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Everything posted by aliveandkicking

  1. aliveandkicking

    BoE on Money Creation: A Bank Lends You £100...

    There appeared to be a controversy earlier when i mentioned that China had created an additional 14T USD of credit since 2008 and you wondered where that amount of money could have come from and suggested it was not possible so much credit could have been created. I said it did not have to come from anywhere since the banks create [most of] the money that exists in the economy. At the end of the day it all comes down to leverage and how much ability China has to control lending by regulation, where in a pre Bear Sterns world the west supposedly had a regulated banking system, where in reality the banks were driving coaches and horses thru the rule book and nobody has been proscecuted for doing that. The unanswered question at the moment, is how much better is China when supposedly it has 'legendary corruption'? Few of us can understand banking but most of us feel something is wrong. In the West the banks have created a continually unfolding disaster by becoming far too levered. Perhaps it is different in China?
  2. aliveandkicking

    BoE on Money Creation: A Bank Lends You £100...

    Being able to spend money you have not earnt so you can maintain your lifestyle has become very fashionable. Increasing government debt levels are also adding to that mix because the governments spending creates a pyramid of income built on the continuing flow of private sector savings being turned into government spending where the governments lenders are effectively in the same position they were before since the governments debt is so liquid - until it is not so very liquid of course. So the problem is not the interest as such but rather how will it be possible to lower government spending as a share of GDP when the population is addicted to the current situation.
  3. aliveandkicking

    BoE on Money Creation: A Bank Lends You £100...

    I think you are mixing apples with pears somewhat. Interest earned from the economy and then returned to the same economy cannot increase the money supply anymore than the fees a plumber charges can increase the money supply. But maybe i dont understand what you are saying: >>The fact they are receiving interest must cause the money supply (Debt) to expand If the banks earn plenty of money, even if it is invested and returned to the economy, then the banks will be richer and in a better position to make more loans. More lending will increase the money supply. Are you saying something different to that?
  4. aliveandkicking

    BoE on Money Creation: A Bank Lends You £100...

    i earn the money from the economy. Both of us exist in the same economy. You are not accumulating money, instead you invest and spend your money so it passes to others. The interest mythology can only be true if the bank is a huge piggy bank that sucks money from the economy that is never spent, whereas the reality is that it is well known banks do not have much money because they invest the money they have to earn a return.
  5. aliveandkicking

    BoE on Money Creation: A Bank Lends You £100...

    There is no problem with the interest. The argument there is a problem is just a myth. The banks are not accumulating vast amounts of money from the economy and storing it. Apart from the growing float that is required to maintain a growing business, all of the money the bank receives as interest returns to the economy as wages dividends and loan payments and so forth. The problem arises from the concept of a bank creating money and the ideas this generates in peoples minds. All the bank is doing by that is matching a promise to pay money versus a promise to end the banks liabilities that the banks promise creates for the bank, where in all cases the bank charges interest as a fee to cover the liabilities this creates for the bank. Anybody can create money if they have a set of books and they can find people who will save with them. In principal it is possible to find any seller of goods or services in the world and enter a record in your books that they forgo payment while receiving interest from you.
  6. aliveandkicking

    BoE on Money Creation: A Bank Lends You £100...

    If the bank has a line of credit available from another bank no deposit yet exists The banking system creates the debt and savings at the same time when the loan entry is written in the books. You promise to repay the bank and the bank promises you can use the savings they created for you. All they have done is recorded the two matching promises which are created when you agree the loan with the loan manager. Since the banks promise of your spendable savings can enable you to buy things from the banks own customers then by definition the bank just created money for you. The money created is however no different to a cheque and the line of credit is not yet drawn. If you buy a house from a customer at another bank then potentially the sellers bank will only require the buyers bank pays interest to enable the purchase. So the seller has a deposit. The buyer has a debt. The buyers bank pays interest on a wholesale deposit that exists at the buyers bank which was created by the buyers bank. The buyers bank wholesale deposit is money that is owed to the sellers bank. The line of credit is not yet drawn. So buyers bank Asset: Buyers Loan 100,000.............liability: wholesale deposit 100,000 in favour of sellers bank, Sellers bank Asset: Wholesale deposit at buyers bank 100,000.............liability: sellers deposit 100,000 The banks have accounts with each other. So an interbank transaction could be settled with an interest payment if the outstanding debt is within agreed limits or it might require a transfer of actual real currency in the form of BOE money that can only be created by the BOE. If the loan results in a transfer of BOE money the line of credit might still not be drawn, it just depends on what incoming amounts the bank has at the time of settlement where effectively the banks are operating at the basic level of liquidity they require to ensure everything runs smoothly. What the regulator requires is that you have lines of funding available when you create loans so that you are not expecting you will need to come to the BOE to pledge top quality assets overnight to get an overnight loan . If the bank miscalculates and comes to the BOE for an overnight loan it is regarded as poor management. The bank should always be able to have a very good expectation it can meet all demands upon it from the market before it has to go to the BOE for an overnight loan. In australia for example the entire banking system makes about 12-15 calls to the RBA for overnight loans where good quality collateral is required over the course of an entire year. However during the day all of the central banks enable day time loans if good quality assets are pledged with the exception of the FED who do not require collateral is posted. The FED though operates a required reserve system of 10% of on demand deposits (on average over an agreed period, so the bank can go negative during the day without collateral up to certain limits providing it meets the average amount for the period, and ends the period with the full 10%) The reason for allowing the on demand central bank loans during the day is because the introduction of real time settlement via central bank money as full and final payment between banks, introduced an element of systemic risk if a bank legitimately expecting payments found it was short and could not pay as expected in real time to another bank. Prior to the real time settlement the banks could accumulate significant risk of not being paid at the end of the day if another bank went bust, whereas today it is very easy for a bank to demand 'instantaneous' full and final payment, and signal trouble to the BOE during the day if payment is not quickly provided. Apart from the fed the current system is risk free for the central bank. So, as Drbubb says no free money is being created. Modern banks are still margin banks, who profit from a spread between borrowing costs and lending profits
  7. aliveandkicking

    BoE on Money Creation: A Bank Lends You £100...

    What the BOE is saying is not totally clear unless you already know what they are talking about, where the BOE has been frustrated for decades with the lack of understanding of credit by nearly all mainstream economists. Banks create money in the same way an ordinary person writes a cheque. You still have to be "good" for the money (ie pay it out) if/when that cheque comes back to you to be paid. However in practice many of those "cheques" can remain with other parties for years to come while only an interest amount is paid to the "cheque" holder. So when people talk about the banks creating money, all the banks can do is create this kind of cheque book money. As for funding, a line of credit is perfectly acceptable as funding. If the banks are happy to take each others "cheques' and receive interest there is no need for lines of credit to be drawn. All that is required is to have a larger line of credit as the loan book gets larger.
  8. So by his own admission when he was talking about: on this Facebook page (without elaboration) the words, “unambiguous,” “conclusive,” and “proof.” He was a bit too lazy to point out another time his own strong view that RV MUST be considered "speculative" and now he says If something is “speculative,” then how can it be “unambiguous,” “conclusive,” and “proof?” And is objecting to the widespread misrepresentation of the use of his words on this Facebook page (without elaboration) the words, “unambiguous,” “conclusive,” and “proof.” My theory is that these kinds of topics are a bit like Nigerian scam emails which act like a sort of Voodoo on the mind, or door to door salesmen once you begin to talk to them. It is a kind of hypnosis that turns your brain to putty to be manipulated however the other person wishes you to be manipulated - but only if you allow it to happen. Once you are in deep enuf you are probably lost forever.
  9. Yes i am giving a simplified version but the fact of the matter is that lending creates deposits either directly intrabank. or indirectly interbank as banks forgo payment in many cases and simply charge interest on money that the loan creating bank never pays to the bank to which money was going to be paid. Yes in many cases money is paid directly interbank. It does not make much difference though. Loans create deposits in the system as either retail deposits or wholesale deposits. The system has to be restrained from creating credit by cost of loans or other regulation.
  10. DrBubb I am not offended by your comments. I appreciated you did answer me. I dont however think it is a very good idea to declare that people who do not agree with you are unintelligent. I found you were way too ready to believe the dead 6 year old was an allien. The main thing i took away from that story was that the genetics guy was prepared to declare this was once a living 6 year old and it is not a foetus. I just do not understand why it is you are so ready to believe these stories where it seems to me you do not want to read what people are actually saying. By the way that dead 6 year olds story was also accompanied by a mountain of hype about disclosure where none was subsequently provided. By the way my theory for a long time is that Callmejoe is you. That user name dominates the board, if you are not dominating it with extreme fringe comments . You have said you want it to be prominantly that way but obviously that drives away most of your audience, with the result you have less influence to change the World. Is it possible some of these 'conspiracy' stories are created to fracture the target audience which wants to plot to overthrow the governments who control our lives? I would not bet against that idea. Divide and rule is not a new idea. How can it be that the bankers brought us to the verge of distruction, we are still mired in a similar place, and no significant prosecutions have taken place? Andrew
  11. Dr Bubb You appear to be daily repeating like a parrot the unconventional views that others hold. While It is good to be open minded, it is possible to open the mind so far that anything can fly in and begin roosting there. You and I are similar ages and I know I am not the only person on this forum who is concerned about what you are doing from the point of view of what is best for you. Just to be clear i am totally not talking about your need to be careful because of dark forces that may harm you. I am only wondering how you have come to this situation where you appear to be willing to entertain anything no matter how wacky. A board like this could be a very highly active venue for alternate thinking in a world that increasingly expects us to be conformist. Instead it is a board that is mainly populated by post after post of your unusual viewpoints. Necessarily you are driving people away and yet you do not seem to care in the slightest. It is kind of sad in my estimation that you are doing that. I wish you all the best but I just think no good can come for you from where you are going at the moment. Andrew
  12. China has created a monster demand for copper by a monster amount of malinvestment, via a more or less insane amount of bank lending, plus copper has been used to avoid regulations where physical copper was pledged to banks. It now seems the Chinese have been forced to change direction since their investment is not going to where the leadership want it to go and essentially they have lost control of the healthy growth they need to remain in power where the masses are somehow appeased in what appears to be an increasingly corrupt unfair system. That could be one hell of a fundamental change for copper and iron ore.
  13. The banking system creates deposit money when it creates loans where there is no limit to the amount of money creation possible if there are willing borrowers and nobody limits the banks ability to lever its capital base. So the money does have to come from anywhere. By definition 14T USD of additional credit did not come from anywhere. The losses will be real however, and potentially could create widespread hardship across the economy.
  14. I was already thinking the plane might have been abducted by aliens or slipped thru into another dimension. Funny the way the mind works.
  15. With Chinese credit having expanded by 14T USD since 2008, gigantic future losses must be baked into the cake by now. I find it very hard to see there will be a painless adjustment to that level of excess .
  16. >>And the DNA has recently been found to be non-human They did not say that. You did the same thing with the six year old 'alien'. I can see you want to believe but it is a very big stretch to go from the ordinary person in the streets view that the government say one thing but mean another, and all of the wars are over oil or whatever, to then say is is all about an alien plot. Aliens coming to Earth in a metal ball three times the size of the earth????? Are we allowed to laugth at that kind of belief or should we recommend a holiday and spending more time with family and friends?
  17. There is the suggestion that Chinas shadow banks are in many cases simply arms of the major banks or state owned firms and their objective was the same as those creating the western methods of avoiding regulation which lead to the GFC. Other things being equal international banking is going to get burnt by this if they were unaware of what was going on or assumed the Chinese leadership would come to their rescue somehow by some method. Even so the financial crisis has been created by the current CCP leadership as a means of controlling those who were in some way encouraged by the previous leadership.
  18. Its not really a Chinese banking crisis as such, but rather a response by the Government to an economy that has too much malinvestment and corruption, where command of the economy is too far out of the hands of the leadership of the distant CCP leadership. The unknown factor is just how badly does the economy have to be allowed to crash before the situation on the ground warrants loser financial conditions?
  19. aliveandkicking

    Iceland: A post crash economy

    http://www.sedlabanki.is/lisalib/get...px?itemid=8147 External imbalances have disappeared, and the underlying current account balance is now in surplus. Inflation has fallen from about 18% at the beginning of 2009 to the present 4½%. It is moving rapidly down to the Central Bank inflation target of 2½% and, excluding the effects of tax increases on price levels, will be at target early next year. Concerns that the Icelandic Government will fail to pay instalments on foreign loans in 2011 and 2012 have vanished as the foreign exchange reserves have grown
  20. The huge number of excess reserves are a consequence of Fed policies to drive down longer term interest rates rather than anything to do with paying interest on reserves. If the Fed brought in penalties for the excess reserves it would be more or less impossible for the banks to reduce the huge number of excess reserves. The only practical way to reduce the excess reserves that i can think of is if the Fed begins selling some of the assets it has bought since QE began but it seems unlikely they will be doing that before at least 2015.
  21. aliveandkicking


    Thats looking to me like the beginnings of the mother of all head and shoulders!
  22. aliveandkicking


    In the shorter term at least you guys have lost the kind of argument that the ordinary person is going to understand - ie prices to the moon so protect yourself with gold now - so it is only natural that Gold should not be a sought after commodity when stock piles are already hugely in excess of annual use. Further out, we would need to see greater intolerance to being poor, by people who are able to influence the status quo, than is being shown at the moment, to enable the kind of dollar devaluation by spending that will result in prices to the moon. In the current environment and for the forseeable future, prices to the moon in fact remains only some kind of a central bankers dream, where their ability to lower prices is ginormous and their ability to create price rises using the current methodology has being fairly pitiful.
  23. aliveandkicking

    Fed "Guidance" may stop working soon

    There seems a bit of a flaw in the logic there somewhere when he says: "A few months pass and the economy remains moribund. In response, the Fed begins a program of securities purchases, with Options One and/or Two, as discussed above, being operative. That is, nominal spending begins to grow faster. " He seems to have got the cart before the horse. The dominating theme here is that the economy is moribund and spending is low. If the feds actions were leading to so much additional spending there would not be a moribond economy and they could reduce the degree of their action. The fed is only going to have a problem when inflation picks up because spending is higher and for some reason they decide they will not alter their policies.....meanwhile the economy is moribund. This to me seems like simple economic reality. The other issue at stake here is that if fed actions lead to higher inflation they will need to wind back their expansive policies while even so the economy is sick, real jobs are scarce, and we move into a more clearer stagflationary recessionary mess than is happening at the moment. No free lunches here, but lets at least understand what is happening from a fed point of view, where a correct understanding can lead to a reasonable idea of what happens next.
  24. aliveandkicking


    Bill Mcbride at Calculated risk blog is saying FOMC might begin some modest tapering this month. Gold already a bit lower this week. http://www.calculatedriskblog.com/2013/09/wednesday-housing-starts-fomc.html Gold still showing a surprising amount of resilience.