Skip to content

You call this an Insolvency Crisis?? My A$$!!

by on July 27, 2012
Mr-T-fools

More and more people are calling this whole Credit Crunch Charade an insolvency crisis.

What nonsense.

By Anthony Migchels for Henry Makow and Real Currencies

The latest example is this article by the American Dream’s Michael Snyder.

Here’s how he puts it:

“Well, the truth is that this is not a liquidity crisis.  If it was, the central banks could flood the system with money and solve the problem.

No, what Europe is facing is an insolvency crisis.  There is way, way too much debt in the system and it is inevitable that an “adjustment” is going to happen.”

What nonsense!

In the first place, all the major banks own each other. They also control or outright own the Central Banks. Even BIS is a private corporation.

It’s just one massive monopoly.

So we ask: if my right hand owes to my left and he can’t pay up, do I go to my neighbor to bailout my right hand? Or do I, as the owner of both, just cross off this debt?

Huh? Get it?

Secondly: the problem is not debt, it’s Interest.

All these banks create all the credit through fractional reserve banking. Most of the money out there was created the moment a loan was taken out. This is an almost zero cost operation. If you don’t build massive palaces all over the place, anyway, and pay your people twice what normal employees earn, let alone what you fork over to your vampire ‘traders’ and ‘investment bankers’.

If we call an interest moratorium, the depression would be over tomorrow.

Conclusion
Nothing to conclude. This is just one massive charade, aimed at causing depression while raping us for untold trillions in the process. The only thing that makes it hard to see is the sheer scale of the whole thing.

The bigger the lie, the easier to sell.

The sooner we wake up to the blatantly obvious, the sooner we can put all these bozos to rest.

Related:

Understand that the Banking System is One
The Few Banks that Own All
The Problem is not Debt, it’s Interest
The Wolfson Prize, I win!
Debt Repudiation or an Interest Strike?

68 Comments
  1. Gary S permalink

    Anthony, you made the following comment in the “Few Banks own it all..” article: “Questions remain. How do the CAFR’s of US Governmental pension funds and the like fit in this picture? How are the companies controlled if they all own each other?” I am following the CAFR story and I am wondering if you have any more info as it pertains to the subject comment. I feel that the CAFR issue go much further than just omission–it is perhaps a measure of the actual income/wealth that the average citizen is ignorant of–but I am thinking that this second set of books is probably happening in every country that has a central bank. Any info that you might have would be appreciated while I am happy to share whatever info/writing that I am able to produce. Thanks. An email contact would be appreciated. GaryS

  2. ron permalink

  3. ron permalink

    http://www.youtube.com/watch?v=DOXp1iUvYvE backing the oppens were WHO?tachan The roth…..

  4. Dark Dirk permalink

    Yes, it is not insolvency crisis. It is energy crisis. Growth is not possible any more. The Earth has finite dimensions. If we continue to use this financial system, we will enter into very big depression soon (2015).
    http://www.peakprosperity.com/crashcourse
    http://peakoiltaskforce.net

    Anthony, I very much like your site. Personalty I very much like the Silvio Gesell’s idea about demurage currency. It should be implemented on national level as he sad. And there should not be central bank which acts like lender of last resort.

    • thanks Dirk, much appreciated!

  5. I was also just rereading the German language Wikipedia article on money creation.
    http://de.wikipedia.org/wiki/Geldschöpfung .

    That’s where I started my research for my series of articles. Now that I read it again, I understand some more than before. It also has a section on money creation by central banks (which is very different from money creation by commercial banks). Further study is required before I will hopefully fully understand that central bank part too. It’s all rather complicated. But important and interesting.

    The English Wikipedia is also quite good on these subjects, but the German one is slightly better and more comprehensive, it seems.

    We live in blessed times, with all this information so easily accessible!

  6. ===
    In the first place, all the major banks own each other. They also control or outright own the Central Banks.
    /===

    The ECB is fully owned by the central banks of the euro countries, which is turn are owned by the respective governments. Source of this info: http://en.wikipedia.org/wiki/European_Central_Bank#Organization

    • The european central banks were nationalized after the war. That’s why I wrote “They also control or outright own the Central Banks. ” Emphasis CONTROL

      • So the governments indirectly control central banks (but they leave them independent, because that is vital for their tasks and role). Commercial banks do not own and do not control the European central bank.

        I just read in Wikipedia that the US central banks ARE owns by the commercial banks. But here too, things are organized (in a rather complicated way) such that control and monetary policy are independent. Independent of the government and independent of commercial banks.

        It’s all rather complicated, but Wikipedia has ample information, also about the history of those central banks. Quite interesting.

        • commercial banks do control the ECB. Otherwise the ECB would never have allowed multi trillion bailouts.

          one knows a tree by its fruit Ruud.

  7. Anthony Migchels:
    ===
    If we call an interest moratorium, the depression would be over tomorrow.
    /===

    No. Without interest, banks could no longer pay their operational costs, so they’d all go bankrupt. That means their indispensible transformation functions (http://rudhar.com/economi/monydebt/en/005bnkfn.htm) would no longer be performed.

    Result: an economic collapse. Companies would get into big trouble.

    • yes, those poor banks. They could not cover their cost without interest and golly, would we suffer without the banks……..

      • Of course you can make fun it, but yes, that is the reality.

        How do you think farmers and trade companies could function without credit? As the Dutch expression goes, “de kost gaat voor de baat”. There must be lots of English expressions too, something with sowing and harvesting, but they escape me right now.

        • Of course we need credit Ruud.

          And since it costs almost nothing to produce, we’ll produce it interest free.

          • And don’t deny this is possible.

            do the research first, you can start at the Interest Free economics page to your right, but the internet is full of it.

            Ruud, you are incredibly naive. The forceful and insisting way you claim all is well shows you really need it to be so.

            You seem to have a very childish appreciation of human nature. But understanding human nature, including the fact that there are really mean people out there, is vital to appreciate the system as it is.

            • > The forceful and insisting way you claim all is well

              It don’t all is well with banks. There may be quite a lot of problems and mistakes, but I don’t know enough about that subject to write about it.

              I only wrote about some basic principles of banking, which doesn’t say everything about what individual bank do in actual situations and periods.

  8. Anthony Migchels:
    ===
    All these banks create all the credit through fractional reserve banking. Most of the money out there was created the moment a loan was taken out. This is an almost zero cost operation.
    /===

    No it isn’t. Every loan needs to be funded, and that has its price.

    You STILL don’t understand how money creation works, even though I first sent you the link to my explantions many weeks ago. Please try again:

    http://rudhar.com/economi/monydebt/en/001creat.htm

    Anthony Migchels:
    ===
    All these banks create all the credit through fractional reserve banking.
    /===

    Moreover, money creation is NOT caused by fractional reserve banking. Fractional reserve banking is only a mechanism to limit and control money creation. Full reserve lending and even mutual credit ALSO cause money creation.

    Money creating springs from the very nature of credit granting. Credit granting duplicates mony into a claim (Dutch: vordering) and the original money. Both are money, and that’s why afterwards there is more of it.

    • And who created the money that funds the loan Ruud?

  9. Very good points Anthony and I would add that the global economic crisis is by choice and not necessity. Albeit; a very bad choice and one made for us by the banking cartel through their corrupt politicians.

    As long as P+I > P (where P=Principal and I=Interest) is integral to the system, there will never be enough money to repay the debt (all money is P). Chronic shortages will persist, interrupted by the occasional bubbles. After all, a bubble is nothing more than a period of time where we create money much faster than we destroy it.

    Many of the big banks are indeed insolvent if traditional leverage ratios are used. Newer, BIS bank regulations allow phantom money measured in notational amounts to be used as leverage to keep them afloat. This allows zombie banks to continue on and as things get worse, we see more and more government guarantees that assure that when the next big one comes, we will pay.

    In the last few decades, regulations on the biggest banks have been systematically eliminated, unleashing them to prey on the real economy. For example, in 1999, the Glass-Steagall Act of 1933 was repealed. Glass-Steagall effectively separated the activities of commercial and investment banking. The results have been staggering:

    – The 10 biggest banks hold 60 percent of bank assets: In the 1980s, the 10 biggest banks controlled 22 percent of total bank assets.

    – The six biggest banks hold assets equal to 63 percent of the country’s Gross Domestic Product (GDP): In 1995, the six biggest banks in the country held assets equal to about 17 percent of the country’s GDP.

    – The four biggest banks issue 50 percent of mortgages and 66 percent of credit cards: Bank of America, JP Morgan Chase, Wells Fargo and Citigroup issue one out of every two mortgages and nearly two out of every three credit cards in America.

    The big zombie investment banks are sucking the life out everything else. They are an entirely unnecessary parasitic load but yet their existence is held paramount to everything else – nation states, people, commercial banks, etc.

    If the people and politicians had the will and the courage, the entire financial crisis could be ended almost immediately.

    • Larry:
      ===
      As long as P+I > P (where P=Principal and I=Interest) is integral to the system, there will never be enough money to repay the debt (all money is P).
      /===

      Simply not true. The interest flows back into, and remains part of, the money supply. Interest doesn’t reduce total money available. So there will always be enough.

      At the bottom of my http://rudhar.com/economi/monydebt/en/004intrs.htm there is a link to a spreadsheet (not made by me) that convincingly illustrates that fact.

      • No. Banks spend part of the interest back into the economy, but their profits they use for other games: either LENDING It back into the economy, creating even more usurious pressures, or siphoning it off to their financial economy (forex, the stock exchange) where it does not serve the real economy.

        So interest DOES have deflationary effects.

        • Incorrect. Everything serves the real economy. If someone buys a 200.000 euro BMW, _I_ think that’s a waste, but macro-economically, there nothing wrong with it, because there are always who benefit, and in turn make others benefit.

          This is a very long article about interest: http://de.wikipedia.org/wiki/Zins
          It has sections marked for insufficient neutrality.

          • you do not react to my point, other than ‘incorrect’, which you do often.
            So I’ll wait until you DO reply to what I said.

          • samalbahaykubo permalink

            Ruud, you can’t rely on wikipedia for all your answers. It’s really not that reliable.

        • > LENDING It back into the economy, creating even more usurious pressures

          If people agree to do that. Voluntarily agreeing to take out a loan at offered conditions.

          Nobody says you MUST do that.

          • That’s not the point: the point is that the interest is not SPENT back into circulation, it is LENT back. This is a fundamental difference, creating eternal scarcity of money according to the P+I>P issue.

            • meaning your spreadsheet is irrelevant, as it assumes all is SPENT back into circulation.

            • Most of it IS actually spent: on credit interest for the funding, on salaries, on bonuses, on computer, on system administration, on ATMs, on taxes, on buildings, offices, etc. etc.

              • No: the banking industry (before the crunch) made hundreds of billions in profits per year. and that’s only the banks.

                But Ruud: I have seen that everywhere you go, you are just making conversation. You don’t address the key issues: like the math Larry put forward, the margrit kennedy analysis I put forward. Your fractional reserve banking analysis proves all the money is created, you go on to say it is not and that interest on this created money is fine.

                You have seen that the banks own each other, so it’s a closed circle: teh deposits they need they get from each other, the interest they ‘pay’ they pay to each other (while the ‘customer’, ie the interest slave) must pay for it all.

                So until you actually respond to what we are saying I must respectfully request that you stop littering these pages.

                Hit reply to read squashed text

      • My Comment: As long as P+I > P (where P=Principal and I=Interest) is integral to the system, there will never be enough money to repay the debt (all money is P).

        Ruud Harmsen responded: “Simply not true. The interest flows back into, and remains part of, the money supply. Interest doesn’t reduce total money available. So there will always be enough.”

        How do you repay 11 tokens when only 10 exist?

        Surely, the 11 tokens cannot be repaid as a mathematical certainty. In this example, our only hope of avoiding a default is that someone else will borrow some tokens and that we will be able to capture one of their tokens in order to satisfy our debt. And, their only hope of satisfying the shortage is that again, someone else will borrow more chips for them to capture.

        As long as the amount of new debt adequately grows, it is possible for the debts to be repaid. Perpetual growth is impossible to sustain in a finite world as eventually the amount of new debt will be inadequate to satisfy the interest claims.

        The interest bearing debt money system is nothing more than a pyramid scheme. There will be defaults as a mathematical certainty and there will chronic shortages of money.

        If you doubt the math, I suggest that you read Marc Gauvin’s excellent thesis entitled “Formal Stability Analysis of Common Lending Practices and Consequences of Chronic Currency Devaluation”http://bibocurrency.org/English/Formal%20Stability%20Analysis%20and%20experiment%20%28final%29%20rev%203.4.pdf

        You can find empirical evidence of the exponential growth of debt with a graph from Chris Martenson in an article entitled “Death by Debt” – Chart Link – http://www.peakprosperity.com/sites/default/files/resize/remote/dd9c022897dcc9ce4f8221e797a6788a-542×431.jpg

        From Chris Martenson: “There’s a lot going on in this deceptively simple chart so let’s take it one step at a time. First, “Total Credit Market Debt” is everything – financial sector debt, government debt (federal, state, and local), household debt, and corporate debt – and that is the bold red line (data from the Federal Reserve).

        “Next, if we start in January 1970 and ask the question, “How long before that debt doubled and then doubled again?” we find that debt has doubled five times in four decades (blue triangles).

        “Then if we perform an exponential curve fit (blue line) and round up, we find a nearly perfect fit with a R2 of 0.99. This means that debt has been growing in a nearly perfect exponential fashion through the 1970’s, the 1980’s, the 1990’s and the 2000’s. In order for the 2010 decade to mirror, match, or in any way resemble the prior four decades, credit market debt will need to double again, from $52 trillion to $104 trillion.

        “Finally, note that the most serious departure between the idealized exponential curve fit and the data occurred beginning in 2008, and it has not yet even remotely begun to return to its former trajectory.

        “This explains everything.”

        In 1835, President Andrew Jackson threw the money changers out and repaid the national debt. In 2008, over a span of 173 years, the national debt grew to $10 trillion dollars. Then, from 2008 to 2012, a period of less than 4 years, the national debt exploded to $15 trillion. In just 4 years, the national debt grew by 50%.

        The exponential growth of debt in our system can be observed and proven mathematically. If you are going to challenge the math, please provide a mathematical argument.

        • > How do you repay 11 tokens when only 10 exist?

          By taking one of the 10 and starting there.

          You can see it happen in the spreadsheet:
          https://docs.google.com/spreadsheet/pub?key=0Ah7kGcba2qOVdGNNMXBmRDZNUkFsTXJ5SjlmMFJJU0E&gid=0

          No money shortage occurs.

          If you can read Dutch, you can see how it is also explained over and over again:
          http://www.visionair.nl/politiek-en-maatschappij/nederland/update-hoe-eerlijk-is-ons-huidige-economische-systeem-eigenlijk/comment-page-3/#comment-26292

          But some people there too do not manage to see the logic.

          > As long as the amount of new debt adequately grows,
          > it is possible for the debts to be repaid.

          The existing debts do not grow. They are gradually redeemed.
          And even if not, the system if still stable. Simply because because (in the simple example in the spreadsheet) the banker spend everything he received on food.

          > The interest bearing debt money system is
          > nothing more than a pyramid scheme.

          Only if the interest isn’t paid but added to the debt amount, and no repayments take place.

          > there will chronic shortages of money.

          The simple spreadsheet, logic AND real life experience all show otherwise.

          • The simple spreadsheet, logic AND real life experience all show otherwise
            Real life experience clearly shows there is scarcity of money. the spreadsheet is irrelevant as I just showed. Logic is in the eye of the beholder. It also suffers from the bullshit in, bullshit out problem.

            You know not of what you speak Ruud and you misinterpret the little that you know: your fractional reserve banking analysis clearly shows that.

            • “You know not of what you speak Ruud and you misinterpret the little that you know: your fractional reserve banking analysis clearly shows that.”

              Please show where my misinterpretations are. Which of my seven articles? Which sentences or figures?

          • Ruud – your spreadsheet has several fatal flaws that misrepresent the interest bearing debt money system. You suggest that the bank simply “mints” $510 in coins and then lends out $480 which is inaccurate and a distortion of the system that plagues us. ALL new money can only be created through new debt.

            And you neglect to show that as the principal on that debt is repaid, the money is destroyed – it ceases to exist. ALL money is TEMPORARY. You naively show the $510 still in existence after the debt has been repaid.

            I encourage you to continue exploring the interest bearing debt money system as it is clear that you do not yet have a basic understanding.

            • lol! Thanks for actually looking at it Larry! Incredible…………

            • Larry from Pittsburgh wrote:
              “Ruud – your spreadsheet has several fatal flaws /”

              Note that it isn’t MY spreadsheet. I saw it mentioned by someone in a discussion, and he too isn’t the author and doesn’t know who is.

              “/ that misrepresent the interest bearing debt money system. You suggest that the bank simply “mints” $510 in coins /”

              I found that a flaw too. Commercial banks cannot and do not mint money. Governments do mint coins and central banks ‘mint’ banknotes. But commercial bank don’t.

              But that doesn’t invalidate the example. The point is that the example starts out with 480 coins that the bank happens to have. Where it comes from is irrelevant.

              “/ and then lends out $480 which is inaccurate and a distortion of the system that plagues us. ALL new money can only be created through new debt.”

              Do you mean Zentralbankgeld (central bank money, base money) or extra money as a result of money creation in commercial banks?

              “And you neglect to show that as the principal on that debt is repaid, the money is destroyed – it ceases to exist. ALL money is TEMPORARY. You naively show the $510 still in existence after the debt has been repaid.”

              Apparently you still fundamentally misunderstand what money creation entails. Please reread my explanation in http://rudhar.com/economi/monydebt/en/001creat.htm and try to see through the paradox.

              The paradox means that what you say in a way is true, but also that there is no need to show it in the spreadsheet example.

              “You naively show the $510 still in existence after the debt has been repaid.”

              It still exists as MB but not a M1. (See http://en.wikipedia.org/wiki/Money_supply for the meaning of those codes.)

              If a depositor has 510$ in cash, total money supply is 510$.
              If he puts it in the bank, the cash no longer counts as money (cash in a bank isn’t part of M1/M2/M3), but he has a claim of 480$ to the bank. That claim counts as M1-money (if it is “on demand”, not if it is a time deposite).

              Now if the bank loans out 480$, the borrower has 480$ in cash. The claim of the original depositor is also still there. Total money now is 510 + 480 = 990. THAT is money creation.

              Now if the borrower pays back 30 dollars, those 30$ in cash move from his wallet (where it counts as M1) to the bank’s vault where it doesn’t! THAT is money destruction. But the cash is still in the bank’s vault, and appears on the bank’s balance sheet as an asset, as something the bank owns.

              “I encourage you to continue exploring the interest bearing debt money system as it is clear that you do not yet have a basic understanding.”

              It’s just the opposite. I do understand it and explains how it works in my articles. You don’t understand it because you keep relying on misleading videos such as Money as Debt.

              Note that I am not the only one who understands: the people at Khan Academy do too. See http://www.youtube.com/watch?v=F7r7l1VG-Tw and many others.

              • Some interesting statistics about the various kinds of money supply (aka money stock, Geldmenge, geldhoeveelheid):

                http://www.shadowstats.com/charts/monetary-base-money-supply

        • Larry from Pittsburgh:
          “[…] Marc Gauvin […] Chris Martenson”

          There must be a flaw somewhere, probably that it assumes the interest isn’t paid, and that it overlooks the flow of the interest money through the economy.

          I made a note of your comment so I can analyse those two later. But I probably won’t find time for it soon. There’s so much more to do.

          • Please don’t comment on similar issues until you have educated yourself: you take quite a bit of energy with ignorance, which is acceptable as long you are open to development, but not when you are just making noise while not responding to real feedback.

        • Two out of three parts of my repudiation of Dominguez and Gauvin stability analysis are now finished: http://rudhar.com/economi/monydebt/en/010rstab.htm and the next part (11).

  10. samalbahaykubo permalink

    Anthony, there seems to be an unfinished thought in this sentence: “If you don’t build massive palaces all over the place, anyway, and pay your people twice what normal employees earn, let alone what you fork over to your vampire ‘traders’ and ‘investment bankers’.” I was just hoping you could relieve my curiousity!

    • Hi samalbahaykubo,

      I’m not sure what you mean?
      “This is an almost zero cost operation. If you don’t build massive palaces all over the place, anyway, and pay your people twice what normal employees earn, let alone what you fork over to your vampire ‘traders’ and ‘investment bankers’.”

      What I was trying to say is that if you run an efficient organization (not with massive bonusses etc) credit creation is very cheap.

      • samalbahaykubo permalink

        Ah, ok. thanks for the clarification. I didn’t want to miss anything. I think maybe a semi-colon rather than a full-stop between sentence 1 and 2 that you highlight.

      • The sentence gives conditions, but it does not stay what will happen if those conditions are met.

        If X, [and then it stops].

        • read the first sentence. I agree it is not a very elegant formulation, but everything is there

  11. Anthony,

    This was a very good article and I learned something from it. It makes sense that the banks actually own each other. The problem I see is that with interest, the economies of the world will always be in a state of chaos. The solution is so simple yet getting it done will be difficult. Not impossible, but difficult. The thieves will not let go but as people wake up to what is happening to them, it could work nicely. Eliminate interest and income tax, and life would be good. interest is slavery.

    • it won’t be fixed tomorrow Al, but it WILL be fixed!

      • Buzz Suite permalink

        i like that attitude – it will be fixed!

    • > interest is slavery.

      No, interest is a normal and reasonable compensation for a service, just like rent, the price margin in a supermarket, and anything else you pay for.

      • You just don’t understand the implications of Interest ruud: the ‘normal price for services’ is the lamest excuse for interest the completely debunked mainstream economics has come up with.

        Please read
        Budget of an Interest Slave
        On Interest
        Usury, why we don’t build Cathedrals these days

        To get a certain sense for the profound and horrific implications of interest.
        Interest slavery is real.

        The basic problem is that 45% of prices are cost for capital, so even if you have no debt, you lose 45% of yoru disposable income to interest

        Also: all the interest ends up with the very rich. The poorer you are, the larger the percentage of your income is lost to interest. Only the richest 10% gain more from interest than they pay.

        interest is a built in redististribution from poor to rich.

        In the Netherlands alone this wealth transfer is 50 BILLION per year. Worldwide, it’s about 5 to 10 trillion.

        The worst thing is, that over time ALL the interest ends up at the very top. It takes a while, but it is inevitable. At the top of the food chain there is the Money Power owning tens if not 100’s of trillions, through compound interest over the centuries.

        this is the stark truth of interest.

        • Please read
          Budget of an Interest Slave

          From which I quote:
          ===
          All percentages where available are taken from Margrit Kennedy, in the case of clothing and Telecom they have been estimated.
          /===

          Margit Kennedy was effectively debunked by Arie Roos in this long discussion (in Dutch only):
          http://www.visionair.nl/politiek-en-maatschappij/nederland/update-hoe-eerlijk-is-ons-huidige-economische-systeem-eigenlijk/

          The essential mistake that all these people make, is that they assume interest is only paid, and that then the process stops.

          That’s wrong: interest received is also spent and invested again in various ways. That’s why eventually it is no problem for the economy as a whole: it will return to where it came from.

          It’s just like water: the land doesn’t eventually dry up because the water flows to rivers and then to the sea. If you only look at that and totally ignore coulds and rain, you can arrive at such fallacies.

          • IF YOU Actually read the comments you referred to, you’d see Arie Roos does not even discuss anything Kennedy is saying. He is only denying (wrongly) that P+I>P.

            It is true that in the same article that Roos commented on, kennedy was discussed.
            Roos does not discuss anything Kennedy said.

            So go back to the article, read, digest and come back.

        • > Also: all the interest ends up with the very rich.

          No it doesn’t. At least not in the Netherlands, with all its pension funds. Most of the interest paid goes to the pension funds who then use it to pay small pensions to relatively poor people.

          And even the interest that does go to rich people, will then either be spent or invested by then, which means it eventually reaches poorer people again.

          The economy is a dynamic and ongoing, moving system. If you look at it statically, fallacies will result. It is easy to fall for such fallacies, because our brains are only capable of keeping about five things in mind at the same time. The economy is simply too large and complicated to grasp for humans. Many people will never understand (and of course I have great difficulty with it myself too, being also human.)

          • yes it does: it takes many steps, but eventually it all ends up with the very rich.

            “And even the interest that does go to rich people, will then either be spent or invested by then, which means it eventually reaches poorer people again.”

            This is not the issue: the issue is, the poor pay it to the rich first. The poor borrow, the rich lend….

            You’re blind Ruud: you’re only making conversation: youre not thinking hard in the face of new information.

            I’m not discussing the inherent instability of the system here (which is real also, even though you offhandedly and ignorantly brush that aside), I’m discussing the fact that YOU pay more interest than you receive to the rich.

      • Brian Hughes permalink

        No, YOU don’t get it, Rudd. You’ve been hoodwinked like so many others with your take that justifies interest. We’ve been conditioned to believe that the business of banking has evolved into this complex megalith out of necessity to accomodate an expansion of this ‘modern’ World. But the truth of the matter is that for any integrity in a concept of banking to exist means it would go no farther than being a basically simple operation. One which receives FEES for its service, not INTEREST, These fees, in turn, would translate into modest salaries at best for those who choose banking as their line of work. Think George Bailey in the movie “It’s a Wonderful Life”. This is at the heart of your misconception, and reflects the kind of thinking which keeps us smothered under a giant thumb.

        And like Anthony said, “Who created the money which funded the loan”? Banks as a MORALLY FUNCTIONING ENTITY DO NOT CREATE MONEY!!! They simply ‘move it around’ in service of its MORAL creation which reflects the goods and services of those who do business with them as with everything ELSE in a MORALLY FUNCTIONING SOCIETY. And that’s for those who choose to do business with it at ALL, because the great hypnotic trick has us believing that we need them TOTALLY when we don’t need them AT ALL!

        • Brian Hughes
          ===
          But the truth of the matter is that for any integrity in a concept of banking to exist means it would go no farther than being a basically simple operation.
          /===

          OK, agreed. So start your own bank with a group of people, that does only those simple operations, or look for an existing one that does. Cooperative, not-for-profit banks are probably what you are looking for.

          http://en.wikipedia.org/wiki/Co-operative
          http://en.wikipedia.org/wiki/Co-operative#Credit_unions_and_cooperative_banking
          http://en.wikipedia.org/wiki/Cooperative_banking

          ===
          One which receives FEES for its service, not INTEREST,
          /===

          Interest IS a fee. One of several possible types of fees.

          Fees can be transaction-based or volume-based. Interest is a volume-based fee. That makes sense, because the cost of funding is also largely volume-based: risk, handling, negotiations, investment earnings if the amount was used for something else than putting it in the bank.

          So the price of funding is also largely volume-based. The price of funding is interest. How could that be bad?

          If you buy 10 apples, it costs more than 1 apple. Why should that be different with hiring money?

          • Again you are ignoring the fact that this so called ‘fee’ is taking away half of your income.

            • And the other half is indirectly coming from such fees. You continuously look at only one half of the equation. Debit always equals credit.

              Following you reasoning, 10% of all my income is actually transport costs. So: trucks are evil, let’s forbid all transport. Result: hunger and poverty. It just doesn’t make sense.

              • No Ruud, you’re babbling again: you’re not listening: I said: half of your income goes to interest. Only the richest 10% gain more from interest than they pay.

                You are probably fairly well off, so you probably have some income through itnrest, I have no assets, I lose 45% of my income to interest.

                so no, I don’t look at one part of the equasion. I actually truly process the data I receive, without starting arguments with people without listening to them and without addressing their core points

                • > You are probably fairly well off, so you probably have some
                  > income through itnrest,

                  No. I may far more interest than I receive. And my income is low.

                  • May => pay, of course. Stupid typos all the time.

        • > Banks as a MORALLY FUNCTIONING ENTITY DO NOT CREATE MONEY!!!
          >They simply ‘move it around’ in service of its MORAL creation which reflects the goods and services of those who do business with them as with everything ELSE in a MORALLY FUNCTIONING SOCIETY.

          1) You are right, that is what banks do and should do: collect money and lend it out to others. That is the transformation function.

          2) That money creation takes place in that process, is not their fault, not an evil plan, but just a natural consequence of the concept of credit. If you don’t want that to happen, you must abolish and forbid all credit granting. But think of the consequences: poverty for all.

          If you don’t want anything to do with this money creation personally, just don’t take out a loan. It’s a free country. Nobody forces you to borrow money.

          • It’s unfortunate you don’t read.

            Like I tried to explain many times, also by directing you to the relevant articles, even if you don’t borrow a cent, you lose 45% of your income to interest. Because of cost for capital included in prices.

            we are all interest slaves. Do your homework, before you come back.

        • Thanks for the great explanation Brian. It is sad that people assume that banks MUST collect interest in order to turn a profit. In every other sector of the economy, profits are earned by charging for goods and services. Inexplicably, we assume that banks MUST charge interest because we have been taught to believe so.

          • Indeed…..

            Living in a box……..how people can love those limited spaces…….

          • Zero interest and higher fees is also a viable income model. Actually, for on demand accounts, that is what most Dutch already do at the deposit site. And judging from an internet ad by Citibank I once found, American banks work like that too.

            Ok, so suppose banks do the same at the loan side too. That means a company taking out a 1 million loan pays the same flat fee (but not interest) as someone borrowing just 1000 or 100 dollars. Do you find that acceptable? How high should that fee be?

            If the fee is made to depend on the loan amount, it’s no longer a fee, but interest. In other words, interest is an amount-dependent fee.

            It’s all just a question of “how to calculate the fee?” “and what are the loan conditions the bank offers?”.

            Just like in any other business than banking.

  12. Excellent article Anthony. Thank you.

    KB

    • thanks Kev, much appreciated!

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: