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How the banks steal your money in the form of a loan Watch

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    The loan will still appear on the balance sheet. it's not invisible money.
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    (Original post by akka444)
    Mr A takes out a bank loan to buy a car. The bank simply types the sum out of thin air into his bank account, despite the fact that they don't actually have the money in their reserves. Mr A then gives the cash from the loan to the person selling the car. The person selling the car then banks the cash. At this point the cash becomes real money. Mr A then pays back the loan. The original loan money disappears back into thin air again, but the interest is banked by the bank as real money that they now own. So the bank now owns both the interest and the cash that the person selling the car banked, neither of which they owned before giving the loan.
    Interesting, but what happens when there are two banks involved?

    For example, Mr A borrows money from Bank A and Mr A gives the money to Ms B for the car for sale. Mrs B then deposits the money in Bank B.

    With this example, Bank A only has the interest from Mr A's loan but not the initial loaned sum. Surely, this would be a problem for Bank A.

    Two, if we assume the banks can manufacture money from thin air to loan to Mr A, why don't they manufacture the money to pay themselves? Why go through the hassle of borrowing to Mr A with the risk that he may never pay back the loan?
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    (Original post by Chaz254)
    Not everything relates to Islam you know and this isn't a meme...this is what happens.
    It seems very similar to a number of pro-Islam posts I've been seeing on Facebook over the past several days... wondering if it's become yet another copy-pasta

    It's a meme because it's so hilariously wrong that I can't take it seriously. OP should have called this thread a "hi I just discovered fractional reserve banking xd" and spared himself the humiliation of calling this process "theft" or whatever.
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    (Original post by Doonesbury)
    The loan with still appear on the balance sheet. it's not invisible money.
    I didn't say it was? I simply said banks lend what they don't yet have.
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    (Original post by Drummond)
    So is rigging the LIBOR rate, rigging the gold price, running the stock markets by algorithms, running derivative books that are 10x your nations GDP, and so on and so on and so on. Since when did banks give a monkeys about the small matter of illegalities?
    Algorithmic trading is not illegal

    When banks break laws they get fined, those responsible get fired and often prosecuted, in many cases even fined by the bank they work for. At a systematic scale it is hard to hide criminal activity so easy for authorities to catch criminals.

    If banks are getting away with breaking the law, then simply blaming the banking industry as a whole is silly considering how useful it is. Maybe you should put pressure on your democratically elected government to invest more into catching those bankers/banks that do break the law.
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    (Original post by Wired_1800)
    Interesting, but what happens when there are two banks involved?

    For example, Mr A borrows money from Bank A and Mr A gives the money to Ms B for the car for sale. Mrs B then deposits the money in Bank B.

    With this example, Bank A only has the interest from Mr A's loan but not the initial loaned sum. Surely, this would be a problem for Bank A.

    Two, if we assume the banks can manufacture money from thin air to loan to Mr A, why don't they manufacture the money to pay themselves? Why go through the hassle of borrowing to Mr A with the risk that he may never pay back the loan?
    Well this is a win win scenario for the banks, because from the funds Mr A gets in his account in Bank A, Bank A can then create whatever the fractional reserve is for itself, so what is it 100x the deposit? Then Mr A withdraws the deposit and gives it to Mr B who deposits it in Bank B, then Bank B can create anoother 100x the value of the deposit. So the initial amount which was created from nothing has just created another 200x itself all ready to do the same over and over again.
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    (Original post by D3LLI5)
    Algorithmic trading is not illegal

    When banks break laws they get fined, those responsible get fired and often prosecuted, in many cases even fined by the bank they work for. At a systematic scale it is hard to hide criminal activity so easy for authorities to catch criminals.

    If banks are getting away with breaking the law, then simply blaming the banking industry as a whole is silly considering how useful it is. Maybe you should put pressure on your democratically elected government to invest more into catching those bankers/banks that do break the law.
    Mate, not even bankers or traders defend banking anymore, only central bankers, IMF employees and government trolls.

    Who do you think regulates banking? Who do you think funds the FCA, the taxpayer? The banks fund the FCA, the banks police themselves. Sure they'll hang a patsy out to dry every now and again to maintain the illusion, but its all in vain.

    What, so because banking is useful then we should turn a blind eye to their criminality? That's surely the reasoning of a madman isn't it?

    Banking is not useful, its just that its all most have ever known. Its a habit of fear, from hiding cash under the bed. Doesn't make it useful by any stretch. And when they ban cash, most will have no choice but to remain in the great ponzi scheme.
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    (Original post by Doonesbury)
    They can make the decision to lend, but they can't then provide the finance unless they have the reserves (or otherwise fund the loan).

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    He's actually right. A bank only needs to have a fraction of what it pays out in loans in reserve (hence 'fractional reserve'). When a bank makes a loan, new money is created. When the principal is paid back, it's destroyed. The vast majority of the money in the economy is created this way. The Bank of England 'confessed' to this a couple of years ago, you can read the report here: http://www.bankofengland.co.uk/publi...eycreation.pdf
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    Funny how people even mention fractional reserve banking, but apparently have no idea what it means. By mentioning it, you're actually providing evidence for the OP.

    Look at the history of money, it's always been debt. Look at the first known banks of today, by merchants of Italy. They too started giving people more than they actually had in gold. As long as not everyone wants theirs back at the same time it worked.
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    (Original post by Wired_1800)
    Interesting, but what happens when there are two banks involved?

    For example, Mr A borrows money from Bank A and Mr A gives the money to Ms B for the car for sale. Mrs B then deposits the money in Bank B.

    With this example, Bank A only has the interest from Mr A's loan but not the initial loaned sum. Surely, this would be a problem for Bank A.

    Two, if we assume the banks can manufacture money from thin air to loan to Mr A, why don't they manufacture the money to pay themselves? Why go through the hassle of borrowing to Mr A with the risk that he may never pay back the loan?
    If Mrs B deposits the money in bank B, then it is more than likely that there is a Mrs C depositing money in bank A that she received from selling her car to someone who borrowed money from some other bank.
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    (Original post by Captain Haddock)
    He's actually right. A bank only needs to have a fraction of what it pays out in loans in reserve (hence 'fractional reserve'. When a bank makes a loan, new money is created. When the principal is paid back, it's destroyed. The vast majority of the money in the economy is created this way. The Bank of England 'confessed' to this a couple of years ago, you can read the report here: http://www.bankofengland.co.uk/publi...eycreation.pdf
    Fractional reserve means if a bank has 100£ deposited, it can only lend out 90£, not that it can lend out 1000£
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    (Original post by D3LLI5)
    Fractional reserve means if a bank has 100£ deposited, it can only lend out 90£, not that it can lend out 1000£
    And once those 90 are deposited it can again lend out 81. And again. And again.

    Please stop, for everyone's sake, mostly yours though.
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    I mean it's literally in the name. They need to only hold in reserve a fraction of what they lend out.

    Out of interest what do you do/study, that you think you know something about this. Or just heard the term somewhere and thought it sounds great to mention a technical term to sound smart?

    Backfired. Greatly.
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    (Original post by yudothis)
    And once those 90 are deposited it can again lend out 81. And again. And again.

    Please stop, for everyone's sake, mostly yours though.
    Which means only 81 has left the bank and as soon as anyone withdraws their money the bank needs to find money to give them
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    (Original post by D3LLI5)
    Which means only 81 has left the bank and as soon as anyone withdraws their money the bank needs to find money to give them
    So how are bank runs possible?
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    (Original post by Drummond)
    Why is it a bait attempt mate? I think the point he is raising is why have private banks got the right to make money and then gain interest from the usury on that money? I might be wrong but the problem seems to be 'private bank', creating money and then profiting from it. I guess its no different to you or me creating money and then loaning it out, how far do you think we'd get before being arrested?
    Banks are generally public (listed), and so highly regulated that they can hardly be described as a free private enterprise. Providing this loan service also has costs, so it's not like banks make huge profits out of it (especially with current rates).

    This system keeps the economy going, ensures money is available to those who are likely to be able to pay it back and results in wages for people employed in banking and small profits (less than in other industries) for shareholders. It also gives the central bank control of the money supply through reserves ratios.
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    (Original post by D3LLI5)
    Fractional reserve means if a bank has 100£ deposited, it can only lend out 90£, not that it can lend out 1000£
    Nope. In fact, in the UK, banks have no reserve requirements at all. The central bank encourages or discourages the creation of new loans (i.e. money) by setting interest rates. Commercial banks can then lend as much money as they want, as long as it's profitable for them to do so. The commercial banks then ask the central bank to furnish them with reserves to meet the increased demand for cash. Therefore the amount in reserve is decided by the amount of lending, not the other way around.
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    (Original post by Captain Haddock)
    Nope. In fact, in the UK, banks have no reserve requirements at all. The central bank encourages or discourages the creation of new loans (i.e. money) by setting interest rates. Commercial banks can then lend as much money as they want, as long as it's profitable for them to do so. The commercial banks then ask the central bank to furnish them with reserves to meet the increased demand for cash. Therefore the amount in reserve is decided by the amount of lending, not the other way around.
    If they want to lend money they don’t have them they can BORROW money from the central bank, ie not just create money out of thin air, as is being argued

    They have to pay interest on it
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    (Original post by yudothis)
    So how are bank runs possible?

    You're a joke, you know that? I will stop replying to you to stop further embarrassing you.
    Bank runs happen when lots of people want to withdraw their money. Banks make money by lending their capital, when they lend money it becomes illiquid, meaning they cannot easily just get back the money they lent. Hence banks struggle to liquidate all assets to meet withdrawal demands during a bank run. They could sell the debt to someone else but during a bank run people will pay less for it than it’s actually worth
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    (Original post by yudothis)
    I mean it's literally in the name. They need to only hold in reserve a fraction of what they lend out.

    Out of interest what do you do/study, that you think you know something about this. Or just heard the term somewhere and thought it sounds great to mention a technical term to sound smart?

    Backfired. Greatly.
    I work in the finance industry
 
 
 
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