Fractional Reserve Banking Questions

Torakx

I think you are talking about the multiplier when i am suprised we have one in the first place.
It still looks to me like for the most part the banks are creating by way of expansion most of the excess money in the system.
So we are basically giving the banks control of the large portion of the monetary system.
What is proposed in the documentary is that the government issue the money with no debt attached there by having 0 inflation.
Then when the money is paid back it is dissolved keeping the system free of self perpetuating debt.
They point out the gold standard simply keeps control of the money flow with those who own the gold and stated that any currency based of a resource will eventually be susceptable to tampering due to the issue of control of the money.
At least if government werent in debt to an outside party for the simple use of money and were able to print their own countries money free of interest they could then switch their loyalties and policies to the people who vote them in instead of the people who control the money.
This is the basic idea with the documentary i posted and i dont do it justice with my explanation.
I personally dont know exactly how that system would work,i presume it would be a gradual replacement of the current money within a small state and slowly expand the currency to suit the amount of goods needed to be traded etc.
Just control of money would be changed to the government instead of an outside party with no loyalties to state and country.
I do hope you guys watch it at some stage.Sometimes its good to question the status quo even if its just to appreciate why we have it in the first place.

andrew

But why would you want the government entirely in control of the money supply, what with the potential for short sighted ministers to use it for political gain and damage the economy. Remember the pressure on the government during the housing boom to remove stamp duty? Imagine the pressure that would've been on them to create more liquidity or something; there's huge potential for political abuse of the monetary system.

Torakx

andrew wrote: »

But why would you want the government entirely in control of the money supply, what with the potential for short sighted ministers to use it for political gain and damage the economy. Remember the pressure on the government during the housing boom to remove stamp duty? Imagine the pressure that would've been on them to create more liquidity or something; there's huge potential for political abuse of the monetary system.

Well im am the last person here to trust the government.
I have seen that with the current system allegiance to the controllers of money is not good when that allegiance possess the government too.
But when the government have a parliament or congress of some type to issue the currency without interest.There is no permanent expansion of money,there wouldnt be more debt than available money because of lack of this interest.
The parliament would then owe allegiance to those who vote them in aka the people of that country.
I agree its not a 100% solution for the whole economy but that is just the basic idea like we have the basic idea of the current system.There is more to both and i think both need to be explored openly and without bias.

Oak3

Économiste Monétaire wrote: »

What you define to be "twaddle."

For example;

Banks don't print currency...

Yes they do. Ireland's Central Bank printed €20 notes in recent times. The ECB prints banknotes.

They take on short-term liabilities and give these deposits a return by issuing long-term loans.

My understanding of the meaning of the word currency extends beyond cash and includes other types of currency. Long-term loans are currency which can be traded as we have found out to our detriment. CDO's being a case in point;

Um, what? We don't have a banking system dominated by one firm.

I reckon the ECB qualifies. Beyond that the IMF, signatories to which extends to 186 countries. Pretty damn monopolous.

He's correct, actually. The sum of time required of individual Joe-Soap lenders to scrutinise potential borrowers > that of a bank. Specialisation: an age-old concept.

A Joe-Soap lender might lend to you on the basis that your shoes are clean. Therefore the sum of time required to scrutinise potential borrowers may well be far < that of a bank.

3. They minimise the cost of monitoring borrowers: because it'd be costly for you to keep an eye on everyone to whom you lend money.

My point is that this statement is not sufficiently accurate to describe a reason why we have banks in the first place. We can borrow from Mutual Funds, Credit Unions and so on as well.

He's talking about diversification of idiosyncratic risk, not market risk. His point is entirely correct and makes no reference to banks sharing risk.

Granted, point taken.

andrew wrote: »

Have you ever read an economics text book?

Yes.

No, banks don't always issue currency. Loans don't always come in the form of currency; it's not like people go in looking for a loan and walk out with a suitcase full of cash ready to spend. Money is lent for specific things usually, like cars, or capital, and doesn't become currency.

My understanding of the meaning of the word currency extends beyond cash, or printed banknotes and includes other types of currency. Cleary you believe things like cars and capital are not currency. This is exactly the overall point I'm trying to make.

No. Who do you think is going to charge more interest; the loan shark who lends 500, from a reserve base of thousands, or a bank who lends 500 from a reserve base of millions? The bank. As a proportion of it's total reserves, the loan shark's loans are greater, and so to compensate for the greater risk they charge a higher interest rate.

Why should a loan shark be any less likely than a bank to lend €500 from a reserve base of millions, or for that matter to charge a lot less?

Hah, Tricky to find? Try impossible.

I'd say there are a great many people out there who borrow money from people who are not Banks, and more cheaply, and with a lot less red tape, all the time. To go back to a previous point, I'm just not sure it's an adequate reason to describe why banks exist in the first place.

Economies of scale. Which do you think is more efficient; lots of individuals loaning to each other, monitoring each other for default and payment, or a centralised system which lends out money and monitors people?

The former without a doubt. You believe a centralised system is more efficient than a more collective one? Open source software development is far more efficient than a single company developing that same software as a parallel. So one really has to look at the concepts and ideas one takes for granted, and more specifically the context in which it is held.

Any examples of the 'infinite' other ways of doing things? Or are you just assuming that there 'must' be, just, well, because.

Commodity trading, Resource trading, promissory note trading, bullion trading, a combination of any and all of the former ... for example. Banks and the fractional reserve just happen to be what we have, it doesn't mean it's the only or the most effective way of doing it. We just haven't developed another system to that degree. So it's a bit of a sweeping statement to be fair, particularly considering the human collateral damage that has ensued from it's most recent side effects.

Économiste Monétaire

Oak3 wrote: »

Yes they do. Ireland's Central Bank printed €20 notes in recent times. The ECB prints banknotes.

Err, commercial banks and central banks aren't the same thing. Commercial banks do not print money. The ECB itself doesn't print banknotes, by the way. If you believe so, what is the identification code on an Euro banknote ordered by the ECB? Bundesbank carries an X, the currency centre in Sandyford carries a T.

Oak3 wrote: »

My understanding of the meaning of the word currency extends beyond cash and includes other types of currency. Long-term loans are currency which can be traded as we have found out to our detriment. CDO's being a case in point;

Generally, currency means banknotes and coins that makes up part of the monetary base. If you're going to broaden the definition beyond what's used in economics, it's best to make that explicit.

Oak3 wrote: »

I reckon the ECB qualifies. Beyond that the IMF, signatories to which extends to 186 countries. Pretty damn monopolous.

Commercial banks, not in the issuance of currency. But you were comparing the ECB to a loan shark? IMF is a monopoly in what? Loans to broke Nations?

Oak3 wrote: »

A Joe-Soap lender might lend to you on the basis that your shoes are clean. Therefore the sum of time required to scrutinise potential borrowers may well be far < that of a bank.

Sum of time of Joe-Soap lenders.

Oak3 wrote: »

My point is that this statement is not sufficiently accurate to describe a reason why we have banks in the first place. We can borrow from Mutual Funds, Credit Unions and so on as well.

A mutual fund is hardly a perfect substitute for a commercial bank.

Oak3

Économiste Monétaire wrote: »

Err, commercial banks and central banks aren't the same thing. Commercial banks do not print money. The ECB itself doesn't print banknotes, by the way. If you believe so, what is the identification code on an Euro banknote ordered by the ECB? Bundesbank carries an X, the currency centre in Sandyford carries a T.

He didn't distinguish between either, he said Banks. And you can't print a banknote without permission from the ECB.

Generally, currency means banknotes and coins that makes up part of the monetary base. If you're going to broaden the definition beyond what's used in economics, it's best to make that explicit.

So generally diamonds for weapons is not economics then?

Commercial banks, not in the issuance of currency. But you were comparing the ECB to a loan shark? IMF is a monopoly in what? Loans to broke Nations?

Banks and banking are the monopoly.

Sum of time of Joe-Soap lenders.

You mentioned Joe-Soap lender, not me. And you mentioned the sum of time to scrutinise potential borrowers too.

A mutual fund is hardly a perfect substitute for a commercial bank.

I never said it was, but it could be.

Économiste Monétaire

Oak3 wrote: »

He didn't distinguish between either, he said Banks. And you can't print a banknote without permission from the ECB.

You said "[t]he ECB prints banknotes" after stating the same for the Irish CB. It doesn't. This point is on their web-page. The aggregate number of banknotes is decided by the Governing Council (ECB board + NCB governors), but the ECB does not print banknotes. 'Banks' usually refers to commercial banks, I've never heard someone refer to a central bank by using the general term.

"Legally, both the ECB and the central banks of the euro area countries have the right to issue euro banknotes. In practice, only the national central banks physically issue and withdraw euro banknotes (as well as coins). The ECB does not have a cash office and is not involved in any cash operations. As for euro coins, the legal issuers are the euro area countries. The European Commission coordinates all coin matters at euro area level. For further information, see the European Commission’s website.

The ECB is responsible for overseeing the activities of the national central banks (NCBs) and for initiating further harmonisation of cash services within the euro area, while the NCBs are responsible for the functioning of their national cash-distribution systems. The NCBs put banknotes and coins into circulation via the banking system and, to a lesser extent, via the retail trade. The ECB cannot perform these operations as it does not have its own technical departments (distribution units, banknote processing units, vaults, etc.)."

http://www.ecb.int/euro/intro/html/index.en.html#issuance

Oak3 wrote: »

So generally diamonds for weapons is not economics then?

So I can understand what you're referring to when you say 'currency'. Otherwise, we're talking about completely different things, and the discussion goes no-where.

Oak3 wrote: »

Banks and banking are the monopoly.

Banking is a monopoly of banking? I still don't see your point about the IMF.

Oak3 wrote: »

You mentioned Joe-Soap lender, not me. And you mentioned the sum of time to scrutinise potential borrowers too.

Lenders: plural. Many people looking to lend money and many potential borrowers. Banks agglomerate these two individual-level desires.

Oak3 wrote: »

I never said it was, but it could be.

Then they would no longer really be a mutual fund, they would be a commercial bank... I don't really see your point.

Time Magazine

Torakx wrote: »

They point out the gold standard simply keeps control of the money flow with those who own the gold and stated that any currency based of a resource will eventually be susceptable to tampering due to the issue of control of the money.

I like Paul.

Pixel8

Flamed Diving wrote: »

I can't predict the future. I don't think anyone can, tbh. At least not long-term predictions, anyway.

Ya haven't heard of Edgar Cayce then?

Pixel8

Économiste Monétaire wrote: »

If I thought there was a better system, I would be arguing for it. What I don't appreciate is how videos such as Zeitgeist put evil symbolism around the banking system, and talk about how lending your money is such a terrible deed—as if you weren't already aware of what they do. Then economists are portrayed as people who attempt to 'hide' this 'fact' from the public, as if we're in on the gag. Most economists are nerds. Massive nerds, in fact; look at some old pictures of Ben Bernanke. They're about as far away from financial-elite as one can be.

I'd be more interested to hear what you think of The Secret Of Oz which is a documentary all about the banking system, its (dark) history in America from the 1700's to the present day and how some American presidents fought with the private bankers over control of the money supply throughout history. The private bankers ended up killing a lot of people to retain control of the power to change the 'quantity' of money in the money supply.

Bill Still the presenter claims that whenever the government had taken back control of the quantity of money in the money supply the country would prosper because money was printed with no debt attached to it but when the bankers took back control of the quantity of money in the money supply, depressions and recessions would set in as a result of the bankers charging interest to the government on every dollar printed. This would basically make the rich (bankers) get richer and the poor get poorer, and is this not what we see today?

How is the American system described in Secret of Oz similar to the Irish situation is what i wanna know? A similarity here is that our government also issue bonds which the banks exchange for money at interest to the government, so do we give non-government controlled banks control of changing the quantity of our money supply and therefore the power to create recessions at will or does our government print its own money? If we print our own money, why do we have a national debt? Why would we need to borrow money if we could print our own? Who controls the quantity of money in the Irish money supply?

Something is seriously wrong here and i think its beginning to come to light, at last. Who stands to benefit most from a recession?

Buy Gold or Silver fast if you have any savings left.

Pixel8

Économiste Monétaire wrote: »

IMF is a monopoly in what? Loans to broke Nations?

Just curious, have you read the book Confessions Of An Economic Hit Man by John Perkins? Great read, eye opening book on how America really took over the world with the help of the IMF and the corrupting of presidents of various countries, if you couldn't be corrupted, you were taken out.

Flamed Diving

Note that this forum falls under the category 'science', not for conspiracy theories.

Hasschu

Robin Wells and Paul Krugman wrote an article titled Our Giant Banking Crisis - What to Expect in the New York Review of Books. An excellent article that puts things in perspective by reviewing three books dealing with the crisis.

http://www.nybooks.com/articles/archives/2010/may/13/our-giant-banking-crisis/

Économiste Monétaire

Pixel8 wrote: »

I'd be more interested to hear what you think of The Secret Of Oz which is a documentary all about the banking system, its (dark) history in America from the 1700's to the present day and how some American presidents fought with the private bankers over control of the money supply throughout history. The private bankers ended up killing a lot of people to retain control of the power to change the 'quantity' of money in the money supply.

Bill Still the presenter claims that whenever the government had taken back control of the quantity of money in the money supply the country would prosper because money was printed with no debt attached to it but when the bankers took back control of the quantity of money in the money supply, depressions and recessions would set in as a result of the bankers charging interest to the government on every dollar printed. This would basically make the rich (bankers) get richer and the poor get poorer, and is this not what we see today?

How is the American system described in Secret of Oz similar to the Irish situation is what i wanna know? A similarity here is that our government also issue bonds which the banks exchange for money at interest to the government, so do we give non-government controlled banks control of changing the quantity of our money supply and therefore the power to create recessions at will or does our government print its own money? If we print our own money, why do we have a national debt? Why would we need to borrow money if we could print our own? Who controls the quantity of money in the Irish money supply?

Something is seriously wrong here and i think its beginning to come to light, at last. Who stands to benefit most from a recession?

Buy Gold or Silver fast if you have any savings left.

I won't be watching it because I have other, better things to do with my time. If someone wants to watch it and provide a running commentary for you, then I'll let them answer.

Pixel8 wrote: »

Just curious, have you read the book Confessions Of An Economic Hit Man by John Perkins? Great read, eye opening book on how America really took over the world with the help of the IMF and the corrupting of presidents of various countries, if you couldn't be corrupted, you were taken out.

I have read Perkins' book and it was a good read. Just like Harry Potter is a good read.

BESman

Truthrevolution wrote: »

Just out of interest when do you reckon will be the next financial crisis?

2:37pm, Thursday, 26th September, 2013.

Pixel8

Until the Federal Reserve is audited, i don't think any economist can claim to know about how the system *really* operates. Ron Paul has been accusing the Fed of bailing out Greece and the Euro, wtf?:

http://www.youtube.com/results?search_query=ron+paul+greece+euro&aq=f

The Secret Of Oz has the only solution worth considering and i bet Ron Paul has watched it.

Économiste Monétaire has loads of time to post on boards.ie but doesnt have 2 hours to watch The Secret Of Oz? Mmm, cop out. If you're really an economist prove the Secret Of Oz wrong, thats what the OP originally asked. Nobody cares about what you think about the system which we were all brought up to believe in, its the Secret Of Oz that was being asked about so until you have seen that, your opinion is irrelevant and off the point. You do seem to know your stuff though and so it would be more helpful to everyone if you actually did watch it and give us a more informed opinion. No point in trying to guess what points are being made in Secret of Oz by what we're telling you, you HAVE to watch it yourself.

I cant stand it when people have opinions about stuff they haven't even researched themselves, and they're going on old outdated information. The Secret Of Oz is being brought to everyones attention because it challenges what we thought we knew, including you ÉM. Bill Still obviously knows something that you don't know yourself and most of us didn't know either.

And thanks to the OP for investigating this further, after seeing the Secret Of Oz myself im as interested in this investigation as the OP is and im sure anyone that has seen it or will see it will want to know more too. Things are not as we thought they were...

Translate that video into a paper and I'll read it.

This is the way that serious, credible ideas are spread in both academic and professional economic environments.

Its the same as the way that I'll ignore some nutter on the side of the street claiming that he knows the secret of the holy grail, but I'll to go a debate on the manner. If you want to be taken seriously in economics, you present the information in a professional, well researched paper. If you won't take the time to do that, I won't take the time to listen to you.

BESman

What is the argument in this thread?

I can't make any logical sense of it which means it must really be complete ring talk.

Flamed Diving

I think the OP wanted an explanation of the fractional reserve system.

No argument.

Économiste Monétaire

Pixel8 wrote: »

Until the Federal Reserve is audited, i don't think any economist can claim to know about how the system *really* operates. Ron Paul has been accusing the Fed of bailing out Greece and the Euro, wtf?:

http://www.youtube.com/results?search_query=ron+paul+greece+euro&aq=f

The Secret Of Oz has the only solution worth considering and i bet Ron Paul has watched it.

Économiste Monétaire has loads of time to post on boards.ie but doesnt have 2 hours to watch The Secret Of Oz? Mmm, cop out. If you're really an economist prove the Secret Of Oz wrong, thats what the OP originally asked. Nobody cares about what you think about the system which we were all brought up to believe in, its the Secret Of Oz that was being asked about so until you have seen that, your opinion is irrelevant and off the point. You do seem to know your stuff though and so it would be more helpful to everyone if you actually did watch it and give us a more informed opinion. No point in trying to guess what points are being made in Secret of Oz by what we're telling you, you HAVE to watch it yourself.

I cant stand it when people have opinions about stuff they haven't even researched themselves, and they're going on old outdated information. The Secret Of Oz is being brought to everyones attention because it challenges what we thought we knew, including you ÉM. Bill Still obviously knows something that you don't know yourself and most of us didn't know either.

And thanks to the OP for investigating this further, after seeing the Secret Of Oz myself im as interested in this investigation as the OP is and im sure anyone that has seen it or will see it will want to know more too. Things are not as we thought they were...

First, the Fed is audited every year. Its accounts are on the Fed website. Second, the OP never referenced 'The Secret of Oz' in their first post, it doesn't appear on the first page even, so that wasn't what "the OP originally asked."

FYI, school-yard goading doesn't work on me , I have no intention of watching that.

BESman

Économiste Monétaire wrote: »

Just like Harry Potter is a good read.

How can we ever trust ÉM again?

Soil Mechanic

Forgive me for the over simplification.........
http://video.google.co.uk/videoplay?docid=-2550156453790090544#

the relevant website...
http://www.moneyasdebt.net/


Was just wondering what academic/professional economists made of the video conclusions, particularly with regard to the exploration of possible alternatives?
Surely as a thought experiment it is interesting, if nothing else?
Has there been serious economic only analysis of those alternative proposals NB. in isolation of political/ideaological viewpoints?

Thanks for yoru time folks, very interesting thread.

Cheers,
SM

Flamed Diving

I do not have time to watch these videos, sorry.

Pixel8

Économiste Monétaire wrote: »

First, the Fed is audited every year. Its accounts are on the Fed website. Second, the OP never referenced 'The Secret of Oz' in their first post, it doesn't appear on the first page even, so that wasn't what "the OP originally asked."

FYI, school-yard goading doesn't work on me , I have no intention of watching that.

Why is Ron Paul trying to introduce an "Audit The Fed" bill then? Im sure that pdf file you posted has everything we need to know about the Federal Reserve except who they are transferring money to internationally through the IMF, World Bank and other organisations, who they are bailing out with over 1 trillion dollars in Europe and trillions more to American banks and Corporations. If all countries have a National Debt then who is bailing out all these countries? They are not disclosing this information and his Audit The Fed bill is being blocked by the Senate in the U.S.

But its not just the Federal Reserve that is being targeted here, its ALL central banks around the world, they are all privately owned and connected somehow, lending money to governments at interest. Is this or is this not true? Im not sure if it is but im dying to find out and the Secret Of Oz definitely raises a lot of questions which you all need to see because this is info you definitely have not heard before, none of us have heard this before. The OP is definitely talking about Secret Of Oz, he raised this point in another thread and i watched it and im amazed by it too! I just want to know what the truth is about these systems, as im sure we all do.

Is this statement true? "All governments are actually corporations trading for profit" ? I was in at the bank protest the other day and got a flyer with the name Tír Na Saor on it making that statement, im seeing similar info in a lot of different places lately. This Moroccan dude called Taj Tarik Bey talks about the drivers licenses fraud but has a lot of other interesting info about law and government, comes in 15 parts, here's the first:

Governments and Banks are enslaving us and we're letting them.

Torakx

Interesting talk he gave there.It isnt anything new but he did add some more details over what i have read up on so far.
Governments are corporations afaik.John Harris does some great talks on lawfull rebellion,human rights and the legal world of ctracting yourself by mistake.Google video has a goodone of him and you will learn so much about the legal system here in ireland using his explanations of how the british system works.
My main quest here is to find the exact policies or agreements that controls banks spending and loaning.I understand how the fractional reserve works to a fair extent but that still does not prevent banks lending/borrowing each other money or from other sources from what i see,leading back to the practise or ability to expand the currency at interest on top of more interest from the ECB or whoever that goes to i would imagine supposedly the printers,although i thought taxes would cover the printing of the currency we use.
It really looks like to me the banks are set up in a way that they can expand and contract the currency to take advantage of this knowing how the system really works.They only need to pay 2% or whatever is agreed to pay back on top of that.Another question is if the money is printed out of thin air and the people at the bottom of the "pyramid" have to cover that 2% arent we slowly just giving away our country to whoever is collecting that 2%?

andrew

I havn't watched any of those videos or anything, but I was just wondering what the people posting them thought about those recovery bonds (or whatever they're called) that have been set up. Do you think that they should exist, given that they pay interest to the people who buy them?

Torakx

I would be one of those who mentioned The Secret of OZ and really reccomend you watch it.Covers the history on money aswell and i even learned about tally sticks!
I dont want to drift too far off the the main reason for the thread but i think your question might be relevant if you mean those savings accounts the Irish gov did years ago during the "boom" where people saved for five years or so and got high interest back.If you mean those i would wonder also if the banks back then were able to take each deposit given them and apply the fractional reserve practise to this money and use the excess created from those high interest returning savings accounts to expand the currency more and help perpetuate a boom as people were calling it.
The banks lent out so much with credit cards and loans in those years its no wonder everyone had so much money.Those schemes im sure benefited the people also who had the savings but really those people by saving more money had imo helped create in a small way the situation we are in now albeit unkowingly i would think.
I dont keep any money in my bank account anymore.I see now the more i save(with a bank) the more the bank is able to create.
I hope someone can show me how exactly the bank is prevented from doing this.I dont see how the fractional reserve practice or the interest gained back from it by the ECB or whoever that goes to again as enough of a control mechanism for this current system of currency managment.If i missed it or didnt understand please someone refer me back to a previous post.

I could be wrong Andrew about that question you asked,did you mean this nama thing thats going on with the bank bailouts?
Ok i should have done this before i posted but turns out i was spot on the first time
I just googled irish bonds and got this http://www.realirishpolitics.org/home/16-economy-/794-irish-recovery-bond

That sounds exactly like i was just talking about and i think will create alot more money as the more people give the bank the more the bank can lend out(see first few posts for fractional reserve numbers roughly done) and a mini boom will occur most likely with the banks lowering interest on new loans or some kind of super bonus special loans....actually like those bonds haha and inflate the currency.Dont know if thats enough to get the money flowing again in this country but it might help lift the seemingly uncontrollable mysterious entity known as the "economy".

When i see those bonds offered all i see at the moment is the banks saying "Hey can you lend us some money at 5%+ a bonus so we can turn it into way way more and lend it out and make an even bigger profit?"
Thats fair enough thats how the banking system works they perform a service and we pay them very well for it through % interest per loan.

I am curious about some things related to this myself.Firstly i think the Irish in general did do alot of stupid things and fell into the trap of borrowing too much at too high interest.
Now while i blame the people who were ignorantly borrowing(loans credit card type things) i also must ask if we elect a government to represent our needs, is covering the banks as when the ignorant citizens are being taken advantage of a good practise to be having?
Why do we have a recession in the first place?
As i understand it there isnt enough money in circulation.The currency has been contracted or else it would be out there on the streets keeping the "economy" monster moving forward or at least more active.Somebody at the top of the pyramid has called in the interest owed.The money must come back then as i see it from circulation or resources leaving people having to close/sell houses businesses or lose them outright.

This money coming back also has in alot of cases interest owed.Where is this interest expected to be generated by the general population?I guess they have to compete with each other and the loser loses his/her house or bussiness or just ends up running from debt collecters.Wheres the NAMA for all those people who did what the banks did by borrowing too much money and not being able to pay the interest or the money so fast.
After all we are the ones the bank and the ECB etc etc rely on to keep this system running.If we stopped using the banks they would not be able to expand money and make so much profit.
If we bail out the banks we are basically covering their ass for bloating the currency and throwing money onto the streets and then not being able to get it back or just plain losing it in overseas give away deals.
It looks like the Irish people are covering the banks debt and we individually on top of that have to cover our own private debts to the same people the banks do if they are not one and the same.

andrew

Firstly, I don't think you fully understand the process by which money is created, since you seem to think that the recovery bond will somehow increase the money supply. Secondly, the reason I asked is because some people (not necessarily you) have expressed the sentiment that the banks shouldn't profit from lending the government money by charging interest on it. When someone lends the government money, be it a bank or an individual, they buy government bonds. I asked about the individual, because I think most people can see that if an individual buys a government bond (ie. lend the government money) then it's only fair that they get interest on the money they lend. Similarly, if a bank lends the government money, then it's completely fair that they get interest on the money they lend.

Torakx

Thanks for clearing that up.How does this bond work exactly?
I am thinking the government have a bank that handles these bonds.Or where does the money go from the persons paying into them?

My main query is around the fractional reserve which the banks are held to.
Do these government bonds come into contact with this fractional reserve rule through any stage of its transfers?I suppopse i mean does the money at any stage get deposited in a bank.This would effect the amount of money the banks can lend out.The more they can get in the door the more they can lend out because of the fractional reserve practise.This i am thinking would have the effect if on a national scale so as to cause a boom with more money,more finance for new bussinesses etc.

Time Magazine

Torakx and Pixel8, not to be rude or condescending here, but neither of you have much of a clue what you're talking about.

You've admitted this yourselves. Torakx, you asked "How does this [Irish government] bond work exactly?" Pixel8, you've asked "If we print our own money, why do we have a national debt?" and claimed that "ALL central banks around the world [...] are all privately owned and connected somehow, lending money to governments at interest."

Pixel8, when you don't understand the difference between fiscal and monetary policy, who are you to claim that all central banks are privately owned? Here's a hint: our Central Bank was founded by the Oireachtas in 1943, and the foundation of the European Central Bank was passed by a referendum in 1997. Can you find me any verifiable reference anywhere that says our Central Bank lends money to the government at interest? (Here's another hint: If the Central Bank is controlled by the government, how could it lend itself money and why would it charge itself interest?)

Torakx, if you don't understand the basics of bond markets, why are you coming up with conspiracy theories about the SSIAs?

If you guys don't really have a grasp of this complicated subject, who are you to have decided that Nama is a bad idea; who are you to suggest we "Buy Gold or Silver fast if you have any savings left", or to tell us (us, those that are answering your questions) that we would learn from watching the Secret of Oz?

Again, I'm not trying to be rude here but rather I'm being a bit more up-front about it: When you haven't taken our advice to go read a book on monetary economics first, why should we spend time talking?

Put a little bit more bluntly: If you were a biologist, how long would you spend talking to a creationist?