An alternative way of banking

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.

coffee_cake

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.

coffee_cake

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?

smurgen

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 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.

they use interest rate manipulation when it suits them? http://en.wikipedia.org/wiki/Libor_scandal I love how some of the smug experts here seem to call anyone who is skeptical of the banking world a "conspiracy theorist". Banks really do pull all the stings and are involved in shady dealings.The fight any further regulation rigorously and any time they do get cause they seem to get away with it with just a fine and a warning.

Phoebas

smash wrote: »

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

The money supply is increased by an additional €80 whenever I lodge €100 cash.

This is news to me - was the system changed last night while I was sleeping? :pac:

IceFjoem

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

Maybe I wasn't clear actually, the running costs would need to be paid, this would be absolutely minuscule to the interest we pay at the moment, it could even be paid for through taxation, but what I'm proposing is a bank that's not designed to make a profit, only to provide a service.

Anyone

IceFjoem wrote: »

Maybe I wasn't clear actually, the running costs would need to be paid, this would be absolutely minuscule to the interest we pay at the moment, it could even be paid for through taxation, but what I'm proposing is a bank that's not designed to make a profit, only to provide a service.

How are these costs miniscule? Have you looked at any of my questions? Or attempted to answer them?

coffee_cake

IceFjoem wrote: »

Maybe I wasn't clear actually, the running costs would need to be paid, this would be absolutely minuscule to the interest we pay at the moment, it could even be paid for through taxation, but what I'm proposing is a bank that's not designed to make a profit, only to provide a service.

So you want a state bank? One which keeps getting bailed out every time they lose investments - the problem we're in in the first place? Or hike up the taxes every time they mess up?

And these issues?

Anyone wrote:

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?

schnitzelEater

IceFjoem wrote: »

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?

You missed the point. The bank needs to borrow money to lend (or take in deposits)...who will lend to or deposit money with a bank that doesn't pay interest?

Fukuyama

IceFjoem wrote: »

Maybe I wasn't clear actually, the running costs would need to be paid, this would be absolutely minuscule to the interest we pay at the moment, it could even be paid for through taxation, but what I'm proposing is a bank that's not designed to make a profit, only to provide a service.

Your misunderstanding the principles behind finance and economics.

It's not a mathematical formula that operates in a straight undeviating line.

It depends on how humans interact with one another. The very basis of trade is that people will only do work so that they can earn a profit to increase their living standards.

I know you're saying 'just the banks' but banking is the bed rock of all commerce, so it'd knock on to the rest of the economy.

Would you go to work just to remain where you currently are in life?

What you're suggesting is edging on close to the communist utopia that has been proposed around the world for well over a century. Look how that turned out.

People operate together as a society, but only for their own selfish interests.

Valetta

Ireland imported circa $63 Billion worth of goods and services in 2012 http://www.indexmundi.com/ireland/imports.html

How are we supposed to pay for this in the future?

Don't think the Germans or the yanks will be too impressed when we offer a barrow full of IceFjoems.

Three Seasons

A_Sober_Paddy wrote: »

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

They aren't creating money, simple as that.

If you deposit 100 euro, the bank owes you 100 euro. They use a percentage of the cash you have them to lend out. No where has money been created. It is taken from one person and lent to another person. The same money exists.

Solair

shedweller wrote: »

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

We had several public banks in the recent past:
ACC Bank (Agricultural Credit Corporation) - now owned by Rabo Bank
ICC Bank (Industrial Credit Corporation) - was purchased by Halifax (HBOS).

They were setup in the 1920s and 30s to provide credit to the agricultural and agribusiness sector (ACC) and the industrial sectors (ICC).

So, we've used that model before (quite successfully).

The state has also also become the rather unenthusiastic owner of AIB and PTSB.

So it's not THAT unusual in an Irish context to have had state owned banks.