Monday morning feeling
Welcome to another anxious Monday morning.
Money markets are deeply stressed again, with the Asian rates for lending between banks for three months remaining at their highest level since last December.
Asian stock markets are falling, with Japan down 5%.
And it's the troubles of Europe's banks, and the messy response of the authorities, that's to blame.
First, let's accentuate the positive.
Fortis's Belgian and Luxembourg operations have been bought - and effectively rescued - by the mighty BNP Paribas of France for just under £12bn in shares and cash.
The troubled German property lender, Hypo Real Estate, has been rescued for the second time in a week, with a package of loans provided by the government in partnership with a consortium of banks and insurers.
And the UK seems to have moved a step closer to announcing the details of a contingency plan being worked on in the Treasury (which I described in my note on Saturday) to inject billions of precious new capital into British banks.
So far, so reassuring.
But.
We still don't know how and what the Icelandic government will do to restore confidence in its banking system.
There's talk of a great national effort, or the use of its citizens' £8bn of pension savings to provide financial support to banks that may need it.
But as of now, it's unclear what Iceland will attempt to do to stem the flight out of its currency and shore up banks that have borrowed £80bn in foreign currencies (and see my other Saturday note, "Markets call time on Iceland").
Finally, there's the residual uncertainty about the extent of Germany's guarantee to holders of private accounts.
It certainly looks as though it's providing 100% insurance to £450bn of deposits. Which seems fairly ambitious, and will put pressure on the UK government to do something similar.
But here's the thing: retail deposits in the UK are much greater than that, some £950bn, according to an analysis by the City watchdog, the Financial Services Authority.
In other words, we in the UK appear to hold more of our savings in authorised banks than seems to be the case in Germany.
So for the UK to offer 100% protection would put a proportionately great strain on the public sector's balance sheet.
I'm 
© MMIX~RS~q~RS~~RS~z~RS~30~RS~)
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Today's assignment, should you wish to accept it, is to find ONE (1) MAJOR MEDIA OUTLET running a story on FRACTIONAL RESERVE BANKING.
First in with a URL (http://...) wins the prize*
The term "fractional reserve banking" must be mentioned in TEXT of the story - pages using the term in their reader comments section only will not be accepted!
* Actually there is no prize. There's no need, because there's no stories to find.
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We still need to do more to stabalise the markets. The US for instance guaranteed temporarily money market funds if they "broke the buck" We may still see a lot of fall out from investors who will lose money in what was traditionally relatively low risk investements. Money Market funds hold a lot of paper from Banks which are rescued, being rescued or have already failed.
Let us hope that the new NEC can get ahead of the event cycle.
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Dear Robert,
There will be bad news for two more British banks this week, and Nationalisation of Banks is going to cause serious Economic fall out. The Banks are the cuase of all yet we bail them out, and the government is scared stiff of APublic revolt over savings losses, more so than the economy,
When will those who created this crisis be bought to boot, and why is it the Stock exchange shares index, over the last two years is on a continuous downward spiral."?
"What and who is generating thses losses."?
It has got to stop because this is the way wars brreak out,
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Thanks for the clear basic analysis of issues hitting the proverbial this morning.
Guaranteeing private savers will potentially stop a run on the banks by private individuals but what of the corporate savings and those moved around by many a vice chancellor of universities and the like?
The amounts of money held in savings accounts on behalf of educational establishments alone will have a huge impact on the potential for improved liquidity in the banks as it is moved to what is perceived to be a safer haven to weather the storm and this would have to be outside the UK.
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The effects of everything going in on the Banking industry are now clearly going to be felt for years.
I'm not quite so dogmatic as some on this site about things never being the same again, and because everything depends on confidence and that confidence has blown..that things can NEVER be restored.
However with the large rise in the jobless in the USA and the same expected here and across the world, it may be that while confidence gets restored in the Banking industry it won't do a lot now to avert something that is looking, as each day passes, as if it could slide over from a "technical recsioon" into a depression.
On a side issue I do like the use of "Technical" as a softening adjective.... I wonder if it would work as well in other fields...Doctor: 'The patient is technically dead..." or Garage: "The car is a technical waste of money"
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Iceland has an inflation rate of 14%. The government is looking at wage restraint. Iceland's credit rating has been downgraded. Its currency, the Krona, is plummeting, it has lost a fifth of its value against the dollar.
Can Iceland bail out its banks? I dont think so, even if it beggers its population.
In the UK, the knock-on will be felt, but in a rain storm, a little more rain will go un noticed.
PS. Robert. What have you done to upset a Crabbe columnist over the weekend ? ;-)
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Wait a minute .. Britons have more cash savings than Germans? Yet we are constantly lambasted by tales of consumer debt. That's odd.
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Like any insurance, a guarantee only strains the balance sheet to the extent that it is likely to be called upon. If a blanket guarantee prevents liquidity draining from banks, and (as is repeatedly claimed) banks are generally solvent, there are huge benefits and few costs. A collapse of the banking system is many times more costly than the guarantee itself.
There are times when balancing the budget and avoiding moral hazard is important, but this is not one of them. Feet dragging and obfuscating language is simply not helpful when leadership is needed.
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I don't think we ought to be too surprised by Germany's unilateral action (regardless of the impact it could have across Europe) in the case of savings guarantees.
I think the UK Government could well be facing their "Normal Lamont" moment.
In the face of enourmous currency speculation ahead of Black Wednesday, Lamont faced was faced by an intransigent Germany that wanted high interest rates to conquer inflation (owing in part to the botching of currencies in the East/West reunification) and in Britain we wanted low interest rates to beat inflation. The Uk wanted Germany to lower interest rates to beat the speculators.
Robert - maybe an idea to get Norman's view on what to expect from Germany? Especially on the future of monetary union - given the ERM experience.
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Robert to conclude that the British have greater savings in "authorised accounts" than the Germans from the fact that the German government "only" guarantees an extra 450GBP is a Monday morning mistake. Bear in mind that in Germany there already was one of the most generous systems of saving protection worldwide, which (besides the "normal" state guarantees) includes an internal insurance fund within the industry.
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Robert you quote:
"retail deposits in the UK are much greater than that, some £950bn, according to an analysis by the City watchdog, the Financial Services Authority."
Is the use of the word "analysis", not a bit of a stretch for this organisation?
Their performance in recent years has been woeful in relation to regulating the activities in the financial services sector. In this context is the quoted sum at all reliable?
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What we need is a war to sort this all out!
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i like comment number 4. Guaranteeing private savings is interesting and should at least match the Irish and Germans, but what of the larger institutional sums? Without confidence that source of funding is not going to fly out of the door, I doubt you really start to get anywhere close to the core problems.
Isn't it interesing how initially the banks get all 'protectionist' and dont coordinate anything with each other as they are scared for their own survival- then the nation states start to do the same. Everyone retreating into themselves because of fear and mistrust.
BW
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Al Jazeera August 16 2007:
Max Keiser looks at the global asset bubble and the record levels of debt caused by the carry trade.
Specifically the Yen carry trade and Iceland’s dependence on it:
http://www.youtube.com/watch?v=JjglR2KYz5o
No surprise to me, but hey, as much as I tried to tell people about Max’s predictions; no one took any notice.
Can any here get Max on the Beeb?
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Why do the government need to guarantee more than the first £35,000/£50.000 of people's savings? Why not leave the status quo? Anyone with any sense/responsibliity has made sure they have only this amount in one institution. Now the less responsible people who didn't bother to sort out their affairs are going to be supported by the unresponsible. The usual story for this government - the responsible paying for the irresponsible.
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#9
As you probably gathered, the "Normal Lamont" moment was meant to read "Norman Lamont".
Given the context of my comment, this Freudian slip (by using the word "Normal") could be as equally correct in relation to Germany's behaviour.
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How do I become a bank?
Up to now, people have been unwilling to lend me millions of pounds, but now that all deposits are guaranteed by the government, this shouldn't be a problem anymore.
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Checkout this story 'About solving the banking crisis'......
http://www.guardian.co.uk/commentisfree/2008/sep/28/economics.creditcrunch
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#1
Best I could do here:
http://www.bbc.co.uk/dna/collective/A27434397
Extract here: (Mods - Please let the truth be free)
By Action Network U9476027, Glasgow City
"Yes? So where? Where does the money you have in your pocket and in your bank account come from?
Who created it?
It comes from the Government! ... Nope. It doesn't.
It comes from the Treasury! ... Nope. And that's part of the government.
It comes from the Mint! ... Nope. It doesn't, though they do print some.
It comes from the Bank of England! ... Generally Nope. Though they do have the ability.
Of all of the money we have, almost all of it is created by your local bank. Yes, created.
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#1
here is another attempt to win the prize!
(Mods - Please let the truth be free)
[Unsuitable/Broken URL removed by Moderator]
Smoke, mirrors ... and how a handful of missed mortgage payments started the global financial crisis
GLOBAL FINANCIAL CRISIS, PART 4: How we got here -Iain Macwhirter traces the history of financial mismanagement, fraud and complex mathematics that combined to culminate in a run on – and the collapse of – some of the world’s biggest banks
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Robert - forgive me if i am wrong but dont you think all Savers deposits in Banks ought to be guaranteed as of definition from now on. The problem is how to do such a move.
My pragmatic view is that out of the shambles of NR and BB the government should take a permanent 49% share, underpinning all savings. When the market returns maybe they could be re-mutualised and owned by their own members/shareholders/mortgagors and the lending criteria return to a normal risk. By this time the markets will have driven property prices down by 40%.
Alternatively the government could make a 'safe haven mortgage bank' a bit like Fanny Mae which if i am correct was set up to free up finance for house buying after the great depression. Something major needs to be done to get some confidence back quickly otherwise downturn in Housing and Construction will lead us in to a slump.
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Robert - How about YOU explain what "Fractional Reserve Banking" is?
I would think that a great many of your readers would love to know your description of it.
May even deflect some of that unfair critisism that seems to be directed towards you of late.
Thanks in advance,
FWIW
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\1
''Today's assignment, should you wish to accept it, is to find ONE (1) MAJOR MEDIA OUTLET running a story on FRACTIONAL RESERVE BANKING.''
'Fractional reserve Banking is bankrupt in the western world....' quoted on Bloomberg 0847 this morning.
So there you go, when the blind, bonkers public begin to realise the game is up and that assassinating leaders for trying to change 'their' system cant be done any more, the people who hold real power and that caused this mess will be like caged tigers.
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re: In other words, we in the UK appear to hold more of our savings in authorised banks than seems to be the case in Germany.
I can explain this one: most Germans with sufficient funds have deposited their money in Liechtenstein bank to hide it from our equivalent to the Inland Revenue.....does anyone know the state of those banks?
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Dear Robert
Finance, and leadership, "Are we on the right track, "?
IF there is a unaminouse agreement over the problem, "Why are governments all doing different things regards the Economy,"/
"This is economic warfare all are playing the card of Brinkmanship with ordinary people taking the hit"?
" Why are we not told of the Corporate issues that are far more damaging than savings accounts, "?
"This just goes to show Europe as a collective is not working"?
"Europe is divided over the solution?"
The root cause of this crisis is the Banks, yet they have closed their doors to all but a selective few, and therefore when all this is over the Banking sector should be laid open to public scrutiny as the money they hold is the Customers, and it is they who keep a Bank operating, not governemnts and bail outs.
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Oh dear oh dear oh dear. I was just idly thinking that we seem to lack ANY form of leadership, in the guise of a senior Government minister (Gordy Boy, Ally-Pally or even, God forbid, Mandy) standing up and giving a succinct summary of the problems, a straightforward analysis of the proposed solution, and setting out what they will DO, plus how ordinary simple folk like me will be affected. But please, an end to saying they are listening and will do whatever it takes. (Trebbles all round, and pass the Beano please)
Could it be that they have no understanding, so cannot set a plan, and therefore are clueless about the impact. Surely not.
Oh, and another thing, do you think any of them read these blogs? Hello there in Downing Street ... is there anybody in there, just nod if you can hear me, is there anyone at home? (As David Gilmour and Roger Waters put it in 1979)
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A short while ago,i wrote on yomi11 blog that the financial markets have been in this situation before but have a way of digging themselves out of it,a few days after that the US passed the bailout bill and it was passed into law,way before that Barclay,s bank and Bank of America had played their part with Merrill Lynch and AIG,ultimately everything will sort itself out,if we can just tone down the hysteria a lttle because all the money does is change hands, it doesn,t really leave the city.We should stop hanging our heads and get on with it.
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All this money is owed to Asia.
Why don't we just let those banks fail and take the debt with them. Apologies to Asia but they took a risk lendinf to those banks.
The alternative is taxpayers are stuck with this for decades and there will be no economic growth. Living standards are going to slump anyway but this will just make UK Plc a slave for at least a generation.
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Ho hum.
Anxiety and large amounts of slippage in the perception of values that is stock market trading around the globe.
However, chaos is normal. Varyingly extreme forms of chaos are normal. We try to regulate against possible 'wayward' behaviours but all we do is make the slip of grains down the sand pile more dramatic when it is eventually released. All we can do right now is observe, think and stick on another sticky plaster or band aid.
At some point, hopefully soon, the perception of the then current state will be that there is not just hope but a distinct possibility of making money again and then, and only then, will money readily be available between the banks.
They never have trusted each other but their interdependence and interchangeable products and skills make them have to put up with each other like people in a bad marriage.
Just giving them more liquidity by pumping money in by the central banks is not sufficient because, as with the people in a bad marriage, some form of counselling and agreement needs to be made between them to create a new way of working productively and successfully.
The old banking business model has failed by selling and buying high risk products as if they were low risk, and the banking business model needs a revamp for all concerned to be able to more forward. NM
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So at waht point will the cost of bail out be too big? There must be a point, which I suspect Iceland has reached where it actually would make sense to let it all collapse and start again. Probably result in a lot of pain short term but bail out will be paid for for many generations.
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Dear Robert,
thank you for your comments, which are deprived of jargon and easy tor ead for non-bankers.
My wild guess about the end-result of this historic set of events is that Europe will guarantee deposits up to certain ceilings, perhaps 100%. As some countries, especially France, cannot afford it, as soon as one bank collapses -and it will, whether ordinary citizens withdraw their cash or not, other banks will follow suit, and the ECB may submit and "print" vast amounts of money which should result in a massive devaluation of the Euro, perhaps to less than 1 euro a dollar.
European industries will be delighted, the banking industry will be reshuffled, and that will be the end of the drama.
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Hi Rob,
With the greatest respect, I am starting to doubt your sanity.
Why are you advocating a government backed Ponzi scheme? What you are avocating (taking an equity stake in ailing companies) is a very bad idea. These banks are a very bad investment. With the exception of a few, they have exceedingly bad balance sheets and if fund managers are selling them, let's face it, short sellers can't sell them anymore, (and they are meant to know what they are doing) why are you advocating using govenrmment money to prop them up? This is nothing more than polishing a cow pat.
What is wrong with maintaining the current depositor insurance and allowing them (banks who have made dodgey investments) to go bust? All this 'systemic' mumbo jumbo. I simply don't buy it.
Allow the organisations to go down, we will have 1-2 years of very tough times, but the system will clean itself out and rebuild.
Make no mistake, a lot of people will loose money but, hopefully they will learn from this massive mistake and put checks and balances in place to make sure that this kind of rampant capitalism can be allowed to happen again.
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Robert,
I know you are steadfastly refusing to begin the discussion on Fractional Reserve Banking but events are going to catch up on you and you're going to miss the boat.
If you begin the conversation now you may get your own statue in Trafalgar Square. If you refuse to have the conversation you'll end up reporting it behind the curve as usual.
You know its the root cause behind this whole debacle.
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lsi92 - nice one ;-)
Robert - are the sharp falls in UK banks today due to fear of public sector capitalisation which might dilute stakes of the private sector or would UK banks welcome more capital? It still seems to me an issue of liquidity rather than solvency so clearly the solution is for BoE to become the lender in the interbank market and possibly for Northern Rock to start lending in the SME and consumer sector.
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Fractional reserve banking, the big dirty secret that nobody will talk about!
Seriously Robert, I know you're sort of hinting at it, but these 'guarantees' are completely worthless aren't they? Where's the money coming from if a big bank goes under? Where exactly would £200 billion come from if, say, Barclay's went under and the whole system is teetering on the abyss?
Let's face facts, there is NO money to back up these fanciful guarantees is there?
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So its Monday morning again and the markets are down 4.5 percent of so, but I wonder if someone can give me a rational explanation of why all the world's markets move quite so synchronously?
E.g. the CAC 40 and the FT 100 are both down about the same percentage, but these indices are made up of different stocks in different proportions - so why do the aggregates move together? I particularly notice this with NASDAC and the SandP 500 - different sectors same country yet they move together.
I know in times like these it is mostly marking stocks lower, but this seems to happen in normal times too.
My guess is that it mostly gambling related options covering moving the real market. (But there are often quite large volumes of real shares moving at these prices.)
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"There's talk of a great national effort, or the use of its citizens' £8bn of pension savings to provide financial support to banks that may need it."
OMG - talk about your dropping your country's future into a black hole!
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Can we please have a break from banging on about fractional reserve banking without offering any realistic alternatives? It is a system that needs to be managed properly, not thrown on the rubbish tip. Banks do not create money, they simply provide the mechanism for it. Anyone who lends or deposits money in return for an exchangeable IOU create the stuff. It doesn't mean they create value for themselves as the extra money is matched by debt. They just increase the amount of money in circulation. At the other end of the process loans get paid back, this reduces the amount of money in circulation. As long as the system is stable and regulated properly it works (now, who's job was that...)
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Dear Robert,
I would be prepare to make a small wager that most European banks will be in public ownership within a month. At which point the acute phase of the banking crisis will, most likely, be at an end.
I think the speed with which the situation is developing will, in time, come to be regarded as a good thing.
If this is the end game, then the sooner Governments seize the initiative the better.
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So its Monday morning Robert. Whcu way are you swinging today, is the Uk going to gaurantee all savings as you stated yesterday or are they not as you also reported yesterday
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How could it make sense for taxpayers, rich and poor alike, to compensate a super-rich individual with £1bn in a bank that fails, but not to compensate a small private firm, a pension fund or a charity with £50,000?
Yet that appears to be what is being suggested.
Maybe the limit should be £100,000 rather than £35,000 or £50,000, but an unlimited guarantee restricted to private individuals seems both illogical and frighteningly costly.
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How to solve this issue in two moves:
1. Rescind FASB 157. This regulation includes the accounting rule that requires banks to monitor on a daily basis the impact of collateralised debt on their balance sheet. This constant "pulse taking" is fuelling a collapse and contributing to "knee jerk" moves by panicking governments.
2. Regulate the CDS market. Ensure that any underwriter is subject to strict fiscal criteria to ensure that they are in a position to "guarantee" loans.
It's a big problem, bu the solution is really quite simple.
Tom Donnelly
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Isi92 try the Sunday Herald, which has a clear and simple article by Ian MacWhirter.
[Unsuitable/Broken URL removed by Moderator]
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A quick additional comment on the savings guarantee given by Ms Merkel: all the news in Germany are talking about a complete guarantee. No limits of any size are being mentioned. Not sure where Robert's figures come from, but they are not reported anywhere in Germany!
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As a serviceman employed overseas for the last 10 years the current situation is very worrying. We have saved over 200000 to allow us to by a house but it is in just one account. We would like to spread the risk but the EU Savings directorate means that most British Banks will not allow us to open accounts from outside the UK. We are vulnerable we know it and the rules to protect the banking system from money laundering are currently working against us.
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Gordon Brown's newly created National Economic Council who will meet soon for tea and toasties, then get down to the real job of counting how much they will earn for drinking tea etc.
another quango is all we need in times of crisis or just someone else for the PM to blame.
mondays used to be a great day the start of the working week and full of get up and go people would resume there duties.
now its just another doom and gloom day under a government whos policy seems to be doom and gloom.
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#9 Terry - well remembered - it's almost like we were here before!
I thank the stars that this time around we're not in the ERM and our (BoE) hands are not tied in this way.
Imagine if we were in this pickle under the EU rate setting - there would certainly be no rate cut this week and it would undoubtebly lead to a recession.
I heard David Cameron on Sunday spouting about 'how this lax lending must never happen again - and regulation must be put in place to prevent it happening'.
.....a bit like Major was spouting about 15 years ago. Obviously the Government is as stupid as a 5 year old child and perhaps the people need to take it in hand and treat it so - because they don't seem to be learning on their own.
So the Tories let it happen in the 80's and Labour have done it in the 00's - so who wants a go next?
Bunch of useless good-for-nothing time and money wasting muppets.
POLITICIANS ARE FAILED INTELLECTUALS AND NEED TO BE REMOVED FROM RUNNING THIS COUNTRY INTO THE GROUND.
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HBOS is trading at c175p while Lloyds is c275p so HBOS is still at a massive discount relative to implied fair value of around 250p - it represents a good buy op.
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Just for good measure Fractional Reserve Banking is a very American term which is possibly why a lot of younger Brits may not know its definition or use.
If anyone cares to read FRB by Murray N Rothard, it will enlighten all you wanabee bankers.
Some people consider it to be just an elaborate scam - 'a swindle' in American terms but in reality the Fed now controls the money supply in USA. It is a very interesting subject and for any Economic historian it is definately worth reading.
The exact definition is 'A Banking system in which only a fraction of the total deposits managed by any bank must be kept in reserve. The amount of total deposits equals the amount of reserves X the deposit multiplier. In the USA this system is maintained by the Federal Reserve Board.
Am not sure whether the BOE does the same here... perhaps Bloomberg may be carrying something on this today but Rob Please do a piece on this sometime this week as it puts our global banking/investment Bank crisis in to perspective.
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I have a theory about the bailout crisis: it's routine--a routine credit contraction caused by overexpansion. I would welcome a comment.
Here's how to prove this yourself: Google "The Curve in the Road by John Mauldin". Look at the two graphs for LIBOR over the last year and for commercial paper outstanding since 1990. Two things stand out:
LIBOR also spiked in Dec 07 and from Mar-May 08--to 2% from 0.5%. This past 30 days it spiked from 1% to 3.5%. To me, it doesn't seem unprecedented. I've heard that in the early 1970s a similar spike
occurred (can anybody confirm this?). Second, and most damaging: the reduction in commercial paper is not historically abnormal now. From 2000 to 2003, commercial paper dropped 19% (look at the graph: 1600 to
1300). From 2006 to 2008 (today's crisis) commercial paper outstanding dropped 25% (2200 to 1650). Severe yes, but, again, not totally unprecedented.
Can we therefore say that this credit crisis is a 'routine' (albeit severe) response to the credit expansion we've had over the last five years or so? If so, then why did Bernanke and Paulson panic? Could it be that as middle-aged men who have never witnessed a severe credit
contraction (such as happened in the early 1970s and early 1980s), they overreacted? Of course, more cynical and sinister theories are possible, but this is the benign theory: they were simply over their heads in responding to a relatively normal credit contraction. And we
taxpayers have to pay, as well as setting an extremely damaging precedent for the USA.
One final note: you can argue that "but for" the government intervention, the contraction in commercial paper would have been much more severe, which therefore justifies the intervention. But this is
complete speculation. In fact, you can argue that $700 B is not enough to prevent further contraction, and therefore this argument is circular.
PS--A professional economist has independently made a similar argument to the above: Google "What Crisis" by professor John Seater.
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If the German government has givenb a full guarantee the B of E may have to follow.....
Hardly the sort of leadership that the country needs if the most constructive thing is to follow the german iniative
Where is our supposed leadership I thought the pruneheads were supposed to be running some of the best Banks in the world and all they can come up with is We may "follow the Germans"..
No wonder the FTSE is going south again this morning. Could a major bank go this week?
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#1
I found this story in the Sunday Herald
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#38
Ah, but Fractional reserve banking doesn't have any mechanism within to to accommodate 'interest'.
OK, the loan is paid back - but it's paid back 'with interest'. Now where does that money to pay the interest come from? Gottcha!
Only by infinite expansion will this system keep working.
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Now in amongst all the hullabub anyone notice that the price of oil has dropped below $90 a barrel - a drop of nearly one third?
Now the gas companies never tire of telling us that 'the price of gas is tied to the price of oil'. So, I'm really looking forward to a reduction in gas bills this winter!
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When does any one think that the government will/should bring back exchange controls so that they can be sure where all the bail-out money is going?
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The cause of all this is not the banks...
the cause is the policy of controling inflation for 20 years by every means.
excess capital normally destroyed by inflation has sought a residing place, the pressure has built up to extreme levels
so bubbles have grown , the IT bubble destroyed a lot of capital but governments sought to replace it without inflation so house price growth became the receptical
finally the oil price bubble broke the economy and the capital values are falling due to real interest rates. the banks are the casualty. we need 25% inflation instantly worldwide or 25% asset destruction more accuratly and low interest rates to create inflation to sort it all out from there liberals are right for once
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19. At 08:38am on 06 Oct 2008, FWIW_FWIW wrote:
Sorry, no prize for this one. I actually wrote that a couple of years back...
"By Action Network U9476027, Glasgow City
"Yes? So where? Where does the money you have in your pocket and in your bank account come from?"
This was before I decided that getting high blood pressure about it all was a waste of effort and instead to simply switch to cash at the peak and watch everyone wail and beat their chests as the giant sucking sound emptied their pension schemes, house values and investments.
Hey, you can't tell people. Nobody wants to hear that they don't know what money is... Or that they should sell now and rent for a year or two. They look at you like you're an idiot.
All you can do is say "Don't you all look silly" afterwards.
Here's the best advice I can give:
- READ MISES! -
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So last year all us bank customers had to sit through all the banks posting record profits whilst we had to pay their inflated and dare I say, quasi cartel, inspired charges. Their directors got fat and ever more greedy and governments did nothing.
Now, unlike any other commercial organisation, the governments are now having to shore them up - with our money again.
So our governments, get us a fair deal! We'll allow you to bail them out but we don't want to have to foot the bill now and later. They get the money on the following provisos - they pay back all you loaned them plus providing us, the taxpayer and customer, with some interest on those loans. You drop your charges and you make less out of us beacuse without us, you'd be dead!
Just imagine if all the customers of one bank (any bank) moved all their funds out of that bank- al al Northern Rock. How would the banks survive? We can as one organised group have our say but we don't organise.
Banks - we are your Customers and your lifeline - treat us properly.
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With the economic crisis seeming to affect much of the world, it is not obvious to me as to how this is affecting China. They did seem to be gloating at the woes of the US but surely if the rest of the world doesn't have the money to spend then China will be affected.
I would welcome some comments on this
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This is like a cliff receding and threatening several houses-every occupant looking at their neighbours and saying-'oooh, that's bad we have to do something'-then each neighbour running to their own garden shed and using their own tools and nicking wood fron next door to protect their own house!
Look at the global response to global warming!!!
Foreign nationals don't vote in our elections-of course each country will look after its own!
Now here's the thing....if joe-public overspends on mortgage and credit cards noone gives him a hand out. Currently, sub prime debts are increasing as property prices fall, so what amount of lending is toxic?!
Banks were greedy, focussed on making money and ignored the folk in the street-government turned a blind eye cos of funding by big fat cats. We need to have savings and pensions safeguarded, fatcats to make recompense, and banks to be made accountable. Like the USA, 'main street' people are justified in wanting some sort of payback for having their money being used without their agreement.
Spank the banks, pummel the politicians, and sort this out! Global, European, or national-does it matter?! If the government protects savers, pensions and helps those in mortgage difficulty, then let the banks sort themselves out-humility can be a good thing!
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Am I right in assuming that all guarantees of accounts are provided by the FSA under the FSCS?
If so then I would suggest that such guarantees are not worth the paper they arre written on - the FSCS does not have the assets to cope with a bank failure. if a bank failure were to arise then the FSCS would ask the BOE for a loan to pay those who had lost money and then seek to recover the money ... FROM THE BANKS!
There is already potentially a 14bn liability - which would absorb the total liability for deposit takers under the FSCS scheme and the rest of the scheme only has a 1.8 billion coverage - by asking insurers/ brokers etc to contribute.
Thus the promises of guaranteeing all funds are basically just propaganda to maintain confidence in the retail sector and prevent a 'run on the bank' - - - well more of a run than is happening at the moment.
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Further to Fractional Reserve Banking ... in principle, it's fine. Indeed, I can't see how banks could service a complex, modern economy if they didn't follow this model. Course, by the same token, when confidence goes (like now, for example) FRB adds fuel to the fire.
But banking is essentially a confidence game, isn't it? ... if you dispensed with FRB and went back to a near zero risk "demand assets equal demand liabilities" model then, fine, you wouldn't get the sort of problems we have now but neither would you ever get much economic growth. I mean, why not go back to bartering ,and dispense with money altogether, if we're going to go that road?
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This comment was removed because the moderators found it broke the House Rules.
This may seem such an obvious question - but when the Bank of England "injects" billions into the banking system - where does it come from? It's not already in a bank account obviously, but it's not in a box under Gordon's bed either! Is he printing it?? Either way it's Mickey Mouse answers that the ordinary taxpayer cannot comprehend and therefore feels irrelevant however you try to explain it. So long as Darling says he won't have to increase taxes, them most people think it's all smoke and mirrors anyway and is happy to let HMG get on with its financial sophistry.
And why all this focus in the news from the view of the "ordinary man"? The real story here is surely that these markets move because of the big players - not you or me and those big players used to be people like George Soros, but now I suspect it is the Sovereign Wealth Funds who can wield such enormous financial power - they can advance their country's interests (and dimiish 'ours') by the deployment or withdrawal of their funds from the open, Western system into their more controlled, even closed sovereign ones.
But I guess with that all power ranged against us who would dare to point a public finger at any such big player who is arguably just looking after its own best interests and has firepower in reserve to do even more damage? Maybe we shouldn't be so hard on our big-beast and highly paid bankers who have played them at their own game for so long and who we will almost certainly need again, on our side, when the game resumes.
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"38. At 09:28am on 06 Oct 2008, crispblog wrote:
Can we please have a break from banging on about fractional reserve banking without offering any realistic alternatives?"
Full Reserve Banking.
"Banks do not create money"
Yes they do. They do exactly that. Money is a means of exchange. Bank credit is just as much money as notes and coins are.
"At the other end of the process loans get paid back"
Do they now? How exactly do the loans get paid back. Where does the money come from to pay back the loans?
Want to know the answer? The money to pay back the loans comes from newer, bigger loans. Yuhuh, yes it does... Which means the debt is never in fact paid off, but just keeps growing.
"As long as the system is stable and regulated properly it works (now, who's job was that...) "
The system is NOT stable. It CANNOT be stable because debt is an exponential function. That is, it increases exponentially. Fractional Reserve Banking is fundamentally unstable at it's very core, and this is where the bubbles and bangs as well as the "business cycle" we are all so used to come from.
The ONLY way to make banking stable is to ban the practice of fractional reserve lending. Otherwise it WILL continue happening.
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In view of the current lack of unity in the EU, maybe we should be referring to "factional reserve banking", rather than "fractional"...
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True Lib @ 57
... "This was before I decided that getting high blood pressure about it all was a waste of effort and instead to simply switch to cash at the peak and watch everyone wail and beat their chests as the giant sucking sound emptied their pension schemes, house values and investments" ...
Aren't you a clever boy?
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Can I have my prize for typing "fractional reserve banking" into news.google.co.uk and clicking on this article by Iain Macwhirter in the Sunday (Glasgow) Herald?
http://www.sundayherald.com/news/heraldnews/display.var.2457240.0.smoke_mirrors_and_how_a_handful_of_missed_mortgage_payments_started_the_global_financial_crisis.php
Seriously, I do think fractional reserve banking is a very important issue, and should be understood more widely. I'm not (yet) advocating that we get rid of it, but at the very minimum, when you have any system that is based on improbable things not happening (i.e. a large fraction of depositors trying to take money out of their accounts at the same time) you need good regulation. Perhaps the system would work more sustainably if only 5 rather than 10 times the assets could be leant out? Or perhaps we need a radical new approach to the banking system?
http://www.prosperityuk.com/
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This will not work, only way out is to cut interest rates to 2% and pump money; also immigration has to be temporary hauled as more and more jobs are lost. This will stabiles the markets.
Looks like our government and BOE has started to move n the right way but they are too slow. Don't worry about the tax payers as these are the once that are losing jobs or closing business.
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If it is OK for us depositors to take the risk of bank failure individually, as we are urged by politicians to do, why cannot the taxpayer (which seems also to be us) take this risk collectively? Why is the government so reluctant?
Conversely if the risk is not good for us (the taxpayer) are we (the depositors) not being told that we should switch our savings to Irish banks?
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Regarding FRB, there's a Wikipedia article on it that may help some. http://en.wikipedia.org/wiki/Fractional_reserve_banking
It seems clear from the comments on blogs like this one that there's an audience out there for a programme or two from the Beeb that takes a *non-dumbed-down* look at the world of finance and macro-economics.
By that, I mean one where the cameraman isn't told to bring the scene in and out of focus, and the presenter isn't made to walk and talk at the same time. I'm quite happy to look at someone who stands still and talks if what they're saying is interesting.
How about it? Tim Harford did some BBC 2 work a while ago. Or perhaps Peston if only he had a spare minute in the day. :-)
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This current fall in the Euro, is it overdone or just a long awaited correction that has been overdue? Either way I think in the longterm it may bring some relief to Europe if it sticks. Short term wise corporates can take advantage quickly enough and this volatility is unsettling.
Everybody is worried about banks, faur enough but the basic volatilities are making even the most stable businesses nervous.
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Robert,
You mention that the FSA believes c. £950b exists in UK bank accounts thereby discouraging the government from guaranteeing such a large amount.
They need not worry so much. Given that Ireland, Germany (Greece and Denmark too, I believe) are taking the people focussed approach of guaranteeing all deposits, the£950b will be diminishing as quickly as Zarkava won the Arc on Sunday.
A few weeks should have that whittled down to a more manageable figure and also help to underpin banking in those other countries.
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54:
I think you will see a fall in gas bills, with the following two provisos.
First, the fall will occur in early 2009, providing that the price of oil is still low at the end of December - term supply contracts tend to adjust on a six-monthly basis.
Second, the fall will not be as large as the fall in oil prices. The price of oil is only one factor in the price of gas - declining domestic production is another significant factor.
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Good news!
I have opened my wallet this morning and find that the £10 note there still reads "I promise to pay the bearer on demand the sum of ten pounds". So obviously all is well.
More seriously - we all know that, in a sense, money is meaningless.
So let's stop banging on about fractional reserve banking - which is just one myth built on another.
More interestingly, is it the case that a relatively long period of stability is itself a cause of instability, as Minsky suggests, because of over-confidence which develops?
If so the boom and bust is simply a never ending cycle. If the booms last longer the busts will be bigger.
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Robert - the GBP 450bn refers to the amount that is already guaranteed by the German deposit under the German equivalent of the FSCS. To guarantee "all savings" would probably require an amount closer to GBP 1.3bn.
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In terms of size, the US bail-out may be huge but based on the figures given in the following bbc article it is the UK's bail-out that is proportionately greater:
http://news.bbc.co.uk/1/hi/business/7644238.stm
The US's bail-out works out at approx 7% of its GDP in contrast to the UK's 13% of its GDP. I can't say that i've heard or read this in any articles or reports yet the figures seems quite alarming.
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Fatcat @ 53
Well, one expects expansion over the long term because people work and make stuff and invent things and generally create.
Money is nothing in itself, it's just a barter mechanism and a way of measuring activity and wealth.
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The Western financial system has always been dependant on maintaining a high level of confidence, much of it false and undeserved.
Nationwide Building Society for example is held up as a model of the right way to fund long term mortgages yet it boasts that the majority of its funding comes from customer deposits that could all be withdrawn within 5 years at the most, and the vast majority I suspect is Instant Access. If confidence (in the idea that enough savers will continue to recycle their short-term funds through the Society to keep the ball rolling, it will fall over.
Yet it is fashionable to rubbish Mortgage Backed Securitisation which is a very sensible approach to matching the long term mortgage asset with a long term funding profile which, so far as it could, seeks to match it and create a tradeable security so if the funder want's to cease funding a tranche of mortgages, he trades the paper - he doesn't bring the lending institution down. It's not perfect, it never will be and perhaps it would helpful if the Public were enabled to understand that you cannot talk in terms of absolute security or zero risk in anything - there is always a risk, and it would be beeter if the Public appreciated that.
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No. 52
Well done - the Ian Macwhirter article is the clearest explanation of this mess I have seen so far. I urge everyone to read it.
Maybe your prize will be some worthless bank share certificates to frame and hang on the wall in the toilet...
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The death of globalisation has started.
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It seems if you criticise Peston you get blocked by the moderators, BBC cencorship in operation i see, anyone else think like me that he seems to stoke the fires of uncertainty?.
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Robert, this mess has been compounded by politicians and regulators failing to apprecite that bankers are not masters of the universe.
It is insane to assume they know how to get themselves out of this mess simply because it would be like asking turkeys to vote for Christmas.
I suggest the following:-
1) Banks here come clean about their liabilities and toxic loans, a situations i suggest they have as yet refused to do.
2) Having established the extent of their liabilities, they are then netteed out against their assets.
3) The difference is then agreed to be written off over 10 years at full cost to the banks.
4) Dividends are scrapped for 3 years and only paid when in year 4 when a trend has been established.
5) If banks do not return to lending to customers and continue to keep the draw bridges up. The government instructs the Band of England to cancel the extra
liquidity to the errant banks and takes over direct management.
6) All future short tern loans comes not just at a rate of i terest but with a shareholding resting at the treasury for the taxpayer.
7) Shareholders have to be reminded of caveat emptor( buyer beware) and it is they who take the strain.
8) All banks executives on remuneration schemes in receipt of taxpayers money will have those schemes canceled and will just work on a basic salary. There can be non logic for one more day in rewarding failure!
9) We stop blaming America
10) We stop consulting experts on how to get us out of this as it was they who allowed it to happen.
11) I am happy to offer my services to get this sorted. This problem doesn't need graphs and consultations, it has been bulding for years. It needs firm leadership and resolution not to be bullied by parties who only care about their own self interest.
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Re #1 fractional reserve banking
You win - I can't find one but it's universal in modern banking.
google the crash course by chris martenson
There's an explanation there. Warning it's depressing.
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#18
Many thanks for pointing out the excellent Guardian article.
Recommended to all.
So it was the dire/ criminal lack of regulation of our globalised banks that allowed them to conjure up pyramids of money sold as debt to non wealth creating entities that caused the crunch. Hmm ... simple really.
So Fractional Reserve Banking is all about smoke and mirrors afterall!
Tulips anyone?
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Can anyone tell me where the money that is traded on the wholesale markets comes from ? And what it is doing instead ?
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FRACTIONAL RESERVE BANKING
FRACTIONAL RESERVE BANKING
FRACTIONAL RESERVE BANKING
Illuminati
New World Order
Lizards....
I got it!
It's not the method (tried and tested for years) it's the reckless way it's been used recently - the number of times money is lent and re-lent and who it's lent to.
I for one am now sick to the back teeth of this mess!
Did no one at any of the financial institutions run a ‘what if’ – the housing market turned – the economy turned - etc. Is it really true that no one knows how much and where the liabilities are? I am struggling to believe that!
Despite dealing with International Money Markets why does there appear to be shock that something in another country can affect a bank in the UK.
And now, after relying on the herd instinct of the public for 10 years to borrow for ever more ludicrously priced houses, to uses Credit Card limits set with no real vetting in place or to take out loans that at best are going to be a struggle to repay. They are now asking us to trust them and not do anything silly – like take our money elsewhere! If you are going to use mass hysteria to drive up an economy, don’t complain when mass hysteria drives it down....
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More Banks to be scuppered ?
If all deposits, bonds and cash convertables over 50 thousand were withdrawn from any single Bank, then you can bet that the particular Bank would be out of business tomorrow.
Brown has to guarantee all deposits otherwise the money will slosh around and eventually break down the defences of one or more Banks.
We know that, Brown knows that, the Banks know that, so any inaction on a low guarantee limit is simply waiting for the inevitable to happen.
The total deposits of the 50 thousanders plus will probably exceed the Bank deposit calls by a factor of 2 or 3.
Guarantee is needed if stability is to be reined in.
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All,
Paul Grignon made this animation on "Money as Debt". It gives a very good illustration on terms such as fractional banking, gold-backed dollar, etc.
Google for "Money as Debt", or make use of this link:
http://video.google.com/videoplay?docid=-9050474362583451279
With regards to "interest" or "usury", this was basically shunned by all religions and it was even a crime to ask for interest then.
So, what happened then?
We all have our thoughts and opinions on the above topics, but to lay the blame squarely at bankers and the current financial system, is to show utter ignorance and arrogance.
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All this talk about fractional reserve banking is really a distraction. You could still have a run on a bank without it. This is because banks take retail deposits that can be withdrawn short term, but lend long term.
The authorities are supposed to control the fractional reserve banking system by controlling interest rates. Actually they stood idly by with low interest rates for years while the money supply grew massively, fuelling the asset price boom.
The issue isn't the FRB system, it's the negligence of the authorities who didn't control it properly. Taxpayer-funded bailouts won't work, because they won't correct the root cause of the problem. The only way to stabilise the banking system is higher interest rates. And the authorites (and Robert too) are talking about lower rates!!
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Robert, there is something I would like to understand about the German government bailing out the banks, and EMU.
For the UK, it seems simple. The UK government would probably be unable to cover the cost of bailing out everyone in pre-'08 money (the tax budget is far smaller than the numbers being thrown around)
But in the worst case, that is OK, it prints money via the BoE, and gives it to the banks. Devalues the pound a bit, but currency devaluation to prop up the economy has happened several times in the past couple of centuries.
But the German government surely can't print euros: only the ECB can do this, and Germany has given away its right to control its own currency. So who would actually be empowered to take the necessary action to devalue the euro? And even if authorised, how do they go about distributing the proceeds between all the countries that need it (Italy, Spain.....)?
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The medium term solution will almost certainly involve the rehabilitation of junk bond schemes. There is no way out of this crisis short of a round of mergers and acquisitions supported by speculative bonds - the difference between now and the eighties being that junk bonds would have to be issued (and underwritten in some fashion) by governments. The assets of affected institutions (their debt effectively) would be significantly disocunted and folded into a bond - which somethign similar to but more transparent than the US proposal. The principle is well understood, the difficulty lies with the level of mark down applied to the debt. This is where the regulators and bankers fall out. A very severe mark down of asset values will undoubtedly drop property values which has the upside of stimulating sales among first tiem buyers and investors with cash, but it also has significant downsides. In Iceland, property will dramatically collapse whatever strategy is proposed however, given the debt problems.
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true-liberal #57 said the best advice is to read Mises, the Austrian born economist.
Mises is not the answer!
Mises advocated that during a boom period, Mises counseled the immediate end of all bank credit and monetary expansion; and, during a recession, he advised strict laissez-faire, allowing the readjustment forces of the recession to work themselves out as rapidly as possible.
This advice is nonsense because we did not reduce bank credit and monetary expansion in the boom period. Of course ,if we had done so, we wouldn't be in the mess we are in now but Mises himself was a man who advocated strict laissez faire policies which would prevented the very thing he supported: namely the end of all monetary and credit expansion in boom times. His entire philosphy was against the direct interventionist action required to achieve this!
Because we failed to reduce monetary and credit expansion both in the last few years and also in the USA in the 1920s, a policy of strict laissez faire after massive credit expansion would cause a massive and very deep recession, as it did in the 1930s.
Mises said the worst form of intervention in a recession would be to prop up prices or wage rates, causing unemployment, to increase the money supply, or to boost government spending in order to stimulate consumption. For Mises, the recession was a problem of under-saving, and over-consumption, and it was therefore important to encourage savings and thrift rather than the opposite, to cut government spending rather than increase it. Well, that is the argument for a deep and permanent depression.
In a recession, the problem is a lack of confidence and fear. we can see this with the current banking crisis. Expenditure both of investment and consumption is cut back in such circumstances which leads to lower production, lower consumption and greater unemployment and much hardship. Governments do need to intervene to mitiagate the effects of a recession and to provide the means for recovery.
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I've said it before, and I'll say it again, all this worrying reporting of the 'safety' or otherwise of OUR savings begs the question - WHERE are financial experts {such as Robert Peston} stashing their savings? We want to know
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Moderators - my entry #66.
Please just take out the offending 'wet' and leave the 'dream' stand. The context will carry it.
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There's one thing that puzzles me about the Government's reluctance to give a 100% guarantee to personal savings. We are constantly being told that much of the present difficulty is due to lack of confidence in the banking system - and the risk of a rush to withdraw deposits - rather than banks actually being in the red. In that case, the risk of having to actually pay out against a 100% guarantee would be extremely small - whatever the total "theoretical" risk.
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The banking crisis - It gets worse in Japan
I've just read that uncertainty has now hit the Japanese banking sector:
In the last 7 days Origami Bank has folded.
Sumo Bank has gone belly up. Bonsai Bank announced plans to cut some of its branches.
Yesterday, it was announced that Karaoke Bank is up for sale and will likely go for a song, while today shares in Kamikaze Bank were suspended after they nose-dived. Samurai Bank is soldiering on following sharp cutbacks. Ninja Bank is reported to have taken a hit, but they remain in the black.
Furthermore, 500 staff at Karate Bank got the chop and analysts report that there is something fishy going on at Sushi Bank where it is feared that staff may get a raw deal! BUT there is some good news amid the gloom, a spokesman for Ichifani Bank Corp confirmed- ''we are up to scratch''
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"fractional reserve banking"? Are you kidding?
That's not the problem. Without it there would never be any economic growth.
No - it's FAS 157. Great idea. Unfortunately it is "shock therapy" that cured the patient but killed him the process.
This crisis was anticipated by many, including almost half of the FASB seven member board.
This crisis didn't "just happen", it was caused by the FASB in November 2007 and it was deliberate:
http://www.timesonline.co.uk/tol/comment/columnists/william_rees_mogg/article2852547.ece
http://www.cfo.com/article.cfm/10097878
Unless it's suspended and brought back later in a controlled fashion (and a regulated CDO/CDS market), the bail-out money will disappear into an even bigger black hole (Debt Market Traders' pockets)
Tom Donnelly
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Ohhhh - "profanity blocked" - WHAT ON EARTH did Iwrite..... I used percentage sign, I used the letter 'Kay' appended to the number 50 in a couple of places.... what else - oh, I used round brackets - oh yes and I tend to use ellipses ..... and there were no web links.... I didn't use the ampersand & this is just a test to see if this gets through the filter - if it does appear - I apologise for the waste of space in theblog and I'll try to resubmit my original.....
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This comment was removed because the moderators found it broke the House Rules.
The whole matter is becoming somewhat confusing.
What is the difference between a political commitment that no savers would lose any money, and an offer of 100% protection?
What are the actual extra costs of offering 100% protection? In the first instance, there will only be a small percentage of accounts that have an excess of £50,000, and it is unlikely all the banks in which they are deposited will fail.
Wouldn’t it be better to stop mincing words and guarantee savings 100%? This would at least restore people’s expectations about the safety of cash deposits, prevent cash crossing borders and potentially undermining the banking systems of those countries that didn’t give the guarantee. In view of the “political commitment” and the extra risks involved being minimal to me this would appear to be the most sensible course of action.
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Why oh why do people not look at the lessons of history? If you believe in a free market, which most of us in the "west" do, you must allow to be able to correct the imbalances it has incurred through the boom days of the econmic cycle. Throughout history markets rise and fall: they are meant to. This bail-out demonstrates that western governments do not trust the market and believe human intervention is the only way. It is simply wrong to use tax payer's hard money for those purposes!
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#1 - lsi-92
http://en.wikipedia.org/wiki/Fractional-reserve_banking
I claim my free years supply of Lehman Bros shares.
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This comment was removed because the moderators found it broke the House Rules.
Gloomly now but before 2pm today the fed will announce a 50 bp cut.
It will put a bottom under the market nothing else without we are heading for 9000 on the Dow
In my view 100% guarantees are totally wrong without an equity stake in the bank. In Ireland the shareholder value in at least 2 of the banks would be zero without the government so they must concede some equity to the Government. In the UK the government should say to any bank we are prepared to offer the guarantee but only if you give use at least 25% of the capital.
Off course the Irish model guaranteed the banks wholesale activity.
Finally if the MPC doesn't lower rates by at least 50bp this week Gordon should take control away from them , it is absolutely criminal to have rates this high at a time the country faces its greatest economy crisis
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#65 - If you had read my comment properly you would have grasped the meaning of what I said. Banks are just intermediaries in the money creating process, it is not the nature of banks that create money but the nature of creating credit that can be exchanged.
"The money to pay back loans comes from newer, bigger loans" - Money is credit. The more value there is in the economy (created through economic activity) the more exchangeable credit is required to represent this value and facilitate trade. It is not the same people maintaining the same loans, it is a process that keeps rolling. It is not all lent to or by individuals, alot of it is lent to/by businesses and the government. And if the economy stops growing (ie. GDP stays stable, and all that is produced is on average consumed), there is no need to increase the amount of credit, only to maintain it. Not all credit is liquid money (try spending your future pension down at Tescos).
Interest is no different from any other economic gain. At the right interest rate level, the lender does not wish to relend it, but takes it out from the credit loop and consumes it, destroying money in the process. He might for example buy a loaf of bread from the borrower. The amount of money does not simply keep increasing just because interest is paid on loans, what matters is how much is lent in total, and this is (supposedly) governed by the interest rate.
If you want to bang on about something that is not working, it is the leverage that the Bank of England is supposed to have over this process, and the amount of money (by some counts) that is created *outside* the banking system, through loan syndication and credit instruments. Not to mention the current lack of leadership to ensure stability.
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The more I read about the current 'crisis' the angrier I am getting (and I assume lots of others are as well !!!).
1. Politicians sitting on their hands with no clue what to do but they will "learn" from this ??!!
2. "The regulations will be tightened up" - how will that happen while the FSA is run by a bunch of ex bankers ??!!
3. Ref Post 61 - The FSA and the FSCS do not 'personally' guarantee your account and neither does Gordon Brown or any other politician. The FSCS administers and pays out compensation on failed companies - the compensation monies come from all the other surviving companies and individuals within the financial industry.
(While on the subject have you seen how much pay rise the Chief of the FSCS has paid her self ?? - £237,000 salary package per annum – a 32% rise since the previous year - She gets paid more than the Prime Minister !! Can anyone explain how a person who oversees the administration and payment of compensation can be paid more than the Prime Minister ??!! How many life or death decisions does she have to make ??!!)
We are all mugs for allowing our "representatives" to take care of the things we do not understand, not realising they had not got a clue because they were too busy with their snouts in the trough !!!
What is the solution to all of this ??!!!
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I find it extraordinary that the government is not addressing the time bomb that will inevitably go off shortly unless something drastic is done now. Starting with the 1997 pension fund raid the government has crippled the private pension industry. Yet they are happy to preside over a two tier system. On the one side you have civil servants etc (MP's included) with guaranteed protected inflation proof pensions that are heavily subsidised by the tax payer and on the other side the rest of us, the self employed, private business etc. Unlike the civil servants our pensions rely on the stock market and pension funds to produce our pensions and the less invested in pension funds means less for the stock market.
A two tier system always existed but they lived happily together but now a total different scenario exists and unless some reality is introduced into civil servants pensions and some help given to private pensions, class war will explode . Why should I have my pension fund raided and then destroyed just so Brown and co can retire with not a thought in the world for everyone else.
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Can anyone explain to me how comes that the price of oil has come down 40% since July, however all UK companies have just put their prices up 30% ?????????
How comes the guvermenrt is not looking to help the taxpayer with their bills, but is too happy to fork out our cash to the bankers ??
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Over and Out.
I've tried several times to post a comment on this topic this morning. I amended the first as it was possibly offensive - (it made reference to nocturnal emissions which of course would have offended and shocked most on this section of the site I am sure).
Having made suitable amendments to avoid the riot such unmitigated filth would no doubt have caused, I've had no response from the moderators to my queries as to why my redacted comments are deemed equally to have broken 'house rules'.
I'm going to cut my losses and leave you all to Robert's blogs and the mysteries that surround even the simplest things when it comes to the BBC.
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FRACTIONAL RESERVE BANKING
Yes, it is a load of cobblers which does promote exponential growth.
However I don't believe fractional reserve (in the traditional sense) has been the problem here.
In the thirst for profits and in order to be the 'richest bank in the world' all these muppet banks created instruments which would GET THEM AROUND THE FRACTIONAL RESERVE RESTRICTIONS.
Building societies do not face the same problems as banks because they use the 10% rule.
The planks at the banks decided that they could re-write the laws of econmics, gravity and physics with their new instruments. The regulators In US and UK were too thick, lazy and incompetent to understand what was happening.
By the time the regulators and central banks worked it out - it was all too late. The banks had leveraged more debt than they had in assets, more than the country has and possibly more than the world has.
It's all too late, the government are backed into a corner and the only way out is to use tax payer money to fix it.
Just remember the phrase from about 2 years ago when the bonuses were huge 'financial whizz kids'
....yeah - well I hope the public never believe that again. I don't lend out 60 times my monthly wages - in the expectation of a pay rise - BEFCASE I'M NOT A FOOL!
This is what the 'finanical wizidary' was based on.
So tell me - why don't we just let the system collapse
I'll tell you why - because whereas the joe public will be OK foraging for food and living on the bread line - the politicians, city bankers and all the other chumps who created this mess couldn't - and therefore would become extinct very quickly.
Now that sounds like free market in action - survival of the fittest - it's OK when we're playing by your rules - but now the game is going to change you cry yourselves off like babies.
Real men would face the challenge - these wimps are crying to the government to bail them out.
Lets get this party started......
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Robert,
The game is up!
The Fractional Reserve CAT is OUT of the bag.
Be brave, be strong, go on prime time TV TONIGHT and tell the nation they have been duped by there leaders and banks.
The world is BANKRUPT,
Its only numbers,
We didt really have any money,
It was all just a game.
And the working minority LOST.
Watch ZEITGEIST ADDENDUM on the tube.
This is the new Zeitgeist released 3 days ago.
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Thankfully, at long last the subject of Fractional Reserve Banking is being discussed. Its taken a long time.
The Sunday Herald article is excellent for anyone who has not heard of the term before. If you're just starting out (#64) please watch the following short videos on Youtube for a good understanding of this fraudulent system.
http://www.youtube.com/watch?v=ThXpjmfyiMQ
http://www.youtube.com/watch?v=sanOXoWl0kc
http://www.youtube.com/watch?v=kTv1fo6sKmo
http://www.youtube.com/watch?v=3qicabStQkc
http://www.youtube.com/watch?v=7kpSbkaD4tM
I have not attempted to extend the Fractional Reserve Banking discussion onto the next stage until now. It has been hard enough getting the conversation going in the first place without the distractions of further detail.
The fraud of Fractional Reserve Banking is actually dwarfed by the "Capital Adequacy" philosophy. The banking industry found the 'limitations' of 30 or 40:1 lending ratios too constraining and decided to get rid of them altogether. The lending ratio can actually be orders of magnitude higher as long as the 'risk'[sic] is assessed.
See here for a much more eloquent description of the problem:
http://goldnews.bullionvault.com/banks_fractional_reserve_banking_capital_091220082
I see in posts #38,#62,#76 and #99 and others that not only is Fractional Reserve Banking being defended but, in some cases, because it promotes growth. Growth of course is the single biggest issue on the planet. The Debt-based FRB system requires and causes indefinite geometric growth in population, industrial activity, energy consumption, raw material consumption, waste creation and pollution and so on and so on. This is the growth paradigm. It is trumpeted by the entire political and banking system as the only model worthy of consideration. Recession is villified as a dirty word.
Indefinite geometric growth of the above list is NOT possible. That is a mathematical fact. The debt-based Fractional Reserve Banking system needs geometric growth to sustain itself. Without geometric growth in debt (and since money is debt, money itself) the money pot dries up. When the money pot dries up it is called a Depression.
You cannot defend a system which is fundamentally and utterly flawed mathematically. This is not a political statement or a religious statement or 'green' statement or an opinion. It is a statement of fact.
I will concede one point. Assuming you understand the detail of the underlying mathematical model of the debt-based Fractional Reserve Banking system and are prepared to support it, it must be in the full knowledge that periodically, when the geometric curve becomes too steep, you will suffer a massive correction destroying all 'wealth' and then you can start the geometric series again from scratch. If your conscience allows you to accept this and the pain caused during the correction then the Debt-based Fractional Reserve Banking is a workable system.
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#110 Thank you for the easy question. The answer of course is greed on the part of the petrol/diesel retailers. And the lack of a competent Government to do anything about it.
The answer to your second question is that the Government don't know what they are doing.
I could site examples of people who overmortgaged way beyond their means with self cert mortgages and they are now laughing at Gordon Brown as he has nationalised their mortgage company and guaranteed the payments. They are sitting in their big houses with the biggest smiles you could imagine!
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Am I the only person who thinks it might not be a complete coincidence that this mornings nose-dives in stock markets happen to come at the first time the markets opened after the US passed their $700billion bail-out package into law? Could it be that the markets believe it's going to be an all round disaster?
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All this talk of a Free Market in financial services is a load of tosh. Free markets exist when there is free access to the market by both suppliers and buyers. This is evidently not the case. So all these Free Marketers advocating laissez faire now would plunge us into a deep recession for a principle which does not apply in the real world.
The financial system is global and the market is certainly not free. Unless we get coordinated action by regulatory authorities, we will just export the problems to another country which then impacts on ours.
So get real. We've got into the mess because the regulators have allowed money supply to grow through capitalisation that the buyers did not understand. It is not lending short or lending long. The difference between packaged assets traded entirely depended on the seller's and the buyer's risk models. Many such models were based on insufficient data.
The only way out is coordinated action to stabilise global confidence. Once we've done that, we can look at how we can manage the global economy better.
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110:
The linkage between oil and gas prices works on a six monthly basis (though the oil linkage is not the only factor involved in determining gas prices).
The rises in retail gas prices announced recently were influenced by the change in the price of oil between December 2007 and June 2008, when oil prices increased sharply. Term supply contracts re-set on this basis, typically for six months.
So, if oil prices in December 2008 are lower than in June 2008, term contract prices for the next six months (January to June 2009) will be lower, and retail prices will fall.
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#102
It is the wrong argument to say that only a small percentage of depositors have savings, bonds and other cash realisable assets worth more than 50 thousand with any one Bank and therefore why bother about them.
The percentage with deposit value above 50 thousand is somewhere between 3 and 5 percentage according to the dubious banking figures.
However if you knew the percentage average deposit account value for those accounts below 50 thousand, what is that about 10 thousand; and the average value of accounts above 50 thousand, what is that about 200 thousand ?
then you are looking at a big bit of unprotection which if withdrawn would bust the Bank.
If others aren't too bothered about their Bank not offering higher protection, then let them put the Bank name up here and the high value depositors can withdraw their money.
That Bank will be in default tomorrow if the high value deposits are withdrawn.
Just imagine someone going along to a Bank to deposit 100 thousand or to buy a Bond and being told that they can only get back 50 thousand of their dosh if the Bank gets into trouble.
The customers simply wouldn't give the Bank their money without some sort of surety.
So no business done and the business cycle for that Bank shudders to a halt.
As you say, it is better for Brown to offer full protection.
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While we're on the subject of barmy 'financial logic' - let's get the CDS situation clarified.
For anyone who doesn't work with these - they are simply an insurance policy (on the firm going bust).
Now I have insurance on my house (buildings and contents) in case of a disaster. This is what I need for peace of mind, and the insurers are happy to work out a premium and provide the cover up to the agreed amount.
....now in the world of financial wizardry - I can not only insure my house, but also my neighbours house, and 3 other houses in the street. All these people will have their own insurance too, but this is all taken by the insurance company (bank) - because they are greedy for the premium.
Then the floods come, and every house in my street is wiped out. Several properties are insured several times over and there is no way the insurance company can pay up for everyone - and it goes into receivership.
Now I believe there are strict rules in insuring a property several times for insurance companies - and from this example you can see why.
At least with insurance, the premium is stored up to contribute towards the claim - CDS's have no such requirement and the premium can be re-invested or blown on a Ferrari - no one cares what you do with the money (until it all goes wrong)
So why were multiple policies allowed to be taken out on credit defaults which could never all be honoured if a certain number of defaults occurred?
Do the banks really think that they can change the laws of economics?
You just wait until the defaults start (which will be soon as companies cannot re-finance their debts) - then we really will see a collapse of epic proportions.
The entire IMF fund and all the major economies won't be able to put humpty back together again.
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76. At 10:33am on 06 Oct 2008, Ashill wrote:
"So let's stop banging on about fractional reserve banking - which is just one myth built on another."
I love the way that apologists for the current, (dramatically failing) fractional reserve system steadfastly refuse to even envision a world where this morally fraudulent practice is banned. (if you don't think it's morally repugnant to jeopardize an entire populations life savings, then there is something wrong with you).
I enjoy the arguments that suggest that there is no other historical alternative to the three hundred year old western model. Because frankly they are deluded.
How about 100% reserve banking. Or Islamic banking. Or the Old Tally Stick System. Or Colonial Script. Or countless others that have been successful over the centuries.
Perhaps we should amend the history books for the current apologists as well, to make them all feel better. Because after all, we wouldn't want a million people in the city looking for other employment elsewhere would we. So let's just keep the current ridiculous system going.
Let's just keep pretending that the current banking system is perfect, is absolutely flawless, let's all just hide our heads in the sand as it falls to pieces around us.
Another bank failed? Perfect. The system is supposed to work like that. It's fine. Just needs a tweak. maybe interest rates need changing. The system is fine. Another bank crumbling? maybe a $850 billion bailout. Fine. Praying for the Prime Minister to guarantee the nations savings? It's ok.
The system is fine.
The system is fine.
repeat after me.
The system is fine.
The system is
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"Iceland. We're full of surprises"
"Fortis. Here today. Where tomorrow?"
It says it all, really.
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Chaps, nice work!
I can indeed see the Sunday Herald article, nice one FWIW - so close but so far!
The problem is that The Sunday Herald is, according to it, "Scotland's award-winning independent newspaper".
Note that word, "independent". It's not owned by a large media company - it's not really a major media outlet.
This has worked well for them, in terms of the apparent quality of their journalism, however the article does not disprove the theory that no major media outlet, anywhere, is running a story on this subject.
What is more frightening? Current market turmoil, or a global, pervasive news blackout?
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"If you believe in a free market..." - ianthesceptic
I assume you believe in Father Christmas and the Tooth Fairy as well. Never has been any such thing, never could be: all markets need rules, determined by larger institutional systems.
I see the Austro-nuts are out in force, peddling their nostrums. Does it occur to any of them to wonder why these are not applied? Hint: it's because they are incompatible with the fundamental nature of capitalism, which demands unending expansion of the money supply.
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Bottom line: move money though the system. Forget equities, revive the creidt markets. For that the banks need capital. The Governement/taxpayer has it. There is money to be made for the taxpayer by buying into banks. The banks are good firms that are being pummelled by fear. Combine recapitalisation with a sharp interest rate cut (to protect asset prices in property; whose collapse has caused this) and the engine begins to splutter again. This is no panacea, but sitting and watching and twiddling one's hair as the govt; BofE; Oppostion parties are doing will lead to a continued strangulation of credit; further fall in property and a collapse in equities and, before the taxpayer moans about investing in banks, the taxpayer will lose a lot more if we don't.
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The apparent lack of leadership must be of concern. This crisis appears to be drifting and will get worse for all of us unless Europe acts as an unified body in a clear and descisive manner.
I despair!
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#125 it is because property values were so over inflated that we are experiencing these current difficulties. No one, not even the mighty Fed can support property asset bubbles. This crisis will only end when property values fall and that is increasingly looking like atleast 50% in real terms from the market high. Or to put it another way, anyone who bought a house after 2002 at a ltv of more than 80% will be in negative equity.
Oh dear.
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In my humble opinion the shortage of liquidity and banks' capital will be solved in due course by the Chinese or Middle Eastern Sheiks who will take over everything in sight. Unless the world governments can put together a £3 trillion package I can't see confidence being restored by any individual country, even the U.S. In this country the position is dire as our government has already massively overborrowed with no leeway available. It will have to issue an enormous quantity of Gilts which if taken up in full will take money from deposits - the last thing that's needed - and what interest rate will be offered?
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As I understand it, banks include their depositors money on their balance sheets, and that the withdrawel of this money is part of the problem of "capitalisation" calculations. (I am not confusing this with "Fractional Reserve Banking" - the multipying effect of money on account.)
Surely, depositors money is not the banks money and should therefore not be included on their balance sheets? This would mean that any deposit I may have is on two balance sheets at the same time - mine and the banks. Surely it shouldn't be possible to have the same asset on two balance sheets at the same time?
If this is true then does it mean that the assets of the country might have been hugely over-estimated?
I may have misunderstood how the banks' balance sheets work of course...
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BankRSlicker, nice, I didn't see that one earlier..
Unfortunately, I've discovered a problem with the competition rules. The word "major" was not defined, so I'm having problems deciding whether the Guardian counts! After all, it's "independent" just as the Sunday Herald is, independent of what, I now wonder.
Fortunately, due to the magic of fractional reserve prizes, I can award limitless amounts of nothing to you all!
Thanks for the URLs everyone. Please post any more you find.
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On Fractional Reserve Banking, it is explained on Wikipedia (as 72 mentioned). It is not the cause of the current problems though! (although 67 might be ;-)
Yes, I watched Money Masters and listened to how FRB was the root of all evil. However, after looking into it in more detail, I do not believe it is the cause of the problems. (Note: you talked about FRB, but nobody mentioned the Reserve Ratios. FYI: it is 10% in the US but 0% in the UK. Therefore, in the UK banking system, debt can spiral infinitely!)
The root of the problem is simple: banks lent to high-risk borrower who cannot pay back. Therefore, the whole system goes in to crisis.
The banks seem to have been lulled into a false sense of security by property backed loans. However, this was a cyclic process. House prices only went up because people could get the loans to pay for them. People could only get the loans to pay for them because the banks lent recklessly, but thought it was safe because house prices were going up. The whole think span out of control!
What needs to be done now is unwinding the loans, through repossession where necessary, to clear the system of bad debt. Essentially, people will have to start living within their means rather than on credit, which for some will mean a substantial drop in lifestyle. On this point, I am a bit lacking in sympathy because it was the reckless lender and borrower that benefited the most, so it should be the same that feel the crunch the most.
So it is not Fractional Reserve Banking that is the root of all evil, but rather the love of money, or at least credit!
(Note: some may say "but this could not happen without FRB". However, the banking system could not happen without FRB, so unless you think you can do without banks, changing FRB is not a solution.)
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#121
I think you may have misunderstood the point of my earlier post.
Money is a meaningless promise. It is "confidence" as Dubya put it, and nothing more. Perhaps "faith" would be a better word (faith being defined as a belief in something you know is not true!).
The Bank of England's promise on a ten pound note is simply a promise to replace my ten pound note with another identical ten pound note!
My point is that we all know this. Can we move the discussion along from that point onwards, please?
#129
A depositor's money appears on the bank's balance sheet as a liability of the bank (not an asset). A bank's assets are the funds it has lent to other people (and expects to get back - or perhaps not in the current climate).
Think about it. You put money in your bank account - they call it a credit to your account. It makes you a creditor of the bank (in other words they owe you that money back).
When businesses go bust it is creditors who come hammering on the doors because they are the ones owed money by the business. When you have money in the bank you have a credit balance because you are the bank's creditor (i.e. one of the persons who would lose out - in the absence of protection - if the bank went bust).
The money you have in the bank also appears on your own balance sheet as an asset (an accountant would describe it as a debit balance on your balance sheet). Debit balances are assets, credit balances are liabilities. The entries on your balance sheet and the bank's are mirror images of each other - equal and opposite reflections of the money the bank owes you.
OK, is that one cleared up now?
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It's interesting how the reports on the Footsie today all miss the fact that there are 1800 companies on the stock market's main listing, not 100! I guess the other £100 billion that's gone missing doesn't concern anyone!!
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I think I may be able to help post 7.
I suggest the UK rich/poor divide is a little more severe than in Germany. Ie. We have the majority (the poor) in a lot of debt and the minority (the rich) with stacks of savings.
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Post 12,
Rather than a war, a more pleasant option (even for saver) maybe just be a period of prolonged high inflation.
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131 -
I agree, it isn't the FRB system, per se, which has caused the problem, but neither is it consumers borrowing 'beyond their means'.
It is banks, in collusion with insurance companies (who knows where one begins and the other ends nowadays?) creating ever more complicated and obscure 'investment' vehicles, ostensibly to 'insure' their loans (eg CDSs), but in reality to boost their profits and bonuses, by abusing the FRB system in evermore sophisticated, and blatantly fraudulent and criminal methods.
I think the taxpayer will 'bail out' the system - to the extent that that is possible - but they will demand bankers' heads on plates - and woe betide any government that doesn't deliver the perpetrators to justice.
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131. At 4:52pm on 06 Oct 2008, simonmw3 wrote:
“So it is not Fractional Reserve Banking that is the root of all evil, but rather the love of money, or at least credit!
(Note: some may say "but this could not happen without FRB". However, the banking system could not happen without FRB, so unless you think you can do without banks, changing FRB is not a solution.)”
I could do without Fractional Reserve Banks Simon. My ancestors managed to live without this ridiculous, pernicious pyramid scheme and other cultures have managed to thrive without it. So to say we can’t is the worst kind of laziness I can imagine.
I think I would rather do with full reserve banking instead. I would rather do with a non-inflationary, non debt-based, non-usury monetary system, (similar in principle to the Islamic banking system) and I think most people, if they truly understood the workings of this current system, would too.
At least they’d know their money would be safe.
But hey, if you like the thought of criminals (and bankers are criminals, just legalized ones) handling your hard earned savings then that’s your problem. Keep things as they are. Go back to sleep. Maybe catch up on some Eastenders.
It’s only the sun setting on the West outside your window. Nothing important.
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Re 132
"A depositor's money appears on the bank's balance sheet as a liability of the bank (not an asset)."
Just to expand on that: say you pay £10 into your account: the actual cash you have given them is an asset of theirs. So they have taken one asset (your £10 note) and given you another (the balance on your account, which they owe you).
The bank can then lend your £10 to someone else, cos they figure you probably won't take it out any time soon. In fact because of fractional reserve banking they actually lend out 9 times your money. So they lend £90 to someone else. (The interest that person pays is the bank's profit.) They do that by simply telling their computer that the person has £90 in their account (which becomes a liability on their balance sheet) and also writing a £90 debt from that person as an asset on their balance sheet.
The total assets of the bank are in this example £100 (that is, the £10 you gave them plus the £90 they created and lent to someone else). But their liquid assets (money they can get hold of immediately) are only that original £10.
If you then go and take out £5 from your account, they have only £5 of liquid assets left. They still have a £90 debt owed by the other person. So they now have liquid assets below the 10% minimum and they have to stop lending.
Is that right and do I get a prize for working it all out? Next lesson...collateralised debt obligations...
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#137: If you can do without fractional reserve borrowing, then do neither put your money in a bank nor borrow from a bank. If you want full reserve banking then that mean you would have to pay the bank to keep your money in a vault. If you want an non-usury system, then are you prepared to lend your money without interest? Or are you expecting someone else to do that.
My belief is that non-usury and full reserve banking are one end of the spectrum, and our current reckless lending is the other end. What we really need is the middle-path where there is sensible lending and that is what government regulation should ensure.
I think there should be tightly regulated banks that would only generate moderate returns, but give government backed depositor guarantees and unregulated "investment" banks with no guarantees. Depositors could then take their choice, and they would have no complaints if they took risks.
You should seriously look into the details of the monetary system rather than make cheap digs about Eastender!
P.S. a "legalized criminal" is an oxymoron!
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139.
Actually I have been looking into the details of the banking system and that is why I so vehemently against it.
Legalized criminal is indeed an oxymoron, but describes exactly the current banking system. Which is legalized theft on an industrial scale. Doesn't matter that it is state sanctioned. Fraud is still fraud to most people.
If you don't think so, then please explain to me why the term smoke and mirrors is used a lot in banking. Tell me about derivatives because I'm particularly tickled by that one. Or tell me what an off-balance sheet Special Investment Vehicle is? Try to keep a straight face. I'm filling out a tax return this year, but I'm planning on putting some of my profits, in a specially constructed Special Investment Vehicle hidden at the end of my bed.
Do you think the taxman will mind?
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maroon3 has a good point (and yes the taxman will be ever so especially desperate for our money now!!). I've just discovered anthropology...you should try it, very refreshing.The dominant discourse across all media (including you Robert!) perpetuates the masking of truth from the 'ordinary peasants' (I usually sidestep Marx & Engels...but they had a point relevant). Now if every ordinary peasant today decided to set up the Maroon3 Special Investment Vehicle, there'd be nothing much left for any of you to debate.
What I'm finding fascinating... (because I'm quite happy with my Maroon3 Special Investment Vehicle - heck, I'm not hanging my pennies off your plunging clifftops anymore!!)... is that for all the education and mathematical genius of all you economists, bankers and expert commentators out there:
1.none of you actually really know how to control this slick smooth gloosy Big Machine you created!
and 2. clearly the elevator at the Big Machine has got stuck!!
(I am especially stripping out any technical jargon... you should try it: suddenly the air seems fresher, the sky bluer, and at least my money is safe in a Ralph Lauren sock tucked under the mattress).
I'd like to end with a lovely little ethnographic clue from Evans-Pritchard: Whenever the Zande were sitting around in their granaries/longhouses, and a rare phenomenon would occur whereby the termites having eaten the supporting wood stilts, would cause the longhouses to come crashing down/loss of life/community shock etc, the Azande not only acknowledged the causal explanation (termites) but also used the termite mounds to consult the 'termite oracle' (dakpa), where two sticks are left half entered into the mound, the answer to a question being given by which stick is nibbled. You should also read Malinowski's monograph on the Trobriand Islands about circulation of goods - now their 'economic' model is one cool coconut!
...its fascinating anthropologically-watching you all scrambling like herds of panicked rhino, thundering in one direction, then stampeding in the next direction, several times a day each day. Not only have Friday post-work drinks in Canary Wharf taken on an Attenborough-like feel, but Ralph Lauren in Bond Street is gloriously empty...i can't wait for the discounts!
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It seems to me that the more money the Banks' have the less wisely they employ it.Contrary to Govt. requirements for the limitation of dividends ,the Banks should be encouraged to increase same and pay away at least half of their NET PROFITS in CASH.Surely, by doing so,the shareholders,particularly our pension funds,would then be in receipt of much needed funds ; the exchequer would enjoy the benefit of the tax levied on unearned income ;and simple, but sensible attitudes would be restored.
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I think we should all read:
[Unsuitable/Broken URL removed by Moderator]
and you will conclude that the whole banking system was flawed from the start. Time we all become educated in the knowledge that the central reserve banks have held us all in debt and it is time to tell our government it is time to put in place a new banking system where money does not = debt.
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May I just mention to you earthlings that a more pressing problem is awaiting around the corner:
21 December 2012
The Sun crosses the galactic plane and planet X (dwarf Star) is getting close to our Sun, which will send comets from the Oort cloud Earth bound.
So best we sort this money problem quickly so at least we can offord a big party to watch the big firwork display :-))
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Listening to Robert Zoellick Word Bank President on news today (09.10.08) about the credit crisis.....
Bilderberg Group attendee 2008.....
say no more..... New World Order!
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Firstly, I would like to thank Robert Preston for his concise and plain English commentary and explanation of the economic situation.
I am very dismayed by the lily-livered behaviour of the traders. Their negative attitude towards the efforts of the government and BOE just serves to depress the market and worsen the crisis and I still believe that pockets are being lined at Joe public's expense. Come on you guys, let's have some positives and help steady the national ship - this could be a good time for a bit of old-fashioned patriotism to help the country and not yourselves.
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In my comments 143
look up "Modern Money Mechanics" using google and you will see that the money crisis is the result of the central reserve banking system!
It's this system that needs resolving to cure the money=debt paradox.
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Excellent points Maroon3, shirining and philcrazyalien.
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