Replies to This Discussion

Permalink Reply by Mark Stewart on August 22, 2011 at 11:16am

Are you a fan of Ellen Brown and her "Web of Debt"?

Permalink Reply by Maria Agosto on August 22, 2011 at 11:21am

Don't know her work.  Should I?

Permalink Reply by Mark Stewart on August 22, 2011 at 12:47pm

I think so.  She's doing the most comprehensive reporting on what's going on with banking and other options that would be much better for the people.  She talks about the Bank of North Dakota, the now defunct Bank of Australia.  She has suggested that part of the reason we're after Iran is because they have a state bank, and the private banks don't much like state banks.

Permalink Reply by Maria Agosto on August 25, 2011 at 10:58am

I checked her out.  Don't enough to comment but thanks for the info.  Will read more.

Permalink Reply by Les Squires on August 22, 2011 at 12:41pm

Permalink Reply by Mark Stewart on August 22, 2011 at 12:50pm

When a bank loans you money, they're creating money out of thin air.  That's how most money in the western world enters the economy: through loans.

So when a bank loans you money to buy a house, they only have to have 10% of that in deposits.  Therefore, once you've paid back 10%, you reimbursed them for their risk.  Once you've paid 20%, they've made 100% profit on their 10% risk.  But if you can't pay all of the loan plus all the interest, the bank gets your home.

Sweet deal.

Permalink Reply by Maria Agosto on August 25, 2011 at 11:04am

Yes, and though the bank creates enough cash at the initiation of the loan it doesn't also create the $ to cover interest.  This is the worst of the Ponzi aspect to my mind.  Built into the system is the problem that there is never enough $ in the system to cove BOTH principle & interest.  Eventually, people MUST fall behind and get ground out of the system.  So, admitting my limited understanding of this issue, my question remains, is it possible to have ANY type of banking, even if the interest is invested 100% for the public good, that doesn't end up imploding because there is never enough cash created to cover the interest?  Please respond in actual English folks.  I don't speak economicez.

Permalink Reply by Mark Stewart on August 25, 2011 at 11:16am

Everything I say I've only learned in the last two years.  We were told that economics was over our heads and that we shouldn't even try to understand it.  I think we have to try, and this thread is great so far in the sense that it feels like a safe place to ask questions.

I don't think banks HAVE to implode for any reason that's based on how they work.  There's always the risk of it, but depressions have more to do with greed, I think, than the way banks work.  But is the question whether they can work, or whether we need them?  I think we can make a good argument for needing credit.

 

Permalink Reply by Maria Agosto on August 25, 2011 at 4:00pm

Mark, thank you for engaging in this conversation.  @Les as well.lol!

You say" "I don't think banks HAVE to implode for any reason that's based on how they work." 

This is what I don't understand. 

How else does a bank function, other than  interest on loans or other fees?  If the the $ isn't present in the system to earn & pay back, it doesn't work. I suppose they can just print money, but then THAT dilutes the value of the $ so you still lose.  I think that's why China was saying the US was defaulting on her loans, even B4 we lost our stellar credit rating.  The Chinese lent us $ at X value but we are paying them back @ Y value, which is lower.  Of course, even at value "Y value" I'm sure the Chinese would make a profit, but they make an interesting point. 

 

What am I missing, (which I'm sure is plenty! LMAO!)

 

Anyway, that's as far as I've gotten with this.  Any insights would be really appreciated. 

 

Permalink Reply by Mark Stewart on August 26, 2011 at 9:42am

I think I can only help you at the local bank level, for now.  I'm slowly forming an understanding of this myself.

What's weird about banks, and what most people don't understand, is that they create money through loans.  The money didn't previously exist before.  And when they loan it to you, in the sense that I think you're very realistically thinking of it, most of it does not exist.  Why does it work?  Because we believe in it.  That's it.  That's all.  Understand, they haven't printed money, they just said "You now have a loan, and you have to pay it back to us."

Why doesn't that cause inflation?  I don't know.  Ellen Brown has talked about that, but I'm going to have to read what she or someone else says about that a few more times before I get it.  However I will say that I think it's based on growth.  If you pump money into an economy that isn't growing, you devalue the money.  But I honestly am not sure about that.

And I also don't get trade between nations.  Ellen Brown and Ron Paul say that a very large part of our deficit doesn't really exist.  It's make believe.  We should just pop that fairy bubble.  I think the powers that be are worried about the reaction that those headlines would have:  Money is imaginary?  What?

Kind of like Peter Pan and Tinklebell: money can't work if we don't believe in it.

Permalink Reply by Mark Stewart on August 30, 2011 at 11:37am

I thought some people might be interested in this as well: http://www.yesmagazine.org/issues/the-new-economy/small-banks-radic...

Permalink Reply by Brian Setzler on August 31, 2011 at 6:12pm

I would highly recommend Chris Martenson's "The Crash Course"  http://www.chrismartenson.com/crashcourse

 

Chapter 7 is on the Creation of Money.  

 

The entire course is fantastic, and broken up into nice little 5-10 minute segments.

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