Bitcoin Forum

Please explain in laymen term

Bank hand out the loan at 6-10% interest rate to Small Medium business
Central bank provide low rate (0%) loan to small bank to MAKE profit

The bank can’t survive with 0% interest rate?
How can small business survive with 6-10% interest rate?
How can people survive with 6-10% personal loan interest rate?
Why bank is above small business and human on interested rate privilege?
This is a major scam!

Contrary to popular belief, central banks of the country are not a private institution and are directly regulated by the government. In times of recession or similar crisis, the government will lower the interest rate so as to encourage borrowings from the consumers and firms, which will in turn result in an increase in consumer's expenditure and investment expenditure by firms. This results in an increase in the GDP as both are components of it.

The commercial banks should have a lower than usual interest rates when the central bank sets the interest rates lower. There's a difference between what a central bank and a commercial bank.

Tl;dr: Central Banks do not have to necessarily make a profit. They have to sometimes align with the policies enacted by the government as a stopgap to further deterioration of the economy.

Can you please tell me where you have seen this happening?

Because in a country if the Cebtral Bank is providing loans to banks at zero interest rate, there is no way the Bank will charge 6% - 10% interest rate from individuals or businesses. It has to be around 2% - 3% annually! So please let me know where you have seen such disparity?

Secondly, banks decide their interest rate in 2 main ways! One is MCLR and the other one is Repo Rate bases. The MCLR is decided the banks based on their cost of acquiring the capital money they are lending outside. This is usually 2% - 3% higher than the Repo rate. On the other hand, the Repo rate based loans are cheaper as they are linked to the Central bank decided rate.

Usually Repo Rate based loans are offered to the customers with good credit rating and previous loan repayment history. But yes, there's no hard an fast rules about it and it's on the bank to decide!

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Yup, central bank do not make profit, they provide cheap loan to smaller banks, and the smaller banks further provide loan at higher rate to end users, the point is lower interest rate is not passed down to end user during pandemics where small bank have the privilege of even lower rate but small business are often get stuck with the same rate, the rational being to help smaller bank make profit during pandemic yet killing all other small businesses, that’s some retard decision bank has made.

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Just give a call to locate nearest bank and they will quote you the rate near instantly, you don’t need to get out of the basement and get to know the rate, on real time,

6-10% is very conservative estimate, and most banks are reluctance to provide loan at even lower rate than advertised, they always have myriad of reasons to not provide their loan to risky business such as small business.

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I think 4% is the reasonable cost to add tbh.

Banks still have previous bonds/creditors they have to pay off also.

BUT! What you're probably quoting is an advertised rate, I've seen banks advertise 6-12% (risk dependent) but I think you should be able to negotiate it down to 4-5% above the base rate pretty easily.

Banks also REALLY want to give mortgages and collaterally backed loans because they're easier for them to manage (and less regulated).

Local banks/building societies might give better advertised rates also if you don't want to negotiate.

I think it's very likely that a small business will be able to pay off a bank loan at 6-10% interest. It depends on how the small business tries to run well and grow rapidly. That is why someone still needs additional income apart from his main business, in order to get a reserve fund and maybe be able to help ease the debt to the bank.

What I noticed in my country is that banks don't pay interest anymore on deposit, on top of that they increased banking fees by 100 % on top over the last 12 months and still they need to charge such high interest rates on loans. For me as an saver that means the bank is not really interested in my deposit anymore. It would be actually cheaper for me to withdraw and keep the money at home. But no one is going to do that, that is why banks can charge those fees.

I am sure you didn't understand my question so let me reiterate it again!

I am trying to understand in which country the Central Bank provides loan to Banks in zero interest rate while the Banks are lending that money at 6% - 10% interest rate??

I didn't want to know the interest rate that banks in my country are offering! My concern here is only about the difference here! That is not possible! The Repo rate of my country is close to 4% while my home loan interest is at 7.45% as it is linked to MCLR. This is a justified difference that banks earn usually.

Hope you got my point now!

Well according to the government, they are doing this to :
" Actually help the people, the people can take loans during this pandemic then help their families and stuff "

Actually, it's the government who is controlling the banks , most of them and most of the other private banks are interrelated with the governmental banks. You should understand that this would make the money flow in the society. People are being given many aids by the government but sometimes it's not just enough. It's like people have this other option.

Now if there is a small business which is looking for a loan and they will be able to get their business started even during the pandemic when the situation is very bad so this way the whole country will be benefited and this would inturn help the GDP to grow and help the government too. The government and the country is nothing without the business and other firms achieving a stable space.

This is really really helpful for the people. This is something they are doing for them.

Is interest rate to small banks really that low? I guess the Central Bank does that so that small banks will charge low interest rate to small businesses with long-term repayment?

There's a crisis and that's why they have to let the money flow with lower interest rates. I don't think that it's even 0% rates, do you have some source to back it up?

You still don't know how small businesses works. If the capital comes from loan, the profit that they generate will usually pay off the debt before getting themselves the profit. It's the cycle in the business sector. Maybe out of 100% profit or revenue, they'll only get 5-10% of profit then the rest will go through expenses and payment to debts.

I've known people that were even able to survive with 20% interest rates. If there's a will, there's a way. You get that debt and you need to be responsible paying that. But with the financial and health crisis that's happening today, there are thresholds or extensions when the loaner shall pay. And as sign of recovering together, they'll also consider lowering the rates.

As far as I know small businesses are limited by the number of small loans to be able to maintain their payments at 6-10% interest and match their turnover. so I think there is already a real calculation between the business and existing bank loans so that the bank and the borrower can understand each other

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Central bank are giving out loan at zero interest rate at zero percent to who? To bank or to you? By my logic you won’t be entitle that benefit no matter you can argue to death, to the bank? Yeah possible, to the big banker like Jamie Dimon? Yes Jamie Dimon basically receive free money from central bank for doing absolutely nothing, he is loving it, why can’t he?😂 you want prove, We are not settling this in the court room, we don’t need any prove to form any verdict, yes there is a lot of prove but I’m 100% sure none of this “prove” will convince you and you will still ask for more prove because prove is as dubious as calling election fraud and we have a prove.
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With zero interest rate, and money given to them for free from the central bank, what sort of debt they’re paying? I think they’re paying for their luxury cars fast women fast house.😅

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I’d like to observe how bank gonna survive with 20% interest rate, since there is a will there is a way, this disgusting bank has to be the role model of making 20% in this market conditions, and they’re resorting to 0%, that’s major scam!😂
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Growing wealth and wage inequality raises the default rate of loans. Rising student and home loan defaults diminish profitability. Many banks adopt high risk coupled with high reward (or high failure) business models. Greater risk is correlated with greater failure as illustrate by the 2008 economic crisis where high risk subprime mortgage derivatives became world famous.

Derivatives exposure for banks has been discussed ad infinitum for many years. Losses in derivatives / investment markets, another area where banks sometimes have trouble.

https://i.imgur.com/YRX3OzN.jpg

On the topic of central banks, many are privately owned and produce profits.

You can find rates lower than 6%. If you have solid credit or a good business reputation it is more likely you are able to get a 2-3% rate on a loan. Personal loan rates are also a bit higher than they were at the start of the year because we are technically in a recession caused by Covid and it makes absolute sense for a bank to restrict credit when people are losing their jobs - a likely trigger causing them to stop repaying loans. I don't know why you think banks are a scam (it sounds rather silly to make such a claim), people aren't obligated to lend out money and this is the most basic financial concept around.

As I understand and if I am not mistaken OP's concern is that the private banks can get a loan from the central bank at a 0% interest rate while these banks would give 6-10% interest rate to their borrowers which refer to the small to medium enterprises, which in a glance could be really considered as a stratagem.

However private banks are business too that aside from the taxes they are paying to the government there are other expenses that they need to compensate for to keep their business running. Though 6-10% is quite high I am pretty sure that they are only meeting the government requirements I guess.

Banks are set up to make profit. It is even because it of government regulation that the rates of interest of bank loan is within what we are talking about. Banks are owned and operated by individuals especially in commercial banks so expect that profit should be made.

Let’s me get this straight

The mega rich know:
“The best way to rob the bank is to own the bank”

The mega rich elite also know:
 “GIVE me control of a nation's money supply, and I care not who makes its laws.”

The mega rich definitely know how to make profit by manipulate the bank and interests rate.

My assumption
“The best way to rob the small medium business, the people and every other peasants(include your kids, your grand kids, grand grand kids...), is to own the interest rate privilege”

This make a lot of sense, the mega rich can rob everybody easily by manipulating the interest rate at their will, they care no who take the loan, all of them has to die by pillage of debt.

How do they make it work? Interest rate is some sort of “silent tax”, the govt definitely love to tax everybody to death, “nobody can escape tax and death”, is it possible to increase these “silent tax” through manipulating interests rate? Yes it is quite possible, since they have the control of the money and the interest rate, why can’t they make it work? They just need to make everybody else pay this “silent tax” while they themselves pay absolutely 0% of this “silent tax”, yup it’s a major scam, a scam to rip off the 99% while enrich the 1%.

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Do you wonder why more and more private small shadow banks are thriving like mushrooms around you? I think they must have having a good time on profiting during the pandemic, something is quite wrong here but it’s too very complicate to explain, that might be why they keep lowering the rate to make even more money but not increase the rate.

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Zero percent Interest rate is definitely not something you would consider “normal”, you’re looking at historical moment because interest rate had been keeping above zero percent for over a hundred years, not something you did want to ignore and move on.

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“it's the government who is controlling the banks”, now everything seem clear since every bank are under control by government to rip off everybody else except the government, it’s perfect fine to equal bank = government at this rate, every government will do is collect tax and make your life a living hell, now that’s what bank have been doing for quite sometime, that also make sense why they need to lower the rate for themselves(the government) while maintaining the rest of the people, since it’s quite easy to assume everybody are having debt at some point, it’s easy for them to just collect tax on top of their debt by manipulating the interest rate. That’s right, pay tax on debt which sound very stupid but it’s not something new, people have been paying tax on top of their loss for quite sometime, paying tax on debt just take it to a whole new level of new low.

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Exactly. The Bank cannot survive with such rates because the Bank's money is divided, in fact, into two parts.
"Credit" - those that the Bank takes for storage from people as a Deposit and charges any % on these deposits so that it is profitable for people to carry money to banks.
"Loan" - those that the Bank just gives out as a loan to people who pay the Bank % for using this money.
The Central Bank can issue loans at 0% because this is in fact a repayable debt, not a loan, and the profit will be as taxes received by the state.
Banks can't afford this luxury - at whose expense do they have to pay salaries, rent, operating expenses, etc., etc.? Just go to the Wikipedia article about banks and understand why this is happening, but of course it is much better to ask on the crypto forum how banks work.

thats what i understand also from the OP, he's wondering why these small banks can charge about 6-10% interest, whereas, they got it at 0%. anyway, there's more than meets the eyes here. of course, at a glance, it seemed that these banks are screwing the individuals with high percentage of interest rate.
but as you said, they are just within the regulations of the Central Bank itself. because they will not operate outside its limitations. these banks have a lot of expenditures as well so they cant give to its borrowers the same interest as what they got it from. aside from the fact that they really do need to make profit, because it is business!

It is very clear that private banks only want to generate as much profit as possible, so they provide loan interest of 6% -10%.
Even though they actually got a loan from the central bank with 0% interest. Private banks should be able to provide even lower
interest rates. Therefore, many small businesses go bankrupt in a pandemic situation, because they are unable to pay loan to banks
with high interest rates. Knowing this, I tried to run a business that I owned without the help of a loan from a bank.

Honestly your question have raised even more questions than answers, but that's a good thing. Nevertheless, if what you say is true, then this only shows how cruel banks can be. Charging people more when they can actually get a loan themselves scot-free. If ever, your country's central government should be able to intervene regarding this situation and help with these microbusinesses struggling to make ends meet during this pandemic crisis.

This whole interest taking thing is a scam indeed. The central banks along with all banks are a major scam. By taking poor people's money and giving them greed of small interests, these banks give the money collected to big companies placing on them a big interest which automatically rises the price of the products the company produces which the common and poor people don't recognize and they spend their so little interest-profit ok buying things on an expensive rate. A better system should be there!

And what is the cruelty? This is ordinary usury, the principle of which has existed for many centuries. You take [somewhere] money and promise that you will give them a percentage.
After that, you give [someone] money and say that you are owed a certain %for it.
And then you come to your king and tell him that if he gives you money at 0%, then after a while more taxes will go to the Treasury because you will be able to distribute more money at % for the development of your business or something else.
The scheme is as old as the world and there is no cruelty here, as for me. No one owes anyone anything for free.

That is how banks are making money, even there are lot f hidden fees will be collected when we are taking loans like processing fee, etc but that is the banking business which is not really known by most of the people. When you have good business which needs capital then it is okay to take such loans because you are going to make profits like 20% which can justify the interest rates but new start ups will such loans are always risky.

Bank can give thousands of reasons everything is normal, that mean nothing when we can see inflation is going rampant wild, the food price alone shoot through the roof and the person who regulate the money supply?? The person who regulate the interest rate? The bank just want to point finger at everybody else but not themselves for all the money problem in the economic, this disgusting bank don’t collude a single day I don’t feel normal, it has been their profession to collude and steal, they’re no different than robber, and can you trust a robber, a blatant liars who broke the market in 2008, a colluding organisation that promise will keep inflation in check, to make this world better? And you wonder why bitcoin is needed to wake this world of this bank threat?😂

You are right. Banks will never survive with 0% interest rate. But 6-10% interest rate is so adsurd. In any bank loans, we should always expect an interest in paying back, because its the banks ways of getting more profits. However, upon getting a loan, you should always see if the interest is reasonable enough and your business has the capability of paying loans with the corresponding interests. On the other hand, Central banks offered cheaper loans to assist the small and medium businesses nowadays and it has low interest I guess. Loan interests is totally a burden, and i must suggest that we should not engage with this high interest rates loans if there are still another ways possible.

Due to pandemic banks offering loans with lower interest to increase the cashflow in the economy but central government gave them huge amount of money to offer loan for people but private banks are not offering those loans to everyone, they offer only for the people who is making money right now not for the people who actually got affected and lost their business.

Banks are dying with low central bank interest rates right now, not making much of a profit.

A small business loan might be at 5%, because a number of companies will not pay back, so the risk has to be spread by making everyone pay such a "high" rate.

Here in France, mortgages are relatively low risk because loans are insured, and the housing market is stable, so if you have a good salary, you can borrow big amounts to buy a flat/house, at less than 1% !

The bank is making no money on this, but just want to have a new client with good earnings that will probably have investments, spend a lot, etc.

For someone with an average salary, the rate is about 1,5% for 25 years.

Well, the main idea is the fact that central banks are not giving banks 0% interest because they want to make a profit, but the banks are giving you loans to make a profit. Plus the main idea would be the fact that if a bank fails to pay the loan back (which rarely ever happens) they could just seize everything the bank has, which means very very low default rates and usually very safe loan to give, whereas when banks give us the loans, there is a default rate where some people fail to pay their loans back, and since they have almost nothing you can't really seize anything that worths the same amount of money.

So, banks need to have higher rate to cover that as well. Combining the want for a profit and also the fact of defaulted loans, we get higher rates in the end.

The central bank's benchmark rate movements are independent of private banking institutions unless ofc there is a level of corruption going on. Their mandated targets are generally a) unemployment and b) inflation targeting of 2-3% on avg, over time for most countries. There is nothing that says banks must survive even though implicit guarantees may be made.

To answer your question, there are certainly instances where banks charge high amounts of interest on consumer loans.

But there are two reasons for that, whether or not they justify the banks' actions: a) There is a disconnect between short term benchmark rates (i.e., fed funds, cash rate, whatever you wanna call it) and retail rates and b) There is substantial risk in personal/business loans compared to secured mortgages.

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The layman term is simple like this

“It’s the business at fault”
The business always goes default, this cluster *uck of business is so full of risks and plaguing the entire bank balance sheet, let make the rate as high so all the business eventually can get wipe out from the balance sheet, this way more money for bank, bank rarely goes broke huh? It’s the rich playground now too big to failed! If the bank failed it just get defaults and the taxpayer will pay for the debt, or the business failed, taxpayer will pay for it too!

“It’s the personal loan at fault!”

Personal loan? Fine they’re too very risky, just keep it as high to the point where all of them get default despite we get the money at nearly zero percent interest rate (teehee!), the people go default? Taxpayer will pay for it, oh the wall? We will make Mexico pay for it too! Central bank debt is the debt owned by the nation, the nation = the taxpayer, yup, central bank debt = taxpayer debt, keep the rate low for the taxpayer, keep the rate high for greedy bastard small bank, central bank goes broke taxpayer gonna pay for it, why small bank even need to pay for that LOL! Time to *uckup taxpayer bad for real!

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by offering btc as a panacea, you are proposing to go from shaky order to endless chaos. Is that what you want? For any cryptocurrency, there is not even an infrastructure - and there is simply no desire to use it as a means of payment. Look around, what do you see? People are obsessed with cryptocurrencies not because it is some kind of progress and the present future, but because they can become millionaires in one day, or lose everything. For all of them, and most of them, cryptocurrency is just a gray kind of casino, where you can earn good money and come out a winner.
Do you remember that the casino always wins?

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People often ignore thing that’s much more questionable, because the banker has succeed on brainwashing us to be a Pavlov dog: “everything is fine!” “Zero interest rate is fine!” It’s amazing every human being is just a Pavlov dog in disguise, they would stop questioning when they get enough of that indoctrination. But why I find it fascinating there are so many things we ignore already for too long that even banker don’t want to mentioned anymore, and all these little thing stack up against us and eventually forming a bubble and begin to pop in due time.

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To be fair, bankers are honest people making honest income from pay check to pay check, it’s just the interest rate itself is the culprit, I would emphasise on the interest itself being scams, but not the bank itself, and the person who regulate the interest rate, yup the president of the particular bank is a big criminal but no one can arrest that crooked criminal for the reason they’re two wrong, it become a right. That sound wrong but you know the proverb.

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Michael Saylor the Microstategy was calling bitcoin a online gambling a.k.a the casino too, but look what his narrative today? Whether bitcoin is a scam or it’s a pin to debunk a greater scams, we shall see the result very soon, I’m not calling bank is the greater scams that required some rude awakening, just a guess work.

They’re going around and tell everybody there ain’t free lunch in the world, everything has to pay for it, yet they are having free meal and pay for nothing? I think it’s a completely rip off, they pay for nothing while we all pay for hyperinflation, even hyperinflation isn’t the end of that, they’re gonna kill it post hyperinflation, that might not impact anybody else, they said everything is fine the interest rate for you and business is fine, we are fine too.

6-10% interest rate? WOw, I think that it is a very big amount of the interest rate that the bank needs. However, I ever know about the high-interest rate but only for property loans like in my country. However, if it is for a  am business, there should not be that high amount. But I don't know where you live so that I will not judge it true or not. It may be different from one to other banks.

Additionally, a bank with zero interest? EVen a central bank by the government in my country still get the interest although it is very small like zero point - 2%.

Commonly the banks will need a high rate and even with that around 2% interest rate, the banks are still having profits. Imagine tht we also deposit our money in banks and they make our deposits for loans to other people and they get profits from the loans as many as they can and we do not get anything or ol]nly very few banks. That is why this becomes one f the reasons why Bitcoin is created.

And what is the bank's fraud? The fact that he gives you the money you need today and asks you to return a little more for it? Or is it that he offers to take your money today and give you back a little more tomorrow?
What is your complaint against banks as such? Except for the failure in 2008-the fault here, I believe, is not that in the banks as a whole, but rather in the people themselves and in the fact that we all want to somehow earn a comfortable eldery and no more.
you don't go saving every homeless person from a thunderstorm when it starts. You are sitting in your own house/apartment with a cup of tea, do you?

Well that would be very obvious, nobody like getting lock down, nobody like getting pandemics, nobody like getting their food bill skyrocketing through the roof like nothing else (over 1,000,000% inflation rate), nobody like living a life that will constantly need to compete who has faster monetary velocity, nobody like to living on the hood that hey have a heavy loan just after leaving school this monetary system rarely reward the provider aka it punish the person who contribute to the world by being selfless, this system reward the crooked financial people, many university is under funded, many professor who invent great tech are under funded all of them need to living on extreme frugal yet need to make change to this ever rotten corrupted financial system, you can have plenty to hate on this system, how am I doing fare, good but I’m not doing great as before pandemics, because I’m always compete outsmart the system, for many of the people around me they’re not so fortunate, but would you want to help them? :)

So you want to destroy the economy as such simply because it is built on competition and movement? And what do you suggest? Give everyone money just like that and make products, training, all communications and many other basic things free? Or what is your suggestion? All that you have described is a reason to think once again about your actions before you commit them. Yes, mistakes are often painful and you have to pay for them, but this does not mean that you need to stand for universal communism and lack of competition simply because you do not have money for education here and now or because you can not buy yourself a marbled beef because you work at McDonald's.

The banking model is like this:

Banks collect money from the individual, small business, large corporations and rotate the same money into the market when they loan it. It's not just that small banks get money from the central banks but actually money flow is from the savings account.

Bank charge from 6% to 13% in different range depending on for what purpose the loan has been taken. For example, personal loan is as high as 13.5% while home loan could be 8-10%.

Moreover, bank has to give % interest to every savings account which is around 4-5% based on age of the person. Where seniors get highest range and other group gets 4.5% interest on their savings.

So this is the money they use for loans.

Bank gets the profit from the difference of this rate and loan rate.

Banks are charging fees in your country and not giving any interest in deposits because they want/are encouraging their people to not save money in bank and start investing those money in the economy. This in turn gives the economy a boost. These are the monetary policies that are applied by the government if they sees that the future of the economy is going be bad. Helps avoid recession.

My prediction 16 years ago all come true
16 years ago I predict:
Interest rate would goes all the way down until zero bingo
USD would forever the king currency bingo
Stock market is long dead bingo
QE won’t stop forever bingo
Market crash in 2008, next would be 10 years later cycle in 2018, they managed to delay to 2019 bingo
And my belief still hold true even today

The next prediction I made:

Investment result is not an accident, they had rigged well who is winner who is loser and completely rigged, it defeat the purpose of investing completely, it’s not even a gamble anymore, but outright a rigged outcome. Winner: vaccine producer, weapon maker, food chain.

The bank are the offender, we are the defender, they launch the wars on us, not the other way around, we don’t destroy bank, the bank destroy us, and they would continue to destroy us forever

The government destroy the stock market, they can’t wait and watch the gun sales collapse, hence they spread FUD and rattle the stock market to the point the market is completely dead, only the weaponry business could survived.

Conspiracy theory is 100% correct, and government would continue to censor them and call it fake news.

What about the next 10 years will it be the same? How do you protect yourselves?

Also my insight on don’t get a job don’t invest don’t use bank don’t do anything at all, I would never change that too, they’re all pretty accurate even after ten years later.

All the prediction above I had strong belief it wouldn’t change for the next 100 to 1000 years.

That’s all my suggestions, it’s very clear.