Modern banking – telling it like it is

This arrived in my twitter feed – I wish I’d had it when I last went to see the bank manager.

I pass it on so that subsequent supplicants can at least know which side their bread is buttered….

Comments

  1. Ian Stevenson -

    in fact the 200,000 is cancelled. The banker keeps the interest. I am not sure but I think the taxpayer borrowed the money and is now paying it back.

  2. Peter May -

    The loan is cancelled but the banker keeps the repayments as well as the interest….

  3. Ms Christine Bergin -

    Thats what is meant by saying that banks ‘create’ new money.

  4. Charles Adams -

    There’s a good piece on money creation by banks on Frances Coppola’s blog

    http://www.coppolacomment.com/2017/10/money-creation-in-post-crisis-world.html

    that builds on comments from Pontus Rendahl on an earlier post.

    http://www.coppolacomment.com/2017/10/beyond-disappointment.html

    PR sums up the essential point with the question:

    “Banks do not create money out of thin air. If they could, why would we need to bail them out?”

    Well worth reading.

    1. Peter May -

      As you say!
      Thanks. Very interesting.
      It leaves me more and more convinced that we need to nationalise, not the banks, but the bank payment/clearing system.
      Banks create money out of nothing to all intents and purposes. Otherwise I as a borrower, was just “a decent [bank] asset at their disposal (i.e. a borrower with a realistic capacity of repaying).”
      It felt much more as if I was ‘nothing’!
      What the pieces do not touch on is why the banks are now so involved in property. At one time it was only building societies, who really did have to lend out their deposits. Now, of course there are few building societies left and even they, as I understand it, can now create money. But as the building societies are mutuals I wonder if forbidding the banks from making further property loans might both quieten housing market inflation and boost the, rather more cautious, building societies?

      1. Charles Adams -

        I agree it is still much of a win-win for the banks, because if the individual cannot pay then the collective (all of us) have to.

        Banks got involved in property because it was win-win!

        I still think that some kind of dual system with only state protected 100% reserve banking for individuals and unprotected fractional reserve banking for business which is kind of the old Building Society model.

        The 1980s deregulation has been a complete failure.

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