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Although a great deal of smoke and mirrors is used when justifying the banks unique right to print money, and it's easy to miss the wood for the trees as you ge

by npoc 3y ago

Although a great deal of smoke and mirrors is used when justifying the banks unique right to print money, and it's easy to miss the wood for the trees as you get lost in the details, the bigger picture is quite simple: 1) the banks print new money every time a loan is taken out and charge interest on that money 2) the amount of money loaned out is increasing every year 3) the total amount of money currently loaned is essentially all the fiat money in existence i.e. even 2% interest is a mind-blowing amount of annual income Sure, we can debate about between the banks and government, who receives what proportion of the interest, but if you disagree with any of those three points, please explain.

lupire 3y ago
That created money is lent to borrowers, who in aggregate benefit from it more than the interest costs. The banks don't get to just spend the deposits. Lending out money at the rate of inflation is 0 profit after inflation.
- npoc 3y ago
  All the fiat currency units in existence are a loan to a bank somewhere. That is over a hundred trillion dollars for the US alone. If you're receiving 2% of $100,000,000,000,000 each year, for money you printed out of thin air, you're not going to worry about the effects of CPI on your monthly budget.
CraigJPerry 3y ago
1) incomplete statement - When the bank creates new money (its liability to you) it does so because it agreed a loan contract with you (its asset). The consequences of this are wide ranging, but relevant to this thread, it means a bank does not get richer when creating money, it gets richer when you pay interest in excess of its costs of providing you with money. Although the bank created the loan money from nothing, it still ends up with significant costs to provide that money, for example through capitalisation regulations on the asset. Another relevant consequence of this is that a bank is not incentivised to have a huge balance sheet - which it would have if it only made loans. Instead these loans made are securitised and removed from the bank’s assets. This means interest paid on the loan no longer goes to the bank but to whoever bought the loan.
- npoc 3y ago
  I appreciate you filling in the details. > it gets richer when you pay interest in excess of its costs of providing you with money. Apart from the costs of running the bank, any other costs are simply what I would call money laundering (i.e. smoke and mirrors - as I mentioned, we can argue over who exactly receives what proportion of the money, but it doesn't escape the facts that the population is paying interest on trillions and trillions that were created out of thin air by a select few). > This means interest paid on the loan no longer goes to the bank but to whoever bought the loan. The key words here are "...whoever bought the loan". So someone has paid the bank money (I assume relatively equal to the outstanding balance of the loan) for money (the loan) that the bank printed effortlessly. This is simply more money laundering.
  - notahacker 3y ago
    The costs of running the bank include the costs of administering the loans, the cost of the bank paying interest on reserves it needs to borrow and the costs of defaults. No "money laundering" is involved. Banks are going to earn money on the margin between the rate they can lend at and the rate they need to pay to secure reserves regardless of monetary system. The alternative without Fed access is the population paying much more interest plus random bank busts, and this doesn't seem to be an obvious improvement to anyone except the superrich earning much more interest on the money they can offer long term loans on.
    - npoc 3y ago
      There is no real cost of defaults. The money that wasn't paid back was created out of thin air with no effort from the bank. Money laundering is taking ill-gotten gains and processing them to make them look legitimate. This is exactly what the central banking system, in partnership with the government, does. However much you try to justify what they are doing you can't deny that the banking system is charging interest on every unit of currency in existence and they created them all for essentially free. People absolutely should pay more interest - the free-market rate. It's absolutely wrong that people who get into debt are rewarded for doing so, at the cost of people who don't, who have the value of their savings, wages and pensions stolen. It's a vicious cycle - lower than free-market interest rates force people to have to borrow money. Look at what it has done to prices of houses relative to wages over the last 50 years. It's reached the point that many people are now forced to take on 35, even 50 year mortgages, just to buy a very modest home. Look up the Cantillon effect. See here for some of the terrible, far reaching effects: https://wtfhappenedin1971.com/ https://wtfhappenedin1971.com/

by npoc 3y ago

lupire 3y ago

That created money is lent to borrowers, who in aggregate benefit from it more than the interest costs. The banks don't get to just spend the deposits. Lending out money at the rate of inflation is 0 profit after inflation.

npoc 3y ago
All the fiat currency units in existence are a loan to a bank somewhere. That is over a hundred trillion dollars for the US alone. If you're receiving 2% of $100,000,000,000,000 each year, for money you printed out of thin air, you're not going to worry about the effects of CPI on your monthly budget.

CraigJPerry 3y ago

1) incomplete statement - When the bank creates new money (its liability to you) it does so because it agreed a loan contract with you (its asset). The consequences of this are wide ranging, but relevant to this thread, it means a bank does not get richer when creating money, it gets richer when you pay interest in excess of its costs of providing you with money. Although the bank created the loan money from nothing, it still ends up with significant costs to provide that money, for example through capitalisation regulations on the asset. Another relevant consequence of this is that a bank is not incentivised to have a huge balance sheet - which it would have if it only made loans. Instead these loans made are securitised and removed from the bank’s assets. This means interest paid on the loan no longer goes to the bank but to whoever bought the loan.

npoc 3y ago
I appreciate you filling in the details. > it gets richer when you pay interest in excess of its costs of providing you with money. Apart from the costs of running the bank, any other costs are simply what I would call money laundering (i.e. smoke and mirrors - as I mentioned, we can argue over who exactly receives what proportion of the money, but it doesn't escape the facts that the population is paying interest on trillions and trillions that were created out of thin air by a select few). > This means interest paid on the loan no longer goes to the bank but to whoever bought the loan. The key words here are "...whoever bought the loan". So someone has paid the bank money (I assume relatively equal to the outstanding balance of the loan) for money (the loan) that the bank printed effortlessly. This is simply more money laundering.
- notahacker 3y ago
  The costs of running the bank include the costs of administering the loans, the cost of the bank paying interest on reserves it needs to borrow and the costs of defaults. No "money laundering" is involved. Banks are going to earn money on the margin between the rate they can lend at and the rate they need to pay to secure reserves regardless of monetary system. The alternative without Fed access is the population paying much more interest plus random bank busts, and this doesn't seem to be an obvious improvement to anyone except the superrich earning much more interest on the money they can offer long term loans on.
  - npoc 3y ago
    There is no real cost of defaults. The money that wasn't paid back was created out of thin air with no effort from the bank. Money laundering is taking ill-gotten gains and processing them to make them look legitimate. This is exactly what the central banking system, in partnership with the government, does. However much you try to justify what they are doing you can't deny that the banking system is charging interest on every unit of currency in existence and they created them all for essentially free. People absolutely should pay more interest - the free-market rate. It's absolutely wrong that people who get into debt are rewarded for doing so, at the cost of people who don't, who have the value of their savings, wages and pensions stolen. It's a vicious cycle - lower than free-market interest rates force people to have to borrow money. Look at what it has done to prices of houses relative to wages over the last 50 years. It's reached the point that many people are now forced to take on 35, even 50 year mortgages, just to buy a very modest home. Look up the Cantillon effect. See here for some of the terrible, far reaching effects: https://wtfhappenedin1971.com/ https://wtfhappenedin1971.com/