Why do we need private owned banks doing what could be easily done by a truly centralized bank? We aren't in the days of where money was stored in banks.
Oh right, they "create jobs". Yeah, bullshit jobs.
I cannot help thinking that the borrower doesn't just repay the loan only but also pays interest, through which banks grow fat on thin air (digital "money"). The interest they charge us is considerably more than the interest they pay us on our savings.
"When the bank makes a loan, the capital account is the real collateral. That is, if I take a $1000 loan and I don’t pay, the bank is now on the hook for that $1000. That is, the bank must draw down on its capital account to pay the loan I didn’t pay because my loan is a liability to the bank.
(That is, if the bank lent me $1000, they created that money out of thin air, but they have to account for it so they create a liability of negative $1000 and write that in their books." )?
That quote is indeed confusing. It's mixing up 3 different concepts that relate to loan creation. The concepts that it mixes up are: loan creation; collateral; and loan delinquency. It mixes them up as if they are all one and the same thing, happening all at the same time. They are not!
It then makes the mix-up even worse by using imprecise language to describe the consequences of loan delinquency for the bank. It refers to the "capital account" being "drawn down" as a consequence of a bad loan, when it should really be talking about solvency and the impact of loan delinquency on the bank's own capital.
My article has discussed only the loan creation transaction in order to demonstrate that digital money is created in the making of a loan. There is no need to introduce collateral or delinquency into the equation. It just confuses things unnecessarily. The loan creation step is the relevant transaction when thinking about money creation. The discussion of collateral and a loan going bad do not change the essential fact of deposit creation during loan creation. To repeat: they should not be mixed up in the basic principle.
So yes. That quote is very muddled thinking. These are not easy concepts for non-accountants to grasp straight away because you have to translate each step into an accounting entry in the bank's books. The only book that I've seen which achieves this is the book I referenced in my article. And the reason I know that it does it well is because I'm an accountant. That’s not to say that a non-accountant has no hope of getting it. It just makes it a little harder! I’ve tried to make it accessible to everyone.
A very well-crafted article, though based on a source that uses “bank-speak” (my name for economic jargon) crafted by banking wizards to distort the truths you are exposing about banks.
To give readers a flavour of what can be hidden by word-spells of these wizards, I’ll translate some key magic *spells* that appear in just one of your paragraphs, viz.: “*Commercial bank money* or *bank deposits* are what’s in your bank account. Not all deposits with banks derive from deposits made by the public. When banks *lend* *money*, they simultaneously create a *deposit* in the borrower’s account, enabling them to access the borrowed funds. This is the *money* creation process.”
In plain (non-bank) dictionary English:
1. Money is <notes & coins> [or “M0” in bank-speak; we don’t need the confusing spells cast by M1, M2, M3 or M4];
2. Commercial bank money is not money, it’s <Credit-items written in bank Liability accounts> and such Credit-items are a SUBSTITUTE for <notes & coins>, i.e., they are NOT money;
3. So-called bank deposits are not deposits and were not deposited by the bank. They too are <Credit-items written in bank Liability accounts>. Each occurs as a result of a customer deposit, the value of which is recorded as a <Debit-item in a bank Asset account>, and matched with that <Credit-item in a bank Liability account>. [This is a complete inversion of reality, a typical magician’s ploy.]
4. “Not all deposits with banks derive from deposits made by the public” now becomes confusing, because EVERY so-called bank deposit is a <Credit-item written in a bank Liability account> and derives from a matching <Debit-item written in a bank Asset account>, ALL of which represent the value of a customer deposit. You are helpfully distinguishing Credit-items arising from bank “loans” (caused by the deposit of customers’ PROMISSORY NOTES) from those caused by customer deposits of either CHEQUES or MONEY.
5. Finally, banks can’t create, and don’t LEND, money. Banks could lend money if they wanted to (but never do). Banks also can’t LEND credit, but can only PRETEND to lend it, by PRETENDING to own it. For 300 years, like naïve children, we have believed what they told us. That’s the biggest mistake the world ever made, because banks can never OWN a <Credit-item in a bank Liability account>, so they can never LEND it. Indeed, they do create it for us – but it belongs to us, alone, never to them. That’s why they can only PRETEND to lend it to us.
6. Every such bank deposit is owned by the customer who made the valuable deposit that created it, and bank “lending” of our credit to us relies on deliberate magical DECEPTION, which conceals accounting FRAUD. When proven, fraud and deception are certainly CRIMINAL, and I have published documentary proof of their fraud and exposed how their deception has been achieved.
Magicians never say, “I am about to deceive you …”.
Instead, they say, “Prepare to be amazed, as I [perform an impossible feat]”.
They tell you what they want you to BELIEVE they are doing [i.e., their illusion of lending you your own credit-item], instead of the truth about what they are doing [i.e., false accounting].
Why do we need private owned banks doing what could be easily done by a truly centralized bank? We aren't in the days of where money was stored in banks.
Oh right, they "create jobs". Yeah, bullshit jobs.
And why do they earn a profit for this?
https://robc137.substack.com/p/allergic-to-bullshit
I cannot help thinking that the borrower doesn't just repay the loan only but also pays interest, through which banks grow fat on thin air (digital "money"). The interest they charge us is considerably more than the interest they pay us on our savings.
Bingo.
Corrupt from inception. Politicians and economists love to confuse the financial illiterate. Theft, theft, theft.
The first rule of Central Bank Club is we don't talk about Central Bank Club.
In the USA the reserves was set to 0 in 2020
Anyway this is a confusing article in quora
Cooy paste
"When the bank makes a loan, the capital account is the real collateral. That is, if I take a $1000 loan and I don’t pay, the bank is now on the hook for that $1000. That is, the bank must draw down on its capital account to pay the loan I didn’t pay because my loan is a liability to the bank.
(That is, if the bank lent me $1000, they created that money out of thin air, but they have to account for it so they create a liability of negative $1000 and write that in their books." )?
That quote is indeed confusing. It's mixing up 3 different concepts that relate to loan creation. The concepts that it mixes up are: loan creation; collateral; and loan delinquency. It mixes them up as if they are all one and the same thing, happening all at the same time. They are not!
It then makes the mix-up even worse by using imprecise language to describe the consequences of loan delinquency for the bank. It refers to the "capital account" being "drawn down" as a consequence of a bad loan, when it should really be talking about solvency and the impact of loan delinquency on the bank's own capital.
My article has discussed only the loan creation transaction in order to demonstrate that digital money is created in the making of a loan. There is no need to introduce collateral or delinquency into the equation. It just confuses things unnecessarily. The loan creation step is the relevant transaction when thinking about money creation. The discussion of collateral and a loan going bad do not change the essential fact of deposit creation during loan creation. To repeat: they should not be mixed up in the basic principle.
So yes. That quote is very muddled thinking. These are not easy concepts for non-accountants to grasp straight away because you have to translate each step into an accounting entry in the bank's books. The only book that I've seen which achieves this is the book I referenced in my article. And the reason I know that it does it well is because I'm an accountant. That’s not to say that a non-accountant has no hope of getting it. It just makes it a little harder! I’ve tried to make it accessible to everyone.
Thank you
I really appreciate that you took the time to answer.
A very well-crafted article, though based on a source that uses “bank-speak” (my name for economic jargon) crafted by banking wizards to distort the truths you are exposing about banks.
To give readers a flavour of what can be hidden by word-spells of these wizards, I’ll translate some key magic *spells* that appear in just one of your paragraphs, viz.: “*Commercial bank money* or *bank deposits* are what’s in your bank account. Not all deposits with banks derive from deposits made by the public. When banks *lend* *money*, they simultaneously create a *deposit* in the borrower’s account, enabling them to access the borrowed funds. This is the *money* creation process.”
In plain (non-bank) dictionary English:
1. Money is <notes & coins> [or “M0” in bank-speak; we don’t need the confusing spells cast by M1, M2, M3 or M4];
2. Commercial bank money is not money, it’s <Credit-items written in bank Liability accounts> and such Credit-items are a SUBSTITUTE for <notes & coins>, i.e., they are NOT money;
3. So-called bank deposits are not deposits and were not deposited by the bank. They too are <Credit-items written in bank Liability accounts>. Each occurs as a result of a customer deposit, the value of which is recorded as a <Debit-item in a bank Asset account>, and matched with that <Credit-item in a bank Liability account>. [This is a complete inversion of reality, a typical magician’s ploy.]
4. “Not all deposits with banks derive from deposits made by the public” now becomes confusing, because EVERY so-called bank deposit is a <Credit-item written in a bank Liability account> and derives from a matching <Debit-item written in a bank Asset account>, ALL of which represent the value of a customer deposit. You are helpfully distinguishing Credit-items arising from bank “loans” (caused by the deposit of customers’ PROMISSORY NOTES) from those caused by customer deposits of either CHEQUES or MONEY.
5. Finally, banks can’t create, and don’t LEND, money. Banks could lend money if they wanted to (but never do). Banks also can’t LEND credit, but can only PRETEND to lend it, by PRETENDING to own it. For 300 years, like naïve children, we have believed what they told us. That’s the biggest mistake the world ever made, because banks can never OWN a <Credit-item in a bank Liability account>, so they can never LEND it. Indeed, they do create it for us – but it belongs to us, alone, never to them. That’s why they can only PRETEND to lend it to us.
6. Every such bank deposit is owned by the customer who made the valuable deposit that created it, and bank “lending” of our credit to us relies on deliberate magical DECEPTION, which conceals accounting FRAUD. When proven, fraud and deception are certainly CRIMINAL, and I have published documentary proof of their fraud and exposed how their deception has been achieved.
Magicians never say, “I am about to deceive you …”.
Instead, they say, “Prepare to be amazed, as I [perform an impossible feat]”.
They tell you what they want you to BELIEVE they are doing [i.e., their illusion of lending you your own credit-item], instead of the truth about what they are doing [i.e., false accounting].
Expose the Trick! [https://patcusack.substack.com/]
Shatter the Illusion! [https://patcusack.substack.com/p/1-bank-accounting-magic]