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Where did all the money go.

124

Comments

  • #92
    antoobrien
    Registered Users, Registered Users 2 Posts: 6,106 ✭✭✭antoobrien


    Climber wrote: »
    I think we've missed a crucial point here.

    If we follow the cash there is an obvious answer to the original question.

    Cash > Bond holder > Irish Bank > Irish property purchaser > Seller of Irish property.

    Leaves out the bleeding obvious - a large part of the price of property is for working capital - i.e. paying for things like peoples wages, materials, lots and lots of tea so the build will take longer and go over budget, etc.

    That value/capital/money (whatever you want to call it) doesn't stay with the developer. Indeed due to the nature of the business a lot of the cost of materials (all of the cost of land) has to be paid up front.

    Hence the disappearing money. Why is this so hard for people to see? Did anybody on here do any variety of Business Studies/economics for the junior/leaving cert or in 3rd level?


  • #93
    Climber
    Registered Users, Registered Users 2 Posts: 184 ✭✭Climber


    Leaves out the bleeding obvious - a large part of the price of property is for working capital - i.e. paying for things like peoples wages, materials, lots and lots of tea so the build will take longer and go over budget, etc.
    You are referring to Property developers here right? Developer borrows cash to buy land to develop it. The 'developing' part costs money, immediately. Developer hopes he will earn all the borrowed cash back, plus (a lot) more in profit when he sells the developed land on to purchasers. When no purchasers materialise he's left holding the bag?

    So the person who got the cash when the developer bought the land, this is where the money has gone.


  • #94
    antoobrien
    Registered Users, Registered Users 2 Posts: 6,106 ✭✭✭antoobrien


    Climber wrote: »
    You are referring to Property developers here right? Developer borrows cash to buy land to develop it. The 'developing' part costs money, immediately. Developer hopes he will earn all the borrowed cash back, plus (a lot) more in profit when he sells the developed land on to purchasers. When no purchasers materialise he's left holding the bag?

    In a nutshell yes - or when the developer goes under the banks for the money they had to borrow (see the various post about anglo's funding methodology and the one about leveraging.
    Climber wrote: »
    So the person who got the cash when the developer bought the land, this is where the money has gone.

    Not anywhere near all of it. If it's even 20% of it I'd be very surprised.

    In most cases we're not talking much more than 1/2 million to a few thousand people. There'll be a few hundred NAMA scale deals (the total Irish properties in NAMA is something in the order of 600 - the list is available from the website) from business and the like - who'll have reinvested in their company, used to relocate & other similar things and unfortunately reinvested in more property (now valueless with loans which they can't repay) and worse stocks.

    The small holders will have spent it on various things, new house, cars, new shoes etc as well as investments.

    Remember the caveat in the financial ads - value of investments may rise & fall.


  • #95
    Debtocracy
    Registered Users, Registered Users 2 Posts: 208 ✭✭Debtocracy


    Money supply in real economy contracting. Money supply in financial gambing economy expanding. This can only lead to
    STAGFLATION


  • #96
    recedite
    Closed Accounts Posts: 13,989 ✭✭✭✭recedite


    antoobrien wrote: »
    The small holders will have spent it on various things, new house, cars, new shoes etc
    Your'e playing down the scale of it.
    The failed speculator Sean Quinn today filed for bankruptcy. Yesterday he owed €2.8 BILLION to the taxpayer (Irish Bank Resolution Corporation - formerly Anglo Bank) In 12 months time he will be debt free. He gambled that money away; somebody else won it, the taxpayer lost it. It did not disappear.

    Meanwhile, he will continue to live in a mansion. I know people who are really struggling, and they live in very modest houses. They can expect to emerge from negative equity in 10 years, and be mortgage free in 26 years.
    Debtocracy wrote: »
    Money supply in real economy contracting. Money supply in financial gambing economy expanding. This can only lead to
    STAGFLATION

    Stagflation as I understand it, is due to government's inability to control rising production costs, as with the 1970's oil price crisis. What we are dealing with here is a downward spiral caused by profits generally being used to pay off debt, instead of stimulating demand.


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  • #97
    nesf
    Registered Users, Registered Users 2 Posts: 27,644 ✭✭✭✭nesf


    recedite wrote: »
    Stagflation as I understand it, is due to government's inability to control rising production costs, as with the 1970's oil price crisis. What we are dealing with here is a downward spiral caused by profits generally being used to pay off debt, instead of stimulating demand.

    The other reason it can happen is if central banks allow very high money supply growth.

    I'm really not sure at all where Debtocracy is getting a contracting money supply in the real economy from since this is exactly the opposite of what's required for stagflation to occur in an economy (i.e. you need expanding money supply in the real economy to fuel a wage/price upwards spiral a la what we saw in the 70s and 80s).


  • #98
    antoobrien
    Registered Users, Registered Users 2 Posts: 6,106 ✭✭✭antoobrien


    recedite wrote: »
    Your'e playing down the scale of it.
    The failed speculator Sean Quinn today filed for bankruptcy. Yesterday he owed €2.8 BILLION to the taxpayer (Irish Bank Resolution Corporation - formerly Anglo Bank) In 12 months time he will be debt free. He gambled that money away; somebody else won it, the taxpayer lost it. It did not disappear.

    Oh dear oh dear, with idiotic statements like that I know why people are sitting in a halting site in the middle of eyre square.

    Quinn borrowed money - off Anglo - to buy anglo shares. The Anglo shares price fell - Quinn sold at a considerable loss.

    That money has most certainly disappeared. Why? Well Anglo borrowed the money elsewhere to raise this (see the 1st page of the thread).

    It wasn't Sean Quinn's money that was invested - it was money that neither Quinn nor Anglo had. it was done in an effort to boost the share price. The golden circle was the original NAMA (organised by Anglo to make sure it gets the loan paid).


  • #99
    MungBean
    Closed Accounts Posts: 3,915 ✭✭✭MungBean


    antoobrien wrote: »
    Oh dear oh dear, with idiotic statements like that I know why people are sitting in a halting site in the middle of eyre square.

    Quinn borrowed money - off Anglo - to buy anglo shares. The Anglo shares price fell - Quinn sold at a considerable loss.

    That money has most certainly disappeared. Why? Well Anglo borrowed the money elsewhere to raise this (see the 1st page of the thread).

    It wasn't Sean Quinn's money that was invested - it was money that neither Quinn nor Anglo had. it was done in an effort to boost the share price. The golden circle was the original NAMA (organised by Anglo to make sure it gets the loan paid).

    Bought them off of who ?


  • #100
    Scofflaw
    Registered Users, Registered Users 2 Posts: 23,283 ✭✭✭✭Scofflaw


    recedite wrote:
    Your'e playing down the scale of it.
    The failed speculator Sean Quinn today filed for bankruptcy. Yesterday he owed €2.8 BILLION to the taxpayer (Irish Bank Resolution Corporation - formerly Anglo Bank) In 12 months time he will be debt free. He gambled that money away; somebody else won it, the taxpayer lost it. It did not disappear.

    Meanwhile, he will continue to live in a mansion. I know people who are really struggling, and they live in very modest houses. They can expect to emerge from negative equity in 10 years, and be mortgage free in 26 years.

    Or they could declare bankruptcy, and apparently be debt free in 12 months time...

    amused,
    Scofflaw


  • #101
    recedite
    Closed Accounts Posts: 13,989 ✭✭✭✭recedite


    MungBean wrote: »
    Bought them off of who ?
    Good question, but we will never know because the bank was hurriedly nationalised and all the evidence of dodgy dealings buried.
    A lot of his investment was not in shares, but in contracts for difference. A pure bet in which the loser's money is handed straight to a stockmarket trader.
    Scofflaw wrote: »
    Or they could declare bankruptcy, and apparently be debt free in 12 months time...
    amused,
    Scofflaw

    Unfortunately, they failed to have their liabilities assigned to a limited company, and their assets assigned to family members.

    unamused,
    Recedite


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  • #102
    MungBean
    Closed Accounts Posts: 3,915 ✭✭✭MungBean


    recedite wrote: »
    Good question, but we will never know because the bank was hurriedly nationalised and all the evidence of dodgy dealings buried.
    A lot of his investment was not in shares, but in contracts for difference. A pure bet in which the loser's money is handed straight to a stockmarket trader.

    So Quinn took out these contracts for difference with money he borrowed from Anglo to back a rise in share prices. Share prices plummeted and when due he had lost it all and owed huge amounts to Anglo who I presume never recouped anything as Quinn couldn’t repay.

    Basically someone made billions from Quinn which was paid with Anglo money and which Quinn cannot repay. So for antoobrien's point about neither Quinn nor Anglo having that money its not money disappeared its just money owed for a bad bet by Quinn paid for with money Anglo itself borrowed. Effective transferring huge amounts to private traders though the hands of Quinn leaving Anglo in the red.

    So in Quinns case is most certainly was gambling debts covered with taxpayers money assuming those debts were paid.


  • #103
    Scofflaw
    Registered Users, Registered Users 2 Posts: 23,283 ✭✭✭✭Scofflaw


    recedite wrote:
    Unfortunately, they failed to have their liabilities assigned to a limited company, and their assets assigned to family members.

    unamused,
    Recedite

    Fair point - I'll concede you that one!

    cordially,
    Scofflaw


  • #104
    Good loser
    Registered Users, Registered Users 2 Posts: 3,265 ✭✭✭Good loser


    MungBean wrote: »
    So Quinn took out these contracts for difference with money he borrowed from Anglo to back a rise in share prices. Share prices plummeted and when due he had lost it all and owed huge amounts to Anglo who I presume never recouped anything as Quinn couldn’t repay.

    Basically someone made billions from Quinn which was paid with Anglo money and which Quinn cannot repay. So for antoobrien's point about neither Quinn nor Anglo having that money its not money disappeared its just money owed for a bad bet by Quinn paid for with money Anglo itself borrowed. Effective transferring huge amounts to private traders though the hands of Quinn leaving Anglo in the red.

    So in Quinns case is most certainly was gambling debts covered with taxpayers money assuming those debts were paid.


    Really really interesting thread.

    I'm struggling to follow things.

    Some of you at all costs are determined to attach blame and find the money store.

    For one thing remember all the major players and their advisers were doing their level best to make money. Swept up in the incredibly busy day to day
    dealing they hadn't a clue about the cliff they were heading towards or the abyss into which they were about to fling the economy.

    A few anecdotes.

    In 2007 a farming relative sold 10 acres for €750,000. The buyers tried to flip the deal before paying for it. Eventually they paid and he paid 25% capital gains tax. The farm was totally undeveloped and understocked - he invested virtually all the money into the farm since. Recently he hadn't the money to buy 15 acres adjoining that went for sale.

    A landowner near Cork sold development land for €12 m and put all into bank shares - he couldn't pay the CGT bill when he got it. This happened many farmers who sold (non development) land for good money.

    I recently asked some one who would be familiar with the building scene in Cork whether any builders got out before the crash. He didn't know of any; one builder/developer may have half extracted himself in time.

    Re your post MungBean and Quinn's CFDs.

    If a punter bets €50,000 on a horse and the horse loses does that make the bookmaker richer by €50,000?

    The answer is yes only if he had no other(winning) bets.

    And if he only had bets on that race.

    And if he closed his business after that race.

    And if he hadn't accumulated losses from the day before.


  • #105
    MungBean
    Closed Accounts Posts: 3,915 ✭✭✭MungBean


    Good loser wrote: »

    Re your post MungBean and Quinn's CFDs.

    If a punter bets €50,000 on a horse and the horse loses does that make the bookmaker richer by €50,000?

    The answer is yes only if he had no other(winning) bets.

    And if he only had bets on that race.

    And if he closed his business after that race.

    And if he hadn't accumulated losses from the day before.

    I'm not out to point the finger and find someone to blame, I'd imagine it was more of a cumulative effect of so many different things. I'm just trying to understand some of the things in relation to it.

    Finding the money was initially the point of the thread which has been somewhat cleared up.

    As for the rest of your post unless we know who got the money and what his situation was then all we can do it discuss what we know. That someone benefited hugely from this. Whether he was up to his hole in debt himself is irrelevant if we have nothing to suggest he was as we dont know who it was or what his transactions were.


  • #106
    recedite
    Closed Accounts Posts: 13,989 ✭✭✭✭recedite


    MungBean wrote: »
    its just money owed for a bad bet by Quinn paid for with money Anglo itself borrowed. Effective transferring huge amounts to private traders though the hands of Quinn leaving Anglo in the red.
    Exactly. Quinn just made the classic gamblers mistake of betting what he couldn't afford to lose. Anglo themselves took a gamble in feeding his habit.
    But if the bet had gone the other way, they both would have profited enormously, as would the other members of the infamous "Golden Circle".
    I respect Quinn; he built up a haulage business out of nothing, and when he felt the insurance companies were ripping him off, he set up his own insurance company. Unfortunately his risk taking instincts got the better of him and he failed to see that the fundamentals of Anglo were unsound.

    Compare to George Soros; a guy who carefully examines the fundamentals of every investment. He made $1.1 Billion in one punt on Black Wednesday of 1991 betting against sterling. He's not a bad guy. He gave away $8 billion to charity over the last few decades. He doesn't even need the money, he does it because he can.

    It's in our brains to take a gamble, that's how our ancestors made their way across the seas and continents to get here.
    Good loser wrote: »
    If a punter bets €50,000 on a horse and the horse loses does that make the bookmaker richer by €50,000?
    Certainly the bookie is €50,000 richer than if the punter had not made the bet. So the answer is Yes.

    Next question; If the bookie had accepted an IOU from the punter instead of cash, and then it turned out that the punter couldn't pay up, is the bookie entitled to claim redress from the State, or should he just put it down to experience? This is essentially the "Burn the Anglo bondholders" argument.

    Third Question; if the punter had made the bet in cash, and lost it, and then went home and told his wife that their €50,000 had disappeared. Just like that. In a puff of smoke. Would she believe him?


  • #107
    Good loser
    Registered Users, Registered Users 2 Posts: 3,265 ✭✭✭Good loser


    MungBean wrote: »
    I'm not out to point the finger and find someone to blame, I'd imagine it was more of a cumulative effect of so many different things. I'm just trying to understand some of the things in relation to it.

    Finding the money was initially the point of the thread which has been somewhat cleared up.

    As for the rest of your post unless we know who got the money and what his situation was then all we can do it discuss what we know. That someone benefited hugely from this. Whether he was up to his hole in debt himself is irrelevant if we have nothing to suggest he was as we dont know who it was or what his transactions were.

    MungBean

    As far as I understand things the point clarified by Scofflaw and others i.e. those that seem to know what they're talking about, is that there is no money - no one benefited hugely from this. That is in the broad sense of things.

    In my betting example the bookie won €50,000 in the instant of the result of the race. But he may have lost €60,000 on the previous race. Not much point telling his wife or you he won €50k in isolation.


  • #108
    Good loser
    Registered Users, Registered Users 2 Posts: 3,265 ✭✭✭Good loser


    recedite wrote: »
    Exactly. Quinn just made the classic gamblers mistake of betting what he couldn't afford to lose. Anglo themselves took a gamble in feeding his habit.
    But if the bet had gone the other way, they both would have profited enormously, as would the other members of the infamous "Golden Circle".
    I respect Quinn; he built up a haulage business out of nothing, and when he felt the insurance companies were ripping him off, he set up his own insurance company. Unfortunately his risk taking instincts got the better of him and he failed to see that the fundamentals of Anglo were unsound.

    Compare to George Soros; a guy who carefully examines the fundamentals of every investment. He made $1.1 Billion in one punt on Black Wednesday of 1991 betting against sterling. He's not a bad guy. He gave away $8 billion to charity over the last few decades. He doesn't even need the money, he does it because he can.

    It's in our brains to take a gamble, that's how our ancestors made their way across the seas and continents to get here.

    Certainly the bookie is €50,000 richer than if the punter had not made the bet. So the answer is Yes.

    Next question; If the bookie had accepted an IOU from the punter instead of cash, and then it turned out that the punter couldn't pay up, is the bookie entitled to claim redress from the State, or should he just put it down to experience? This is essentially the "Burn the Anglo bondholders" argument.

    Third Question; if the punter had made the bet in cash, and lost it, and then went home and told his wife that their €50,000 had disappeared. Just like that. In a puff of smoke. Would she believe him?


    Recedite. That is also the answer I gave in the first line.

    There is a difference however between the truth and the whole truth (and nothing but the truth).

    The other lines of the example go towards 'the whole truth'.

    That is what matters and what is relevant to the thread topic 'Where did all the money go'

    Essentially there is no money left - as Scofflaw's examples showed.

    There is no serious money to chase down.


  • #109
    MungBean
    Closed Accounts Posts: 3,915 ✭✭✭MungBean


    Good loser wrote: »
    MungBean

    As far as I understand things the point clarified by Scofflaw and others i.e. those that seem to know what they're talking about, is that there is no money - no one benefited hugely from this. That is in the broad sense of things.

    In my betting example the bookie won €50,000 in the instant of the result of the race. But he may have lost €60,000 on the previous race. Not much point telling his wife or you he won €50k in isolation.

    In the case of Quinn we know that somebody benefited as he lost. That somebody is the somebody he took out those contracts for difference with. He didnt have any money and Anglo didnt have any money and thats why the state footed the bill.

    Your example is saying the bookie has bills to pay too which is irrelevant to the situation. Quinn and Anglo lost money to some other persons or entity. If there never was any money and nobody benefited there would be no bill. There was money as it was borrowed by Anglo, somebody did benefit as that money went to Quinn and then elsewhere as a result of losses on contracts for difference. And there most certainly is a bill as the state is paying it.

    Anglo borrowed money, lent it to Quinn who lost it and now the state is paying it back. Whether or not whoever got that money lost it again is irrelevant, all thats relevant is that nobody but the state had the money to pay it back.


  • #110
    recedite
    Closed Accounts Posts: 13,989 ✭✭✭✭recedite


    Good loser wrote: »
    Recedite. That is also the answer I gave in the first line.
    No, this is the answer you gave;
    The answer is yes only if he had no other(winning) bets.
    Even if the bookie started the day down €50,000 because he had a bad previous day, the €50,000 he makes today from our punter brings him back up to breakeven point, and he gets to stay in business.
    You're saying that just because he lost money on some other gamble, that this one makes no difference to him?


  • #111
    recedite
    Closed Accounts Posts: 13,989 ✭✭✭✭recedite


    Good loser wrote: »
    Essentially there is no money left - as Scofflaw's examples showed.

    Scofflaw was trying to make out that the farmer in his example lost €600,000 and I pointed out that;
    So if the farmer spent the €1 million on construction, his houses were valued just before the crash at, say, €2 million.
    After the crash the houses are only worth half, so €1 million. There's your missing money right there. He hasn't lost anything. He swopped land (now worth very little) for 2 luxury houses worth €1 million at today's prices.

    You are confusing the issue again by differentiating between money and wealth.
    You're saying the farmer spent the money on 2 luxury houses. Ergo, the money is gone. If the money is gone, then he has gained nothing.
    But this is false logic. Money is simply credit, and the farmer converted his credit into bricks and mortar.


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  • #112
    Good loser
    Registered Users, Registered Users 2 Posts: 3,265 ✭✭✭Good loser


    MungBean wrote: »
    In the case of Quinn we know that somebody benefited as he lost. That somebody is the somebody he took out those contracts for difference with. He didnt have any money and Anglo didnt have any money and thats why the state footed the bill.

    Your example is saying the bookie has bills to pay too which is irrelevant to the situation. Quinn and Anglo lost money to some other persons or entity. If there never was any money and nobody benefited there would be no bill. There was money as it was borrowed by Anglo, somebody did benefit as that money went to Quinn and then elsewhere as a result of losses on contracts for difference. And there most certainly is a bill as the state is paying it.

    Anglo borrowed money, lent it to Quinn who lost it and now the state is paying it back. Whether or not whoever got that money lost it again is irrelevant, all thats relevant is that nobody but the state had the money to pay it back.

    We may be at cross purposes.

    I was taking issue with the notion that there was someone out there (preferably in Ireland) with the €2 bn that Quinn/Anglo lost that could be got at in some way by the Irish State.

    The bookie in my example corresponded to the guy with the €2 bn Quinn lost. There is no such person.


  • #113
    Good loser
    Registered Users, Registered Users 2 Posts: 3,265 ✭✭✭Good loser


    recedite wrote: »
    No, this is the answer you gave;

    Even if the bookie started the day down €50,000 because he had a bad previous day, the €50,000 he makes today from our punter brings him back up to breakeven point, and he gets to stay in business.
    You're saying that just because he lost money on some other gamble, that this one makes no difference to him?

    The point of my example was to try to elucidate the thread topic 'where did all the money go?'

    My understanding of the issue came from Scofflaw and others earlier.

    I was adding a simple (as I thought) example and lobbing it into the debate.

    Your last sentence shows you misunderstand the example. See my reply to MB above.

    The point was that if a bookie won €50,000 from a race that he did not necessarily have that €50K an hour, a day, a week or a year later. The guys who won on the Quinn gamble are not now still sitting there with the €2 bn winnings.

    Scofflaws examples showed that most of the money is a debt sitting in the banks books.

    Your example of the farmer is extremely fanciful. You must take Scofflaws example as he gives it - he does not hang much on the farmer's use of the money; it is small beer in the context of the €20 m debt it pyramided.

    Do you believe there is a crock of gold?


  • #114
    MungBean
    Closed Accounts Posts: 3,915 ✭✭✭MungBean


    Good loser wrote: »
    We may be at cross purposes.

    I was taking issue with the notion that there was someone out there (preferably in Ireland) with the €2 bn that Quinn/Anglo lost that could be got at in some way by the Irish State.

    The bookie in my example corresponded to the guy with the €2 bn Quinn lost. There is no such person.

    No no I accept the state is left with the bill with no chance of reclaiming it which is my major issue, the taxpayer paying for Quinn's failed gamble. The state is paying for money Quinn lost to the "bookie".

    All I have been saying is that one's loss is another’s gain and that in this case Quinn and Anglo didnt lose anything as they never had it, the state lost and its loss is somebody else's gain. Whether it was Wall St traders, German banks or somebody/something else 2bn was gained somewhere that Quinn and Anglo couldnt back up.

    My issue is with the fact that the "money" hasnt disappeared in the case of Quinn. It was "gambled" away by Quinn, it was money transferred from Quinn to somewhere else after the bet went wrong. As for it not being money as such it doesnt matter as Quinn didnt have it and Anglo didnt have it the line of credit was extended to the "beneficiary" of those bets to the state.

    In regards to bond holders and property investments I didnt initially understand how it was different to this type of situation. Bondholders lent money, Banks relent that money, developers spent that money. Where did they spend it ? Who gained as they lost.

    But from this thread it doesnt seem as simple as that. From what I gather the banks didnt just lend bondholder money they lent money they didnt have. Bondholder money was borrowed and lent too and more bondholder money was borrowed to roll over the debt. I'm using "lent" here to cover whatever else the bank did too whether it was investments or whatever its all money out of the bank. When the bondholder money stopped coming and the price of the assets backing up their loans dropped they were caught owing much much more than they could even recoup from what they had lent. State pays back bondholders, the "created" money is still owed by developers but in all likelihood it will never be repaid and so the bank gets the assets instead which have dropped in value meaning from the banks point of view money has "disappeared". But I'm still of the view that the money has been spent by the developers. Once that money is created and lent by the bank it doesnt disappear until its paid back with profit. Until it is then its money that has been transferred elsewhere.

    Thinking aloud as I was writing that so apologies for rambling and I'm still very confused about all this disappearing money business.


  • #115
    antoobrien
    Registered Users, Registered Users 2 Posts: 6,106 ✭✭✭antoobrien


    MungBean wrote: »
    No no I accept the state is left with the bill with no chance of reclaiming it which is my major issue, the taxpayer paying for Quinn's failed gamble. The state is paying for money Quinn lost to the "bookie".

    All I have been saying is that one's loss is another’s gain and that in this case Quinn and Anglo didnt lose anything as they never had it, the state lost and its loss is somebody else's gain. Whether it was Wall St traders, German banks or somebody/something else 2bn was gained somewhere that Quinn and Anglo couldnt back up.

    My issue is with the fact that the "money" hasnt disappeared in the case of Quinn. It was "gambled" away by Quinn, it was money transferred from Quinn to somewhere else after the bet went wrong. As for it not being money as such it doesnt matter as Quinn didnt have it and Anglo didnt have it the line of credit was extended to the "beneficiary" of those bets to the state.

    In regards to bond holders and property investments I didnt initially understand how it was different to this type of situation. Bondholders lent money, Banks relent that money, developers spent that money. Where did they spend it ? Who gained as they lost.

    But from this thread it doesnt seem as simple as that. From what I gather the banks didnt just lend bondholder money they lent money they didnt have. Bondholder money was borrowed and lent too and more bondholder money was borrowed to roll over the debt. I'm using "lent" here to cover whatever else the bank did too whether it was investments or whatever its all money out of the bank. When the bondholder money stopped coming and the price of the assets backing up their loans dropped they were caught owing much much more than they could even recoup from what they had lent. State pays back bondholders, the "created" money is still owed by developers but in all likelihood it will never be repaid and so the bank gets the assets instead which have dropped in value meaning from the banks point of view money has "disappeared". But I'm still of the view that the money has been spent by the developers. Once that money is created and lent by the bank it doesnt disappear until its paid back with profit. Until it is then its money that has been transferred elsewhere.

    Thinking aloud as I was writing that so apologies for rambling and I'm still very confused about all this disappearing money business.

    That's the principle retail banking lending has been founded on for hundreds of years. It's (usually) a calculated risk.

    The biggest problem over the past few years is that the banking industry has grown faster than regulation has been willing or able to keep up.


  • #116
    [Jackass]
    Closed Accounts Posts: 9,193 ✭✭✭[Jackass]


    A simple model of what happens to your money.

    Let's assume you uncover a hidden treasure of EUR10,000 of real, legitimate paper cash. For arguments sake, and for the sake of clarity in this example, lets assume that there is only one bank, and only this money you have uncovered is used in the following example, again, for the purpose of clarity.

    You decide that you want to deposit this money to the bank. So we will track what happens to this form of "real" cash over time.

    You deposit this cash to the bank, they are delighted. And, under the practice of fractional reserve lending, they put 10% in the bank vault (EUR1,000), and then they lend out the remaining EUR9,000. (banks only retain approxiamtely 10% of all deposits in real capital - in theory )

    So the bank then lends this EUR9,000 of your money to a lady who then goes out and buys a car.

    The car dealership says thank you very much, and they then deposit the EUR9,000 from the car sale into the same bank.

    The bank now puts EUR900 of this aside (10%), and lends EUR8,100 to a couple who are getting married.

    This couple then goes out and has a wonderful wedding, and all of the venue, catering etc. all lodge the money the couple spent to the same bank.

    The bank now puts 10% of this next lodgement aside as usual (EUR810), and lends out the remaining EUR7,290 to someone else....

    At this point, the bank now has EUR2,710 in "fractional reserve" from all of the above transactions, and they have a total amount owing to them from customers on their loan books of EUR24,390, of which they are all paying 5% interest.

    Now, how can a total material wealth of EUR27,100 (amount owed to them by customers + the amount held in capital reserve) have come in a couple of days from a single EUR10,000 deposit that you made?

    By the time the bank has EUR10,000 in their "vault" in reserve from this cylce (i.e. when all of your money is actually back in the bank), they will have EUR90,000 loaned out to customers, paying interest on it, but your entire EUR10,000 is now back in the vault, which you then withdraw the following day...so where did this EUR90,000 come from, that all of these people are paying interest on, when it doesn't really exist...

    Essentially, over a long enough time scale, trillions upon trillions of money is lent to people, when in reality, it does not exist. Banks have set up a system where they are lending us money that does not exist, only shows up in accounting ledgers and computer screens, but has literally been plucked out of thin air, and has made a society of debt slaves, going out, working, and giving all of their money to the bank, for the benefit of a couple of paper transactions, that never really happened in the first place...

    Take the above example, and when EUR300,000 of fictional wealth is created, this is then lent to you, who goes and buys a house, and the developer then lodges this money into the same bank. Nothing has really happened, no money has been printed, no valuable metals have been mined, the bank has merely moved some figures around on a piece of paper or computer screen, and you are now paying them most of your money for the rest of your life, and the developer is now borrowing all of the money it's "giving back" to the banks to clear the debt from the previous project..

    The financial system is a scam. And it's a business of thin air transactions.

    Then, it's a whole other system in place that runs the bank of England, the Federal Reserve and the European Central Bank, that are not Government run and owned institutions, contrary to popular belief, these are privately owned, by the banking system, which fundemantally agree to control monetary conditions for a Government, print money when they need it, but they control the supply and circulation of money, so control interest rates and rate of inflation. They can print money, devalue your money, increase inflation, as you to borrow and entice you to borrow with low interest, lock you in, increase interest rates, milk you dry, boom, bust, boom, bust, boom, bust. It's an endless cycle, and it's all controlled by the banks.

    What Governments do is almost immeterial.

    But the current situation is far from a banking "crisis", they now have a world indebted, who are contracted to pay this money back, and then get all the money they've lent out back off the people they lent it to through their Government tax collection, and are bailed out no matter how much they lend, and have now created a whole new level of wealth where they have pulled the biggest scam of all, leanding until they bankrupt themselves, tie in an entire generation into unsustainable wealth they must slave to pay back, and get the money back instantly through your taxes, and will begin the process all over again.

    "It is well enough that the people of our nation do not understand the banking system, as if they did, I believe there would be a revolution before the morning." - Henry Ford 1922


  • #117
    recedite
    Closed Accounts Posts: 13,989 ✭✭✭✭recedite


    Good loser wrote: »
    Your example of the farmer is extremely fanciful. You must take Scofflaws example as he gives it -
    Bull$hit. Start thinking for yourself and give a proper reason if you want to criticize my opinions. How is it fanciful?
    Do you believe there is a crock of gold?
    I already gave my opinion on that, the taxpayer is left with a crock of $hit;
    recedite wrote: »
    Technically money is not wealth, but at the end of the day I think we can all agree that the property bubble scam resulted in a massive transfer of wealth from the public purse (the taxpayer) to private persons.

    Having said that, many of those private individuals are taxpayers, or maybe pension funds run for the benefit of ordinary taxpayers. So there is some overlap.

    Lets look at the biggest losers; ordinary taxpayers who stayed away from bubble investment gambles, but still end up covering the losses for the next 30 years.

    The biggest winners; anyone who sold land or shares and converted the proceeds into something tangible, or perhaps stashed the cash in the Isle of Man.
    Also a speculator who defaulted on a loan and now spends the winter living in a villa in Tuscany as a tax exile, flying in and out of Baldonnel airport in his private plane without any passport control, so nobody knows where he is actually resident. (No person in particular)
    My gripe is with the system that fleeced us, and will continue to fleece us.


  • #118
    Good loser
    Registered Users, Registered Users 2 Posts: 3,265 ✭✭✭Good loser


    recedite wrote: »
    Bull$hit. Start thinking for yourself and give a proper reason if you want to criticize my opinions. How is it fanciful?


    I already gave my opinion on that, the taxpayer is left with a crock of $hit;

    My gripe is with the system that fleeced us, and will continue to fleece us.

    Such strong language! At least MungBean is making an honest effort to understand the subject.

    You don't appear to have learned anything from the thread. Your mind is closed to reason.

    You take Scofflaw's farmer and speculate that he used his money to build two houses for €1m which increased to €2m and are now worth €1m.
    This trite example then supports your theory of a massive transfer of money from the taxpayer (as a liability) to private citizens; it's a very small (and fanciful) example on which to base a theory to explain our current situation. The farmer at the base of Scofflaw's pyramid was a minor actor and is irrelevant relative to our current state; it was the leveraging what did it. Your theory is based on a whole series of bookies (my example) winning massive once off bets, banking the proceeds and living like princes for the rest of their lives.
    [What if the farmer bought bank shares?]

    As far as I understand it you do not believe in one crock of gold but in thousands and thousands of them.

    For the fairies!


  • #119
    zenno
    Closed Accounts Posts: 5,377 ✭✭✭zenno


    [Jackass] wrote: »
    A simple model of what happens to your money.

    "It is well enough that the people of our nation do not understand the banking system, as if they did, I believe there would be a revolution before the morning." - Henry Ford 1922

    This is the truth... Thrive..



  • #120
    davoxx
    Banned (with Prison Access) Posts: 2,539 ✭✭✭davoxx


    it's kinda sad that nobody understood this .. or cared to try to understand it ...


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  • #121
    ianuss
    Registered Users, Registered Users 2 Posts: 3,020 ✭✭✭ianuss


    I'm sorry, but David Icke has no place in an economics forum.


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