Money has been privatised by stealth (2011)(theguardian.com)
theguardian.com
Money has been privatised by stealth (2011)
http://www.theguardian.com/commentisfree/2011/nov/15/money-privatised-stealth
2 comments
> When you ask the bank for the money to buy a one-bedroom box in London, the money that appears in your account isn't borrowed from some prudent grandmother's life savings. In fact, the bank simply types those numbers into your account, creating brand new money that you can now spend.
Erm what?
Erm what?
Yes. Banks bring money into existence in the form of debt by loaning it to people. It seems massively immoral to me that they charge interest on something that literally costs them nothing to bring into existence.
Is there a limit on how much money they can create? Can I start my own bank?
1) Yes there is, that is why it is called fractional reserve, they are allowed to expand the money supply based on a fraction of the reserve deposits they take in. This number is set by the FED in the case of the US.
2) Yes you can with the proper licensing and certifications. It's not as easy as hoping on down to the division of banking and picking up your license, there are some pretty stringent requirements, it's not cheap to start a bank.
2) Yes you can with the proper licensing and certifications. It's not as easy as hoping on down to the division of banking and picking up your license, there are some pretty stringent requirements, it's not cheap to start a bank.
Suppose you borrow money from a bank. The bank could:
A. Use mortgages/IOUs instead of cash so the next borrower who wants to borrow is given IOU's (from various people) instead of cash. Assuming the person selling the house agrees, the buyer trades these IOU's to the seller for the house. "I'll give you 2 IOU's that I got from my bank (1 from Bob and 1 from Sally) totaling $200K for your house."
OR B. The bank uses some mechanism to convert those IOU's to cash and assumes the risk that Bob and Sally might not pay their debts.
The bank agrees to guarantee/take responsibility for the IOU's it received i.e covers the risk that the IOU will go bad and gives the next borrower cash instead. The banks is being compensated for assuming that risk by charging interest.
Am I missing something?