The truth is out: money is just an IOU, and the banks are rolling in it

[nordah]

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.

[Rygon]

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.

[600watt]

nice first post. welcome.

[solarflare]

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.

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.

[FeedbackLoop]

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.

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.

[sgbett]

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.

[murraypaul]

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

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

[600watt]

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

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

yes, it will read:


WE ARE FUCKED

 

[knightcoin]

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

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

yes, it will read:


WE ARE FUCKED

 

true ... or ..

[FeedbackLoop]

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

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

yes, it will read:


WE ARE FUCKED

 

true ... or ..

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

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

[superresistant]

I want the shitstorm now.

Buy Bitcoins or die miserably.

[spiderbrain]

Nice post, welcome to the monkey house.

[sgbett]

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

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

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....

BANK B*STARDS BUSTED!!!

Today an expert from the Bank of England came out to reveal the shocking truth. Banks have for years been loaning out money they don't have, and have been INVENTING it to make profits!

The expert claims that in some cases banks have lent out TEN TIMES as much money as they actually have. That means only one in ten Sun readers actually has real money in their account! The other nine of you might not have any, it's pot luck! He also said the government have known the banks can just invent money for years, but have instead been looking to the tax payer to fund their party political parties!

... more hyberbole, loose implication of foreigners, righteous indignation, we are all in it together, finishing with a 'call to action' ...

Have you got any money in the Bank? Why not take part in our "readers run" and really stick it to the bankers! OO-ER.

[TERA]

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.

[MatTheCat]

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.

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.

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.

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.

[sidhujag]

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

[Ibian]

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.

[sidhujag]

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

[billyjoeallen]

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.

[600watt]

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.