3 ms·

That's the thing, they don't loan the money, they create it, banks haven't functioned the way they're popularly imagined to function for centuries. And it's so

by Kinnard 11y ago

That's the thing, they don't loan the money, they create it, banks haven't functioned the way they're popularly imagined to function for centuries. And it's so sad that this false image is the moral basis for banks going after borrowers assets. The bank doesn't lend you someone else's money, it creates the money(no effort) and you have to work and put up real collateral to pay it back. By G-d we should all be working to expose and undo this madness.

tome 11y ago
> it creates the money(no effort) Err, there most certainly is an effort assessing credit risk and dealing with the fallout when someone defaults.
- Kinnard 11y ago
  What exactly is the risk to the Bank in lending out money they just created?
  - tome 11y ago
    They didn't magic it out of thin air. It's a liability to them. If the loan is paid into another bank they then have to transfer central bank deposits to that other bank. If the loan is never paid back then they've lost money. Is it genuinely not obvious to you than bank deposits aren't something that banks can create and destroy on a whim?
    - Kinnard 11y ago
      That's actually not quite correct. The loan itself is an asset to the bank. When you sign the promissory note, they then give you a balance at the bank in the amount of the principal of the note, THAT is the liability. The loan is the asset because that is money coming into the bank. Your deposits are liabilities because that is money you could withdraw from the bank. So it is both a liability and an asset. They don't create it out of thin air, they create it out of ink and paper. It's a hack of the double-entry bookkeeping system. I recommend Paul Grignon's Money As Debt: https://www.youtube.com/watch?v=jqvKjsIxT_8 https://www.youtube.com/watch?v=jqvKjsIxT_8
      - tome 11y ago
        The balance in the bank, which is colloquially called a "loan", is a liability to the bank, yes. And do you agree there is a "risk to the Bank in lending out money they just created" or is that still up for discussion?
        Kinnard 11y ago
        No, the balance in the bank is not the loan. You need some understanding of double-entry bookkeeping to understand fractional reserve banking. The loan(promissory note), is on the banks balance sheet as an asset. Your balance which you can withdraw as cash is on the banks balance sheet as a liability. What is the bank risking when it creates the money and uses the anachronistically titled "loan" contract to distribute it? • They risk only being able to extract so much labor. • They risk taking on collateral which is a REAL asset that someone worked for, like their home if they're unable to generate enough of the assets the banks just write into existence. • They risk passing the buck up the ladder ultimately to the lender of last result if they're "too big to fail" which just creates more money to deal with the problem. Banks are not lending out other people's money, everyone tacitly knows this, if they were how come when you go to the bank they never say, sorry its out on loan at the moment? This was the case at historically and banks are still riding on the fact that people haven't gotten wise to the way it's worked for centuries now. There is no lending taking place when bank loans are made.
        tome 11y ago
        Hmm ... are we still on the same page? This is where the discussion started: https://news.ycombinator.com/item?id=10995433 https://news.ycombinator.com/item?id=10995433 You seemed to be claiming that a bank incurs no cost ("no effort") to issue a loan. Are you sticking to that?
        Kinnard 11y ago
        Yes, we're still on the same page. The Banking system is rapacious and it should be done away with. Its capital allocative functions have been subverted by extraction. It's an emergent system so that isn't to imply that the people who work at banks are rapacious. That would be the fallacy of division: https://en.wikipedia.org/wiki/Fallacy_of_division https://en.wikipedia.org/wiki/Fallacy_of_division It is that bad.

by Kinnard 11y ago

tome 11y ago

> it creates the money(no effort) Err, there most certainly is an effort assessing credit risk and dealing with the fallout when someone defaults.

Kinnard 11y ago
What exactly is the risk to the Bank in lending out money they just created?
- tome 11y ago
  They didn't magic it out of thin air. It's a liability to them. If the loan is paid into another bank they then have to transfer central bank deposits to that other bank. If the loan is never paid back then they've lost money. Is it genuinely not obvious to you than bank deposits aren't something that banks can create and destroy on a whim?
  - Kinnard 11y ago
    That's actually not quite correct. The loan itself is an asset to the bank. When you sign the promissory note, they then give you a balance at the bank in the amount of the principal of the note, THAT is the liability. The loan is the asset because that is money coming into the bank. Your deposits are liabilities because that is money you could withdraw from the bank. So it is both a liability and an asset. They don't create it out of thin air, they create it out of ink and paper. It's a hack of the double-entry bookkeeping system. I recommend Paul Grignon's Money As Debt: https://www.youtube.com/watch?v=jqvKjsIxT_8 https://www.youtube.com/watch?v=jqvKjsIxT_8
    - tome 11y ago
      The balance in the bank, which is colloquially called a "loan", is a liability to the bank, yes. And do you agree there is a "risk to the Bank in lending out money they just created" or is that still up for discussion?
      - Kinnard 11y ago
        No, the balance in the bank is not the loan. You need some understanding of double-entry bookkeeping to understand fractional reserve banking. The loan(promissory note), is on the banks balance sheet as an asset. Your balance which you can withdraw as cash is on the banks balance sheet as a liability. What is the bank risking when it creates the money and uses the anachronistically titled "loan" contract to distribute it? • They risk only being able to extract so much labor. • They risk taking on collateral which is a REAL asset that someone worked for, like their home if they're unable to generate enough of the assets the banks just write into existence. • They risk passing the buck up the ladder ultimately to the lender of last result if they're "too big to fail" which just creates more money to deal with the problem. Banks are not lending out other people's money, everyone tacitly knows this, if they were how come when you go to the bank they never say, sorry its out on loan at the moment? This was the case at historically and banks are still riding on the fact that people haven't gotten wise to the way it's worked for centuries now. There is no lending taking place when bank loans are made.
        tome 11y ago
        Hmm ... are we still on the same page? This is where the discussion started: https://news.ycombinator.com/item?id=10995433 https://news.ycombinator.com/item?id=10995433 You seemed to be claiming that a bank incurs no cost ("no effort") to issue a loan. Are you sticking to that?
        Kinnard 11y ago
        Yes, we're still on the same page. The Banking system is rapacious and it should be done away with. Its capital allocative functions have been subverted by extraction. It's an emergent system so that isn't to imply that the people who work at banks are rapacious. That would be the fallacy of division: https://en.wikipedia.org/wiki/Fallacy_of_division https://en.wikipedia.org/wiki/Fallacy_of_division It is that bad.