Greece

[Lxxx]

Everyone's favourite euro-sceptic Nigel Farage on form earlier today.

 

http://www.youtube.com/watch?v=l8Hhfq6FsVU

[manshimajin]

The banks may not run the world, but they supply the money, and money is used for absolutely everything, and it is based on trust that banks will deliver.

 

The banks do not actually supply the money. Money is supplied from economic activity and from central banks printing extra money. Banks intermediate what others create - shifting it from spender A to borrower B.

 

When banks, concerned about their capital requirements, stop moving A's money to B to allow B to generate more economic activity we get a recession.

 

Unfortunately this time round we have got into a vicious downward spiral. The banks are operating less and less as intermediators. They are now figuratively more like sponges soaking up cash but only a small drips falling out to stimulate gowth. - even with so much extra money being printed.

[Evil Goblin]

Actually the banks do create money (at at no cost to themselves). To illustrate I’ll use a very simplified version.

 

I set up as a bank (assume I'm the only bank there is) and you (fool that you are) give me £100k in cash (BoE notes created by the BoE from nothing) as a deposit. I lodge the cash with the BoE in my account with them. So, I have assets of £100k and liabilities of £100k. MDO then comes to me saying he wants to start a business selling motorcycles – I agree and lend him £50k – I do this simply by debiting a loan account in his name and crediting his current account. I now have assets of £150k and liabilities of £150k. MDO uses the cash to pay various bills and the recipients put the money on deposit with me – I still have assets of £150k and liabilities to match. LDV wants a loan to open a night club so I lend him £50K in the same way I lent money to MDO. I have assets of £200k with liabilities to match - and so it goes on. I create money at no cost and make money by charging interest on loans (nil cost) and not paying interest in deposits. My only restriction is from capital and liquidity maintenance rules.

 

The problem is that the money to pay the interest on the loans has not been created so the only way my borrowers can pay me the interest is by them gouging it out of other people. The interest system guarantees bankruptcies – they are built into the system, although alleviated by the constant creation of new money by the BoE and its’ injection into the system.

[Lxxx]

Actually the banks do create money (at at no cost to themselves). To illustrate I’ll use a very simplified version.

 

I set up as a bank (assume I'm the only bank there is) and you (fool that you are) give me £100k in cash (BoE notes created by the BoE from nothing) as a deposit. I lodge the cash with the BoE in my account with them. So, I have assets of £100k and liabilities of £100k. MDO then comes to me saying he wants to start a business selling motorcycles – I agree and lend him £50k – I do this simply by debiting a loan account in his name and crediting his current account. I now have assets of £150k and liabilities of £150k. MDO uses the cash to pay various bills and the recipients put the money on deposit with me – I still have assets of £150k and liabilities to match. LDV wants a loan to open a night club so I lend him £50K in the same way I lent money to MDO. I have assets of £200k with liabilities to match - and so it goes on. I create money at no cost and make money by charging interest on loans (nil cost) and not paying interest in deposits. My only restriction is from capital and liquidity maintenance rules.

 

The problem is that the money to pay the interest on the loans has not been created so the only way my borrowers can pay me the interest is by them gouging it out of other people. The interest system guarantees bankruptcies – they are built into the system, although alleviated by the constant creation of new money by the BoE and its’ injection into the system.

[Ringwraith]

Everyone's favourite euro-sceptic Nigel Farage on form earlier today.

 

[media=]http://www.youtube.com/watch?v=l8Hhfq6FsVU[/media]

 

Greek Bank Run Update: Up To $1 Billion A Day Now

 

http://www.zerohedge.com/news/greek-bank-run-update-1-billion-day-now?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+zerohedge%2Ffeed+%28zero+hedge+-+on+a+long+enough+timeline%2C+the+survival+rate+for+everyone+drops+to+zero%29

[Lxxx]

Everyone's favourite euro-sceptic Nigel Farage on form earlier today.

 

[media=]http://www.youtube.com/watch?v=l8Hhfq6FsVU[/media]

 

Greek Bank Run Update: Up To $1 Billion A Day Now

 

http://www.zerohedge... drops to zero)

 

Yep, read that earlier today. If anyone wants a true indication of what the current state of the financial situation is at any one time websites like Zerohedge are top drawer for real-time accurate information, derived from sources within the industry and on the ground, who also do not have any vested interest in what 'angle' they portray the information.

[manshimajin]

Actually the banks do create money (at at no cost to themselves). To illustrate I’ll use a very simplified version.

 

I set up as a bank (assume I'm the only bank there is) and you (fool that you are) give me £100k in cash (BoE notes created by the BoE from nothing) as a deposit. I lodge the cash with the BoE in my account with them. So, I have assets of £100k and liabilities of £100k. MDO then comes to me saying he wants to start a business selling motorcycles – I agree and lend him £50k – I do this simply by debiting a loan account in his name and crediting his current account. I now have assets of £150k and liabilities of £150k.

This assmes that as a bank you are willing to lend and that the BoE has donated the notes to me. In fact I have had to add value to something to get the money. As I said the central bank can supply money into the system even if they do not actually create wealth - just bits of paper. It also assumes that you have found someone who will do something positive with the money you have passed from me to them - not destroy its value - in other words the wealth is created by them not by you.

 

It reminds me of the story of the German tourist who goes into a hotel to look for a room. He deposits £50 with the hotel keeper whilst he thinks about whether to take the room or not. The hotel keeper races across to the pub and hands £50 to the publican to wipe some money off his tab. The publican then takes the note and pays the young lady for services rendered the previous night. She takes the £50 back to the hotel to pay the hotelier for the room she had 'borrowed' to entertain the publican. The German returns and says he has decided not to take the room so the hotelier hands him back his £50. Within a short time £50 has supported £300 of economic activity. This is how the world turns provided that someone can do something that earns the money.

 

Sometimes I wonder if the traditional economic solutions being applied to keep bankrupt banks afloat is in need of a radical rethink. Putting money into the banking system in Ireland, Portugal, Greece, UK etc...at present is not generating the level of economic activity to stimulate growth. Largely this seems down to the fact that the money is needed to shore-up their balance sheets because of the levels of bad debts they now have due to past poor risk management. It is also requiring ongoing austerity because the cost of debt servicing is so massive that states have to cut back on activity that supports economic activity in order to pay interest (forget repaying capital). That makes things worse as a vicious circle of reducing economic activity has ensued.

 

If the authorities want to get economic activity moving maybe it would be better to actually pass money indirectly into the banks. This could be through giving £ or € X,000 to citizens with the proviso that it is written off their debts to banks or if no debt exists must be used to buy things. By doing this the debt held by banks would be reduced, reducing the money needed to support their balance sheets and improving the value of their shares - many of which are currently owned by states and thus reducing the states' liabilities. The buying programme would create manufacturing and retailing jobs, again allowing money to flow into the banks through normal commercial activity rather than via subsidies, government tax and consumtion tax receipts would go up significantly and welfare costs would be reduced significantly as employment rises - also reducing the lending risks of the banking sector.

 

I don't know...however the 'traditional' methods of pumping money into failing banks is clearly not working economically nor are the long term austerity programmes required to support this. Improved economic growth would enable governments to recover financially. The moral hazzard of giving money to individuals to spend seems to me no worse than giving it to banks to lock away and/or to allow them to provide remuneration deals to senior staff that bear no resemblance to the problems and value destruction they have wrought.

 

IMO we need some lateral thinking to get us out of the downward spiral - and reliance on (and prayers about) economic growth in China and India is not the answer.

[pongo]

Another issue with the banks Mr Goblin is that this whole idiotic business of "too big to fail" means that they are able to maintain huge risky positions which skew markets. If they win, they win big ... If they lose, they know that central banks and govts will rescue them.

 

Govts should stop propping up the finance sector. Same as Britain stopped propping up British Leyland.

[Lxxx]

Interesting perspective on one option of how Greece can save their financial situation by introducing sound money and screwing the bankers at the same time.

 

Of course Max Keiser is very sensationalist and isn't everyone's cup of tea but last week I was lucky enough to have a beer with him over in the UK and behind all the brashness he is a very clever and switched on bloke who has worked in Wall Street for many years so understands the system more than most, and isn't afraid to speak out against it.

 

[media=]

[/media]

[Ringwraith]

Interesting perspective on one option of how Greece can save their financial situation by introducing sound money and screwing the bankers at the same time.

 

Of course Max Keiser is very sensationalist and isn't everyone's cup of tea but last week I was lucky enough to have a beer with him over in the UK and behind all the brashness he is a very clever and switched on bloke who has worked in Wall Street for many years so understands the system more than most, and isn't afraid to speak out against it.

 

[media=]

[/media]

 

Keiser's great, been telling it like it is for years now - not that many on here pay too much attention though!

[Lisenchuk]

Everyone's favourite euro-sceptic Nigel Farage on form earlier today.

 

[media=]http://www.youtube.com/watch?v=l8Hhfq6FsVU[/media]

It is a shame that Farage wasn't better supported with his prophecy's years ago,but its all coming to bear now.

Remember when he visited the Island and Hovis Brown refused to meet him or speak to him?

[Lonan3]

The real shame is that he's such a smug, self-satisfied prick that no one - even a plonker such as Brown - can be bothered with him.

[Lxxx]

The real shame is that he's such a smug, self-satisfied prick that no one - even a plonker such as Brown - can be bothered with him.

 

I'm not convinced that that persona isn't on purpose and that he isn't controlled opposition. He fits the bill (with his background) as someone who is closet establishment and perfect for the disenfranchised to listen to and resonate with, safe in the knowledge that he isn't ever going to be able to do anything, politically, about it.

[manshimajin]

Whilst most of the commentary I have seen on the Eurozone problems has been talking about the financial aspects of the problem I wonder if the social issues aren't ultimately going to be even more important.

 

Failed economies with massive unemployment, particularly massive youth unemployment, in the medium term may lead to conflict between the 'haves' and the 'have nots'. This could be exacerbated by a perception that the 'haves' are not paying a fair share of tax (was it said that the top earners in UK on average pay tax at 10%?) and that they are paying themselves more and more and creating a widening gulf between rich and poor.

 

Add to that, for example in the UK, that some of the unemployment blackspots are in ethnically diverse areas in which there is already tension and another potential issue starts to emerge if economies continue to fail - not just Greece but the UK, Spain, Italy, Ireland, France in parts.

 

The Greeks have of course already taken to the streets (and the same in London!) but I suspect that continued unemployment amongst particulalry the young has the potential to make things much less stable.

[Lxxx]

Whilst most of the commentary I have seen on the Eurozone problems has been talking about the financial aspects of the problem I wonder if the social issues aren't ultimately going to be even more important.

 

Failed economies with massive unemployment, particularly massive youth unemployment, in the medium term may lead to conflict between the 'haves' and the 'have nots'. This could be exacerbated by a perception that the 'haves' are not paying a fair share of tax (was it said that the top earners in UK on average pay tax at 10%?) and that they are paying themselves more and more and creating a widening gulf between rich and poor.

 

Add to that, for example in the UK, that some of the unemployment blackspots are in ethnically diverse areas in which there is already tension and another potential issue starts to emerge if economies continue to fail - not just Greece but the UK, Spain, Italy, Ireland, France in parts.

 

The Greeks have of course already taken to the streets (and the same in London!) but I suspect that continued unemployment amongst particulalry the young has the potential to make things much less stable.

 

Quite right. The 'riots' last year were the pre-cursor to this. There is plenty of video evidence and eye witness reports of agent provocateurs starting things off and also reports of police being told to stand down, to ignite and then escalate the situation so that draconian laws could be brought in on the back of it, to be used as and when the real disturbances erupt, as they surely will with the decreasing economic situation.

 

My question has always been how long do the manx police and legislators wait before they bring in their own version of these laws, as they surely must as Whitehall will have sent the message over here whilst it was all happening. I think we are seeing them now with the new policing powers that are being proposed.