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Anorak | Finding Complete Bollocks In The Guardian: Banking Balls

Finding Complete Bollocks In The Guardian: Banking Balls

by | 4th, November 2011

NO, no, I know, it’s not a total surprise is it, finding something in The Guardian which is simply complete, total and utter bollocks. And yes, it’s in the comments section but it is still important. Important both for who said it and for who believes it .

Of course banks handle deposits, but as anyone who has reviewed rates available to depositors for the last few years will know just how contemptuous banks have been of those who wish to use their services for this purpose. There is good reason for that: banks do not (and never have) needed depositors for enable them to make loans. The simple fact is that the money banks lend is created by them out of thin air. It’s offensively easy for them to do so. All that happens when someone asks for a loan is to credit a current account with the amount of the loan and debit a loan account with the same sum. That’s it: that is how 97% of all money in the UK is created, but as is clear, deposits play no part in that process. Instead banks literally create the cash they lend and can get away with this trick so long as people think they’re good for their promise to pay which they will be so long as, as is now the case, the government clearly considers them too big to fail and explicitly and implicitly guarantees all they do. The insult to the injury is that having made this cash out of thin air they then charge heavily for it vastly more than they pay for deposits. No wonder an organisation that can costlessly create what it sells is so profitable.

Bob Diamond acknowledges none of this, and the fact that much of the profit he and his colleagues supposedly generate is effectively licenced to them by the fact that the government has failed to claim for itself the right to he profit made on the creation of money; money which only the state can legitimise, but which banks have claimed for thei own benefit and which they have used to speculate at considerable social cost to society at large, as Adair Turner and others have noted.

Now I’m afraid to have to tell you that this is indeed complete bollocks. Think it through for a moment, using the example of Northern Rock. They went bust, didn’t they? They went bust because people were lining

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Posted: 4th, November 2011 | In: Money Comments (5) | Follow the Comments on our RSS feed: RSS 2.0 | TrackBack | Permalink