tag:blogger.com,1999:blog-7530776363222965313.post1526160958307645096..comments2023-10-07T13:16:34.756+02:00Comments on Simon Thorpe's Ideas on the Economy: Michael Rowbotham : The Grip of DeathSimon Thorpehttp://www.blogger.com/profile/02605233720415886802noreply@blogger.comBlogger6125tag:blogger.com,1999:blog-7530776363222965313.post-45581794811315936302013-03-19T07:44:47.569+01:002013-03-19T07:44:47.569+01:00My thanks to Peter for looking into this. It may i...My thanks to Peter for looking into this. It may indeed be the case that the difference between central bank money and credit money is critical. <br /><br /><br /><br />However, I note that the recent news about Barclays lending billions to the Qatar Investment Authority who then used the money to buy shares in Barclays sounds pretty much like a way for banks to keep the money they create. See my piece about how to solve the UK's national debt problem in five easy stages to see how the insanity of commercial bank money creation could potentially be abused.<br /><br /><br />SimonSimon Thorpehttps://www.blogger.com/profile/02605233720415886802noreply@blogger.comtag:blogger.com,1999:blog-7530776363222965313.post-88212947039212930672013-03-19T01:31:10.074+01:002013-03-19T01:31:10.074+01:00Hi Mira, I looked into this and found that his sta...Hi Mira, I looked into this and found that his statement isn't incorrect, it's just not clearly worded. He is referring to central bank money, rather than credit money, when he says "money" is not destroyed. In order to repay a loan, a transfer of central bank money occurs between banks when the borrower earns money to make loan payments. So a bank receives central bank money when a loan is repaid - This central bank money is not destroyed and is held as an asset of the bank...Simon Thorpehttps://www.blogger.com/profile/02605233720415886802noreply@blogger.comtag:blogger.com,1999:blog-7530776363222965313.post-80530320917944320512013-03-18T08:26:28.400+01:002013-03-18T08:26:28.400+01:00The book is great as an eye-opener, but that parti...The book is great as an eye-opener, but that particular statement is incorrect. The money gets destroyed when it's repaid. Positive Money has released a new video explaining this: http://www.positivemoney.org/2013/03/how-money-gets-destroyed-new-video/Simon Thorpehttps://www.blogger.com/profile/02605233720415886802noreply@blogger.comtag:blogger.com,1999:blog-7530776363222965313.post-50770275345480429442013-03-17T15:39:57.866+01:002013-03-17T15:39:57.866+01:00Hi Simon, I read your post with interest and was e...Hi Simon, I read your post with interest and was equally surprised at Rowbotham's statements. I've done some research and have been able to clarify the situation, I thought you'd want to know! I think the confusion here is regarding the different types of "money", namely central bank money and current account (credit) money. When a loan is repaid, credit money does indeed disappear in a puff of smoke. But the central bank money which is transferred when the debtor receives money to pay off the loan is not destroyed. Central bank money is constant within the banking system, unless the central bank decides to create more (QE). It is not destroyed. I think the final paragraph you quote implies that if one bank was making all of the loans, then it would end up sucking in all of the central bank money as the loans were repaid (as central bank transfers from other banks). However, if other banks make loans, or customers of other banks receive their loan to a current account, then central bank money is transferred out of the first bank. So we need to view the banks as one connected system, all using central bank money. This video will make it clear - http://www.youtube.com/watch?feature=player_embedded&v=JCuMAoHpM_4. <br /><br />Regarding your point on central banks lending money to governments (QE), consider that the central bank creates new central bank money which is transferred to the banks with which the goverment has current accounts (showing as a current account asset of the government, balanced by liability to repay the gilts). The government can then use this new money for government spending or servicing debts. But this money is absolutely brand new central bank money and therefore potentially inflationary. However, in a credit crunch (debt collapse) where credit money is destroyed by loan repayments, this new central bank money helps to balance out destruction of credit money. Essentially, the government is filling the hole in the money supply created by repayment of private debt. Public debt expands as private debt shrinks. There comes a point when private debt is so low that people begin to borrow again and private debt expands once more. This will cause inflation, unless the central bank sells the gilts it bought from the government (shrinking central bank money in the system), or raises interest rates to limit private debt expansion.Simon Thorpehttps://www.blogger.com/profile/02605233720415886802noreply@blogger.comtag:blogger.com,1999:blog-7530776363222965313.post-51781335778448279062012-10-12T15:27:35.393+02:002012-10-12T15:27:35.393+02:00I
don’t think much of Michael Rowbotham. His book ...I<br />don’t think much of Michael Rowbotham. His book is great if you want an<br />adrenalin rush. But not if you want to understand money, banking, etc. I made a<br />start on his book, and then gave up. <br /><br /><br /> <br /><br /><br />In<br />particular, I don’t agree with the passage you cite from his book: “And that<br />money is held and accounted as an asset of the bank."<br /><br /><br /> <br /><br /><br />It<br />may very well be that some banks instruct their branches to regard or count<br />loan repayments as money that can then be re-lent. That makes some sort of<br />sense because banks want to lend as much as possible without over-expanding. So<br />telling bank branches they can have £X in total lent out at any one time, and<br />no more (until allowed to by the bank’s head office) makes sense.<br /><br /><br /> <br /><br /><br />However,<br />any idea that “unlent” money of the above sort “is accounted as an asset of the<br />bank” is a joke. That “not yet lent” money just won’t appear on a bank’s<br />balance sheet. Or if it did, any competent auditor would scrub it out.<br /><br /><br /> <br /><br /><br />Re<br />the idea in your next paragraph that the above amounts to “counterfeiting”, I<br />think that claim is very debatable. Money creation by commercial banks is a<br />perfectly legitimate activity. The industrial revolution was funded by this<br />type of money. But at the same time it is perfectly legitimate to ask whether the<br />country’s best interests are served by letting commercial banks do this, or<br />whether money creation should be the preserve of the central bank. Like you, I<br />favour scrubbing commercial bank created money and having just central banks<br />create it.<br /><br /><br /> <br /><br /><br />The<br />two latest posts on my own blog (at the time of writing) are on the fractional<br />versus full reserve argument: http://ralphanomics.blogspot.co.uk/.Simon Thorpehttps://www.blogger.com/profile/02605233720415886802noreply@blogger.comtag:blogger.com,1999:blog-7530776363222965313.post-79095192049531035292012-09-13T10:35:35.548+02:002012-09-13T10:35:35.548+02:00And if you ask yourself where do the banks hide th...And if you ask yourself where do the banks hide their illegal gains, you have to read REVELATION$ from Denis Robert, Les Arenes editions, 2000. It's about how clearing institutions help banks stash illegal gains in offshore islands by using unpublished accounts... Madaleine Albright and Hillary Clinton knows better....Simon Thorpehttps://www.blogger.com/profile/02605233720415886802noreply@blogger.com