An alternative way of banking

IceFjoem

So with the new rumours of AIB in trouble I thought I'd start a thread for discussion of an alternative way of banking.

At the moment, banks create money out of thin air and issue loans with it, nothing new, but why do we allow them to charge interest?

If you need say, €100, a bank will create the money from nothing, give you a loan of the money for a year but ask that you pay back €100 plus say, 10% interest so you pay €110 back in total.

We, like any society, require money to facilitate trade, but, we've collectively agreed to live and work under this bizarre system whereby we work 10% harder (as example above) and then just give the extra money to the bankers.

What we're essentially doing is siphoning off our wealth as a society and sending it to banker's pockets.

Why the hell have we allowed banking to be a private undertaking in the first place? What we should have is a bank for the people that issues loans and 100% of the debt is repaid, but no more. We need money to operate as a society, but there's no reason for anyone to be profiting from it!

We've now found ourselves in a crazy situation where there's plenty of teachers, plenty of kids in need of education, but the government can't afford to pay them and everybody suffers. Even though nothing's really changed since the banking collapse, we still have the same resources that we've always needed to operate the country, but everything's come to a standstill, and all because of this great invisible force called "the economy".

There's plenty of videos on youtube that explain what's going on a lot more eloquently than I have, for anyone interested in how the whole 'scam*' works this is the probably the best short video I could find.

https://www.youtube.com/watch?v=Kz6xG2YtyyE

*It's not technically a scam as the terms of a loan are agreed by both parties before the loan is issued, but the it is a scam in the sense that we are told that there is no alternative to the current system.


I was quite lucky to have my mind blown today on watching an interview with Cody Wilson about the free online sharing of designs for 3D printed guns. I highly recommend that you watch it, but what I think we could see (in the near future) is the power of corporations beginning to wane, as designs for their products are freely shared online, and consumers then printing them out at home on their own 3D printers for a fraction of the price.

More importantly, what this highlights, is the true power of the internet. Will we see a complete boycott of the current private banking system, and will people decide to trade in a new interest-free currency that is regulated with absolute transparency online?

What are your alternatives to private banking?

A fella called fish

I just use my left han...oh, banking... Sorry, no ideas..

schnitzelEater

I love this sort of thread. Some conspiracy theory mixed in with half understood concepts and a Walter Mitty / fantasist / Freeman type solution. And a good chunk of naive optimism.

Great reading. Well done OP.

Dr. Kenneth Noisewater

schnitzelEater wrote: »

I love this sort of thread. Some conspiracy theory mixed in with half understood concepts and a Walter Mitty / fantasist / Freeman type solution. And a good chunk of naive optimism.

Great reading. Well done OP.

And nothing beats a condescending reply to a question no one asked. Kudos to you, good sir.

IceFjoem

schnitzelEater wrote: »

I love this sort of thread. Some conspiracy theory mixed in with half understood concepts and a Walter Mitty / fantasist / Freeman type solution. And a good chunk of naive optimism.

Great reading. Well done OP.

Very constructive, enjoy your debt!

shedweller

Presidents have been assassinated for daring to even talk of setting up public banks.

Sky King

shedweller wrote: »

Presidents have been assassinated for daring to even talk of setting up public banks.

A bank run like the HSE, yeah I can't see any problems with that at all!

shedweller

shedweller wrote: »

Presidents have been assassinated for daring to even talk of setting up public banks.

Who was that?

smash

shedweller wrote: »

Presidents have been assassinated for daring to even talk of setting up public banks.

I saw an ad on TV for a new reality show, can't remember what station but I think it was called 'the bank of Dave' or something like that. A guy in the UK set up his own bank and was issuing loans etc. within a week he was getting cease and desist letters from natwest and other lenders.

Valetta

The Italians have this sussed from long ago.

In all their chip shops they use the batter system.

smash

Valetta wrote: »

The Italians have this sussed from long ago.

In all their chip shops they use the batter system.

One of the, actually no... THE worst joke I've heard in a long time.

johnny_knoxvile

I was hoping the "banking" in the title of the thread was a type-o.

Nabber

Welcome to 2013 OP.
I can confirm the rumours. AIB is fùcked along with the rest.
Wait till you hear the rumours about USC, Property tax & water charges.

schnitzelEater

IceFjoem wrote: »

Very constructive, enjoy your debt!

Anyone that trusts the (Irish) public sector to run a bank needs their head examined I'm afraid. The same crowd of mandarins that regulated the banking sector and were at the heart of the bank guarantee.

Sounds like a plan. Sign me up please.

Presumably this bank doesn't pay interest on my savings either. Or are savings forbidden in this socialist utopia you are proposing?

schnitzelEater

deccurley wrote: »

And nothing beats a condescending reply to a question no one asked. Kudos to you, good sir.

What question is this now?

squod

1. Banks are for people who haven't properly invested their money.

"China's experience is one that others have had at various times," Mr Stevens said. "As long as there are incentives to bypass the formal banking sector, the shadow banking system may keep on growing together with the risks."

2. Regulate the shadow banking system or face a large crash.

schnitzelEater

smash wrote: »

One of the, actually no... THE worst joke I've heard in a long time.

It's in the right thread so.

smash

Nabber wrote: »

Welcome to 2013 OP.
I can confirm the rumours. AIB is fùcked along with the rest.

The point is that it's a lot more fcuked than people realise. Go look at the other banking thread.

schnitzelEater

squod wrote: »

1. Banks are for people who haven't properly invested their money.



2. Regulate the shadow banking system or face a large crash.

Yeah, better to go for Bitcoin.

Three Seasons

IceFjoem wrote: »

So with the new rumours of AIB in trouble I thought I'd start a thread for discussion of an alternative way of banking.

At the moment, banks create money out of thin air and issue loans with it, nothing new, but why do we allow them to charge interest?

If you need say, €100, a bank will create the money from nothing, give you a loan of the money for a year but ask that you pay back €100 plus say, 10% interest so you pay €110 back in total.

We, like any society, require money to facilitate trade, but, we've collectively agreed to live and work under this bizarre system whereby we work 10% harder (as example above) and then just give the extra money to the bankers.

What we're essentially doing is siphoning off our wealth as a society and sending it to banker's pockets.

Why the hell have we allowed banking to be a private undertaking in the first place? What we should have is a bank for the people that issues loans and 100% of the debt is repaid, but no more. We need money to operate as a society, but there's no reason for anyone to be profiting from it!

We've now found ourselves in a crazy situation where there's plenty of teachers, plenty of kids in need of education, but the government can't afford to pay them and everybody suffers. Even though nothing's really changed since the banking collapse, we still have the same resources that we've always needed to operate the country, but everything's come to a standstill, and all because of this great invisible force called "the economy".

There's plenty of videos on youtube that explain what's going on a lot more eloquently than I have, for anyone interested in how the whole 'scam*' works this is the probably the best short video I could find.

https://www.youtube.com/watch?v=Kz6xG2YtyyE

*It's not technically a scam as the terms of a loan are agreed by both parties before the loan is issued, but the it is a scam in the sense that we are told that there is no alternative to the current system.


I was quite lucky to have my mind blown today on watching an interview with Cody Wilson about the free online sharing of designs for 3D printed guns. I highly recommend that you watch it, but what I think we could see (in the near future) is the power of corporations beginning to wane, as designs for their products are freely shared online, and consumers then printing them out at home on their own 3D printers for a fraction of the price.

More importantly, what this highlights, is the true power of the internet. Will we see a complete boycott of the current private banking system, and will people decide to trade in a new interest-free currency that is regulated with absolute transparency online?

What are your alternatives to private banking?

How do banks create money out of nothing, they don't have money printers.

They lend money. That's not creating money out of nothing.

You also think there is no reason to profit from lending. You won't mind lending me money then at 0 % interest.

You don't have a clue what you're talking about. It's basically a rant which stems from a feeling of powerlessness in this world directed at those who you think have power.

smash

Three Seasons wrote: »

How do banks create money out of nothing, they don't have money printers.

They lend money. That's not creating money out of nothing.

You think money is printed every time interest occurs? Or every time a bank loans based on its capital? It's all electronic. Less than 5% of the money in the world is physical money. Apart from that it's generated electronically!

If you don't want to pay interest, don't borrow. If you don't want to get interest, don't use them to save. If you really want, go to the islam banks that charge fees instead of interest. Or expect everything done for you for free, I don't know.
The govt deficit has nothing to do with the banks being run with interest, it's the day to day expenses of running the state that have it in deficit.

Phoebas

schnitzelEater wrote: »

Yeah, better to go for Bitcoin.

... if you want to bring your money on a rollercoaster ride!

StewartGriffin

Three Seasons wrote: »

How do banks create money out of nothing, they don't have money printers.

They lend money. That's not creating money out of nothing.

They create it by pressing the "Return" key on a pc keyboard every time they approve a loan. Those aren't real notes that get transferred into your account.

Hownowcow

OP, you might like to investigate islamic banking.

IceFjoem

schnitzelEater wrote: »

Anyone that trusts the (Irish) public sector to run a bank needs their head examined I'm afraid. The same crowd of mandarins that regulated the banking sector and were at the heart of the bank guarantee.

Sounds like a plan. Sign me up please.

Presumably this bank doesn't pay interest on my savings either. Or are savings forbidden in this socialist utopia you are proposing?

I never proposed anything of the sort, I don't claim to be an expert either, what I'm trying to do is create a dialogue on the issue.

What I am saying is that the system we have at the moment not only doesn't work, but holds profiteering so high that it's destroying people's lives, profiteering that shouldn't even exist, profiteering that regular retail banking customers want nothing to do with in the first place given the now abundantly clear risks.

Anybody that thinks it is working needs their head examined IMO.

A_Sober_Paddy

Three Seasons wrote: »

How do banks create money out of nothing, they don't have money printers.

They lend money. That's not creating money out of nothing.

You give a bank €100 to save...The banks only needs to hold a certain amount on desposit(lets say 25%)...So the banks holds €25 of your money and loans out the other €75...But your account still has €100 in it...Its not the physical creation of money but its still a form of money creation...

Well that's what I remember for my college days

studiorat

halal banking perhaps.

PlainP

My local credit union has a big sign up saying FREE BANKING on the way with a sort code beside it...
Think I'm going to go in and enquire about this. Might be better than banks...

IceFjoem

Hownowcow wrote: »

OP, you might like to investigate islamic banking.

Ye I've heard a bit about it alright, would I be correct in saying they've essentially created a kind of back door usury in the form of charges rather than interest? I'll do some googling when I get a chance anyway!

What I'm proposing though (and I'm by no means the first) is creating a bank that would service society with capital rather than forcing it to grow or die with debt.

smash

Check out three seasons editing his post after people calling him up on it

Phoebas

StewartGriffin wrote: »

They create it by pressing the "Return" key on a pc keyboard every time they approve a loan. Those aren't real notes that get transferred into your account.

So when I stuff an envelope full of cash into the QuickLodge machine, does it go straight to a furness?

smash

Phoebas wrote: »

So when I stuff an envelope full of cash into the QuickLodge machine, does it go straight to a furness?

No, they just press a button and turn your €100 into €180, but the €80 only exists electronically.

StewartGriffin

Phoebas wrote: »

So when I stuff an envelope full of cash into the QuickLodge machine, does it go straight to a furness?

There's a certain amount of real cash in the system, but for example if everyone tried to withdraw their cash from a bank at the same time, the bank wouldn't have a fraction of that real cash available. This is why a run on the banks are so feared, the bank system collapses.

schnitzelEater

IceFjoem wrote: »

Ye I've heard a bit about it alright, would I be correct in saying they've essentially created a kind of back door usury in the form of charges rather than interest? I'll do some googling when I get a chance anyway!

What I'm proposing though (and I'm by no means the first) is creating a bank that would service society with capital rather than forcing it to grow or die with debt.

Silly question I know, but where does this public bank get the money it lends to the public from?

IceFjoem

bluewolf wrote: »

If you don't want to pay interest, don't borrow. If you don't want to get interest, don't use them to save. If you really want, go to the islam banks that charge fees instead of interest. Or expect everything done for you for free, I don't know.
The govt deficit has nothing to do with the banks being run with interest, it's the day to day expenses of running the state that have it in deficit.

I think we should expect it to be done more or less for free, why shouldn't it?

True that the day to day running of the country is creating a deficit, but the national debt too is subject to this crippling interest.

The joke here being that even if we could reduce the deficit from the running of the country to nothing, we'd still be f*cked for decades!

RUSTEDCORE

I store money in prepaid mastercards
Globally accepted online/in shops/ATM

BTW 3D printers are rather expensive

Anyone

Who is going to put money into this bank to allow it to lend, when they get nothing in return? No profit=no payment of interest/dividends.

How do you propose to pay staff,provide services(cards,atms,online banking).

Who will take a mortgage from your bank while paying the 10% interest you propose? With mortgage arrears hitting 16% what impact will this have on the costs of providing those loans?(you are aware of loan provisions right?)

With non mortgage debt in arrears hitting over 20%, what impact will this have on your costs as above?

To give you an example....any debt that goes over 9 weeks in arrears has to incur a provision in case it goes bad. Its a % of the overall debt, and starts at a minimum of 10%(thats the interest you are charging so every loan that goes into arrears will no be incurring a loss). This charge is made on your P+L so it wipes away the profit that you arent making.

What are your capital structures? And how do you plan to structure the liquidity of this bank?

What will you do with surplus funds that are deposited within your bank? Will they just sit there doing nothing? Earning nothing?

Valetta

The bank create money out of nothing and lend it to you.

You then pay them back +10%. Where does the money you pay back come from?
Is it also created out of nothing?
If so, then the bank don't make any profit as the 10% isn't real money.

IceFjoem

IceFjoem wrote: »

I think we should expect it to be done more or less for free, why shouldn't it?

Sure. Will you do your job for free too? Shop workers, everyone else out there - they should work for free too?

I think Anyone answered this one best

Tiddlypeeps

Irish banks don't create money. They don't have the power to just decide to put more money into the economy. Any new money that comes into Ireland comes in the form of loans from the ECB, and I'm pretty sure (open to correction) thats not a privately owned organisation. I have issues with the fact that the EU control our money supply but thats an entirely different topic to the OP.

Fractional reserve banking is what another poster described, somebody puts €100 in their account, the bank keeps 10% of it, loans out the other 90% and charges interest on it.

The problem with this system is not the interest charged it's the fact that they don't keep 100% of their deposits on hand at all times. So if there is a run on the banks (everybody tries to withdraw their money at once) they don't have nearly enough money to pay out. They are forced to go bankrupt.

This isn't an issue and the system works fine IF the banks play it safe. If they don't loan out too big a percentage of their deposits and they charge enough interest to cover their costs and the costs of the odd inevitable failed repayments. If a bank operates like this there is confidence in it so there will never be a run. This is exactly what the banking sector didn't do during the celtic tiger.

Unfortunately the stunt the EU and Crete have tried to pull off has now utterly destroyed all confidence in the european banking sector. Smart people are moving their money elsewhere and any work done to restore confidence in the banking sector over the last few years was undone in just a few short weeks. :mad:

schnitzelEater

If the money that banks lend doesn't 'exist', why do the Irish banks owe tens of billions to bondholders? Did they not know about this phantom money? Someone should have kept them in the loop...

Peregrinus

IceFjoem wrote: »

I think we should expect it to be done more or less for free, why shouldn't it?

If you want to live in a house that you haven't bought or built, you pay rent for that.

If you want to drive a car that you haven't bought or constructed, you pay lease payments for that.

Why should you expect that anyone will give you the use of anything for free? Why, in particular, should you expect to be given the free use of money?

Besides, if borrowing is free, there is no reason why you would ever repay money, since it will always cost you more to repay money than it would simply to extent the borrowing (which would be free). Nor have you any reason ever to limit the amount of money you borrow, since, however much you borrow and however long you borrow it for, it will still cost you nil.

What you are effectively proposing is the creation of money which has no value. Which, since money consists of nothing but value, is pretty pointless.

Fukuyama

Money is created in some form. By central banks - not private banks.

The ECB looks after the Eurozone. Banks can borrow off the ECB at ECB interest rates. To diversify their risk portfolio and keep money flowing they can borrow from one another at the Intrabank rate within the Eurozone.

Without interest the economy would stagnate and implode. 3% is optimum. Obviously you want less if you owe money but in the larger scheme of things this is the best rate.

Retail banking has loads of overheads, hence the need to charge higher than the Intrabank rate so they can pay their bills, staff ect. There's also a profit margin worked in because this isn't Soviet Russia.

Your understanding of the economy is based on the childish musings of an Australian teenager.

Fukuyama

schnitzelEater wrote: »

If the money that banks lend doesn't 'exist', why do the Irish banks owe tens of billions to bondholders? Did they not know about this phantom money? Someone should have kept them in the loop...

You expect every euro in your pocket to have a corresponding gold coin stored somewhere? Or some other commodity?

Leave the bar stool economics in the pub my friend.

schnitzelEater

Dean0088 wrote: »

Your understanding of the economy is based on the childish musings of an Australian teenager.

Teenager? I'd have said closer to a chimp...

twinytwo

Deleted User wrote: »

Who was that?

not sure if serious?


but anyway, there is a theory that JFK was killed for trying to remove power to print money from the federal reserve and transfer in to the treasury department. (Basically america has to pay to create money that isnt actually backed by anything... ie its worthless in the true sence of the word).

Thus allowing america to "create" money without the huge interest bill attached to it.

the problem is though if america borrows a billion dollars from the fed it might cost them 1.2billion for example... but the fed only ever creates the 1 billion thus there is no way to actually ever pay off the debt.

studiorat

bluewolf wrote: »

Sure. Will you do your job for free too? Shop workers, everyone else out there - they should work for free too?

I think Anyone answered this one best

Earning interest isn't work.

studiorat

studiorat wrote: »

Earning interest isn't work.

It's expecting to use a service for free, same as anything else

Peregrinus wrote: »

If you want to live in a house that you haven't bought or built, you pay rent for that.

If you want to drive a car that you haven't bought or constructed, you pay lease payments for that.

Why should you expect that anyone will give you the use of anything for free? Why, in particular, should you expect to be given the free use of money?

Besides, if borrowing is free, there is no reason why you would ever repay money, since it will always cost you more to repay money than it would simply to extent the borrowing (which would be free). Nor have you any reason ever to limit the amount of money you borrow, since, however much you borrow and however long you borrow it for, it will still cost you nil.

What you are effectively proposing is the creation of money which has no value. Which, since money consists of nothing but value, is pretty pointless.

^

StewartGriffin

schnitzelEater wrote: »

If the money that banks lend doesn't 'exist', why do the Irish banks owe tens of billions to bondholders? Did they not know about this phantom money? Someone should have kept them in the loop...

Do you really think all this money actually exists somewhere as banknotes and coins?

This movie is long but does a good job of explaining it if you're actually interested.

IceFjoem

schnitzelEater wrote: »

Silly question I know, but where does this public bank get the money it lends to the public from?

I'd imagine it would be massively complex to just throw a new currency and new banks into the mix and destroy the old ones so I'd imagine it would have to happen with a slow conversion of wealth from Euros to IceFjoems, and in an organic way starting with the domestic trade of commodities in the new currency perhaps between smaller communities.

Banks never created any real wealth in the first place, it's all an agreed upon illusion anyway so why not do the same here?