Right, so – people who know about banking and money and that -
this article is nonsense on stilts, right? This is not remotely how banking works, is it?
This is the bit that annoyed me:
Quote:
Here's how it works. 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. As other banks do exactly the same, the amount of money in the economy grows and grows. Every new mortgage creates new money, which pushes up house prices just a little more and forces the next buyer to borrow even more from the banks.
This is arrant bullshit, isn't it? The only people who can create money out of thin air are the central banks, who then use that to buy government bonds off the banks (or something) which then puts that money into circulation (or more liekly sits on the banks' balance sheet)
Isn't this a case of people confusing credit and money?
Mr Kissyfur puts £10 in HSBC. HSBC now owes Mr Kissyfur £10 - Mr Kissyfur does not
have the £10, he is merely owed it by HSBC. HSBC then lends that £10 it got from Mr Kissyfur to MaliA, who then buys a Girls Aloud CD from Nirjehenge’s car boot sale. Nirjehenge then deposits that £10 in Lloyds, so Lloyds has £10 and Nirjehenge is owed £10 by Lloyds.
So what you have here are two deposits of £10, which are just debts of £10 (one from HSBC to Mr Kissyfur, one from Lloyds to Nirjehenge), one person who owes £10 to HSBC (MaliA), one person who has something worth £10 (MaliA) and a bank with a tenner (Lloyds). So there are two bank deposits of £10, which are both just debts, one person who owes £10 to the bank, and one person with something worth £10. This looks like two people have £10 each and one person has a physical asset of £10, but really the only person with a tangible thing here is MaliA, but even that's balanced out by him owing the bank a tenner. The only party which actually has £10 here is Lloyds. I can see how this looks like creating money, but it isn't, is it? Unless both Nirjehenge and Mr Kissyfur withdraw their money at the same time, but in that case HSBC and Lloyds have given them £10 that each of Grim… and Craster deposited, and so on. This only looks like creating money because not all depositors ask for their money back at the same time – the only time a bank says “sorry you can’t have that £10” is when you haven’t got £10 in your account. The bank never says “eeeeh, we’re a bit hard up at the moment, soz”, unless the bank’s run by Jimmy Stewart.
I’ve got this right, haven’t I?
Where's Craster when you need him etc etc.
Even worse are the full reserve banking weirdoes, who think banks should only be able to lend if they can back that loan up 100% with assets