Money From Thin Air - at the root of credit crunch

[kbo234]

A short article I missed that was published in March by Guardian Online but did not (unsurprisingly) appear in the printed editions. James Robertson is an alternative money systems 'guru'.

See
www.jamesrobertson.com


Money from thin air

High street banks issue money in the form of loans. Could this be the root cause of the credit crunch?


* James Robertson
* guardian.co.uk,
* Thursday March 20, 2008

Northern Rock has been nationalised. A report by the Commons treasury select committee on how various government institutions failed has meant little to anyone except insiders. The government is canvassing complicated proposals to increase banks' compensation to depositors whose money they lose in future. And a distinctive feature of the budget was its 23 motherhood-and-apple-pie references to "financial stability".

Meanwhile, the global credit crunch is spreading and deepening. Complicated calculations suggest that the billions of dollars, euros and pounds already "lost" by banks are turning into trillions, but even the banks themselves don't know how much it really is.

What we do know is that, once again, governments' failure to control the greed of bankers is creating financial disaster for many innocent people; and that, once again, officialdom has failed to ask the basic questions about why this has happened, and to give answers in words that normal citizens can understand.

At the heart of the matter is the fact that commercial banks are allowed to create almost all the money we use. They create it out of thin air and put it into circulation in the form of profit-making loans. They credit those to their customers' accounts by a simple accounting procedure, and their customers spend the money into circulation.

This bank-account money is the money that all of us, people and organisations alike, have in our bank accounts. It is held in electronic form in bank computers. It is far and away the largest part of the money supply. The rest, less than 5% in this country, is "cash". This is issued by agencies of the state in the form of paper banknotes by the Bank of England and metal coins by the Royal Mint.

The key question is this: did the banks' privilege of creating bank-account money to lend to one another play a significant part in fuelling the credit bonanza, subprime market and financial boom that bust, leaving such a tangle of international interbank indebtedness that central banks and other authorities like the Financial Services Agency could not assess the potential consequences if it unravelled?

The answer, of course, is yes. But supposedly democratic parliaments, governments and monetary and financial authorities avoid explaining points like that to citizens in understandable words. Secrecy and deception about how the money system works, why it works as it does, and whether there might be a clear and simple way in which its workings could be reformed in the public interest, undoubtedly contributes to disillusionment with democratic politics and government.

Monetary reform would not be complicated. At present the Bank can only try to influence how much new money the banks create, by regulating interest rates. Monetary reform would make the central bank responsible for creating required additions to the money supply. We would simply be following the example of our 19th century predecessors, who recognised that banknotes were no longer just the "credit" notes they had once been, but had become money accepted by everyone for making payments. So they transferred from other banks to the Bank of England the function of issuing them. Similarly, everyone knows today that bank-account money has become real money, and is no longer just something called "credit".

Transferring the function of issuing bank-account money to the central bank would deprive the commercial banks of a nice little earner, and reduce the power they exercise over the economy and society as a whole. They would fight against it - no holds barred. That is a scary prospect for most practising politicians, government officials, City lawyers, economic academics and commentators, as well as bankers themselves and others professionally connected with money and banking. Until they see the "risk-to-reward ratio" for career survival and success shifting in favour of taking monetary reform seriously, they will keep their heads below the parapet.

So the challenge is for independent citizens outside the mainstream political, economic, and financial complex to start shifting that ratio from outside. We should begin by pressing the chancellor and others responsible for managing our money system to tell us, in words we will understand:

• Where did the billions of money come from which fuelled the credit bonanza, subprime market and associated financial boom?

• Broadly what proportion of that money was created out of thin air by commercial banks as loans to one another to invest in risky packages of already existing debts?

• Did their ability to create it for that purpose make it more difficult for the authorities to assess the potential consequences of the tangle of international interbank indebtedness when it threatened to unravel?

• Who are the people who have actually suffered from the banks having "lost" billions of pounds and dollars?

• Where have those billions gone? Where are they now? Who got them, and what have they done with them? Have they "been laughing all the way to a bank" with them? Is their bank quietly laughing too?

• Or have the lost billions simply disappeared into the thin air from which bankers originally created them?

• If so, during their return journey from and then back into thin air, roughly what proportion of them will have enriched the bankers and other financial operators who handled them on the way?

[blackcat]

[acrobat74]

[simplesimon]

I've noticed over the last 12 months or so that "they" are giving the sheeple a glimpse of this truth, that banksters create money from thin air.

Examples:

* Religious discussion programme on R4 about a year ago, Presenter, Christian, Muslim and Jew discussing things, including usury. The Muslim was allowed to quickly say it outright "create money from nothing", though not to expand on it of course.

* You & Yours phone-in, R4 about 3 months ago about the "credit crunch". A caller began by saying something like "The problem is that all money is created as debt...". The guest expert butted in and said something like "Well, it would take about an hour to explain (chuckles all round in the studio) the real issue is...."

* R4 Six o'clock news, (IIRC) about 2 months ago - financial correspondent said something like "... for every 1 dollar the banks holdings go down, the amount they are allowed to loan out goes down by 10 dollars...". Sadly, I reckon only 1 in a 100 people would stop and think "hang on - so does that work the other way round? - but anyway "they" appear to be letting the "secret" out "officially".

Those are just the examples I can clearly remember - I don't consume much media these days, not wanting my mind bent.

Now we have this article. (thanks kbo234 - interesting find) Seems to me the writer doesn't give readers the full skinny. The writer looks like a globalist, albeit one who tells you that it could be "people centred" which is saying "people-driven" - as though ordinary people have any choice or power whatsoever.

Now, it would be easy to think that, basically because of the internet, more and more people are finding out about money from thin air, and "they" want the sheeple to gradually absorb the knowledge, so as to diffuse the bomb before it goes off, so to speak. They might for example package any glimpse of the truth with vague notions of "well, it sort of has to be that way... economics... complicated... don't worry your little head...".

{Aside: I recently asked, and no-one answered, if folks had noticed that only one poster defends the banking scam. Must be just me who noticed that.}

But - hang on - I remember reading SOMETHING, somehere - about some kind of plan for world domination. It was IIRC written over 100 years ago. It had all kinds of stuff about how the banking scam would be used to gain power and control - and stuff about how society would develop - or breakdown, over the 20th Century - whoever wrote it seemed to be very well versed in economics, "good with money", you might say. I JUST CAN'T REMEMBER WHAT THE DOCUMENT WAS CALLED.

But what worries me is, despite just not remembering what the document was called, I'm sure it said something about, WHEN THE PLAN WAS FULFILLED, THE BANKING SCAM WOULD END, and only corporations would be permitted to charge interest, but on real money only. Or something like that.

Has anyone else seen anything like this?

[blackcat]

[acrobat74]

[kbo234]

[Alexander]

More on Money Out of Thin Air here..
http://www.chrismartenson.com/what_is_money

[fish5133]

Suppose somehow this could be leading towards a greater form of cashless society and those without the "mark of the beast" (whatever that may be) will not be able to buy or sell.
I suppose another concept, which i havent really put much thought to is the idea of "value". Everything has some level of "value" for us. Basic needs (food, water,shelter, etc) actually carry more "value" than say a big Porsche. The real value of money only happens when it becomes the only means of obtaining our needs less so our "wants" (e.g. luxuries).

[simplesimon]

fish5133 wrote:

[kbo234]

[acrobat74]

[acrobat74]

So what happens when central banks 'inject liquidity in the financial system', e.g. to prevent some investment bank from failing?

http://www.guardian.co.uk/business/2008/jul/15/inflation


Jim Rogers on Fannie and Freddie:

http://www.youtube.com/watch?v=rcIBFLSmVGA

http://www.youtube.com/watch?v=vWa9AfkjwoY


John Maynard Keynes
The Economic Consequences of the Peace (1919)
http://www.lewrockwell.com/orig3/hein6.html

[blackcat]

http://www.richardccook.com/articles.php

http://www.globalresearch.ca/index.php?context=viewArticle&code=COO200 70511&articleId=5615