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No, banks are creating credit. https://bankunderground.co.uk/2015/06/30/banks-are-not-intermediaries-of-loanable-funds-and-why-this-matters/ https://bankunderg

No, banks are creating credit. https://bankunderground.co.uk/2015/06/30/banks-are-not-intermediaries-of-loanable-funds-and-why-this-matters/ https://bankunderground.co.uk/2015/06/30/banks-are-not-inter... By creating credit faster than the underlying wealth creation of an economy banks are appropriating real goods and services and the wealth generation later (or rather now as they lent for decades like this) and they walk off with the goods whilst we all drown in asset inflation. I would agree that demographics played a big part. Boomers borrowed heavily as though the demogrpahic inversion were not a problem, and banks played along. Now we have the money supply collapse as we have more olds than young, meaning a collapse in credit supply which is a problem as the model requires that principal + interest is paid back which cannot happen unless more debit is issued into the face of loan expiry which destroys the credit but still requires the interest be paid from some other debt source. Why else do we need constant QE and ZIRP? To encourage more borrowing to try and maintain the rate of credit creation to keep the money supply up as boomers pay down at their end of life. What a nuts system and also a terrible one as all productivity gains are soaked up by adaptable pricing on land to capture all gains. excited for my HN "you're submitting too fast" soon when anything about banks or rentiers is mentioned!

ThrustVectoring 10y ago
Credit is money - there's literally no distinction between the two. Precious metal currencies are only money because it takes way less systemic trust to believe that the bearer of precious metal coins can get things for them later. Gold-backed paper currencies are an interesting intermediate, basically adding trust that you can exchange them for the actual metal at banks.
- branchless 10y ago
  Credit costs nothing to produce. Expansion can cover infinite productivity gains to appropriate for the usurers/rentiers.
andrevvo 10y ago
I think you are talking about fractional-reserve banking, which has been around for hundreds of years. This can exist with or without a gold standard.
- branchless 10y ago
  Nope, read the bank of england blog above. > While money is essential to facilitating purchases and sales of real resources outside the banking system, it is not itself a physical resource, and can be created at near zero cost. > The fact that banks technically face no limits to instantaneously increasing the stocks of loans and deposits does not, of course, mean that they do not face other limits to doing so. But the most important limit, especially during the boom periods of financial cycles when all banks simultaneously decide to lend more, is their own assessment of the implications of new lending for their profitability and solvency. By contrast, and contrary to the deposit multiplier view of banking, the availability of central bank reserves does not constitute a limit to lending and deposit creation. This, again, has been repeatedly stated in publications of the world’s leading central banks. The current model of understanding is broken. To issue money nothing has to be created, therefore if one issues money whilst wealth creation stands still one appropriates some of the total wealth through inflation. Before if you wanted more money you had to have more gold reserves, or the govt/central bank had to lower the exchange rate. > http://www.econlib.org/library/Enc/GoldStandard.html http://www.econlib.org/library/Enc/GoldStandard.html Because new production of gold would add only a small fraction to the accumulated stock, and because the authorities guaranteed free convertibility of gold into nongold money, the gold standard ensured that the money supply, and hence the price level, would not vary much. http://www.shadowstats.com/imgs/charts/m1.gif http://www.shadowstats.com/imgs/charts/m1.gif Again the boe blog from above: > the availability of central bank reserves does not constitute a limit to lending and deposit creation Private banks decide how much land costs. And they always lend as much as they can, so land will always be as much as people can possibly pay. This means that no amount of efficiency gains will ever improve life. All you will see is inflation and people who bought just before the jump have a gain, but again the next batch are pushed into servitude. Because we haven't had a big step-change in efficiency for a couple of decades (and in part because it's not passed on due to globalisation / migration) it's misery all round, unless you are a usurer.

ThrustVectoring 10y ago

Credit is money - there's literally no distinction between the two. Precious metal currencies are only money because it takes way less systemic trust to believe that the bearer of precious metal coins can get things for them later. Gold-backed paper currencies are an interesting intermediate, basically adding trust that you can exchange them for the actual metal at banks.

branchless 10y ago
Credit costs nothing to produce. Expansion can cover infinite productivity gains to appropriate for the usurers/rentiers.

andrevvo 10y ago

I think you are talking about fractional-reserve banking, which has been around for hundreds of years. This can exist with or without a gold standard.

branchless 10y ago
Nope, read the bank of england blog above. > While money is essential to facilitating purchases and sales of real resources outside the banking system, it is not itself a physical resource, and can be created at near zero cost. > The fact that banks technically face no limits to instantaneously increasing the stocks of loans and deposits does not, of course, mean that they do not face other limits to doing so. But the most important limit, especially during the boom periods of financial cycles when all banks simultaneously decide to lend more, is their own assessment of the implications of new lending for their profitability and solvency. By contrast, and contrary to the deposit multiplier view of banking, the availability of central bank reserves does not constitute a limit to lending and deposit creation. This, again, has been repeatedly stated in publications of the world’s leading central banks. The current model of understanding is broken. To issue money nothing has to be created, therefore if one issues money whilst wealth creation stands still one appropriates some of the total wealth through inflation. Before if you wanted more money you had to have more gold reserves, or the govt/central bank had to lower the exchange rate. > http://www.econlib.org/library/Enc/GoldStandard.html http://www.econlib.org/library/Enc/GoldStandard.html Because new production of gold would add only a small fraction to the accumulated stock, and because the authorities guaranteed free convertibility of gold into nongold money, the gold standard ensured that the money supply, and hence the price level, would not vary much. http://www.shadowstats.com/imgs/charts/m1.gif http://www.shadowstats.com/imgs/charts/m1.gif Again the boe blog from above: > the availability of central bank reserves does not constitute a limit to lending and deposit creation Private banks decide how much land costs. And they always lend as much as they can, so land will always be as much as people can possibly pay. This means that no amount of efficiency gains will ever improve life. All you will see is inflation and people who bought just before the jump have a gain, but again the next batch are pushed into servitude. Because we haven't had a big step-change in efficiency for a couple of decades (and in part because it's not passed on due to globalisation / migration) it's misery all round, unless you are a usurer.