el-ahrairah
forward communism, forward gerbils!
did somebody mention jews?
"Banks create money out of nothing" - Guardian
- Thread starter Jazzz
- Start date
Would it make any difference if they had?
el-ahrairah
forward communism, forward gerbils!
probably not, no.
What about usury, slavery, and faustian pacts?
ItWillNeverWork
Messy Crimbobs, fellow humans.
TruXta
tired
Central banks, yes, other banks no. It's really not that complicated.
grit
an ugly force for good
Yeah sorry should have clarified that.
butchersapron
Bring back hanging
So where exactly then is jazzz correct in his assertion that non-central banks create money?
ItWillNeverWork
Messy Crimbobs, fellow humans.
Central banks control the base rate, and of course this is a factor in the decision of a bank to lend. But it's not the only factor, surely? At the end of the day, it's the private banking system that grants the loans.
el-ahrairah
forward communism, forward gerbils!
Jesus Christ they look mental.
Someone has stolen their copy of The Protocols.
ItWillNeverWork
Messy Crimbobs, fellow humans.
Of course, and that's the point. Central banks cannot influence the money supply in any meaningful sense unless the private banks are able to lend, and the private banks cannot lend unless conditions in the real economy allow it. But the CB is the last actor in the whole story, not the creator of money.
grit
an ugly force for good
In the part where the bank grants loans based on money it doesn't have in reserve, its the final act in the process.
Blagsta
Minimum cage, maximum cage
those loans are funded
butchersapron
Bring back hanging
Which you say only central banks do and he says any bank can do. You're saying that he's wrong. Or if you're not, you're saying that your own brief words on the process (i.e the clarification you offered to truxta) are wrong.
So let's clarify further - is jazzz correct or is he wrong to say that non-central banks create money out of nothing?
DotCommunist
So many particulars. So many questions.
did somebody mention jews?
I like how they are all giving it the biggun except one bloke who just looks like he wants to fuck off for a pint
ItWillNeverWork
Messy Crimbobs, fellow humans.
Not necessarily at the moment the loan is granted though. As long as the loan is funded by the time the bank declares it's numbers, then there isn't an issue with the bank granting a loan prior to it going off to find deposits. You have to think about flows in and out of the bank, as opposed to the stock of what is already sitting there.
A bank will have projections of how much money it expects to have coming in over the coming period, and will loan out an amount based on these projections. If a blockage occurs in the real economy then these projections will be wrong, and a banks crisis will hit. If banks always made sure that their loans were fully funded beforehand, then we would never see banks unable to meet their obligations.
butchersapron
Bring back hanging
You didn't really think through your first post did you?
love detective
there's no love too small
This isn't actually true
What you say above suggests the only constraints on the sphere of circulation are formal external legal/reporting requirements that are imposed from outside the circulation process itself, as regulations - which is not the case.
Even in some kind of pure anarcho-capitalist world where there was no formal reporting requirements or legal regulations, bank's would still have the same constraints that they have at the moment (in relation to this anyway) - which mean in order for them to take part in the process of circulation and money/credit creation, there are a number of necessary requirements that have to be in place that are external and outwith of the bank's control, but imposed from within the sphere of circulation - not by regulations external to it. It's not about having to do it for reporting or legal purposes.
This is exactly right, and if something doesn't flow into a bank it can't flow out - no matter how much Jazz thinks it can. This is what circulation is, and the clue's in the name itself.
More the other way around (most of the time anyway), it will agree in principal the level of targeted lending activity in advance (based on existing agreed commitments/facilities, new loans etc..) and seek to ensure it then has funding in place to meet that anticipated lending.
bank's do ensure their loans are funded before they are made, it's impossible for them to be made otherwise - circulation & flow are not formal rules or obligations put on banks from outside, they are 'natural' conditions of the sphere of circulation
a bank's 'obligations' (i.e. it's liabilities in accounting speak) isn't its lending to other parties btw, it's obligations is the funding it has put in place to enable it to make that lending
this is why for example northern rock went under - the funding that it had 'in place' in the form of short term borrowing in the inter-bank lending to fund it's long term mortgage lending dried up, and they were unable to rollover this short term funding when the markets froze up that they had used to fund their lending - this is why the state had to step in with an emergency loan of around £30bn to replace the funding that it had previously got from the inter bank market. If Jazz (and to a lesser extent you) are correct, then this loan from the govt should have never been needed as the assertion is that bank's don't need to fund their lending. But they do.
camouflage
gaslit at scale.
Northern Rock; is that Call Money that dried up or is that something else?
love detective
there's no love too small
what do you mean by call money in this context?
doesn't seem relevant in the context I know it in
doesn't seem relevant in the context I know it in
Mrs Magpie
On a bit of break...
Well, you consistently come over as a bully on here, but having met you I don't regard your board persona as being really you. I've met Jazzz too and I don't equate his postings as being wholly who he is. I find it hard to marry them with the person I know as sensitive, kind and musically gifted, just as I know you aren't a rigid dogmatic bully.
eta I think he picks out the bits he likes and has a sort of blindness to the rest.
eta2 In general I think people who believe in conspiracy theories feel they have no control of their lives and the idea that 'they' control and pull strings is somehow comforting as it denies that the world is a swirling chaotic jumble that includes massive cock-ups and incompetence by those who wield power.
cesare
shady's dreams ♥
Are you asking if Northern Rock's liquidity problem was the result of short term funding being called back?
camouflage
gaslit at scale.
camouflage
gaslit at scale.
Yup, there's also the 'overnight loans' thing they do (between banks), when I asked the above I thought they were the same thing.
love detective
there's no love too small
Not quite, but the bulk of the funding of NR's long term mortgage book was funded by rolling over 3 month lending from the interbank market - they were very exposed in this sense because they didn't match long term lending with long term funding, so when that short term funding market froze up, they were left very exposed and with nowhere to turn to for funding but the state
They were fools really to do that though, they should have just talked to Jazz and done some accounting entries and everything would have been fine
cesare
shady's dreams ♥
I think it was sub-prime/credit crunch when 75% of their funding model relied on that, that caused what happened - rather than any short term funding being demanded back.
Hitler loved his mum
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