"Banks create money out of nothing" - Guardian

[Jazzz]

Amazing, truth hitting the mainstream press! Thank you Deborah Orr.

Much lip service is paid to the idea that over many years in Britain there has not been enough investment in manufacturing. What is overlooked is that one sector did a gargantuan amount of manufacturing during this period. The big international banks manufactured money, using very simple raw materials. All they needed were computers and borrowers. Every time they made a loan, the banks simply typed the amount they were lending into their computer system, transferred it to their victim's account, and charged interest for the privilege. The late media entrepreneur, Roy Thomson, once described his ownership of Scottish Television as "a licence to print money". The banks didn't even have to go to the trouble of printing the stuff.

http://www.guardian.co.uk/commentisfree/2012/jul/13/deborah-orr-better-banks-move-money

 

[Blagsta]

Deborah Orr, that well known economist.

 

[Skimix]

Good god, has she just read Jack and Jill learn about banking or something?

 

[Belushi]

 

[Blagsta]

If banks create money out of nothing, why haven't we got runaway hyperinflation?

 

[Jazzz]

Deborah Orr, that well known economist.

She's right though, and many economists don't actually understand money at all... you can find it explained in greater detail from the book

"Where does money come from?"

There is widespread misunderstanding of how new money is created. This book examines the workings of the UK monetary system and concludes that the most useful description is that new money is created by commercial banks when they extend or create credit, either through making loans or buying existing assets. In creating credit, banks simultaneously create deposits in our bank accounts, which, to all intents and purposes, is money.

"Refreshing and clear. The way monetary economics and banking is taught in many - maybe most - universities is very misleading and this book helps people explain how the mechanics of the system work." Professor David Miles, Monetary Policy Committee, Bank of England

I think this is probably the book she read skimix.

 

[paolo]

Good god, has she just read Jack and Jill learn about banking or something?

(I was taught it as part of O'Level economics)

 

[Blagsta]

She's right though, and many economists don't actually understand money at all... you can find it explained in greater detail from the book

"Where does money come from?"

The Jews, no doubt.

 

[paolo]

She's right though, and many economists don't actually understand money at all... you can find it explained in greater detail from the book

"Where does money come from?"

You don't need a whole book on the subject, and it's not something that "many economists don't understand" either - It's basic stuff taught at school.

 

[Blagsta]

How can banks lend what they don't have? This would lead to hyperinflation.

 

[FridgeMagnet]

She'll have watched one of those "money as debt" videos on YouTube then.

 

[Jazzz]

How can banks lend what they don't have? This would lead to hyperinflation.

It leads to inflation. Remember that as banks create new money by creating new loans, existing money is also disappearing as people repay their existing loans.

 

[Blagsta]

It leads to inflation. Remember that as banks create new money by creating new loans, existing money is also disappearing as people repay their existing loans.

It's magic! Jewish magic, no doubt.

 

[paolo]

How can banks lend what they don't have? This would lead to hyperinflation.

Not intrinsically. They're lending deposits. Whilst the deposits remain deposited, they can't be spent.

However money multiplies - I, Mr Depositor, would say I "have £1000".
The bank however may have lent say £900 of my £1000. So Mr Borrower says he "has £900".

So now we have £1900, which started has £1000. This can go round and round a fair bit. (e.g. Mr Borrower deposits the £900 in a bank, and they lend £800 of it... etc etc).

 

[Blagsta]

Not intrinsically. They're lending deposits. Whilst the deposits remain deposited, they can't be spent.

However money multiplies - I, Mr Depositor, would say I "have £1000".
The bank however may have lent say £900 of my £1000. So Mr Borrower says he "has £900".

So now we have £1900, which started has £1000. This can go round and round a fair bit. (e.g. Mr Borrower deposits the £900 in a bank, and they lend £800 of it... etc etc).

Yes, money circulates. So?

 

[RaverDrew]

It's magic! Jewish magic, no doubt.

Fractional reserve banking is real and a problem, so comments like this aren't really helpful and just add fuel to the fire that certain sections are merely trying to shut down debate.

 

[Skimix]

She's right though, and many economists don't actually understand money at all... you can find it explained in greater detail from the book

"Where does money come from?"



"Refreshing and clear. The way monetary economics and banking is taught in many - maybe most - universities is very misleading and this book helps people explain how the mechanics of the system work." Professor David Miles, Monetary Policy Committee, Bank of England

I think this is probably the book she read skimix.

It's not like fractional reserve banking is some big secret she's just stumbled upon though and she seems to be implying they create money out of nothing which is somewhere between naive and wrong.

 

[paolo]

Yes, money circulates. So?

If you google Fractional Reserve Banking Inflation, you'll find plenty to read. Some people believe it *is* inflationary, but I'm not sure the maths stands up.

 

[fogbat]

Fractional reserve banking is real and a problem, so comments like this aren't really helpful and just add fuel to the fire that certain sections are merely trying to shut down debate.

It is all he's worth. You think Jazzz cares about debate?

 

[RaverDrew]

It's basically a pyramid scheme, it's always going to end in tears for some.

 

[butchersapron]

Deborah Orr - another guardian 'diehard leftie' who sends their kids to private school.

 

[RaverDrew]

It is all he's worth. You think Jazzz cares about debate?

Well there's absolutely zero chance of getting him to engage if people just throw around anti-semitic slurs every time he posts anything. You're just going to make him defensive and more entrenched into ideas that may not be 100% correct.

 

[fogbat]

Well there's absolutely zero chance of getting him to engage if people just throw around anti-semitic slurs every time he posts anything. You're just going to make him defensive and more entrenched into ideas that may not be 100% correct.

You are a bad man

 

[paolo]

It's basically a pyramid scheme, it's always going to end in tears for some.

Kind of.

It doesn't have the same mathematical properties as a pyramid scheme. Fractional reserve works ad infinitum whilst there's no bank run. But oh man when there's a run... Catastrophic on an epic scale.

 

[ViolentPanda]

If banks create money out of nothing, why haven't we got runaway hyperinflation?

Obviously there's some sort of conspiracy to keep the facts hidden, you numpty!

 

[ViolentPanda]

The Jews, no doubt.

(Attempts to look innocent) Nothing to do with me, guv.

 

[ViolentPanda]

It leads to inflation. Remember that as banks create new money by creating new loans, existing money is also disappearing as people repay their existing loans.

Inflation always leads to repayment problems (money buys less, repayments are harder to meet, whether you're an individual or a corporation), so the virtuous circle you're attempting to construct here is flawed.

 

[ViolentPanda]

Deborah Orr - another guardian 'diehard leftie' who sends their kids to private school.

Wasn't she married to Nemo?

 

[ViolentPanda]

It's magic! Jewish magic, no doubt.

Kabbalism.
Feh, you can't trust Kabbalists. All that Gematria and abstruse Talmudic lore, and they still can't make a decent cup of tea!

 

[butchersapron]

Wasn't she married to Nemo?

Yep. How perfect.