Mungo's monetary musings.

[Fletch]

So when a bank makes a new home mortgage the funds come from "thin air"
But when a building society makes a mortgage if comes from existing funds

Is that correct?

If the building society is a mutual then they can't create money. Banks can. Hence the change over back in the 90's/00's

List of building societies now banks

A list of building societies in the UK that gave up building society status (non-profit making, owned by members) and become profit making PLCs. This process is known as demutualisation.

List of former building societies and date of demutualisation.

https://www.economicshelp.org/blog/glos ... ies-banks/

[MungoBrush]

"Why don't you try it?
Deposit £1,000 into your bank account
Make a loan to your mother of £1,000
Deposit that £1,000 into her loan account

See how much better off you are?
You've just created "money" out of thin air.

It's that easy you should be rich in no time."

You didnt create any money out of thin air. What are you talking about?

This started when Fletch posted "Banks create money out of thin air"
I kid you not
Those are his actual words.

How does a Pound/Euro/Dollar etc come in to existence then mungo?

So when a building society grants a mortgage - are they "creating money out of thin air"?
Or when a leasing company makes a new lease for some capital equipment?
Or when you borrow money from a finance organisation to buy a car on a PCP
Or when your pension fund lends money to a company as an investment
Or that high street shop that does "log book loans"

Are they all creating money "out of thin air"?

Only commercial banks create money out of thin air. (and BoE)

Are you seriously suggesting that banks lend money for which they have no asset backing?

[Fletch]

You don't appear to be reading the thread mungo.

I'd like my pension fund manager to boost my pension pot by creating extra money "out of thin air"
Please send me the instructions so that I can pass them on.

Money is only ever created as debt (or tied to debt)(QE)

That is the whole problem. A usurious debt based money supply from private banks rather than state issued money as a unit of credit means countries, and indeed the world, is held to ransom by private banks.

None of this is a secret or unknown. I'm surprised you, as a self confessed economics lecturer, don't know this.

My pension fund makes loans
It lends my money to organisations in the form of various financial instruments such as shares etc.
Is it creating money out of thin air?

No.

Which part of:

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

Bank of England

Don't you understand?

[MungoBrush]

So when a bank makes a new home mortgage the funds come from "thin air"
But when a building society makes a mortgage if comes from existing funds

Is that correct?

If the building society is a mutual then they can't create money. Banks can. Hence the change over back in the 90's/00's

List of building societies now banks

A list of building societies in the UK that gave up building society status (non-profit making, owned by members) and become profit making PLCs. This process is known as demutualisation.

List of former building societies and date of demutualisation.

https://www.economicshelp.org/blog/glos ... ies-banks/

So a building society gets money from depositors and other sources on which it has to pay interest
But a bank gets its funds from "thin air" so presumably it doesn't pay any interest on it at all?

[MungoBrush]

No.

Which part of:

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

Bank of England

Don't you understand?

Every financial institution - including commercial banks - has "sources and uses of funds"
These are listed in its compliance statements
But strangely, I cannot find any reference to "thin air" as a source of funds.

[Fletch]

Are you seriously suggesting that banks lend money for which they have no asset backing?

It's called leverage and is the basis of fractional reserve banking. They use deposits then multiply that by some 35 times to create new money for loans it makes. That is, if they have 1 million in deposits, they can create 35 million to lend.This makes up the money supply, along with government debt.

The Guardian article I linked to earlier explained this but you edited it out of my post when you replied. Must have been inconvenient....

Here it is again though:

You may be objecting at this point: but why does anybody have to be in debt? Why can’t everybody just balance their budgets? Governments, households, corporations … Everyone lives within their means and nobody ends up owing anything. Why can’t we just do that?

Well there’s an answer to that too: then there wouldn’t be any money. This is another thing everybody knows but no one really wants to talk about. Money is debt. Banknotes are just so many circulating IOUs. (If you don’t believe me, look at any banknote in your pocket. It says: “I promise to pay the bearer on demand the sum of five pounds.” See? It’s an IOU.) Pounds are either circulating government debt, or they’re created by banks by making loans. That’s where money comes from. Obviously if nobody took out any loans at all, there wouldn’t be any money. The economy would collapse.

https://www.theguardian.com/commentisfr ... ry-surplus

[MungoBrush]

Are you seriously suggesting that banks lend money for which they have no asset backing?

It's called leverage and is the basis of fractional reserve banking. They use deposits then multiply that by some 35 times to create new money for loans it makes. That is, if they have 1 million in deposits, they can create 35 million to lend.This makes up the money supply, along with government debt.

The Guardian article I linked to earlier explained this but you edited it out of my post when you replied. Must have been inconvenient....

Here it is again though:

You may be objecting at this point: but why does anybody have to be in debt? Why can’t everybody just balance their budgets? Governments, households, corporations … Everyone lives within their means and nobody ends up owing anything. Why can’t we just do that?

Well there’s an answer to that too: then there wouldn’t be any money. This is another thing everybody knows but no one really wants to talk about. Money is debt. Banknotes are just so many circulating IOUs. (If you don’t believe me, look at any banknote in your pocket. It says: “I promise to pay the bearer on demand the sum of five pounds.” See? It’s an IOU.) Pounds are either circulating government debt, or they’re created by banks by making loans. That’s where money comes from. Obviously if nobody took out any loans at all, there wouldn’t be any money. The economy would collapse.

https://www.theguardian.com/commentisfr ... ry-surplus

Hello??????
The multiplier is textbook stuff that has been around for ages.
It's not "thin air"
In fact there's no reference to "thin air" that I can find

So lets go back to my original questions to you about capital adequacy reserves which gets to the heart of fractional reserve banking
If you can give me an intelligent answer instead of just copying and pasting we can continue the discussion in an informed way.

[MungoBrush]

Are you seriously suggesting that banks lend money for which they have no asset backing?

It's called leverage and is the basis of fractional reserve banking. They use deposits then multiply that by some 35 times to create new money for loans it makes. That is, if they have 1 million in deposits, they can create 35 million to lend.This makes up the money supply, along with government debt.

The Guardian article I linked to earlier explained this but you edited it out of my post when you replied. Must have been inconvenient....

Here it is again though:

You may be objecting at this point: but why does anybody have to be in debt? Why can’t everybody just balance their budgets? Governments, households, corporations … Everyone lives within their means and nobody ends up owing anything. Why can’t we just do that?

Well there’s an answer to that too: then there wouldn’t be any money. This is another thing everybody knows but no one really wants to talk about. Money is debt. Banknotes are just so many circulating IOUs. (If you don’t believe me, look at any banknote in your pocket. It says: “I promise to pay the bearer on demand the sum of five pounds.” See? It’s an IOU.) Pounds are either circulating government debt, or they’re created by banks by making loans. That’s where money comes from. Obviously if nobody took out any loans at all, there wouldn’t be any money. The economy would collapse.

https://www.theguardian.com/commentisfr ... ry-surplus

Hello??????
The multiplier is textbook stuff that has been around for ages.
It's not "thin air"
In fact there's no reference to "thin air" that I can find

So lets go back to my original questions to you about capital adequacy reserves which gets to the heart of fractional reserve banking
If you can give me an intelligent answer instead of just copying and pasting we can continue the discussion in an informed way.

In fact I've found a Bank of England paper on capital adequacy reserves which may help your understanding
In the paragraph just following the definitions, you will find the requirements related to "risk-weighted assets" which is what I have been asking you about

https://www.bankofengland.co.uk/statist ... pital-data

[Rolluplostinspace]

You make yourself look more stupid with each post.
We live with a monetary system that is debt based.
Every pound is borrowed into existence.
It didn't exist till you signed for it.
We live in a debt based monetary system.
Our money is created as units of debt not units of value.
No debt equals no money.
The money is created out of thin air.
We used to have these very same arguments with Maddog but he retired from the discussions presumably having done a little research.

Remember Germany 1930's where a loaf cost a truck load of money?
Germany could not buy wheat steel oil anything from the rest of the world because Germanies money had become worthless.
Yet suddenly overnight Hitler created the biggest most modern military the world had ever seen at that time.
Massive air and naval power the first motorways car production with the intentions of every German family having a car.
Hitler went on to appear on the cover of Time Magazine twice for his economic miracle.
What was this miracle?
He kicked Rothschild banking out of the country and created his countries currency interest/debt free.

[Fletch]

Mungo. Where and how does a Pound/Euro/Dollar come in to existence?

This is the fundamental issue we're talking about, not the intricacies of regulation.

[Fletch]

You make yourself look more stupid with each post.
We live with a monetary system that is debt based.
Every pound is borrowed into existence.
It didn't exist till you signed for it.
We live in a debt based monetary system.
Our money is created as units of debt not units of value.
No debt equals no money.
The money is created out of thin air.
We used to have these very same arguments with Maddog but he retired from the discussions presumably having done a little research.

Remember Germany 1930's where a loaf cost a truck load of money?
Germany could not buy wheat steel oil anything from the rest of the world because Germanies money had become worthless.
Yet suddenly overnight Hitler created the biggest most modern military the world had ever seen at that time.
Massive air and naval power the first motorways car production with the intentions of every German family having a car.
Hitler went on to appear on the cover of Time Magazine twice for his economic miracle.
What was this miracle?
He kicked Rothschild banking out of the country and created his countries currency interest/debt free.

I remember them well Jack and maddog also proclaimed to be an economics expert...

[Rolluplostinspace]

The truth is out: money is just an IOU, and the banks are rolling in it

Back in the 1930s, Henry Ford is supposed to have remarked that it was a good thing that most Americans didn't know how banking really works, because if they did, "there'd be a revolution before tomorrow morning".

Last week, something remarkable happened. The Bank of England let the cat out of the bag. In a paper called "Money Creation in the Modern Economy", co-authored by three economists from the Bank's Monetary Analysis Directorate, they stated outright that most common assumptions of how banking works are simply wrong, and that the kind of populist, heterodox positions more ordinarily associated with groups such as Occupy Wall Street are correct.

To get a sense of how radical the Bank's new position is, consider the conventional view, which continues to be the basis of all respectable debate on public policy. People put their money in banks. Banks then lend that money out at interest – either to consumers, or to entrepreneurs willing to invest it in some profitable enterprise. True, the fractional reserve system does allow banks to lend out considerably more than they hold in reserve, and true, if savings don't suffice, private banks can seek to borrow more from the central bank.
What the Bank of England admitted this week is that none of this is really true. To quote from its own initial summary: "Rather than banks receiving deposits when households save and then lending them out, bank lending creates deposits" … "In normal times, the central bank does not fix the amount of money in circulation, nor is central bank money 'multiplied up' into more loans and deposits."
In other words, everything we know is not just wrong – it's backwards. When banks make loans, they create money. This is because money is really just an IOU. The role of the central bank is to preside over a legal order that effectively grants banks the exclusive right to create IOUs of a certain kind, ones that the government will recognise as legal tender by its willingness to accept them in payment of taxes. There's really no limit on how much banks could create, provided they can find someone willing to borrow it. They wi>>>>>>>>>>>>>>> https://www.theguardian.com/commentisfr ... -austerity

The Bank of England finally admit Mungos belief was bullshit all along.
What you were taught at economic school was bullshit.
What many economists have believed for years was bullshit.
Banks create our money out of thin air but Mungo doesn't want to read this .......
The truth is out: money is created by high street banks .... out of thin air. ..... https://www.theguardian.com/commentisfr ... -austerity

[MungoBrush]

The truth is out: money is just an IOU, and the banks are rolling in it

Back in the 1930s, Henry Ford is supposed to have remarked that it was a good thing that most Americans didn't know how banking really works, because if they did, "there'd be a revolution before tomorrow morning".

Last week, something remarkable happened. The Bank of England let the cat out of the bag. In a paper called "Money Creation in the Modern Economy", co-authored by three economists from the Bank's Monetary Analysis Directorate, they stated outright that most common assumptions of how banking works are simply wrong, and that the kind of populist, heterodox positions more ordinarily associated with groups such as Occupy Wall Street are correct.

To get a sense of how radical the Bank's new position is, consider the conventional view, which continues to be the basis of all respectable debate on public policy. People put their money in banks. Banks then lend that money out at interest – either to consumers, or to entrepreneurs willing to invest it in some profitable enterprise. True, the fractional reserve system does allow banks to lend out considerably more than they hold in reserve, and true, if savings don't suffice, private banks can seek to borrow more from the central bank.
What the Bank of England admitted this week is that none of this is really true. To quote from its own initial summary: "Rather than banks receiving deposits when households save and then lending them out, bank lending creates deposits" … "In normal times, the central bank does not fix the amount of money in circulation, nor is central bank money 'multiplied up' into more loans and deposits."
In other words, everything we know is not just wrong – it's backwards. When banks make loans, they create money. This is because money is really just an IOU. The role of the central bank is to preside over a legal order that effectively grants banks the exclusive right to create IOUs of a certain kind, ones that the government will recognise as legal tender by its willingness to accept them in payment of taxes. There's really no limit on how much banks could create, provided they can find someone willing to borrow it. They wi>>>>>>>>>>>>>>> https://www.theguardian.com/commentisfr ... -austerity

The Bank of England finally admit Mungos belief was bullshit all along.
What you were taught at economic school was bullshit.
What many economists have believed for years was bullshit.
Banks create our money out of thin air but Mungo doesn't want to read this .......
The truth is out: money is created by high street banks .... out of thin air. ..... https://www.theguardian.com/commentisfr ... -austerity

Yes yes yes
I've read that and there's nothing new in it at all

BUT there is absolutely no mention of the words "thin air"
So can you please post the sentence that contains that phrase
Or are you just another liar?

[MungoBrush]

Mungo. Where and how does a Pound/Euro/Dollar come in to existence?

This is the fundamental issue we're talking about, not the intricacies of regulation.

You just don't understand at all do you?
Regulation goes to the very heart of banking
It's what drives it
It's what places limits on its activities
It's what consumes their management every single day
It's what Gordon Brown said that he "didn't understand"

If you can't answer a simple question about fractional reserves, I'll assume that you know nothing - as I orginally suspected.

[Fletch]

Mungo. Where and how does a Pound/Euro/Dollar come in to existence?

This is the fundamental issue we're talking about, not the intricacies of regulation.

You just don't understand at all do you?
Regulation goes to the very heart of banking
It's what drives it
It's what places limits on its activities
It's what consumes their management every single day
It's what Gordon Brown said that he "didn't understand"

If you can't answer a simple question about fractional reserves, I'll assume that you know nothing - as I orginally suspected.

Sorry, I missed the answer to the question I posed.

Where and how does a Pound/Euro/Dollar come in to existence?

You have them in your pocket, as do most people. How and where did they come in to existence. Seems a straight forward question but you keep avoiding it for some reason.