

Money has been privatised by stealth (2011) - seanhandley
http://www.theguardian.com/commentisfree/2011/nov/15/money-privatised-stealth

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chrisbennet
This seems to be much a do about nothing.

Suppose you borrow money from a bank. The bank could:

A. Use mortgages/IOUs instead of cash so the next borrower who wants to borrow
is given IOU's (from various people) instead of cash. Assuming the person
selling the house agrees, the buyer trades these IOU's to the seller for the
house. "I'll give you 2 IOU's that I got from my bank (1 from Bob and 1 from
Sally) totaling $200K for your house."

OR B. The bank uses some mechanism to convert those IOU's to cash and assumes
the risk that Bob and Sally might not pay their debts.

The bank agrees to guarantee/take responsibility for the IOU's it received i.e
covers the risk that the IOU will go bad and gives the next borrower cash
instead. The banks is being compensated for assuming that risk by charging
interest.

Am I missing something?

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nodata
> When you ask the bank for the money to buy a one-bedroom box in London, the
> money that appears in your account isn't borrowed from some prudent
> grandmother's life savings. In fact, the bank simply types those numbers
> into your account, creating brand new money that you can now spend.

Erm what?

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seanhandley
Yes. Banks bring money into existence in the form of debt by loaning it to
people. It seems massively immoral to me that they charge interest on
something that literally costs them nothing to bring into existence.

~~~
nodata
Is there a limit on how much money they can create? Can I start my own bank?

~~~
kls
1) Yes there is, that is why it is called fractional reserve, they are allowed
to expand the money supply based on a fraction of the reserve deposits they
take in. This number is set by the FED in the case of the US.

2) Yes you can with the proper licensing and certifications. It's not as easy
as hoping on down to the division of banking and picking up your license,
there are some pretty stringent requirements, it's not cheap to start a bank.

