Banker/Wall Street Governance

geoffrey · February 17, 2007

The banks do not lend money they already have. They create it.

Why do people get rejected for loans if the banks have no risk on their investments?

PolyNewbie · February 17, 2007

Geoffrey:Why do people get rejected for loans if the banks have no risk on their investments?

When people don't pay their loans you have debt free currency floating around in the economy that they cannoit collect interest on. Bankers are happy to make high risk loans but if too many people default then they are in trouble because of the amount of debt free currency.

Its like bugs in the kitchen, but seeing one or two and not doing anything about it means you will have more.

I guess you don't believe any of those quotes about banking or do you ?

Riverwind · February 17, 2007

When people don't pay their loans you have debt free currency floating around in the economy that they cannoit collect interest on.

Then why to banks go bankrupt if there are too many people defaulting on loans? You like twist and turn to avoid admiting the truth: it costs banks money to loan money because they take on a liability when they do. This means they lose money when someone defaults on a loan.

PolyNewbie · February 17, 2007

Riverwind, you need to straighten this guy out I think.

"The world is not, in fact, ruled by global corporations. It is ruled bythe global financial system." - David Korten

About Korten:

"My early academic preparation included a BA in psychology from Stanford University and MBA and Ph.D. degrees from the Stanford Business School. In plain language, my intellectual passion is to apply my knowledge of how culture and institutional structures shape human behavior to a search for ways by which we humans can do a better job of supporting one another in achieving the higher order potentials of our nature. "

PolyNewbie · February 17, 2007

Riverwind:Then why to banks go bankrupt if there are too many people defaulting on loans? You like twist and turn to avoid admiting the truth: it costs banks money to loan money because they take on a liability when they do. This means they lose money when someone defaults on a loan.

Yes they do lose money when someone defaults on a loan. Its a small amount of money but they don't like it.

Riverwind · February 17, 2007

"The world is not, in fact, ruled by global corporations. It is ruled bythe global financial system." - David Korten

His comment offers no context and no explanation and does not support your views in anyway. He could even be implying that the global financial system is a good thing because it constrains the power of global corporations.

Riverwind · February 17, 2007

Riverwind:Then why to banks go bankrupt if there are too many people defaulting on loans? You like twist and turn to avoid admiting the truth: it costs banks money to loan money because they take on a liability when they do. This means they lose money when someone defaults on a loan.
Yes they do lose money when someone defaults on a loan. Its a small amount of money but they don't like it.

Banks go bankrupt if the have have a large number of loan defaults. Why don't they just wave their magic wand and create more money to cover their losses?

PolyNewbie · February 17, 2007

Riverwind:Banks go bankrupt if the have have a large number of loan defaults. Why don't they just wave their magic wand and create more money to cover their losses?

Thats what they do now since deregulation of the financial sector. They just create more money but in earlier times it wasn't so easy. They were required to report M3 to the government now that is no longer required so they can create as much money as they want and the government has no right to know. Thats in the US and we are joining the North American Union so I don't think Candian regulations have any real relevance regarding what we can expect.

Riverwind · February 17, 2007

They were required to report M3 to the government now that is no longer required so they can create as much money as they want and the government has no right to know.

The zero reserve requirement does not mean the banks actually have zero reserves. The regulators expect banks to have prudent reserves and have the power to step in if they feel the banks are not keeping prudent reserves.

You have zero arguments that refute the information that is in any economics text book. Banks create a liability when they create money. That is why they go bankrupt. That is why they don't loan money unless they are sure they can get repaid and that is why the power to create money is not as wonderful as you think it is.

PolyNewbie · February 17, 2007

Did you email Korten to enlighten him with what has emerged from your rectum again wrt the banks ?

Riverwind:You have zero arguments that refute the information that is in any economics text book.

True. Thats because economics text books do not discuss the creation of money and the banks. I have however listed many books and references that do explain that banks create money from nothing and many quotes from notables that show in fact that banks do run this planet.

Riverwind · February 17, 2007

True. Thats because economics text books do not discuss the creation of money and the banks.

The books I have read do. I have provided links to online material that supports what is said in these text books. Sources you have provided also support my explanation but you still desperately cling to your irrational and unsubstantiated beliefs.

I have however listed many books and references that do explain that banks create money from nothing and many quotes from notables that show in fact that banks do run this planet.

You have not provide a single credible reference that supports your bizarre theories about banking. You have provided many quotes where people make unsubstantiated claims regarding the power of bankers. But none of these quotes actually explain WHY the banks have the power they supposedly have. Your quote from Korten is a perfect example - it says nothing other than global corporations are controlled by the global financial system yet you claim it supports your theories.

PolyNewbie · February 17, 2007

Riverwind:Your quote from Korten is a perfect example - it says nothing other than global corporations are controlled by the global financial system yet you claim it supports your theories.

Right. I've also shown John Kenneth Galbraith, a list of ex bankers and ex presidents saying the same thing.

Riverwind · February 18, 2007

Right. I've also shown John Kenneth Galbraith, a list of ex bankers and ex presidents saying the same thing.

And not one of the those quotes actually explains WHY they think bankers have all of the power. Those quotes add nothing to the discussion and certainty do nothing to support your theories.

PolyNewbie · February 18, 2007

Riverwind,

Read the quotes. They do explain why but not all of them.

"The modern banking system manufactures money out of nothing." - Josiah Stamp

""Banking was conceived in iniquity and was born in sin.

The Bankers own the earth. Take it away from them,

but leave them the power to create deposits,

and with the flick of the pen they will

create enough deposits to buy it back again.

However, take it away from them, and

all the great fortunes like mine

will disappear and they ought to disappear, for

this would be a happier and better world to live in.

But, if you wish to remain the slaves of Bankers

and pay the cost of your own slavery,

let them continue to create deposits."

-Josiah Stamp

What is it that is so hard for you to understand about this. Are you just determined to be ignorant ?

Riverwind · February 18, 2007

"The modern banking system manufactures money out of nothing." - Josiah Stamp

That does not contradict anything I have said. I do not dispute that banks create money from nothing. What I claim is that when banks do that they have to pay for the money they create.

What is it that is so hard for you to understand about this. Are you just determined to be ignorant ?

When are you going to learn that out of context quotes from long dead people about evil bankers mean absolutely nothing. I have shown how the banking system works. All the information that I provided is described in any good economics text book - I have provided online links to bank up my explanation. You can provide 1000s of unsubstantiated opinions but they do not invalidate the hard facts that I have provided.

PolyNewbie · February 18, 2007

Riverwind:I have shown how the banking system works. All the information that I provided is described in any good economics text book - I have provided online links to bank up my explanation.

No you haven't. Your links do not explain money creation they only explain how it is managed without showing how its created. All economics text books do this.

How would you interpret the above quote by Stamp when he talks about deposit creation ? I think there is only one way myself. Perhaps another has emerged from your rectum.

Riverwind · February 18, 2007

No you haven't. Your links do not explain money creation they only explain how it is managed without showing how its created. All economics text books do this.

False. The explainations in the text books show exactly how money is created: banks create money when they issue a loan and create a matching deposit on their books. The banks assets do not increase because the asset of the loan is matched by the liability with the deposit (i.e. bank CANNOT profit from the act of creating money). Furthermore, the bank assumes a risk when it creates money because it is still responsible for the liability created by the deposit even if the borrower cannot repay the loan.

How would you interpret the above quote by Stamp when he talks about deposit creation ?

Deposits are LIABILITIES for banks. i.e. they represent money the bank owes to someone else. The banks can create deposits but when they do they create debts for themselves which is something they will never do unless then can match that deposit with loan that pays better interest.

PolyNewbie · February 19, 2007

Riverwind: The explainations in the text books show exactly how money is created: banks create money when they issue a loan and create a matching deposit on their books.

Ok so what is it that you don't understand about the above statement ? Thats why banks have so much power. Do your bookeeping any way that you like but there you have it in a nutshell and they have a monopoly on money creation. The rest of us have to earn money and that money is always bearing interest for them. Why ? The US population bears all responsibility for the notes through FDIC.

Riverwind:Furthermore, the bank assumes a risk when it creates money because it is still responsible for the liability created by the deposit even if the borrower cannot repay the loan.

Responsible to whom ?

Jerry J. Fortin · February 19, 2007

Look at it this way folks, something like 90 % of the money supply in Canada was brought into existence as interest bearing debt. It was not created by the government in a mint, that form of currency represents only 10% of the money supply. Therefore a vast majority of the money in this country is in control of private interests. In other words the government does not control its own monetary system. It can and does regulate the financial sector but it does not have the means of actually controlling it without legislative effort.

Knowing this it is easy to understand how we, the unwashed masses of humanity, can formulate questions about monetary policy. Banks have no limits to their ability to create money, yet the government claims to control money supply through the efforts of a central bank which determines interest rates. The only thing that interest rates really do is determine the level of profit for the industry. During boom times the central bank claims to fight inflation by raising rates, during a bust they lower the rates. All the while the entire effort means profit for the banks. The bean counters will tell you that interest rates reflect risks and returns on investments. In reality if you were to run your home like a business you would suffer immediately. That is because there are two sets of laws, one for individuals and one for business. The individual is the one actually creating wealth through effort, the business is making profit on those efforts through creative accounting. Business uses people for their own ends, people are second class economic citizens.

The current system as it stands in this and for that matter every other nation in the western world is designed to take money from citizens to feed a government. Taxes, that is the big game. Nations and taxation. The taxes are levied on citizens to provide services or so we are lead to believe. The truth is that the individuals that rise to power find clever ways to spend tax dollars to the extent that they usually don't have enough of them. So they borrow money from the banks. In Canada a huge amount of money disappears every year to pay government debt. That represents a net transfer of wealth from the citizens to private interests.

The point I am getting at is that the systems we have designed are using us. That is own problem, it is our fault. We need to change the systems to do what we want them to do. Its not such a big deal when you think about it. The problem is that there is a perception that when the government acts to do anything besides transfer wealth into corporate hands that it is acting against the interests of business.

We need a leader to stand up and tell the truth about this crap and take the definitive action that needs to betaken in order to turn things around and make the citizen the first concern of government.

Riverwind · February 19, 2007

Riverwind: The explainations in the text books show exactly how money is created: banks create money when they issue a loan and create a matching deposit on their books.
Ok so what is it that you don't understand about the above statement ? Thats why banks have so much power.

We have the power to do that. Assume you give me a loan of $1000 and I will pay you 5% interest. However, assume you don't have the cash and I accept an IOU which you agree to pay me 3% interest on. I will then use that IOU to pay someone else $1000 and they are also willing to let you keep the cash and simply collect the 3% interest. You have just created $1000 that I used to settle a debt with someone else - just like the banks. There are no laws that prevent those kids of transactions at a personal level. Banking laws only come into effect if someone wanted to set up a business that offered services to the general public.

Obviously, most people would not accept an IOU from you so it would be hard to spend your IOU but my example does illustrate that the power to create money is a natural part of the economy and is not something that is exclusive to banks.

The rest of us have to earn money and that money is always bearing interest for them. Why?

Why not? The economy needs a money supply - charging interest ensures that the money goes to people who can make the best use of it. I see no reason to have the government get into the business of evaluating business plans and credit history so the gov't can decide who is loaned what and at what interest rate. Remember that the interest paid to banks is _not_ all profit. Banks only make a profit from the difference between what they charge and what the pay to deposit holders.

The US population bears all responsibility for the notes through FDIC.

False - the government will only step in after a bank goes bankrupt and protect _some_ of the savings of individuals. The bank itself was held fully responsible for the deposits it created which is why it went bankrupt and all it its assets would be used to pay deposit holders before the FIDC money would be used. Furthermore, banks pay into the fund just like they pay for fire or liability insurance.

Riverwind:Furthermore, the bank assumes a risk when it creates money because it is still responsible for the liability created by the deposit even if the borrower cannot repay the loan.
Responsible to whom ?

The people that get the cash that they create. When you use your credit card to buy a new TV then the bank has to pay interest on the money they created to the store that sold you the TV.

PolyNewbie · February 19, 2007

Riverwind:When you use your credit card to buy a new TV then the bank has to pay interest on the money they created to the store that sold you the TV.

No, they charge a few percent. Where did you get an idea like that ? What do you do at the bank ?

Riverwind:Why not? The economy needs a money supply - charging interest ensures that the money goes to people who can make the best use of it.

Perhaps the government make better use of a little more of your money, especially with all the wars. perhaps you should send them extra money for income tax this year.

Riverwind · February 20, 2007

Riverwind:When you use your credit card to buy a new TV then the bank has to pay interest on the money they created to the store that sold you the TV.
No, they charge a few percent. Where did you get an idea like that ? What do you do at the bank ?

The company that sells you the TV pays the VISA company its 2% transaction and deposits the remaining 98% into its bank account where it collects interest. If the store uses the money to pay the distributor then the money is deposited into the distributor's bank account where it collects interest.

Every time run up a debt on your VISA card you force the bank to pay interest on the money that was created by that debt.

PolyNewbie · February 20, 2007

Riverwind:Every time run up a debt on your VISA card you force the bank to pay interest on the money that was created by that debt.

They actually have the money that I borrowed then if they pay interest on it. They created it from nothing. They can use that money to make even more money. They pay interest on the deposited money but collect transaction costs for changing the books as the money moves around.

There is no reason to think that the bank who created the money through the Visa loan will get it on deposit and have to pay interest on it . Other banks are willing to accept it and pay interest on it - at least when less favourable reserve requirements (to the banks) were in place. Now they don't care so much to have money on deposit.

Riverwind · February 20, 2007

There is no reason to think that the bank who created the money through the Visa loan will get it on deposit and have to pay interest on it .

Why not? You talk about how very little money is actually used as cash - the rest is sitting in a bank account gathering interest. It is not possible for money to be anywhere else. Now it is true that banks try to convince people to keep money in low interest chequing accounts, however, low interest is not zero interest.

PolyNewbie · February 20, 2007

Riverwind: You have written many more works about economics on this thread than you have read about the topic. Thats why most of what you say is dead wrong. You are also unbelieveably arrogant because you seem to think that you and your reasoning is smarter than me and my books. Any intelligent person that writes about anything has read far more than he has written. Its a litimus test that proves you to be a fool.