction and the banks fear losing their dominance over government and industry, if it ever got off the ground.

Since the very early days I could never understand why the Government had to borrow at interest from a private bank the most important commodity it needed to run the country, when it was within its power to create the currency itself through its own Central Bank. This just creates debt for the sake of the bank’s profits and it has nothing but a negative effect on the country. Issued free of both the burden of debt and compound interest by the Central Bank, so that taxes returned to the treasury rather than to the banks to pay off debt, seems a much better idea.

Then I found out that this was the way things were run before the creation of the FED in the US and how it was in the UK when all the money was created as note and coin by the State, although even then the banks were still creating ledger currency through currency creation i.e loans. But that did not affect the ordinary man in the street ..... because banks only lent to those with sufficient assets and income to ensure repayment. I never have found out why it stopped except that it was pushed for by the banks, just as they are now pushing for a cashless society. When banks are keen on anything it is a sure fire bet that it is their interest and not ours.

The one thing Paphitis said that had credibility was that “This was a very dangerous subject to pursue!” He is right! Can you imagine what would happen if the masses realised that commercial banks were lending the government money at interest, when the government could do it themselves and completely avoid debt ......... which they, through taxes (and austerity) have to repay? Henry Ford was right “ .... there would be a revolution by morning’ ! I think those that disproportionately benefit from the current system would resort to any means to prevent that happening.

I generally agree. It's more than obvious the benefits of changing this procedure will be huge. I had some concerns that the new system could possibly be exploited by irresponsible Governments for political reasons, but I remember your proposal included economists, professors, and lots of other specialists sitting on board for this special function of the Central Bank.

What always bothered me was that we in Cyprus are so fricking cowards that we don't dare apply any new ideas ourselves.All we know is copying pasting things that have already been tried and succeeded in England. Let's hope they do it some day in England so that we follow with our usual pathetic copy-paste habit.

[Robin Hood]

Pyrpolizer:

What always bothered me was that we in Cyprus are so fricking cowards that we don't dare apply any new ideas ourselves. All we know is copying pasting things that have already been tried and succeeded in England. Let's hope they do it some day in England so that we follow with our usual pathetic copy-paste habit.

The problem is that it cannot work in Cyprus or in the Eurozone....... none of the countries have either a sovereign currency or an independent Central Bank because they are just Branch offices of the ECB.

I think your statement would apply to most countries! The people who run our lives are often totally ignorant of the monetary and banking systems, and as such, of the impact it is having because they are career politicians not economists! Just to cut-n-paste is fraught with danger, you need to know WHAT you are cutting and pasting and, as you will have noticed on here, a little knowledge can be dangerous.

For example, I posted this in reply to one of our esteemed member’s misconceptions ...... the basic concept was there but by missing the other components out of the equation ...... it did not work. Taxation had to be included and without that knowledge it could never work. It missed him completely!

Quote:

You presented your example of the $100 serving transactions that total $1m. As it stood it could not work as there would be no inflation and the economy would just stagnate. I pointed that out to you. With the inclusion of the tax deductions, that is exactly what happens. You described just that scenario, so this is your impression of how it works and I agree with you, you just missed out the one crucial step that enables it to work.

Needless to say he never acknowledged his misconception or countered the argument.

I honestly cannot see things changing at all and when the financial collapse does come, which it surely will, the remedy will be led by the very people who caused it! They will make the people pay, with governments/central banks/IMF/BIS etc bailing-out and maybe bailing-in as well, to save the Bankers .... the 0.01% will dominate any solution. There is a lot of misunderstanding out there and all the time people have these misconceptions and denials, nothing will change because ONLY the people can force it to happen.

Whether it was true or not; I heard a lady saying on the radio that just 65 people own 50% of the worlds wealth! She didn’t put any names to that and I don’t think we would recognise them if she had ........ well maybe a couple of them but Bill Gates is not one.

If you can only manage 30 pages, these may be a bit of a struggle for you but it explains in detail all three of the banking concepts and gives both sides of the argument, as well as giving a blow-by-blow explanation of his €200k bank loan experiment and conclusions.

http://www.sciencedirect.com/science/article/pii/S1057521914001434 (I think I already posted this one?)

http://www.sciencedirect.com/science/article/pii/S1057521914001070

http://www.sciencedirect.com/science/article/pii/S1057521915001477

[repulsewarrior]

...interesting stuff, thanks RH.

[Robin Hood]

Just to prove that it is not just me that believes that the money the banks create, they do so from nothing more than a data entry into an account.

Germany’s central bank – the Deutsche Bundesbank (German for German Federal Bank) – has admitted in writing that banks create credit out of thin air.

“In other words, money is created as book-entry by purchasing assets or entering credits on the left side of the balance-sheet and corresponding deposits on the right side. In other words, credit is created out of thin air.”

http://www.washingtonsblog.com/2010/03/german-central-bank-admits-that-credit-is-created-out-of-thin-air.html

Speech Frankfurt

Money creation and responsibility - Speech at the 18th colloquium of the Institute for Bank-Historical Research (IBF) in Frankfurt - 18.09.2012 Dr Jens Weidmann President of the Deutsche Bundesbank

“Indeed, the fact that central banks can create money out of thin air, so to speak, is something that many observers are likely to find surprising and strange, perhaps mystical and dreamlike, too – or even nightmarish.”

https://www.bundesbank.de/Redaktion/EN/Reden/2012/2012_09_20_weidmann_money_creaktion_and_responsibility.html


An interesting article on Income Tax ....US amended the Constitution with the 16th Amendment in 1913 .... the year the FED came into being!

You only need income tax if the Government borrows what they need from private commercial banks. The way the amendment was voted in is also an interesting story ..... the day of the vote The Senate had all gone home for a bank holiday and it was voted in by just a handful of people (4-5?) ..... all bankers!!!!!

http://www.blacklistednews.com/The_Income_Tax%3A_Root_of_all_Evil/50525/0/38/38/Y/M.html

In detail – the original 1954 speech.

https://fee.org/resources/the-income-tax-root-of-all-evil/ very long!!!


From the Daily Mail ........

Revealed: The Government’s hidden 'time bomb’ of debt that would cost EVERY Briton an astonishing £53,000 to pay off.

Read the comments under the article! You can see how so few people have even the remotest concept about the origin of the debt nor that the government BORROW’s it from commercial banks, at interest and that it is always the taxpayers that foot the bill. The government could just as easily create the money they need through their Central Bank, in the same way the banks do it and it would be free of both debt and interest. They could even pay off most of the existing debt almost overnight and it wouldn’t cost a dime. You play by the same rules as the commercial banks! Simple.

http://www.dailymail.co.uk/news/article-3545479/The-Government-s-hidden-time-bomb-debt-cost-Briton-astonishing-53-000-defuse.html#readerCommentsCommand-message-field

[DT.]

I'm sorry but the inaccuracies that have been listed here are way off. Entertaining, but way off.