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I think the culture of getting a loan for everything is part of what’s perpetuating the bad economy. You’re giving your money away to the bank to borrow their

I think the culture of getting a loan for everything is part of what’s perpetuating the bad economy. You’re giving your money away to the bank to borrow their money while they sit back and do nothing to collect. A little patience and you can have that car or house without paying double the cost and then the banks don’t get your money and it incentivizes other parts of the economy that don’t involve lining the pockets of the already very rich.

campee 7y ago
I think that's true of a car but unless you live in an area that is not densely populated (and probably won't have much in the way of jobs), then the house part is not true, unless you're willing to live with your parents until you're at least 30.
- sixseven 7y ago
  > unless you're willing to live with your parents until you're at least 30. Which is considered normal in many non-US cultures.
7373737373 7y ago
>You’re giving your money away to the bank to borrow their money while they sit back and do nothing to collect Banks do not lend money, but instead newly create credit and money. See https://www.economicsnetwork.ac.uk/archive/starkey_banking https://www.economicsnetwork.ac.uk/archive/starkey_banking https://en.wikipedia.org/wiki/Money_creation#Credit_theory_of_money https://en.wikipedia.org/wiki/Money_creation#Credit_theory_o... >A study of banking software demonstrates that the bank does nothing else than adding an amount to the two accounts when they issue a loan. The observation that there appears to be no limit to the amount of credit money that banks can bring into circulation in this way has given rise to the often-heard expression that "Banks are creating money out of thin air". https://www.sciencedirect.com/science/article/pii/S1057521914001070 https://www.sciencedirect.com/science/article/pii/S105752191... >This study establishes for the first time empirically that banks individually create money out of nothing.
- tonyedgecombe 7y ago
  >The observation that there appears to be no limit to the amount of credit money that banks can bring into circulation That's not true, there is a limit on their minimum reserves or capital requirements depending on the location.
  - jfoucher 7y ago
    Citation ?
    - badpun 7y ago
      Banking laws and regulations. In most countries, banks are required to physically hold (i.e. not lend further) as a reserve a fraction of the money in their customers accounts. This is to provide liquidity, protect against bank runs etc. So, If a customer A has $1000 in his account and the reserve rate is 10%, the bank can only lent $900 to some other person B. Then, in turn only 90% of that can be lent further. If you run this to the limit, for a 10% reserve rate, the amount of money that can be generated by banks is at most 10x the physical amount.
    - dlp211 7y ago
      https://www.google.com/search?q=bank+deposit+reserves&oq=bank+deposit+reserves&aqs=chrome..69i57j0l3.8204j1j7&sourceid=chrome-mobile&ie=UTF-8 https://www.google.com/search?q=bank+deposit+reserves&oq=ban... Currently 10% of deposits for big banks, ie more than $124MM in deposits.
  - nradov 7y ago
    While you are technically correct, in practice reserve requirements aren't the limiting factor in bank lending.
  - gerardfoucher 7y ago
    "minimum reserves..." In Eurozone, 1% of already issued credit. https://www.ecb.europa.eu/explainers/tell-me/html/minimum_reserve_req.en.html https://www.ecb.europa.eu/explainers/tell-me/html/minimum_re... "or capital requirements" Basel Accords are a very complex system of ratios between bank capital (as a guarantee against bankruptcy) and bank credit (at risk of depreciation). The resulting ratio from these accords currently evolves between 0 and 9.5%. One important detail : Basel III is a "voluntary regulatory framework". A lovely oxymoron that means "you have to comply with this, if you want to." https://en.wikipedia.org/wiki/Basel_III https://en.wikipedia.org/wiki/Basel_III

campee 7y ago

I think that's true of a car but unless you live in an area that is not densely populated (and probably won't have much in the way of jobs), then the house part is not true, unless you're willing to live with your parents until you're at least 30.

sixseven 7y ago
> unless you're willing to live with your parents until you're at least 30. Which is considered normal in many non-US cultures.

7373737373 7y ago

>You’re giving your money away to the bank to borrow their money while they sit back and do nothing to collect Banks do not lend money, but instead newly create credit and money. See https://www.economicsnetwork.ac.uk/archive/starkey_banking https://www.economicsnetwork.ac.uk/archive/starkey_banking https://en.wikipedia.org/wiki/Money_creation#Credit_theory_of_money https://en.wikipedia.org/wiki/Money_creation#Credit_theory_o... >A study of banking software demonstrates that the bank does nothing else than adding an amount to the two accounts when they issue a loan. The observation that there appears to be no limit to the amount of credit money that banks can bring into circulation in this way has given rise to the often-heard expression that "Banks are creating money out of thin air". https://www.sciencedirect.com/science/article/pii/S1057521914001070 https://www.sciencedirect.com/science/article/pii/S105752191... >This study establishes for the first time empirically that banks individually create money out of nothing.

tonyedgecombe 7y ago
>The observation that there appears to be no limit to the amount of credit money that banks can bring into circulation That's not true, there is a limit on their minimum reserves or capital requirements depending on the location.
- jfoucher 7y ago
  Citation ?
  - badpun 7y ago
    Banking laws and regulations. In most countries, banks are required to physically hold (i.e. not lend further) as a reserve a fraction of the money in their customers accounts. This is to provide liquidity, protect against bank runs etc. So, If a customer A has $1000 in his account and the reserve rate is 10%, the bank can only lent $900 to some other person B. Then, in turn only 90% of that can be lent further. If you run this to the limit, for a 10% reserve rate, the amount of money that can be generated by banks is at most 10x the physical amount.
  - dlp211 7y ago
    https://www.google.com/search?q=bank+deposit+reserves&oq=bank+deposit+reserves&aqs=chrome..69i57j0l3.8204j1j7&sourceid=chrome-mobile&ie=UTF-8 https://www.google.com/search?q=bank+deposit+reserves&oq=ban... Currently 10% of deposits for big banks, ie more than $124MM in deposits.
- nradov 7y ago
  While you are technically correct, in practice reserve requirements aren't the limiting factor in bank lending.
- gerardfoucher 7y ago
  "minimum reserves..." In Eurozone, 1% of already issued credit. https://www.ecb.europa.eu/explainers/tell-me/html/minimum_reserve_req.en.html https://www.ecb.europa.eu/explainers/tell-me/html/minimum_re... "or capital requirements" Basel Accords are a very complex system of ratios between bank capital (as a guarantee against bankruptcy) and bank credit (at risk of depreciation). The resulting ratio from these accords currently evolves between 0 and 9.5%. One important detail : Basel III is a "voluntary regulatory framework". A lovely oxymoron that means "you have to comply with this, if you want to." https://en.wikipedia.org/wiki/Basel_III https://en.wikipedia.org/wiki/Basel_III