They do actually do this.
Surely if it was as simple as "access to their pool of deposits" the value of the loans could not exceed the value of deposits. However, we know they do.
62 people have more wealth than half the worlds population
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Surely if it was as simple as "access to their pool of deposits" the value of the loans could not exceed the value of deposits. However, we know they do.
- Oct 30, 2010
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huh? of course they don't. why do they makes losses? Why do they go out of business? You’re ignoring the fact that banks create a liability on their balance sheet at the same time they “create credit out of thin air”.
Example:
A bank has 10 customers who each deposit $100; The bank has $1000 (10 x $100) reserves and $1000 in liabilities (they owe that $1000 to their deposit customers).
The bank lends me $900 by crediting my account.
The bank now has $1000 reserves, $1900 in liabilities and a $900 loan asset.
I withdraw my $900, set it on fire and disappear to Mars.
The bank now has $100 reserves, $1000 liabilities and the $900 loan asset (the latter is worthless now as I’ve moved to Mars).
So, the bank owe their customers $1000, have only $100 to give them, and I’ve stolen their money which they can’t get back. Customers try and withdraw their $1000, the bank has to borrow that money from elsewhere (let’s say the lender of last resort, the central bank) or they go out of business.
I hope the above example explains it better. if in that example, I don’t steal the money and move to Mars, but instead spend it when buying the HFC 10-peat Bluray collection, then the $900 I borrowed comes back into the bank when the HFC deposit my purchase.
The bank now has (again), $1000 reserves, $1900 liabilities and a $900 loan asset. So now they can lend that same $900 dollars again: it becomes $1000 reserves, $2800 liabilities and an $1800 loan asset. When the loan money is withdrawn it becomes $100 reserves, $1900 liabilities, and $1800 in loans assets.
You keep doing this process over and over and over and you end up with that $1000 worth of original deposits expanding to provide like ~$9000 in loans/deposits. Voila, credit out of thin air.
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I'd like to see a simultaneous run on banks world-wide and see what chaos follows.Turn that abstract financial world into mass hysterical reality.
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It will happen in the medium term.
- Oct 30, 2010
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you want to see common folk's money disappear for shits and giggles? and here I thought *I* was cold.
Would it disappear though aren't the banks obliged to deliver on peoples deposits?They've got a few assets they can sell.
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bank depositors are unsecured creditors. they are the very last ones to get paid if a bank goes under (which is why some countries have government insurance schemes for deposits).
JoseMourinho
Not A Manager
And here is a person who wants to watch the world burn......
JoseMourinho
Not A Manager
Now before people spout off that Banks could have zip capital and be operating. There are agreements and targets that must be met under the Basel III agreement and countless of regulators overseeing what banks are doing.
Not really big on anarchy,just thought it's a viable protest option,better than walking down the street chanting slogans and waving placards.
JoseMourinho
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It'll be the worst possible option. You piss off everyone and turn them against you. Bad idea.
Fair enough I guess I'll have to put my #runonbanks campaign on the backburner
JoseMourinho
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The Occupy Wall Street tried to do it to the Bank of America. That is when everybody started turning on them (and also because of the fact they were huge hypocrites too).
Upgrayedd
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Us poor 10%er's should just invade the Cayman Islands and Luxemberg.
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No you're generalising about my statement. I'm not saying everyone who didn't pay tax were avoiding it but if you want to find those who were avoiding tax looking at those who didn't pay much, or any, is a pretty good place to start.
There are likely a number of companies on there that have made a loss and therefore have paid little or no tax. But there's a whole stack that don't fit into those categories. Basically every big multi-national reroutes its profits through offshore tax havens. Google, microsoft, uber, airbnb, etc. Take your pick and just about every one of them does dodgy s**t to avoid tax.
The ATO found that in the 2011-12 financial year over $60B was transferred in intra-party transfers to related entities in tax havens. Now maybe not 100% of that is just tax minimisation but at a 30% company tax rate we're probably losing out on at the very least $10B a year. That's twice the cost of the Gonski reforms for example.
I'm in,may as well have a crack at the Vatican while we're at it
JoseMourinho
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You have to remember that the income has to be derived in Australia. I personally think that we're missing out on less than 1% Corporate Tax (if Apple paid tax in the regions that it sold in).
The main problem is that these tax havens are deliberate because they want companies to come to their country so they can raise money for their budget and to administrate the country. They want investment in other words.
JoseMourinho
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Ironically enough in that OxFam report, you're a part of the top 10%.
Upgrayedd
A Vote for Clive is a Vote for Justice
I hope many poor african children died constructing my lavish personal desktop computer while i eat more then 2 meals a day
Yeah. its weird, When i see people post offended about the spread of wealth, While yeah it's insane...but your spreading it through something only the top 10-15% of the richest people in the world can access. Im sure Charles and David Koch have had a bit session on a private jet that Bill gate's has too much money and he should spread the wealth
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derivatives, hedge funds, futures trading????? anybody out there in BF land know much about these? my understanding is very limited, can anyone answer any of these questions?
1. are they just a wall street form of gambling?
2. do they actually produce anything of substance to benefit the economy?
3. is the derivatives market really 100s of trillions of dollars or as i have seen in some online articles a quadrillion or more? is this money backed by anything?
1. are they just a wall street form of gambling?
2. do they actually produce anything of substance to benefit the economy?
3. is the derivatives market really 100s of trillions of dollars or as i have seen in some online articles a quadrillion or more? is this money backed by anything?
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derivatives are a risk management tool. Used wisely, they reduce the risk profile for investments. But yes, in 2016 they do seem to be investment vehicles moreso than risk assessment.
As above.
Yes, it’s something ridiculously high.
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jason pm you could check this out for a reasonable overview of derivatives, with particular emphasis of the GFC. frontline do some amazing work.
http://www.pbs.org/video/1302794657/
http://www.pbs.org/video/1302794657/
thanks Long Live HFC, is the ridiculously high derivatives market as big a worry as some make out in your opinion? bubbles and all that.
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honestly, I really don't know enough to comment. I do know that they played a significant part in the GFC, so it's definitely possible.
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