Tom Crawford failed judgment 3/9/15 Part 1 & 2

[Bungle]

Yes, if you borrow, you repay.
But what if you say, gamble your house and lose ?....you obviously forfeit the house.

Would you expect someone else to pay ?

To a certain extent Tom gambled his house because he believed the freeman woo woo crap. He forfeited his house but instead of expecting someone else to pay.....he thinks that he should be given the house back.

He intentionally made himself homeless. He gambled and lost. He needs to get over it.

[Skeleton]

Hi All
First off, I would like to apologies for the last few days, I can see how my comments were inappropriate.
I would like to thank the moderators for the fairly easy ride they gave me, and for other contributors tolerance.
For the record, Quatloos provides a valuable service in debunking freeman myths and methodology which leads to further debt and misery.
I have said before that the amount of solid investigation , evidence and logic used is incredible .
That said, I still stand by my dislike of personal attacks, in fact I believe it undermines everything that is good about this site.
To Yiam, my apologies too, although I believe the venture was ill advised, you are obviously free to go where you wish.
I can only blame another horror day at Stamford Bridge, don't worry, I'm not going tonight!

Well said Joinder, I also fully agree with you on the subject of personal attacks.

And this is from a West Ham supporter!!

[letissier14]

Banks do make up money from thin air by hitting a few keys on the keyboard. That's a proven fact.

Not quite the way you put it. The banks do indeed increase the amount of money in the world but they don't quite create it from thin air. I've posted about this several times before and like Gregg I'm a bit bored with it. Check out his post upthread and take the time to follow the link and get your head around it.

This "banks create money from nothing" tale kind of reminds me of the sad misconception so many woo woo idiots try to promote due to thier total failure to comprehend the facts of quantum physics choosing instead to rely on an insane predeliciton for drawing the wrong conclusions from analogies used by physisists who do understand the maths of it all to try and explain it to laymen in simple language. It's complicated, don't get upset by the fact you don't understand it but ffs, please don't try to push incorrect conclusions based on flawed analogies as fact.

...The reality of this is totally opposite, and banks can, and do lend money they don't have. I can't remember the exact figures off hand, but the Banks are allowed to create money, just as long as they have between 10-20% of the amount loaned in assets. So if a bank has £100,000 in assets, it can then lend approx £900,000.

The only entities that can actually really create money from nothing by just printing more notes, or the electronic equivalent, are governments. Banks cannot lend money they do not have or do not have some arrangement in place to cover. It doesn't take long to get very complex once you start to work out the consequences of a number of banks moving large amounts of money around but one thing is for sure. There is not a commercial bank on the planet that can just whip up currency from nothing. Not a one. No way.

Check out the link Gregg gave above, it's good stuff and saves me a lot of typing.

I shall just have to bow to your superior knowledge, after all, I only got my information from the Bank of England - what do they know eh?

[NG3]

I only got my information from the Bank of England - what do they know eh?

It's run by a Canuck, eh?

[letissier14]

/

[letissier14]

It's complicated, don't get upset by the fact you don't understand it but ffs, please don't try to push incorrect conclusions based on flawed analogies as fact.

Likewise - please take the time to actually learn and understand how money is created and stop pushing your incorrect conclusions based on what you think in your opinion is right. It doesn't take long to actually read up from official sources.

[PeanutGallery]

Gentlemen please, both of you are right (from your respective points of view), however I think a couple of points should be made so as to avoid yet more unpleasantness.

Do High Street Banks create money out of thin air?

No. They don't. They borrow the money from the Bank of England (which creates the money out of thin air, woo complications). When the loan is repaid the created money is removed from the economy (if this didn't happen - HYPERINFLATION which is a really really bad thing (unless you like to collect bank notes with lots of 0's)). Money is uncreated, destroyed, deleted because that way the economy can stay in balance - which is important and a very tricky thing to manage.

If the Bank of England doesn't create the money to pay for the loan, because of reasons, the banks will borrow money from each other using the LIBOR rates (which is what some bankers are right now in jail over because they rigged it).

The money creation myth, as espoused by a lot of sites holds a mistaken premise that the created money isn't subsequently destroyed, as the loan is repaid. We also know, because of 2008, that when the banks loan a lot of money out to a lot of people who don't pay it back, everyone suffers (especially Greeks).

A lot of this money creation doodah is due to the concept of fractional reserve banking and the somewhat inverse logic banks have when it comes to money. You would normally think that the amount you put into a bank account and lodge with "Friendly High Street Bank" would become an asset for the bank, after all it's been given money, but it's not it's a liability because you could walk straight in and say I want my money back and do anything you like with it. Loans, which you would think would be a liability because this is money the banks have given out, are actually assets to the bank, because unlike the money you deposit, the bank can say "hey give us some of that loan back" each month. In order to stay an asset however the loan has to be good, like Tom Crawford was for most of his mortgage, it was only at the end that he went daft.

Again all of this is very very very complicated and quite difficult to distil into a short post without it being bloated, taking up most of the forum and being so long you'd skim straight to the end hoping for a TL:DR summary.

TL:DR High street banks don't magic money, Bank of England does, but just as that Bank maketh that Bank taketh away. The money creation myth omits the notion that money is also removed from the economy, which is what keeps it balanced, and the whole thing is way complicated and difficult to bend a brain around.

[letissier14]

Gentlemen please, both of you are right (from your respective points of view), however I think a couple of points should be made so as to avoid yet more unpleasantness.

Do High Street Banks create money out of thin air?

No. They don't. They borrow the money from the Bank of England (which creates the money out of thin air, woo complications). When the loan is repaid the created money is removed from the economy (if this didn't happen - HYPERINFLATION which is a really really bad thing (unless you like to collect bank notes with lots of 0's)). Money is uncreated, destroyed, deleted because that way the economy can stay in balance - which is important and a very tricky thing to manage.

If the Bank of England doesn't create the money to pay for the loan, because of reasons, the banks will borrow money from each other using the LIBOR rates (which is what some bankers are right now in jail over because they rigged it).

The money creation myth, as espoused by a lot of sites holds a mistaken premise that the created money isn't subsequently destroyed, as the loan is repaid. We also know, because of 2008, that when the banks loan a lot of money out to a lot of people who don't pay it back, everyone suffers (especially Greeks).

A lot of this money creation doodah is due to the concept of fractional reserve banking and the somewhat inverse logic banks have when it comes to money. You would normally think that the amount you put into a bank account and lodge with "Friendly High Street Bank" would become an asset for the bank, after all it's been given money, but it's not it's a liability because you could walk straight in and say I want my money back and do anything you like with it. Loans, which you would think would be a liability because this is money the banks have given out, are actually assets to the bank, because unlike the money you deposit, the bank can say "hey give us some of that loan back" each month. In order to stay an asset however the loan has to be good, like Tom Crawford was for most of his mortgage, it was only at the end that he went daft.

Again all of this is very very very complicated and quite difficult to distil into a short post without it being bloated, taking up most of the forum and being so long you'd skim straight to the end hoping for a TL:DR summary.

TL:DR High street banks don't magic money, Bank of England does, but just as that Bank maketh that Bank taketh away. The money creation myth omits the notion that money is also removed from the economy, which is what keeps it balanced, and the whole thing is way complicated and difficult to bend a brain around.

Sorry but commercial Banks do create money. Commercial banks create money, in the form of bank deposits,
by making new loans. When a bank makes a loan, for example to someone taking out a mortgage to buy a house, it does not typically do so by giving them thousands of pounds worth of banknotes. Instead, it credits their bank account with a bank deposit of the size of the mortgage. At that moment, new money is created. For this reason, some economists have referred to bank deposits as ‘fountain pen money’, created at the stroke of bankers’ pens when they approve loans.

Another common misconception is that the central bank determines the quantity of loans and deposits in the
economy by controlling the quantity of central bank money — the so-called ‘money multiplier’ approach. In that view, central banks implement monetary policy by choosing a quantity of reserves. And, because there is assumed to be a constant ratio of broad money to base money, these reserves are then ‘multiplied up’ to a much greater change in bank loans and deposits.

For the theory to hold, the amount of reserves must be a binding constraint on lending, and the central bank must directly determine the amount of reserves. While the money multiplier theory can be a useful way of introducing money and banking in economic textbooks, it is not an accurate description of how money is created in reality.
Rather than controlling the quantity of reserves, central banks today typically implement monetary policy by setting the price of reserves — that is, interest rates.

In reality, neither are reserves a binding constraint on lending, nor does the central bank fix the amount of reserves that are available. As with the relationship between deposits and loans, the relationship between reserves and loans typically operates in the reverse way to that described in some economics textbooks. Banks first decide how much to lend depending on the profitable lending opportunities available to them — which will, crucially, depend on the interest rate set by the Bank of England. It is these lending decisions that determine how many bank deposits are created by the banking system. The amount of bank deposits in turn influences how much central bank money banks want to hold in reserve (to meet withdrawals by the public, make payments to other banks, or meet regulatory liquidity requirements), which is then, in normal times, supplied on demand by the Bank of
England.

Taken from the Bank of England...

I'm not an expert on Banking and don't pretend to. We all know it is very complicated at best, but some people are quite happy to push their opinions, rather than facts, on others.

This site has taken a turn for the worse in the last month or so. Debate seems to be going out of the window and replaced by insults and put downs.

Each to their own I guess.

[letissier14]

Gentlemen please, both of you are right (from your respective points of view), however I think a couple of points should be made so as to avoid yet more unpleasantness.

Do High Street Banks create money out of thin air?

No. They don't. They borrow the money from the Bank of England (which creates the money out of thin air, woo complications). When the loan is repaid the created money is removed from the economy (if this didn't happen - HYPERINFLATION which is a really really bad thing (unless you like to collect bank notes with lots of 0's)). Money is uncreated, destroyed, deleted because that way the economy can stay in balance - which is important and a very tricky thing to manage.

If the Bank of England doesn't create the money to pay for the loan, because of reasons, the banks will borrow money from each other using the LIBOR rates (which is what some bankers are right now in jail over because they rigged it).

The money creation myth, as espoused by a lot of sites holds a mistaken premise that the created money isn't subsequently destroyed, as the loan is repaid. We also know, because of 2008, that when the banks loan a lot of money out to a lot of people who don't pay it back, everyone suffers (especially Greeks).

A lot of this money creation doodah is due to the concept of fractional reserve banking and the somewhat inverse logic banks have when it comes to money. You would normally think that the amount you put into a bank account and lodge with "Friendly High Street Bank" would become an asset for the bank, after all it's been given money, but it's not it's a liability because you could walk straight in and say I want my money back and do anything you like with it. Loans, which you would think would be a liability because this is money the banks have given out, are actually assets to the bank, because unlike the money you deposit, the bank can say "hey give us some of that loan back" each month. In order to stay an asset however the loan has to be good, like Tom Crawford was for most of his mortgage, it was only at the end that he went daft.

Again all of this is very very very complicated and quite difficult to distil into a short post without it being bloated, taking up most of the forum and being so long you'd skim straight to the end hoping for a TL:DR summary.

TL:DR High street banks don't magic money, Bank of England does, but just as that Bank maketh that Bank taketh away. The money creation myth omits the notion that money is also removed from the economy, which is what keeps it balanced, and the whole thing is way complicated and difficult to bend a brain around.

Sorry but commercial Banks do create money. Commercial banks create money, in the form of bank deposits,
by making new loans. When a bank makes a loan, for example to someone taking out a mortgage to buy a house, it does not typically do so by giving them thousands of pounds worth of banknotes. Instead, it credits their bank account with a bank deposit of the size of the mortgage. At that moment, new money is created. For this reason, some economists have referred to bank deposits as ‘fountain pen money’, created at the stroke of bankers’ pens when they approve loans.

Another common misconception is that the central bank determines the quantity of loans and deposits in the
economy by controlling the quantity of central bank money — the so-called ‘money multiplier’ approach. In that view, central banks implement monetary policy by choosing a quantity of reserves. And, because there is assumed to be a constant ratio of broad money to base money, these reserves are then ‘multiplied up’ to a much greater change in bank loans and deposits.

For the theory to hold, the amount of reserves must be a binding constraint on lending, and the central bank must directly determine the amount of reserves. While the money multiplier theory can be a useful way of introducing money and banking in economic textbooks, it is not an accurate description of how money is created in reality. Rather than controlling the quantity of reserves, central banks today typically implement monetary policy by setting the price of reserves — that is, interest rates.

In reality, neither are reserves a binding constraint on lending, nor does the central bank fix the amount of reserves that are available. As with the relationship between deposits and loans, the relationship between reserves and loans typically operates in the reverse way to that described in some economics textbooks. Banks first decide how much to lend depending on the profitable lending opportunities available to them — which will, crucially, depend on the interest rate set by the Bank of England. It is these lending decisions that determine how many bank deposits are created by the banking system. The amount of bank deposits in turn influences how much central bank money banks want to hold in reserve (to meet withdrawals by the public, make payments to other banks, or meet regulatory liquidity requirements), which is then, in normal times, supplied on demand by the Bank of
England.

Taken from the Bank of England...

I'm not an expert on Banking and don't pretend to. We all know it is very complicated at best, but some people are quite happy to push their opinions, rather than facts, on others.

This site has taken a turn for the worse in the last month or so. Debate seems to be going out of the window and replaced by insults and put downs.

Each to their own I guess.

[#six]

Gentlemen please, both of you are right (from your respective points of view), however I think a couple of points should be made so as to avoid yet more unpleasantness.

Do High Street Banks create money out of thin air?

No. They don't. ...

<snip>

My A level economics maybe a little hazy but that's a pretty good summary of how I was taught it worked.

Just to add though, there are multiple definitions of money and therefore ways of "creating money" The freemen, as usual, pick and choose the definition that suits them best and then pick and choose the "rules" that govern that money creation from the other definitions of money. Throwing away what doesn't suit them in the process.

In reality its a pointless task to discuss what is money on a forum. One could write hundreds of books on the subject and still fall short of a 100% accurate definition. Suffice to say some types of money can be created and destroyed by the taking out and repayment of loans. But is always the repayment part that the freemen ignore.

[guilty]

I found this book to be quite useful:
http://www.amazon.co.uk/Where-Does-Mone ... b_title_bk

[PeanutGallery]

Central to the issue of money being created is the oft ignored inverse in that money is also destroyed, it ceases to be. Money and economics are bloody complicated beasts and when you try to simplify something that is very complex you often wind up omitting certain aspects which can lead to misconceptions, I certainly do not mean to suggest anyone is an idiot or make any personal attacks. In fact that it is complicated doesn't mean anyone is wrong in their position, it's arguing different sides of the same coin.

The main problem with the money creation myth, as supported by the cranks, is that it ignores the fact that at the same time the bank is creating money it's also destroying it. When a loan is repaid, the 'created' money is removed from the economy, all the bank gets is the interest it charges (if it could keep the magicked money it would make a commercial sense to loan at a negative interest value, which in turn would destroy the economy) . This is what balances the books. The misconception and misunderstanding often advanced by Sov's is based on an ignorance of the fact that the banks don't keep the money they create, when it gets paid back it gets destroyed by the bank. They don't just keep it and the interest.

A lot of this is semantics and frankly the topic is bloody complicated, perhaps too complicated for a lot of us to understand properly, again that is not to denigrate anyone or say it is beyond the ken of any of us, just that it would mean I would have to put more time into it than I would personally desire. Equally trying to express a very complicated and frankly esoteric process which involves advanced economic theory and various accountancy practices in a short forum post or article is very obviously going to either omit or clumsily work it's way around the central issue. As others have pointed out whole books have been written on this topic and will continue to be written.

Finally if banks can create money, does this cause harm to the economy? Or is the harm caused when the banks create more money than they will be able to destroy?

[Pox]

I think this economics debate doesn't just need its own topic - it needs its own forum (If there aren't any already).

[Gregg]

It's complicated, don't get upset by the fact you don't understand it but ffs, please don't try to push incorrect conclusions based on flawed analogies as fact.

Likewise - please take the time to actually learn and understand how money is created and stop pushing your incorrect conclusions based on what you think in your opinion is right. It doesn't take long to actually read up from official sources.

Ahem,,,, you sir, are misunderstanding what it in itself a terribly oversimplified explanation of an incredibly complicated process in which, if followed all the way to its conclusion (which in a real transaction requires several hundred iterations of a formula) balances out, more or less to the penny. The simple matter is, if I borrow $100,000 and pay it back over 10 years, I am the one who creates the money, over the ten years, by earning enough to pay it back. The bank who loaned it to me, made the money supply increase when I borrowed it by a) issuing a check (or more commonly the evil keystrokes) that increases the country's money supply by (actually just a fraction of) the $100,000, the money is not currency, its my security agrreement (the loan note wherein I agree to pay back the $100,000 plus interest) and as I pay back in currency (or equal, like my check to the bank or electronic keystrokes from my online bill pay etc...) the value of the security agreement decreases and almost equal amount, because I have paid part of it back, and I no longer owe as much. The security agreement is the "new money" in tangible form, existing only in a computer file or a ledger account. I go out and make $5,000 worth of metal into $50,000 worth of automobile, which created $45,000 (well, not really, the iterations I spoke of above come into play here) of new money for Ford Motor Company, who kindly gave me my $50 cut of that for my contribution, over and over and over again, over the course of the ten years. After 10 years of this cycle, the "new money" security agreement is now a worthless memorial to the transaction, and has been replaced with real live coins, bills and such that I have been paying in over ten years, as I created it. Its not any different than if I saved $10,000 a year for 10 years in coffee cans in the kitchen, and after 10 years I went and bought the house cash, EXCEPT, no one makes any interest (the bank, although the $100,000 was still created, but if the bank had loaned it to me, over the 10 years it would have been $100,000 plus the interest, more more created, but nonetheless created by me, not the bank) and borrowing the money upfront is a lot more convenient for me. It also tends to make the overall economy grow faster and increases the velocity of money in the economy, another thing that makes me and bankers smile.

And still all of that was a terrible oversimplification, for me to explain the entire transaction in detail would involve maybe ten thousand pages. I did it once for a car, a Ford Taurus, as an exercise to demonstrate something and the Excel spreadsheet was several thousand pages long. (BTW, one $23,500 car created about $4200 in newly created money if bought cash, I didn't do the extensions of what happens if the customer had gotten a loan to pay for it)

Like I have said, if you have a few years, and a MS in Finance or Accounting, I can teach you how money is created on the level it takes to truly understand all its nuances. Its not a little flip book from BofE but I will note that I myself did once work at The Bank of England, and not as a teller mind you, as well I worked on this side of the pond at The Federal Reserve Bank of Cleveland. All whilst earning my PhD in International Business in which I wrote my dissertation on international central banking mechanics.

Go ahead, tell me you know better because you learned it on the internet.

And I have, on several occasions, gone to the trouble to post some fairly involved discussions trying to explain money creation right here on Quatloos over the last 11 years, searching my posts about the Federal Reserve, Money Creation and new money will give you a few pages and with some help I would seriously consider a 1st year semester's worth of work. But I'm a serious snob about talking about it, not because I don't like to, indeed I love it, find it a fascinating subject, but all too often the person on the other side is someone trying to prove me wrong and show how banks just majik new money with a poof and a keystroke...its like arguing with a toddler about is Santa Claus real, its starts out cute but if they're persistent it gets tiresome.

I might come back and write some more...but trust me, you're wrong, and so wrong, you're not even wrong for the right reasons.

[letissier14]

Thanks for the lesson but I'm quite able to understand how money is created.

What I have trouble understanding is how all you experts out there are so good at explaining a system that clearly doesn't work?

The reason why the world is in a financial mess is because we use a system that is based on false premise

[YiamCross]

It's complicated, don't get upset by the fact you don't understand it but ffs, please don't try to push incorrect conclusions based on flawed analogies as fact.

Likewise - please take the time to actually learn and understand how money is created and stop pushing your incorrect conclusions based on what you think in your opinion is right. It doesn't take long to actually read up from official sources.

I have, which is why I know banks cannot create currency from nothing. Please cite your source, not just a link to some video from the bank of England which I have actually seen and as far as I can ascertain does not say banks can create currency.

The fact that banks can lend money backed by assets, such as deposits and bonds, does have the effect of increasing the money supply which is what I think you're saying but that is a completely different thing from creating money. It remains a fact that banks are limited in what they can lend by the assets they hold to cover their loans and this sets a limit on the money which is out in the world at any one time.

It is also a fact often overlooked that when loans are repaid the money supply shrinks by a corresponding amount, something which would not be true if banks just created cash from thin air.

If banks could create money from nothing then they would be able to lend what they want when they want with no concern about collecting repayments or having any assets to back up their loans. Money would become valueless if any institution, banks or otherwise, could just churn it out. Even governments, which can actually create money from nothing, are very careful about how and when they do it.

Again, I would refer you to Gregg's link and rather than simply make snide personal remarks I suggest you read the information to which it refers or at least produce some kind of argument to back up your stance other than you've seen a video by some blokes who work for the Bank of England so you know what's what and I don't because you don't think I've seen that video.

Not getting into another flame war, so unless you come up with something more substantive than you've seen a video I'm done here. At least produce something you got from that video to back up your stance.

[Gregg]

Let me go a step back, and then further on that...I borrowed the money, the bank made a few keystrokes and the loan document is the new money...okay we got that...but its hardly what the guy who built my house wants to be paid with, he wants notes, keystrokes, coins,,,,too,, so where do those come from? In the USA, ultimately, from the Federal Reserve Bank. They CAN print new money but they can't just spend it on hookers and blow, they have to put it into the economy to back the new money created by my security agreement. And they can do this several ways.

For the transaction I was talking about, I borrow $100,000 to buy a house, from a bank, a bank that is not going to sell my loan, they're going to hold it until maturity, although, almost, and by that I mean 99.9999% of them have the right to resell the loan, only about 85% of loans in the US are sold in the secondary market, and this one is the other 15%.

My security agreement constitutes "good collateral" at the local Federal Reserve Banks (for you UK folks we don't have just one, there are 12 and they go by region). It might not be good collateral if another bank tried to use it, my own bank has no guarantee it will be good next week, but they have written it according to certain guidelines as to my credit score, income, the house I'm borrowing against and such, and they're pretty sure the Fed is going to take it. So, when I sign the note, the bank issues a check to my builder. At the same time, my bank pldeges my security agreement to The Federal Reserve Bank who goes to the back room where they print the money (well, store it, its printed in Washington DC you can take tours!) and send a stack of Benjamin's over to make sure the check to the builder doesn't bounce. BUT THEY HAVE TO DO SOMETHING< because they have to write a check to the builder, and it can't bounce.

Since my new house represents new wealth in the asset base of "US HOMES OWNED" that is a legitmate increase in the money supply, there was a wooded piece of ground worth $3500, now there is a house worth $120,000, the money the Federal Reserve Bank "created" (by taking it out of the storage room where money waits to be born) all is well, the Fed sent out cash, they took in my mortgage note, a 1-1 exchange of assets, and new money created.

Remember when I said I'm going to create the $100K plus interest over the ten years by paying it back, to retire the loan? So, how come the $100K is here now (an event called memorializing, the money is memorialized when a check, coin or currency denotes money not already in existence) The money that is being memorialized is NOT EXACTLY the same $100,000 I borrowed, its the money that was created by the value added to the material of the things that went into what I bought. Are you confused yet? If this is a problem with 99 levels we're halfway to the starting point of the first percent of 1.....do you get why, well, it confounds some people, and other people who don't get it either use the complexity of it to confuse and talk bullshit to people who don't understand it (which frankly, is almost everyone at one level or another)


The other way that a central bank controls the money supply, is first, it needs to determine whether in the last period (month, quarter, year, what have you) the wealth of the total economy increased, decreased and by how much. They do this with data collected from hundreds of sources, but the key is, by the time they act on a datam, the set of data is usually 6 weeks old or more, and the action they take doesn't really have affect for 2-6 months....but I digress.

If they have decided the wealth has increased and they want to memorialize that increase in wealth by increasing the amount of currency, coins and deposit accounts out there, they buy things, and the money they buy these things with is NEW MONEY created when they buy stuff. In theory, the only thing the US Federal Reserve Open Market Committee is supposed to buy is secondary market (never new issue, we'll get to that in a minute) US Government Securities..T-Bills, Bonds etc....The money they use to buy the securities is new money, and increases M1 the overall money supply. They are trying to buy an amount that matches the increase in wealth since the last time they bought them. If they think the economy didn't grow, and they want to decrease the money supply, they SELL government securities in the open market, and the money they take in on these sales is destroyed and thus decreases M1, we call this, well, nothing nice. The Open Market Committee and open market operations are the big picture of all the little pictures, all the 1 house here, a few cars there, a B2 Stealth Bomber or 4, all the new wealth created that isn't like my house if I pay cash (still new money, just already accounted for) or borrowed from a bank that sold (possibly but not necessarily securitized) the note. And the 2 dollars the girl scouts make on a box of cookies.....the Fed is trying to guess how much that is and put that like amount of currency or equals into circulation.

Money is created every day out of thin air, by you, me, everyone who provides a good or service that someone else will trade their hard earned money for. The "hard earned" (or easy earned I guess") is the creation, the loan instrument is the first step of making into functional money.

[YiamCross]

Thanks for the lesson but I'm quite able to understand how money is created.

What I have trouble understanding is how all you experts out there are so good at explaining a system that clearly doesn't work?

The reason why the world is in a financial mess is because we use a system that is based on false premise

But the system, on the whole, does work. If it didn't we'd still be banging rocks together in caves and straw huts and struggling to provide the food we need to survive.

It ain't perfect in the same way that life, nature and the universe is not perfect and I don't expect it ever will be.

The main reason the world is in a financial mess is because there are so many people out there who would rather screw someone over to get what they want than deal fairly and honestly with the world. It's really that simple.

[Gregg]

Thanks for the lesson but I'm quite able to understand how money is created.

What I have trouble understanding is how all you experts out there are so good at explaining a system that clearly doesn't work?

The reason why the world is in a financial mess is because we use a system that is based on false premise

Who says it clearly doesn't work? I can go to an ATM almost anywhere on earth and get pieces of paper which I can then within a short distance trade for food, shelter, sustenance, hookers and blow.... or beanie babies

The reason the world is in a financial mess (a premise I don't agree with, but as much as it is) is because governments, companies, people, spend more than they can pay back without making sacrifices that they sometimes later cannot or will not make. The system is not only working but working damn well thank you very much, because outside of Somalia, North Korea and a few other pretty phucked up places, anyone with a few hundred dollars spread out into US Dollars, Euros, Yuan, Yen and Pounds Sterling can buy pretty much anything he needs to survive. And a check written in Kansas to a person in Poland can clear funds within 48 hours of being presented for payment at a bank anywhere in Europe (the bank will freeze it 10 days, but its clear in less than 48 hours)

That sounds like working to me.

You're "not working" isn't the money system, its people's income and payments problems, which is another kettle of tea.

[letissier14]

It's complicated, don't get upset by the fact you don't understand it but ffs, please don't try to push incorrect conclusions based on flawed analogies as fact.

Likewise - please take the time to actually learn and understand how money is created and stop pushing your incorrect conclusions based on what you think in your opinion is right. It doesn't take long to actually read up from official sources.

I have, which is why I know banks cannot create currency from nothing. Please cite your source, not just a link to some video from the bank of England which I have actually seen and as far as I can ascertain does not say banks can create currency.

The fact that banks can lend money backed by assets, such as deposits and bonds, does have the effect of increasing the money supply which is what I think you're saying but that is a completely different thing from creating money. It remains a fact that banks are limited in what they can lend by the assets they hold to cover their loans and this sets a limit on the money which is out in the world at any one time.

It is also a fact often overlooked that when loans are repaid the money supply shrinks by a corresponding amount, something which would not be true if banks just created cash from thin air.

If banks could create money from nothing then they would be able to lend what they want when they want with no concern about collecting repayments or having any assets to back up their loans. Money would become valueless if any institution, banks or otherwise, could just churn it out. Even governments, which can actually create money from nothing, are very careful about how and when they do it.

Again, I would refer you to Gregg's link and rather than simply make snide personal remarks I suggest you read the information to which it refers or at least produce some kind of argument to back up your stance other than you've seen a video by some blokes who work for the Bank of England so you know what's what and I don't because you don't think I've seen that video.

Not getting into another flame war, so unless you come up with something more substantive than you've seen a video I'm done here. At least produce something you got from that video to back up your stance.

Who said I have seen any video? did I mention any video? getting ahead of yourself I think?

Snide remarks? I don't do snide remarks, if I wanted to tell you something I would tell it to your face.

I'm not the one who was Patronising and dismissive in their initial response to my earlier post.