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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 consequ

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/
    - notahacker 3y ago
      I'm going to be honest, if you put half as much effort into learning the very, very basics of how the system worked as you did into campaigning against it by furiously incorrecting everyone in this thread, you'd probably feel a bit embarrassed to be posting stuff like "there's no real cost of defaults" . The money was "created out of thin air" is the loaning bank's debt to the account the borrowed money is assigned to, not the bank's asset, so there's a very real cost to them if the borrower defaults and stops repaying them. Banks can become bankrupt, just like any other business, and no, they can't "print" their way out of it. If you're still struggling to believe there's no real cost of defaults to banks, I invite you to look up bank insolvencies. Perhaps someone could make a wtfhappenedin2007 website. I'm also chuckling away at you complaining that the current system means mortgages take too long to pay off a sentence after complaining that people who get into debt are rewarded! For the record, what you're actually advocating for with higher "free-market" interest rates is that poor people pay rich people more over the course of 25 years than they currently do over 35 or even 50 years to secure a house, which is less likely to appreciate in value. US home ownership rates were down at 40% before governments got involved in the mortgage market. It's impossible to pretend that anyone benefits from such a system other than people who are much, much richer than average home buyers.

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/
  - notahacker 3y ago
    I'm going to be honest, if you put half as much effort into learning the very, very basics of how the system worked as you did into campaigning against it by furiously incorrecting everyone in this thread, you'd probably feel a bit embarrassed to be posting stuff like "there's no real cost of defaults" . The money was "created out of thin air" is the loaning bank's debt to the account the borrowed money is assigned to, not the bank's asset, so there's a very real cost to them if the borrower defaults and stops repaying them. Banks can become bankrupt, just like any other business, and no, they can't "print" their way out of it. If you're still struggling to believe there's no real cost of defaults to banks, I invite you to look up bank insolvencies. Perhaps someone could make a wtfhappenedin2007 website. I'm also chuckling away at you complaining that the current system means mortgages take too long to pay off a sentence after complaining that people who get into debt are rewarded! For the record, what you're actually advocating for with higher "free-market" interest rates is that poor people pay rich people more over the course of 25 years than they currently do over 35 or even 50 years to secure a house, which is less likely to appreciate in value. US home ownership rates were down at 40% before governments got involved in the mortgage market. It's impossible to pretend that anyone benefits from such a system other than people who are much, much richer than average home buyers.