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The UK banking system

A Dashing Blade said:
Erm . . . the UK govt has redeemed (ie paid back) a shedfull of gilts over the last 20 years (this is the reason the UK Govt retains it's triple A credit rating, the UK Govt has not defaulted on any Govt bonds over the last 200 years). In fact, the lack of long dated Govt paper is a significant factor in exacerbating the current pensions "crisis".
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Whether the UK debt is consumer debt or governmental debt it is based upon money from the BoE. It is an I.O.U with no return on it

edit to clarify

Whether the UK debt is consumer debt or governmental debt it is based upon money from the BoE. It [money] is an I.O.U with no return on it
 
This is like economics for autistic toddlers. The basics of fractional reserve banking, a financial bedrock of capitalism were, until the 1930s:

(1) Central Bank prints money, which is convertible to gold.

(2) Commercial Banks accept deposits, lend money out to people wishing to invest.

(3) Some of that money gets deposited back into banks.

(4) Therefore you get credit creation.

Now, here's the key bit. For every asset on the bank's books there is a liability. Therefore there is no such thing as money from nothing. That's absolute crap. The banks are liable for the deposits. It is true that if they were all claimed at once, there is a run on banks and there is not enough money to back it. This happens. It happened in Argentina only a few years ago. But this is an issue of intertemporal substitution and reserve requirements, not some magical conspiracy.

Nowadays we're off the gold standard and so money is not redeemable against gold. It is however backed by the state. And it has worked remarkably stably for centuries; as A Dashing Blade has said, the UK Govt has not defaulted on any Govt bonds over the last 200 years. This means that not once in two centuries has somebody asked for their money from the government and not received it. So what is this conspiracy again?
 
Incidentally, the assets of the Bank of England are owned by the state, the leaders of which are responsible to the electorate. Have you noticed that all the quotes you find on the evil of central banks are at least 60 years old? That's because they are spectacularly out of date. The BoE was nationalised in 1946, and is wholly owned by the government.

http://www.bankofengland.co.uk/about/parliament/index.htm

Pull yourself together.
 
slaar said:
Now, here's the key bit. For every asset on the bank's books there is a liability. Therefore there is no such thing as money from nothing. That's absolute crap. The banks are liable for the deposits. It is true that if they were all claimed at once, there is a run on banks and there is not enough money to back it. This happens. It happened in Argentina only a few years ago. But this is an issue of intertemporal substitution and reserve requirements, not some magical conspiracy.
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It's you that need educate yourself slaar. When a bank - through the wondrous scam of fractional reserve banking - creates money out of thin air, it counts as both an asset (customer deposit) and liability (promise to repay). So the bank's books balance - however it may have just lent up to ten times the amount of cash it has, money which one can fairly say never previously existed.

That's the thing - when you go to your bank and they give you a loan, the money doesn't come from anywhere. They don't deduct another account with the same sum. No, it just appears in your account because someone types the number in! If you give a bank £10,000 - it can lend £100,000, charging interest too and get away with the swizzle it unless there is, as you say, a run.

That's why the banks always have the fanciest buildings around!

How banks create money out of nothing
 
Jazz, you've just repeated exactly what I said.

A loan is both an asset and a liability. That doesn't mean they can lend £100,000 for every £10,000 they get; the amount they can lend out depends on reserve requirements. If they take in £10,000 and the reserve requirement is 5% they keep £500 on deposit and lend £9,500. It's only when this money is re-deposited, if it is, that the credit multiplier comes into play. But again they're still taking on liabilities, and if they do it in an unstable manner they go bust. That's a risk for them, hence a service they are providing.

Money exists if it is generally accepted as a social medium of exchange. There's nothing magical about that, and it seems to work fairly well by all accounts at keeping the capitalist wheel turning, whatever one's views on that.

I'm finding it hard to locate the conspiracy. A basic textbook might assist you with all this.

Edit: In fact I've just re-read your post and it's mostly crap. Banks can't just type in figures into a spreadsheet and call it money. That's illegal. As is breaking reserve requirements. As is failing to meet demands for somebody's money. I don't think you quite grasp the iterative principles of fractional reserve banking. It's not really that tough. You haven't even understood your own link, which takes you through the process quite succintly.

But that example only works with one bank if all money is redeposited. In practice much money is in circulation (that's the M0 definition of money supply), in current account deposits which can't be called upon as sources of funds so easily (M0 plus CA deposits equals M1), and reserve requirements plus banks' own restrictions are much higher. The credit multiplier is nowhere near the 10x figure you imply.
 
Bank's can't just type in figures into a spreadsheet and call it money.
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Indeed, as Enron, MCI and about 70% of corporate America found out a few years ago when they all embarked on a massive round of 'restating' their accounts, Banks, central or private, can't do it either (I might be wrong but this was why BCCI failed wasn't it?)
 
slaar said:
So what is this conspiracy again?
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Ok, back to my first post,

Society is formed out of a system of economics. Production of trade, industry, culture, ideology, the individual is based upon a system that has as its basis 'sign value'.
'Sign value', money has no intrinsic value it is wholey an attributed value that is not fixed but free flowing and in flux.
Capitalism, communism, socialism are all based upon the premise of ownership of trade and industry. Capitalism - the private ownership of trade and industry, Socialism - the trade and industry is owned by the state, communism - common ownership of trade and industy all based upon ownership. Ownership is 'belonging to'.
The basis for all trade and industry is 'sign value'. Therefore trade and industry cannot be owned, it is not 'real'. Nothing is owned.

"To dissimulate is to feign not to have what one does.
To simulate is to feign to have what one hasnt"
Baudrillard

The economy is the simulation. It is the re-production of the real, the hyper-real.

Marx, Hegal, pyscho-analysis, sociology, philosophy holds the social basis as 'use value'. This is the most disgusting representation of a system that is false. These theories state that 'sign value' = 'use value', a gross distortion of our lives.

Political parties are based upon this myth, Labour, Tory, Liberal, BNP are all simulations, re-productions of the real through the economy, just as we are.

Power, control and individual agency are locked into this system as perfect representations of the real. All social, philosophical, psychoanalytical theories are part of the the simulacrae, but a re-evaluation of these using 'sign value' as the basis gains useful results.

Foucault discusses power and its effects as an internalised system, that makes individuals control their own behaviour. This power is internalised through Institutional changes in society - prisons, military and discourse. This as foucaults clearly says is empowering not repressive and thus always remains. This is has been evaluated and termed 'Bio-power', the thinking behind this evaulation is based upon 'use value'. Re-evaluation with 'sign value' provides a body of work that explains how 'simulacrae' is internalised and acts through us.

At this point there emerges the problem of position of speaking, namely that coined term 'subjectivity'. How can i talk of simulacrae if the simulacrae is acting through me?

Psycho-analysis - Lacan - Mirror phase
At this point staring in the mirror, the individual sees themself. Their simulated self, an image, a sign. Here is the point of divergence between the real world and the simulacrae. There still remains a real point of subjectivity.

[dashing blade]
How about profits in the sense that most people would understand in the context of this "discussion" ie financial ones.

This is the simulacrae speaking. An argument based through 'sign value' results in the validation of the simulacrae.

[zark]
sign value underpins the the structure and as such makes a mockery of financial arguements.

The economic system (simulacrae) is all controlling, there is no hidden hand, there is no controllers other than the simulacrae itself. Any attack upon the simulacrae results in a violent reaction to preserve itself. It is a living entity as it speaks through us.
The mirror stage;

the mirror stage establishes the ego as fundamentally dependent upon external objects, on an other. As the so-called "individual" matures and enters into social relations through language,

The individual, the 'I', is the simulacrae. The simulacrae is internalised and enters the newly formed reproduced individual into reproduced social relations, those being based upon the economy, the simulacrae.

The bank's shareholders, the governors, the politicians, the uk public, everyone is living through this reproduced society. Any denial of the validity of this system results in defense from politicians, shareholders, public. These individuals are defending their perceived selves, their simulated selves. To deny the system as real, requires denying ones self that has been created through this system. The simulacrae will fight for its survival at any cost.

I am speaking from the pre-mirror stage, from the real. The conspiracy is none existant. Your-simulated-self belongs to the simulacrae, it is the simulacrae. The Bank of England owns all, it owns all your property as it created everything; trade, industry, individuals, capitalism, communism, socialism, ideology, working class, ruling class, labour, tories, everything.


The increase in bank created loans over the years is additional conclusive proof that banks do create “money” out of nothing – £1.2 billion in 1948 up to £14 billion by 1963 up to £680 billion by 1997.
Today’s supply of notes and coins after taking inflation into account, has similar buying power to the supply in 1948 (£1.1 billion) but since then, there has been a ten fold plus increase in real terms in money supply made up of credit created by banks.

As the economy moves futher away from coins and real money, the economy begins to completely subsume your-real-self. As this process increases exponentially the simulacrae begins to disappear from sight.

"An unoccupied land gives ideas to people in occupied lands."

When we are completely occupied by the simulacrae, we will not hesitate to save the simulacrae from collapse and be willing to do anything to perform this. Total enslavement will be willingly accepted.
 
slaar said:
Jazz, you've just repeated exactly what I said.

A loan is both an asset and a liability. That doesn't mean they can lend £100,000 for every £10,000 they get; the amount they can lend out depends on reserve requirements. If they take in £10,000 and the reserve requirement is 5% they keep £500 on deposit and lend £9,500. It's only when this money is re-deposited, if it is, that the credit multiplier comes into play. But again they're still taking on liabilities, and if they do it in an unstable manner they go bust. That's a risk for them, hence a service they are providing.

Edit: In fact I've just re-read your post and it's mostly crap. Banks can't just type in figures into a spreadsheet and call it money. That's illegal. As is breaking reserve requirements. As is failing to meet demands for somebody's money. I don't think you quite grasp the iterative principles of fractional reserve banking. It's not really that tough. You haven't even understood your own link, which takes you through the process quite succintly.
Click to expand...

You're simply wrong slaar - if a bank has £10,000 deposits it can lend out £100,000. Money which never existed. The money lent out doesn't have to come from a deposit, as you seem to think - it's a computer entry. It exists in the client's account because the bank says it does.

And this is precisely what happens in the link I provided. Had you read it properly you would see the bank in question receives £10,000 and lends out £100,000!

Unfortunately this practise of money creation is not illegal, although it certainly should be.
 
Jazzz said:
You're simply wrong slaar - if a bank has £10,000 deposits it can lend out £100,000. Money which never existed. The money lent out doesn't have to come from a deposit, as you seem to think - it's a computer entry. It exists in the client's account because the bank says it does.

And this is precisely what happens in the link I provided. Had you read it properly you would see the bank in question receives £10,000 and lends out £100,000!

Unfortunately this practise of money creation is not illegal, although it certainly should be.
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This is getting tedious. Banks can indeed make loans equal to multiples of an original deposit, if the initial loan is deposited back into the bank. It is illegal for banks to re-lend money that they do not have claims on.
from your link said:
It will, therefore, be prepared to go on making loans (or creating credit, which is the same thing) until the cash that is held is equivalent to only 10 per cent of deposit
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This possibility, as I have stated, is dependent on the money being redeposited, it can't just be created:

http://en.wikipedia.org/wiki/Money_multiplier

let's assume that a primary deposit of $1000 is made into bank A. If the cash reserve ratio is 12%, then $120 must be kept on hand by the bank and $880 is available to be lent to someone else (called the excess reserve). Now if bank A uses its $880 in excess reserve by lending it out, and that is deposited in bank B, it represents a primary deposit to the second bank. Bank B must keep 12% of $880 on hand but can lend out $774.40. If that $774.40 is eventually deposited in bank C, the third bank must keep $92.93 on hand but can lend out $681.47. The process continues until there is no excess reserve left (For simplicity we will ignore safety reserves.). By adding all the derivative deposits we can calculate the amount of money created.
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As I said, any basic textbook will tell you this. Basic factual error.
In actual fact, the money creation multiplier is more complex than this simple description. We must add to the equation the currency drain ratio (the propensity of the public to hold cash rather than deposit it in the banking system), the clearing house drain (the loss of deposits from the system due to interactions between banks), and the safety reserve ratio (excess reserves beyond the legal requirement that commercial banks voluntarily hold—usually a very small amount). Also, most jurisdictions require different levels of reserves for different types of deposits. Foreign currency deposits, domestic time deposits, and government deposits often have different cash reserve ratios.
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I repeat: Where is this conspiracy?
 
slaar said:
This is getting tedious. Banks can indeed make loans equal to multiples of an original deposit, if the initial loan is deposited back into the bank. It is illegal for banks to re-lend money that they do not have claims on.

This possibility, as I have stated, is dependent on the money being redeposited, it can't just be created:

http://en.wikipedia.org/wiki/Money_multiplier


As I said, any basic textbook will tell you this. I know you're liberal with your facts on a range of issues, but this is silly.
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Its money created. The BoE produces money.
Following your argument;

the redeposited money is coming from where???
which money?

the money produced by the BoE.

Its so simple.

On a global banking scale, the money deposited is nothing more than figures on screen.

There is nothing behind this system, it is created out of thin air.

Using money from the BoE to pay for money from the BoE.
The world bank just types in numbers to balance the world economic system.

Its all fake.

The conspiracy is fake, i have never said it was a conspiracy. I never blamed zionists, bankers, governors, politicans or anyone.
 
The Bank of England owns all, it owns all your property as it created everything; trade, industry, individuals, capitalism, communism, socialism, ideology, working class, ruling class, labour, tories, everything.
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So explain pre-central bank societies that used money and issued credit then?

Your Baudrillard reading has clearly driven you to some kind of craziness - altho I understand your rejection of historical events now since things that actually happened such as the nationalisation of the BoE is, in your variant of reality didn't and are part of the ongoing simulacrae.

Don't be so presumptive as to call your mirror view 'the real' tho - you are simply seeing one edge of many competing 'reals'.

As you should know being a student of PoMo. The simulacrae you describe only exists in relation to other simulacrae - such as (but not limited to) non-economic interactions with other actors who in turn exist within their own 'real'.
 
kyser_soze said:
So explain pre-central bank societies that used money and issued credit then?

Your Baudrillard reading has clearly driven you to some kind of craziness - altho I understand your rejection of historical events now since things that actually happened such as the nationalisation of the BoE is, in your variant of reality didn't and are part of the ongoing simulacrae.

Don't be so presumptive as to call your mirror view 'the real' tho - you are simply seeing one edge of many competing 'reals'.

As you should know being a student of PoMo. The simulacrae you describe only exists in relation to other simulacrae - such as (but not limited to) non-economic interactions with other actors who in turn exist within their own 'real'.
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seeing one edge of many competing 'reals'

ahh String Theory pushes into the fray. Multiple reflections of the Mother of all Theories.

Dont mistake the real for realities.

PoMo - Post-Modernism? I am guessing you are using an abv i have never seen before.

Post-modern theory is intertwined within the Simulacrae and doesnt describe simulacrae. Baudrillard has been unable to merge with Post-Modern theory due to the basis of PoMo being use value.

Non-economic interactions are non-simulacrae interactions. The theory of realities are re-produced through theories based within the simulacrae, based upon use value.

non-economic interactions with other actors who in turn exist within their own 'real'

What produced 'actor'? Where does the idea of 'actor' emerge from? The principle of 'use value'.

Realities are simulacrae, the real is not.
 
So tell me, what is the real? Lets assume that I agree with your take on how the banking system works (not too hard a stretch since it is largely supported on smoke and mirrors), why do you have a conceptual difficulty with the idea of other actors within the real? (By actor I mean a non-self entity that describes itself as being self aware and sentient) And also, non-economic interactions happen in the same reality as the simulacrae - I can be talking to my girlfriend about something while using a cashpoint withdrawing an actual physical representation of money.

So you need to define what 'the real' is.
 
A Dashing Blade said:
Whereas I just didn't understand it.
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Its a mishmash of poorly understood Marxism, psychoanalsyis and post-modernism/post-structuralism with a hefty dose of idiocy and paranoid delusions.
 
kyser_soze said:
why do you have a conceptual difficulty with the idea of other actors within the real? (By actor I mean a non-self entity that describes itself as being self aware and sentient)
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While you are adhering to an essential self, outside of simulacrae, you none-the-less reinsert the essential self into the simulacrae. The 'actor' you talk of is indistinguishable from objects. Actor is produced through trade, industry, techonology and is positioned within an interconnected network that is the simulacrae. Self-awareness is produced through this network and doesnt exist outside of it. Whether called node, or actor, subjective positions do not emerge from the individual but from the specific inter-connected actors. Therefore it is entirely simulacrae.

kyser_soze said:
non-economic interactions happen in the same reality as the simulacrae - I can be talking to my girlfriend about something while using a cashpoint withdrawing an actual physical representation of money.
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Your example names actors ; you, girlfriend, cashpoint, money. The example is a subjective position created by the simulacrae.

Now here is where we can depart from these constraints of the simulation;

Modernist theories are structured and produce simple explanations of power and control.
Post-Modernist theories are post-structural and produce complex explanations that are partial.

Using Actor theory, it is possible to positon oneself as central to all nodes, or actors. At this point you are vibrating within a network of nodes, yet there is no escape from this position. It is entirely dependant for its existance upon the nodes/actors. The individual cannot claim personal identity at this point and is totally subserviant to the system creating the individual.
The nodes are produced by the simulacrae; industry, technology, trade and you. The entire system is based upon sign value.
We are uprooted from the real and reproduced by the simulacrae.
We are satillised, with a giant mirror below us reflecting back our image. This image is perceived as the real. Everything we see is fake, it is unreal. Smash the mirror and a surface is found.

kyser_soze said:
So you need to define what 'the real' is
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For what reason is it important to 'define' the real? In an attempt to claim it? To own it?

Please,
ownership is the simulation
 
I tell you what, somebody is really going to have to go some to beat this in the "crackpot thread of the year" awards come christmas.
 
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