Bank problems

[GreyWing]

Please don't take offence, I'm not having a pop here, but you have to see the funny side.
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Nope mate it's a friendly discussion and it's opinions not fact that we are discussing, so no offence taken on this side.

Your first signature is for "quick loans" and the heading of the site is:
"Peer to Peer Subprime Lending"

Who do you think the majority of your customers will be? I say the very ones you state should not get into difficulties in the first place.

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I don't say people shouldn't get into difficulties, it's not my job or wish to try and control anyones finances or judge anyone that does fall into difficulties, it is easy done. The site in my signature is one that will when launched possibly give people more options and possibly save them money, the customer will have to decide. I'm not doing that out of the goodness of my heart though, it's a purely commercial venture.

I'm merely saying that if you want free banking then you have to live within the terms of that free banking. If you pay for the banking then you can complain about the charges.

 

[jasman]

How many people here are aware that banks are legally allowed to create new money and lend it at interest? In fact under the fractional reserve system, which is the system all the Western banks use, they can lend out £10 for every £1 that they have on deposit. A bank with £1 billion total in capital and customer deposit accounts may lend out and charge interest on £10 billion, even though it only has £1 billion. This is the real reason for inflation because most of the growth in the money supply comes from new loans created by banks. An excellent film explaining this can be seen here:

Money As Debt

 

[Darren]

Thanks for the link Jasman, very interesting video.

 

[jasman]

It makes you realize what a con things like tracker mortgages are. People think the banks are borrowing the money from the bank of england at base rate and then adding 2% interest on and relending it to you. Wrong. They borrow 10% of your mortgage money from the bank of england at the base rate. Then they're legally allowed to create the other 90% of your mortgage money out of thin air. And they lend it to you at interest.

Let's look at an example to see how this scam works. You apply for a 100k mortgage from a high street bank. The high street bank borrows 10k from the BoE at base rate, say 0.5% interest. 0.5% of 10k is £50, so that loan will cost the bank £50 per year if none of it is paid off. The bank can then create 90k out of thin air thanks to the fractional reserve system. So the £100k loan is really costing them just £50 per year. But YOU are charged a higher rate ON THE TOTAL AMOUNT. If their tracker mortgage is advertised as base rate+2.5%, then you are paying 3% interest on 100k i.e. £3000 per year. So per 100k they would be borrowing at £50/ yr, lending at £3000/ yr.

The trouble is this works backwards too and this is what has really happened to the banks. There's a good little article here explaining it here:

What?s the Value of a Promise that Can?t be Kept? Adask's law

Here's an excerpt

If the bank were to discover that the true value (truth) of that $100,000 bond was only $97,000, the bank would not merely lose $3,000 in face value—it would have call in $30,000 in loans (imaginary dollars; lies) that had been issued based on the (now missing) $3,000.

If the value of the $100,000 bond/“reserve asset” were reduced (as per Standard and Poor) to $87,000, the bank would have to call in $130,000 in imaginary loan dollars (lies).

Get that? In a 10% fractional reserve banking system, if the value of a $100,000 bond fell by 13% the bank would have to call in 1.3 times the face value of the entire bond. If the bond’s value fell by 62% (as suggested by the market), the bank would have to call in loans worth 6.2 times the face value of the entire bond. If things go as badly as I expect (80% repudiation of the value of existing debt instruments) then, on average, every $100,000 bond being held by banks as a reserve asset will be reduced in value to $20,000. The resulting $80,000 loss of value could therefore cause $800,000 in loans to be recalled and sucked out of the economy.