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Exposed: the confidence trick that supports banks

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    Exposed: the confidence trick that supports banks

    http://www.timesonline.co.uk/tol/new...cle4795058.ece

    Panic is especially dangerous for banks. For banking is, quite literally, a confidence trick. At their simplest, banks take in people’s savings and in return pay them a small amount of interest. Since the banks don’t expect everyone to want their money back simultaneously, they can make loans worth far more than their deposits. Like a pyramid seller, they often end up paying interest out of new money they are taking in.

    HTH

    #2
    The problem with banks now is that in order to get bigger profits they started using leverages - that's why suddenly their liabilities became so huge that they have to go bankrupt, it's not even a question of a run on a bank (which is easy to defend against) - leverage is a problem. Effectively banks were spreads betting - extremely dangerous gambling practice that they should have never been allowed to get involved in.

    Comment


      #3
      Yeah, let's return to full-reserve banking. AtW would approve.


      Actually, it has a lot going for it. No more dodgy debts, no reason for a run on any bank, inflation would be a lot lower as money supply growth would be constrained.

      Just not going to happen.
      How did this happen? Who's to blame? Well certainly there are those more responsible than others, and they will be held accountable, but again truth be told, if you're looking for the guilty, you need only look into a mirror.

      Follow me on Twitter - LinkedIn Profile - The HAB blog - New Blog: Mad Cameron
      Xeno points: +5 - Asperger rating: 36 - Paranoid Schizophrenic rating: 44%

      "We hang the petty thieves and appoint the great ones to high office" - Aesop

      Comment


        #4
        Originally posted by HairyArsedBloke View Post
        Yeah, let's return to full-reserve banking. AtW would approve.
        Yes I would. This would certainly reduce amount of credit and make people actually think before they buy stuff. The only credits that should be allowed are long-term based - house morgages (at very low net salary multipliers) and capital investment for businesses (like say building new factory). All other credit (apart from maybe bridged loans) should be banned as threat to economy. Islam has got a point when it bans interest rates.

        Comment


          #5
          Originally posted by HairyArsedBloke View Post
          Yeah, let's return to full-reserve banking. AtW would approve.


          Actually, it has a lot going for it. No more dodgy debts, no reason for a run on any bank, inflation would be a lot lower as money supply growth would be constrained.

          Just not going to happen.


          I think you forgot to mention the gold standard!

          Comment


            #6
            Originally posted by AtW View Post
            Yes I would. This would certainly reduce amount of credit and make people actually think before they buy stuff. The only credits that should be allowed are long-term based - house morgages (at very low net salary multipliers) and capital investment for businesses (like say building new factory). All other credit (apart from maybe bridged loans) should be banned as threat to economy. Islam has got a point when it bans interest rates.
            atw for chancellor? maybe as religious affairs minister too?

            why don't you tell us what you think instead of posting this trolling stuff?

            Comment


              #7
              Originally posted by BrilloPad View Post


              I think you forgot to mention the gold standard!
              OH YES! Thanks.

              Yeah, bring that back too.



              I find myself begining to like this idea.
              How did this happen? Who's to blame? Well certainly there are those more responsible than others, and they will be held accountable, but again truth be told, if you're looking for the guilty, you need only look into a mirror.

              Follow me on Twitter - LinkedIn Profile - The HAB blog - New Blog: Mad Cameron
              Xeno points: +5 - Asperger rating: 36 - Paranoid Schizophrenic rating: 44%

              "We hang the petty thieves and appoint the great ones to high office" - Aesop

              Comment


                #8
                Originally posted by BrilloPad View Post
                atw for chancellor? maybe as religious affairs minister too?
                I'd make a good chancellor. Whoever made IR35 will be sacked among the first

                Yes net salary is important. It always amused me during morgage boom time that banks used gross salary in full knowledge that 40% tax bracket would leave a lot less disposable income, this is especially true for place like London where salaries were higher and so were house prices but in terms of net salary the difference was even higher. If morgage payments were tax deductible (which they used to be I believe) then it would have made sense, but it was not making sense for the past 10 years. This just shows how irresponsible banks were - if I was running bank and had to decide whether to give morgage to someone then I'd obviously want to see if they get enough disposable income to pay the morgage! Gross salary is totally irrelevant - for all you know that person might have drug addiction that won't leave any money left for morgage payments.

                Comment


                  #9
                  Originally posted by BrilloPad View Post


                  I think you forgot to mention the gold standard!
                  I don't support gold standard. The only useful role it had though was putting kind of natural limit on money printing which disappears as soon as it was abolished.

                  Comment


                    #10
                    Originally posted by AtW View Post
                    I don't support gold standard. The only useful role it had though was putting kind of natural limit on money printing which disappears as soon as it was abolished.
                    Yup, that's the idea. Constrict the money supply and keep inflation down.
                    How did this happen? Who's to blame? Well certainly there are those more responsible than others, and they will be held accountable, but again truth be told, if you're looking for the guilty, you need only look into a mirror.

                    Follow me on Twitter - LinkedIn Profile - The HAB blog - New Blog: Mad Cameron
                    Xeno points: +5 - Asperger rating: 36 - Paranoid Schizophrenic rating: 44%

                    "We hang the petty thieves and appoint the great ones to high office" - Aesop

                    Comment

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