Bitcoin Forum

The Bank of England let the cat out of the bag.
http://www.theguardian.com/commentisfree/2014/mar/18/truth-money-iou-bank-of-england-austerity?CMP=fb_ot
Banks original paper: http://www.theguardian.com/commentisfree/2014/mar/18/truth-money-iou-bank-of-england-austerity?CMP=fb_ot

I suppose this is pretty obvious for the Bitcoinistas out there, but how about the ordinary Joe? Could this drive a shift towards cryptocurrencies? Will it affect the price?


Btw. Hello to all! I've been lurking for a long time. 1,5 Years.. Thought it would be about time to post.

Lol, that's hilarious. Truly bizarre why those employees at the BoE would publish that paper. The question everyone has to ask themselves is, "Why am I not borrowing as much money as possible to buy up hard assets and investments? After all, money is essentially free, and most debt can be wiped away if it gets out of control.

nice first post. welcome.

It's something I considered a few years back when the economy was in the shitter.
To borrow as much as I could in order to buy gold. I'm glad I didn't, banks were bailed out and gold went down.

Would have been better in most parts of the world with more mainstream hard assets such as a house.

Nice that this info has moved from the dark corners of the internet to the broadsheets.

Next stop, the red tops. Then the fireworks really begin.

I think now is the best time to sell your BTC and withdraw fiat to cold storage ;) because charts.

You think The Sun is going to run a headline economic theory article?

yes, it will read:


WE ARE FUCKED

 :D

true ... or ..
http://www.bankingday.com/files/images/2010/20101104_Herald_Sun_page_one.gif

lol! Yeah, going after some fee sure is massive war on banks! :D

I think we are safe from seeing an article of the level of the one in The Guardian there.   :)

I want the shitstorm now.

Buy Bitcoins or die miserably.

Nice post, welcome to the monkey house.

Yes. This stuff is really easy to sensationalise, and requires no actual understanding of economic theory. The Guardian article is already halfway there. The Sun, well....

what if i own two fractional reserve banks and i just have them multiply and lend money to each other until the money supply reaches infinity.

Yeah....it is quite mad that this argument is coming into mainstream. Would have been unthinkably taboo just a few short years ago to see this type of thing discussed anywhere in mainstream press. However, bear in mind that 95% of our money is created by the private banking system, but backed up with the legal authority and the tax raising powers of the UK government. Bitcoin in turn is backed up by how much of this 'worthless government backed fiat' someone is willing to pay at any given time on any one of a wide array of shoddy and generally untrustworthy online exchanges that may or may not pay out customers funds upon request.

It is not true to say that Fiat is backed by nothing. It may be created out of thin air by the banking system but is backed by our government and all the resources that it ultimately commands. Bitcoin, now Bitcoin is backed by nothing. In a hypothetical post USD collapse world, you think anyone is gonna happily trade a couple of hens and a few sacks of vegetables with you for some lines of intangible computer code? Unless that computer code is backed by something real (precious metals, energy, by decree of ruling authority), Bitcoin can only ever be a means of quickly transferring money. It can never be money and in any instance where it is used as a money substitute it will be completely dependent on its convertibility into fiat currency.


That is kind of what happened. The credit crunch happened cos some institutions got way too far ahead of the game and started not being able to clear their account with central banks which made other institutions nervous of lending them money, que chain of defaults on grand scale.

The ideal of course is, that banks create credit and grant it to those who are willing and capable of going out into economy and creating real wealth....but who can be bothered with all that hassle? Better just to give it to a big pile of crack addicts wanting to get in the property owning game and the repackage it up and sell it on to dumb Chinamen.

Im surprised ppl caught on this late... Ever since i read chris martnesons ebook ive had my eyes open.

And if you had never read it? Most people simply do not care to learn new things that are not directly related to their work or the sports channel and proper popcorn making.

ya its funny that my team of engineers have no clue how money works yet they consider themselves smarter than averrage because they are software engineers... Lol

Only reason i read it is cause i played forex and grew increasingly skeptical about my surroundings as i traded.. Like an invisible eye everytime i threw on an order.. After 2008 it was clear long term charts are affected and that is still to come

What's interesting is the article claims that candor from the BoE "throws the theoretical basis for austerity out the window". I draw the opposite conclusion. The Crown is not spending real money, only value stolen from people already holding pounds.

Money created from thin air is not wealth created from thin air. It is wealth stolen from the owners of devalued currency.

in germany banks are actually possessing only 2-3% of the money they gave out as credit. if 3 out of 100 bank customers decide to get their funds out the bank the institute will go belly up.
that is why merkel in 2008 after lehman brothers collapse went live on nationwide tv stating to the public that "all funds are safe, the german government is backing every account, stay calm"


it is really funny: for several hundred years people did not know if they should trust banks & governments about the money because they never knew for sure if there was enough gold/silver backing those strange pieces of paper they were given.

today we have a different problem. there is not even enough paper money around to back up all the money in account. let that sink.  :D

Sometimes one wonders if there's even enough....paper!!!!!!  :D

Yes.
Is that meant to be a surprise to anyone?

Money doesn't have to be backed by material resources, like gold. If we're on an island that has no gold, should we suspend all trading and starve? Obviously not. The issue is, as with everything, about trust.

The problem is not that money is "just an IOU". Every LETS (https://en.wikipedia.org/wiki/LETS) works like that.

The problem is who controls the issuance of those IOUs, and the rules that come with it, and the deliberate complexity and bureaucracy that allows parasites to suck off wealth on each level of the pyramid.

In a LETS, if I'm a plumber, I can trade one hour of my plumbing work against one hour of your plumbing work. In today's system, I pay the plumber 10 times more per hour than my own hourly wage. Go figure.

Shrug. Not all jobs are equally valuable.
If you have skills or knowledge other people don't, but that they require, you will be able to command a higher fee for your work.
If you don't, you won't.
I don't begrudge paying plumbers, electricians, etc... for their skills. They can do things I need, and can't do myself.

This was a simplification, assuming both plumbers are equally valuable (but still I have to pay 10 times more in today's system). Many LETS in fact do accommodate for the fact that your work might be more valuable than mine.

He's not talking about the value of jobs between them but the fact that most of the money you use is sucked out to the top of the pyramid.

The more money you have, the more money you get.

Having too few money is being a slave of the system.

Anyone here? Or anyone reasons the Sun?

Yup the law is that if you deposit $1 you can effectively lend $99 if the people you lend each $9 deposit back into a bank(which they always do)... that $99 is printed.

iirc leverage is 10000 not 10.

Its 10:1 becoming 100:1 because of bank monopolies.

That number doesnt even make sense.

Yes, money has never been something different than debt. Money is debt, gold is gold and cirarettes are cigarettes.

What I was told by the illuminati is that...

A bank only has to hold a small percentage of their capital so they can invest the larger percentage.
This way they can create more money by investing it in a diversified way. The results of the investment become profits and we customers receive a percentage on our money.
Every bank customer knows that their money is being invested unless they are ignorant :)

So yes it is true that a bank only holds a few percent of its total capital. If they would HODL you would have to pay yearly for storing your money in that bank.

If "a lot" of people want their money because the bank can not produce it since it is tied up in investments and retreiving it takes time. This can sometimes cause FUD and panic resulting in a cascading collapse of a good bank. For bad banks the retreiving time is infinity so they go belly up no matter what.

Technically money in the bank is an IOY of an IOY since fiat is an IOY already :)


There is only a problem if they lose money in investments and cover it up by acting like they have profits. Only this last point is a real problem since the money is non existent.
Usually a country has a central bank or reserve which is the only place money can be created. This should expose the bad banks quickly or allow a country to act accordingly without having FUD spread through the population. With the use of credit and debit cards I believe banks are capable of creating virtual money and that's a bad thing.

I also believe the banking system is rotten and I like bitcoin.


Disclaimer: I'm do not work for a bank or own one or have any good knowledge of them. Feel free to comment.

Well this system should sink in 2008, sad thing is taxpayers must keep it alive now. System will collapse at some point, together with it fiat and London Club.

Good thread. Too bad it'll probably get moved.

Has anyone of the macro-financial experts here even bothered to read the original article (and not just THE MONEY IS NOT REAL sensationalism from the OP link)?

http://www.bankofengland.co.uk/publications/Documents/quarterlybulletin/2014/qb14q102.pdf

And if you can't read scientific articles - here is what is the main statement of this one:


;)

Does anyone really believe that? Even IF they can't touch the money in normal (that is, fraudulent) ways, without them they would not have money to lend out - or in some cases, a bank at all.

Which is it? Is it not money or is it not free?