Mungo's monetary musings.

Re: Mungo's monetary musings.

Postby MungoBrush » Mon Jun 11, 2018 8:54 am

Fletch wrote:That happens when banks have gambled too much and then lost. Creating money as loans is a bet. They are not lending someone else's money, the money never existed before the loan was made. The gamble is that the loan is repaid and then the created money can be deleted from the books and it's all back to normal. If the loan is not repaid, or in the case of a mortgage, the loan sliced and diced with others loans then sold on as financial investments, then there is a problem if the loan 'stops performing'. (goes in to default) The bank has to make up that loss.

What you have to remember is that all money is created out of thin air on a computer as debt. ie a loan.

Regulation of banking means sticking to a leverage of around 35 times. The idea of capital reserves is that not all of the deposits can be used to create money, hence limiting banks to around the 35 times mentioned.

When a loan doesn't perform (defaults) it causes a liquidity problem. Suddenly banks are outside the lending ratios and have less ability to carry out day to day functions due to that imbalance. The solution in the 2008 crash was to inject capital so the lending ratios were back within limits and enable liquidity to be available for day to day business.It was in effect a paperwork exercise with the money to bail them out also being created on a computer with the government signing up to the debt. They took shares in the banks in return for the capital but those were also created at the time by the banks.

How loans become deposits:

Person A borrows 1000 from bank 1.

Bank 1 created the money when the loan was agreed

Person A buys a car from person B. He pays person B 1000 for car.

Person B pays the 1000 in to his bank, Bank 2.

Bank 2 now has 1000 deposit which can be leveraged to loan out 35,000.

Money is created as debt but has to be laundered through a third party. Banks can't create debt for themselves, only the BoE can do that. The central bank has no limit on how much it can create, commercial banks do.



Your illustration is wrong
The bank cannot lend £1000 to person B
The bank is required to hold back a FRACTION in RESERVE
That's why it's called Fractional Reserve Banking

Under Basel II the absolute minimum reserve for Capital Adequacy is 8% which means that they can loan up to £920 to person B
Then only £846 to person C etc diminishing with each loan

So the total amount of funds leveraged from the original £1000 of deposited funds is not £35,000, it's only £11,825

Which brings us back in a full circle to the calculation that banks must use for their risk-weighted capital adequacy reserve

And back to your exam question which you have avoided from the very start
Now it's time to respond.
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Re: Mungo's monetary musings.

Postby Guest » Mon Jun 11, 2018 9:05 am

https://www.lowimpact.org/money-really- ... system-uk/

There is a simple conception of the banking system – that banks look after money for savers, and pay them interest. They then loan out that money to other people and charge them a slightly higher rate of interest, and that’s where they make their profit.

More and more people are realising that this conception is totally wrong. The new understanding that most people are coming to is that the money that banks lend doesn’t really ‘come from’ anywhere. People who work in the banking industry will explain to you about the fractional reserve system, whereby banks only have to hold around 10% of the money that they lend out. I’ve blogged about this system before. This ‘money multiplier’ model means that if someone borrows money from a bank, buys something, and the seller then deposits the money in their bank, the bank then considers it ‘real money’ (even though it’s money that has been originally borrowed from another bank), and hold 10% of it in reserve, and loan out the rest – which for a reserve ratio of 10% means that for every £100 deposited in a bank, £1000 is generated from loans – multiplying the money supply by ten.

However, it turns out that this idea is wrong too. Positive Money have been educating the public about the money system for years, and they’re telling us clearly that there is no longer a fractional reserve system in the UK. This can be checked on Wikipedia [don’t judge me for quoting Wikipedia as a source; research has shown that it’s at least as reliable as Encyclopedia Britannica – but I’ll blog more about that soon]. It seems that the trend in developed countries has been towards zero. However, on this Wikipedia page, it states that the reserve ratio in the UK is 3%. Sort it out, folks.

But there really is no longer a fractional reserve system in the UK. This means that there is no limit to the amount of money that banks can lend out – it doesn’t have to bear any relation at all to the amount of money they hold in reserve. So the only thing limiting the amount of money that banks lend is their confidence that it will be paid back.

Right, what was it you were saying about you knowing all? :pointlaugh:
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Re: Mungo's monetary musings.

Postby MungoBrush » Mon Jun 11, 2018 10:08 am

Guest wrote:https://www.lowimpact.org/money-really-comes-no-longer-fractional-reserve-system-uk/

There is a simple conception of the banking system – that banks look after money for savers, and pay them interest. They then loan out that money to other people and charge them a slightly higher rate of interest, and that’s where they make their profit.

More and more people are realising that this conception is totally wrong. The new understanding that most people are coming to is that the money that banks lend doesn’t really ‘come from’ anywhere. People who work in the banking industry will explain to you about the fractional reserve system, whereby banks only have to hold around 10% of the money that they lend out. I’ve blogged about this system before. This ‘money multiplier’ model means that if someone borrows money from a bank, buys something, and the seller then deposits the money in their bank, the bank then considers it ‘real money’ (even though it’s money that has been originally borrowed from another bank), and hold 10% of it in reserve, and loan out the rest – which for a reserve ratio of 10% means that for every £100 deposited in a bank, £1000 is generated from loans – multiplying the money supply by ten.

However, it turns out that this idea is wrong too. Positive Money have been educating the public about the money system for years, and they’re telling us clearly that there is no longer a fractional reserve system in the UK. This can be checked on Wikipedia [don’t judge me for quoting Wikipedia as a source; research has shown that it’s at least as reliable as Encyclopedia Britannica – but I’ll blog more about that soon]. It seems that the trend in developed countries has been towards zero. However, on this Wikipedia page, it states that the reserve ratio in the UK is 3%. Sort it out, folks.

But there really is no longer a fractional reserve system in the UK. This means that there is no limit to the amount of money that banks can lend out – it doesn’t have to bear any relation at all to the amount of money they hold in reserve. So the only thing limiting the amount of money that banks lend is their confidence that it will be paid back.

Right, what was it you were saying about you knowing all? :pointlaugh:


It's not me you need to convince
It's Fletch
He started this whole debacle accusing me of "not even understanding fractional reserve banking"

Of course, it's all been superceded by Basel II - a much more sophisticated risk management model
Which is what I have been posting about since the beginning.
It's Basel II that has re-defined the process for calculating capital adequacy reserves.
But don't worry, Basel III is due next year.
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Re: Mungo's monetary musings.

Postby Cannydc » Mon Jun 11, 2018 12:15 pm

Google are saying that if you are going to continue to use them excessively, they will require a deposit.
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Re: Mungo's monetary musings.

Postby MungoBrush » Mon Jun 11, 2018 6:25 pm

Cannydc wrote:Google are saying that if you are going to continue to use them excessively, they will require a deposit.


Steady on
Fletch must be feeling like a bit of an idiot right now
His precious "Fractional Reserve Banking" system doesn't exist we are told

And his echo chamber:
You
Rolluplostin space
Gigabit
all look like prize prats
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Re: Mungo's monetary musings.

Postby Baroness Warsi » Mon Jun 11, 2018 6:39 pm

MungoBrush wrote:
Fletch wrote:That happens when banks have gambled too much and then lost. Creating money as loans is a bet. They are not lending someone else's money, the money never existed before the loan was made. The gamble is that the loan is repaid and then the created money can be deleted from the books and it's all back to normal. If the loan is not repaid, or in the case of a mortgage, the loan sliced and diced with others loans then sold on as financial investments, then there is a problem if the loan 'stops performing'. (goes in to default) The bank has to make up that loss.

What you have to remember is that all money is created out of thin air on a computer as debt. ie a loan.

Regulation of banking means sticking to a leverage of around 35 times. The idea of capital reserves is that not all of the deposits can be used to create money, hence limiting banks to around the 35 times mentioned.

When a loan doesn't perform (defaults) it causes a liquidity problem. Suddenly banks are outside the lending ratios and have less ability to carry out day to day functions due to that imbalance. The solution in the 2008 crash was to inject capital so the lending ratios were back within limits and enable liquidity to be available for day to day business.It was in effect a paperwork exercise with the money to bail them out also being created on a computer with the government signing up to the debt. They took shares in the banks in return for the capital but those were also created at the time by the banks.

How loans become deposits:

Person A borrows 1000 from bank 1.

Bank 1 created the money when the loan was agreed

Person A buys a car from person B. He pays person B 1000 for car.

Person B pays the 1000 in to his bank, Bank 2.

Bank 2 now has 1000 deposit which can be leveraged to loan out 35,000.

Money is created as debt but has to be laundered through a third party. Banks can't create debt for themselves, only the BoE can do that. The central bank has no limit on how much it can create, commercial banks do.



Your illustration is wrong
The bank cannot lend £1000 to person B
The bank is required to hold back a FRACTION in RESERVE
That's why it's called Fractional Reserve Banking

Under Basel II the absolute minimum reserve for Capital Adequacy is 8% which means that they can loan up to £920 to person B
Then only £846 to person C etc diminishing with each loan

So the total amount of funds leveraged from the original £1000 of deposited funds is not £35,000, it's only £11,825

Which brings us back in a full circle to the calculation that banks must use for their risk-weighted capital adequacy reserve

And back to your exam question which you have avoided from the very start
Now it's time to respond.


So according to the above post it is YOU talking about it but you think Fletch is talking about it. Ok. :trollface:
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Re: Mungo's monetary musings.

Postby Fletch » Mon Jun 11, 2018 8:20 pm

MungoBrush wrote:
Fletch wrote:That happens when banks have gambled too much and then lost. Creating money as loans is a bet. They are not lending someone else's money, the money never existed before the loan was made. The gamble is that the loan is repaid and then the created money can be deleted from the books and it's all back to normal. If the loan is not repaid, or in the case of a mortgage, the loan sliced and diced with others loans then sold on as financial investments, then there is a problem if the loan 'stops performing'. (goes in to default) The bank has to make up that loss.

What you have to remember is that all money is created out of thin air on a computer as debt. ie a loan.

Regulation of banking means sticking to a leverage of around 35 times. The idea of capital reserves is that not all of the deposits can be used to create money, hence limiting banks to around the 35 times mentioned.

When a loan doesn't perform (defaults) it causes a liquidity problem. Suddenly banks are outside the lending ratios and have less ability to carry out day to day functions due to that imbalance. The solution in the 2008 crash was to inject capital so the lending ratios were back within limits and enable liquidity to be available for day to day business.It was in effect a paperwork exercise with the money to bail them out also being created on a computer with the government signing up to the debt. They took shares in the banks in return for the capital but those were also created at the time by the banks.

How loans become deposits:

Person A borrows 1000 from bank 1.

Bank 1 created the money when the loan was agreed

Person A buys a car from person B. He pays person B 1000 for car.

Person B pays the 1000 in to his bank, Bank 2.

Bank 2 now has 1000 deposit which can be leveraged to loan out 35,000.

Money is created as debt but has to be laundered through a third party. Banks can't create debt for themselves, only the BoE can do that. The central bank has no limit on how much it can create, commercial banks do.



Your illustration is wrong
The bank cannot lend £1000 to person B
The bank is required to hold back a FRACTION in RESERVE
That's why it's called Fractional Reserve Banking

Under Basel II the absolute minimum reserve for Capital Adequacy is 8% which means that they can loan up to £920 to person B
Then only £846 to person C etc diminishing with each loan

So the total amount of funds leveraged from the original £1000 of deposited funds is not £35,000, it's only £11,825

Which brings us back in a full circle to the calculation that banks must use for their risk-weighted capital adequacy reserve

And back to your exam question which you have avoided from the very start
Now it's time to respond.


:ooer:

This is trolling now isn't it? Got to be. No-one is really that thick. :dunno:
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Re: Mungo's monetary musings.

Postby Fletch » Mon Jun 11, 2018 8:26 pm

MungoBrush wrote:
Cannydc wrote:Google are saying that if you are going to continue to use them excessively, they will require a deposit.


Steady on
Fletch must be feeling like a bit of an idiot right now
His precious "Fractional Reserve Banking" system doesn't exist we are told

And his echo chamber:
You
Rolluplostin space
Gigabit
all look like prize prats


How does a bank

Mungobriush wrote:The bank is required to hold back a FRACTION in RESERVE


when the deposits never actually leave the bank?

Money creation in the modern economy

By Michael McLeay, Amar Radia and Ryland Thomas of the Bank’s Monetary Analysis Directorate.

This article explains how the majority of money in the modern economy is created by commercial banks making loans.

Money creation in practice differs from some popular misconceptions — banks do not act simply as intermediaries, lending out deposits that savers place with them, and nor do they ‘multiply up’ central bank money to create new loans and deposits.

The amount of money created in the economy ultimately depends on the monetary policy of the central bank. In normal times, this is carried out by setting interest rates. The central bank can also affect the amount of money directly through purchasing assets or ‘quantitative easing’.

http://www.bankofengland.co.uk/publicat ... b14q1.aspx


:dunno:
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Re: Mungo's monetary musings.

Postby Fletch » Mon Jun 11, 2018 8:28 pm

Image

Also, one bank is missing from the list above: Deutsche Bank. CT1/TA: 1.68%. Oops.

That's right - Deutsche Bank was so bad that it wasn't even allowed to appear on a screen of Europe's most undercapitalized banks - and we helpfully pointed out its true capital ratio of just under 2%, and an implied leverage of 60x!

What does that mean mungo? The leverage of 60x. :dunno:
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Re: Mungo's monetary musings.

Postby MungoBrush » Mon Jun 11, 2018 9:01 pm

Fletch wrote:Image

Also, one bank is missing from the list above: Deutsche Bank. CT1/TA: 1.68%. Oops.

That's right - Deutsche Bank was so bad that it wasn't even allowed to appear on a screen of Europe's most undercapitalized banks - and we helpfully pointed out its true capital ratio of just under 2%, and an implied leverage of 60x!

What does that mean mungo? The leverage of 60x. :dunno:


Are you still claiming to be an expert in something that doesn't exist?

Here are some other things that don't exist in which I am not an expert:

The tooth fairy
Pennies from Heaven
Ghosts
Santa Claus
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Re: Mungo's monetary musings.

Postby Rolluplostinspace » Tue Jun 12, 2018 6:09 am

9 pages in and Mungo finally discovers fractional reserve.
Lot of Googling there.
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Re: Mungo's monetary musings.

Postby MungoBrush » Tue Jun 12, 2018 6:47 am

Rolluplostinspace wrote:9 pages in and Mungo finally discovers fractional reserve.
Lot of Googling there.


So tell us

Does Fractional Reserve even exist?
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Re: Mungo's monetary musings.

Postby MungoBrush » Tue Jun 12, 2018 6:51 am

Guest wrote:https://www.lowimpact.org/money-really-comes-no-longer-fractional-reserve-system-uk/

There is a simple conception of the banking system – that banks look after money for savers, and pay them interest. They then loan out that money to other people and charge them a slightly higher rate of interest, and that’s where they make their profit.

More and more people are realising that this conception is totally wrong. The new understanding that most people are coming to is that the money that banks lend doesn’t really ‘come from’ anywhere. People who work in the banking industry will explain to you about the fractional reserve system, whereby banks only have to hold around 10% of the money that they lend out. I’ve blogged about this system before. This ‘money multiplier’ model means that if someone borrows money from a bank, buys something, and the seller then deposits the money in their bank, the bank then considers it ‘real money’ (even though it’s money that has been originally borrowed from another bank), and hold 10% of it in reserve, and loan out the rest – which for a reserve ratio of 10% means that for every £100 deposited in a bank, £1000 is generated from loans – multiplying the money supply by ten.

However, it turns out that this idea is wrong too. Positive Money have been educating the public about the money system for years, and they’re telling us clearly that there is no longer a fractional reserve system in the UK. This can be checked on Wikipedia [don’t judge me for quoting Wikipedia as a source; research has shown that it’s at least as reliable as Encyclopedia Britannica – but I’ll blog more about that soon]. It seems that the trend in developed countries has been towards zero. However, on this Wikipedia page, it states that the reserve ratio in the UK is 3%. Sort it out, folks.

But there really is no longer a fractional reserve system in the UK. This means that there is no limit to the amount of money that banks can lend out – it doesn’t have to bear any relation at all to the amount of money they hold in reserve. So the only thing limiting the amount of money that banks lend is their confidence that it will be paid back.

Right, what was it you were saying about you knowing all? :pointlaugh:



This is the organisation that you've quoted:

"The community itself was founded in 1978, and by the late 90s had solar hot water, compost loos, straw-bale buildings, organic gardens, orchards, soft fruit, bees, sheep, chickens, natural paints, lime, wood stoves, and one member was experimenting with making biodiesel from waste cooking oil."

They are probably very good at managing shit
Jokes on you I'm afraid
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Re: Mungo's monetary musings.

Postby Cannydc » Tue Jun 12, 2018 7:44 am

Fletch wrote:
Mungobrush wrote:Would you like to discuss the impact on capital adequacy reserves resulting from the implementation of the credit risk strategies defined by the Basel II accord?



I'll kick off with all money is created as usurious debt by private banks but the interest payable is never created. That means to repay in full, one has to have foreign earnings or more debt. Being as the whole world (bar 4 countries) are on the same system, foreign income is just another countries debt to pay.

A country can't operate without debt, both state and private, because there would be no money supply.

Banks create money out of thin air when someone takes out a loan, they do NOT lend any savers deposits.

When the loan is repaid, the bank deletes the money re-balancing the books and keeps the profit (the interest)

You are talking about economics used within the system of money forced on to us. I'm talking about the actual system.



So this was the original post on the thread.

Seems Fletch is 100% correct - at least the Swiss find it such an important issue that they are holding a referendum on PRIVATE BANKS CREATING THEIR OWN MONEY...

https://www.youtube.com/watch?v=HwhmrC0neGw
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Re: Mungo's monetary musings.

Postby MungoBrush » Tue Jun 12, 2018 8:07 am

Cannydc wrote:Seems Fletch is 100% correct - at least the Swiss find it such an important issue that they are holding a referendum on PRIVATE BANKS CREATING THEIR OWN MONEY...

https://www.youtube.com/watch?v=HwhmrC0neGw


Of course
Every single bank in the whole world that has invested in Basel II compliant systems is wrong
Only Fetch is right
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