The banks are lending money they do not have

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housemaid900
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They eventually receive this money that they never had when it is paid back, in addition to interest on it.
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MatureStudent36
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(Original post by housemaid900)
They eventually receive this money that they never had when it is paid back, in addition to interest on it.
What news from Mafeking?
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T.L
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(Original post by housemaid900)
They eventually receive this money that they never had when it is paid back, in addition to interest on it.
That's the whole point of a bank.
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nixy49
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(Original post by T.L)
That's the whole point of a bank.
The original point of a bank is to store money.
The modern bank creates credit that is underwritten by taxpayers under threat of violence.
Government officials need ever more slaves, be they young people and / or immigrant people to service this 'debt'.... which is nice for bankers.

NB... modern bankers never have produced any wealth...at all....they take it.
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T.L
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(Original post by nixy49)
The original point of a bank is to store money.
The modern bank creates credit that is underwritten by taxpayers under threat of violence.
Government officials need ever more slaves, be they young people and / or immigrant people to service this 'debt'.... which is nice for bankers.

NB... modern bankers never have produced any wealth...at all....they take it.
Not so. The point of a safe is to store money. The original point of a bank ever since Ancient Greece and possibly Babylon has been to accept deposits and to use that wealth to make loans to other people.
The modern bank creates credit that is only underwritten by the taxpayer in extremis (which of course is the worst time to be on the hook), because the taxpayer in a democratic country has chosen for that to be the case. Personally, I think the banks should have been allowed to fail and the entire senior management of nearly all banks jailed for long periods. However, banks do serve a very useful purpose in the long run. Not least because people want large loans, they want to be able to finance businesses, and they want their governments to borrow huge sums to finance the absurd levels of public spending that they insist on, while refusing to pay for them themselves.

NB It is not the job of bankers to create wealth. The job of bankers is to provide the capital to allow businesses and individuals to create wealth. Unsurprisingly, like any other business or individual, they charge for doing that. You don't expect your food or travel to be free, so why would you have a different expectation or particular resentment of bankers?
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MatureStudent36
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(Original post by nixy49)
The original point of a bank is to store money.
The modern bank creates credit that is underwritten by taxpayers under threat of violence.
Government officials need ever more slaves, be they young people and / or immigrant people to service this 'debt'.... which is nice for bankers.

NB... modern bankers never have produced any wealth...at all....they take it.
How very misinformed you are.

You have an almost childlike understanding of finance.
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nixy49
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(Original post by T.L)
Not so. The point of a safe is to store money. The original point of a bank ever since Ancient Greece and possibly Babylon has been to accept deposits and to use that wealth to make loans to other people.
The modern bank creates credit that is only underwritten by the taxpayer in extremis (which of course is the worst time to be on the hook), because the taxpayer in a democratic country has chosen for that to be the case. Personally, I think the banks should have been allowed to fail and the entire senior management of nearly all banks jailed for long periods. However, banks do serve a very useful purpose in the long run. Not least because people want large loans, they want to be able to finance businesses, and they want their governments to borrow huge sums to finance the absurd levels of public spending that they insist on, while refusing to pay for them themselves.

NB It is not the job of bankers to create wealth. The job of bankers is to provide the capital to allow businesses and individuals to create wealth. Unsurprisingly, like any other business or individual, they charge for doing that. You don't expect your food or travel to be free, so why would you have a different expectation or particular resentment of bankers?
Thanks. I think you broadly make my point better than I.
You say ....'The modern bank creates credit that is only underwritten by the taxpayer in extremis'
but this completely changes (changed) the risk away from the bank to the future tax payers.... which strikes to the heart of the problem.
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nixy49
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(Original post by MatureStudent36)
How very misinformed you are.

You have an almost childlike understanding of finance.
Maybe. Think Occam's Razor, Emperor, Clothes.....?

Don't forget...... the 'grown ups' who caused the banking crisis are the same to find the 'solution'.

The cure for debt? ....... more debt.
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MatureStudent36
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(Original post by nixy49)
Maybe. Think Occam's Razor, Emperor, Clothes.....?

Don't forget...... the 'grown ups' who caused the banking crisis are the same to find the 'solution'.

The cure for debt? ....... more debt.
People put their money into a bank and expect a return called interest to be paid on it.

That money is then lent out and a return on the loan is expected.

That profit from the loan is used to pay for banking overheads, interests on deposits and a dividend for the shareholders in the banks stock.

You've used Occams razor. Try this one for Occam's razor. The current system has been around for centuries and is still here, still financing improvements in living standard.

Other systems have been tried and failed.

Occam's razor tells me that the current banking system is the most effective one.
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nixy49
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(Original post by MatureStudent36)
People put their money into a bank and expect a return called interest to be paid on it.

That money is then lent out and a return on the loan is expected.

That profit from the loan is used to pay for banking overheads, interests on deposits and a dividend for the shareholders in the banks stock.

You've used Occams razor. Try this one for Occam's razor. The current system has been around for centuries and is still here, still financing improvements in living standard.

Other systems have been tried and failed.

Occam's razor tells me that the current banking system is the most effective one.
Well the banking system has been most effective in transferring wealth away from the young to the us older 'mature' types.

At age 21, I needed just over 2 times my yearly average wage to buy our first house. That same house is now 'worth' over £200,000. Not many 21 year olds earn 90,000? ...... ALL caused by your banking system.... who can print thin air credit money without risk to themselves...... risk that is transferred to the same young who are priced out. Heartily sickening.
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demx9
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They want you to think this is the only way ..
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demx9
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(Original post by MatureStudent36)
People put their money into a bank and expect a return called interest to be paid on it.

That money is then lent out and a return on the loan is expected.

That profit from the loan is used to pay for banking overheads, interests on deposits and a dividend for the shareholders in the banks stock.
You obviously don't know how banks work.
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T.L
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(Original post by nixy49)
Thanks. I think you broadly make my point better than I.
You say ....'The modern bank creates credit that is only underwritten by the taxpayer in extremis'
but this completely changes (changed) the risk away from the bank to the future tax payers.... which strikes to the heart of the problem.
Yes. I think the cardinal error was that the banks, owners, creditors and management did not have sufficient punishment to realise that risk. All investors shoud have lost everything (and shareholders pretty much did), and the entire managements of the banks should have been given the choice of 10yr+ jail terms or working on UK median wage without bonus until they'd reimbursed the bail-outs and covered the taxpayers' costs. Essentially, I think the taxpayer has to be the ultimate guarantor, because of the benefits of banking.
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T.L
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(Original post by nixy49)
Maybe. Think Occam's Razor, Emperor, Clothes.....?

Don't forget...... the 'grown ups' who caused the banking crisis are the same to find the 'solution'.

The cure for debt? ....... more debt.
The "solution" arose because the Government (Labour) did have a clue what to do and asked the bankers. What do you expect if you elect an economically incontinent and socialistically inclined party?
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nixy49
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(Original post by T.L)
Yes. I think the cardinal error was that the banks, owners, creditors and management did not have sufficient punishment to realise that risk. All investors shoud have lost everything (and shareholders pretty much did), and the entire managements of the banks should have been given the choice of 10yr+ jail terms or working on UK median wage without bonus until they'd reimbursed the bail-outs and covered the taxpayers' costs. Essentially, I think the taxpayer has to be the ultimate guarantor, because of the benefits of banking.
Yes. But if the bankers were punished as you correctly suggest, there would virtually be no need to call on tax payers to underwrite the risk.

Of course if government sanctioned violence was outlawed, there would be no taxation to underwrite banking risk
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T.L
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(Original post by nixy49)
Yes. But if the bankers were punished as you correctly suggest, there would virtually be no need to call on tax payers to underwrite the risk.

Of course if government sanctioned violence was outlawed, there would be no taxation to underwrite banking risk
That's true. Taxpayers very rarely have to pay out anyway. The issue this time is that the bankers weren't punished at all, so the industry has no long-term incentive to learn the lessons and be sensible in future.

Tax doesn't directly underwrite banking risk, sovereign creditworthiness does.
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nixy49
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(Original post by T.L)
That's true. Taxpayers very rarely have to pay out anyway. The issue this time is that the bankers weren't punished at all, so the industry has no long-term incentive to learn the lessons and be sensible in future.

Tax doesn't directly underwrite banking risk, sovereign creditworthiness does.
Hmm, fair enough. What factors affect sovereign creditworthiness? What's a sovereign?
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MatureStudent36
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(Original post by nixy49)
Well the banking system has been most effective in transferring wealth away from the young to the us older 'mature' types.

At age 21, I needed just over 2 times my yearly average wage to buy our first house. That same house is now 'worth' over £200,000. Not many 21 year olds earn 90,000? ...... ALL caused by your banking system.... who can print thin air credit money without risk to themselves...... risk that is transferred to the same young who are priced out. Heartily sickening.
I know many younger types who are able to buy their own cars and go on foreign holidays regularly. Food and utility bills have also dropped down significantly.


Incidentally, I don't think I know anybody from older generations who bought houses at 21. They got married, moved in with on e set of parents and saved up.

Times have changed. At aged 21 my parents didn't have to compete with mass immigration. Would you acknowledge that a massively growing population driven by immigration and a reluctance to build on green field sites are another reason for increasing house prices?
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MatureStudent36
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(Original post by demx9)
You obviously don't know how banks work.
I think I do. That's why I've explained in simple terms.

I can recommend the first couple of chapters of this book to explain it to you.
Fundamentals of corporate finance by brearly, Myers and Marcus.
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T.L
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(Original post by nixy49)
Hmm, fair enough. What factors affect sovereign creditworthiness? What's a sovereign?
A sovereign is an independent country. The main factors are past conduct, current indebtedness, trajectory of government spending, political risk, strength of economy etc.
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