How much will this cost me

[Rorschach]

I can only imagine that many pubs and restaurants will more or less disappear in the short term, at least.

Yes I think so, bigger chains might be able to carry on, though some branches will close I am sure. It's the independents that will suffer most. Same goes for shops, already several have gone under and we still have another week at least before any kind of re-openings.

 

[Trainee neophyte]

I was possibly a bit trollish this morning - apologies for that. There are some unusual things unfolding at the moment, and it will be interesting to see where it all ends up.

Firstly, the reality of money is going to be better understood after all of this. I.e. money is created out of nothing, at no cost, by banks who then get to charge interest on that money. A phenomenal scam in anyone's book. The creating of astounding amounts of new money is going to have some effects, but what and where is yet to be seen.

Secondly, people are going to want to save rather than spend, for quite some time. The fact that saving is actively discouraged by the system may mean drastic actions will have to be taken: digital currency and negative interest rates to steal your savings would be one option to force you to spend.

Finally, never let a good crisis go to waste: the initial deflationary crash will crush many businesses - assets will be available to be bought for pennies. If you happen to have cash available, then serious fortunes can be made. If you happen to be close to the creators of new money, you could end up owning everything. The conspiracy theorists claim that these crises are intentionally engendered for exactly that purpose - to let the super rich become super richer, at everyone else's expense. As it stands, the "free market" will be reduced, and monopolies and cartels will benefit by squeezing out the competition. Thise closest to power will get bailed out, and their lesser competition crushed. We, the little people, will all lose out by paying higher prices and having less choice.

 

[Blackswanwood]

Firstly, the reality of money is going to be better understood after all of this. I.e. money is created out of nothing, at no cost, by banks who then get to charge interest on that money. A phenomenal scam in anyone's book. The creating of astounding amounts of new money is going to have some effects, but what and where is yet to be seen.

.

Could you share the secret of creating money out of nothing ... this could solve a lot of problems :roll:

 

[Trainee neophyte]

Firstly, the reality of money is going to be better understood after all of this. I.e. money is created out of nothing, at no cost, by banks who then get to charge interest on that money. A phenomenal scam in anyone's book. The creating of astounding amounts of new money is going to have some effects, but what and where is yet to be seen.

.

Could you share the secret of creating money out of nothing ... this could solve a lot of problems :roll:

Ahh, well - if you or I do it, we go to prison. Banks can do it with impunity. Funny old thing, life.

Edit: here's how it works: https://www.bankofengland.co.uk/quarter ... rn-economy

This article explains how the majority of money in the modern economy is created by commercial banks making loans.
· Money creation in practice differs from some popular misconceptions -- banks do not act simply as intermediaries, lending out deposits that savers place with them, and nor do they ‘multiply up’ central bank money to create new loans and deposits

 

[Blackswanwood]

Firstly, the reality of money is going to be better understood after all of this. I.e. money is created out of nothing, at no cost, by banks who then get to charge interest on that money. A phenomenal scam in anyone's book. The creating of astounding amounts of new money is going to have some effects, but what and where is yet to be seen.

.

Could you share the secret of creating money out of nothing ... this could solve a lot of problems :roll:

Ahh, well - if you or I do it, we go to prison. Banks can do it with impunity. Funny old thing, life.

Edit: here's how it works: https://www.bankofengland.co.uk/quarter ... rn-economy

This article explains how the majority of money in the modern economy is created by commercial banks making loans.
· Money creation in practice differs from some popular misconceptions -- banks do not act simply as intermediaries, lending out deposits that savers place with them, and nor do they ‘multiply up’ central bank money to create new loans and deposits

Yes, I’m familiar with that article. You’ve missed a couple of key points though - it’s not out of nothing or at no cost.

 

[Trainee neophyte]

Yes, I’m familiar with that article. You’ve missed a couple of key points though - it’s not out of nothing or at no cost.

You obviously know a lot more than I do about these things - I'm just the cynic looking in from the outside. However, if it is not "out of nothing", where does the increase in money supply come from? It can't be from previously existing money, because it didn't exist before being created, so where does it magically come from? As for there being a cost, I would say that it is irrelevant accounting until such time as the bank needs a bailout, whereupon the bank WILL be bailed out, and the public WILL be saddled with the debt. In other words, a transfer of wealth from the public to the bank. This is going to happen again, quite soon - and this time we have the legislation for bail-ins, where they just steal money directly from peoples' bank accounts.

But, as I said, I am no expert so your thoughts would be very welcome.

 

[Chris152]

Edit: here's how it works: https://www.bankofengland.co.uk/quarter ... rn-economy

Well, I just gave that two viewings Tn and can honestly say I'm absolutely none the wiser! In my world, you labour and get paid some money in exchange for your time and efforts. You then blow that on bills and stuff. It's bizarre how the likes of me can spend our lives not really having a clue how the very system we spend most of our lives working for (money), works. I'm off to see if my laser printer can manage a passable likeness of a £50 note.

 

[Trainee neophyte]

Edit: here's how it works: https://www.bankofengland.co.uk/quarter ... rn-economy

Well, I just gave that two viewings Tn and can honestly say I'm absolutely none the wiser! In my world, you labour and get paid some money in exchange for your time and efforts. You then blow that on bills and stuff. It's bizarre how the likes of me can spend our lives not really having a clue how the very system we spend most of our lives working for (money), works. I'm off to see if my laser printer can manage a passable likeness of a £50 note.

I think of labour as hours of my life I will never get back, doing things I don't want to do, for people I don't like very much. The government then takes about half of your total income in taxes, one way or another, so all that labour - all those hours of your life, for what purpose? Who benefits?

I am officially allowed to go the beach on Monday - woo hoo! I used to have a job, but I'm alright now.

 

[Chris152]

I assume you've used lockdown wisely, Tn, and will be launching your newly built wooden SUP on Monday...

 

[Trainee neophyte]

I assume you've used lockdown wisely, Tn, and will be launching your newly built wooden SUP on Monday...

pineapple! Too busy before Christmas, too disorganised after Christmas, and then 80% of my income was taken away from me - no spare cash for fripperies. I may make one anyway - it's only €200, and how much food do children need, anyway?

 

[Blackswanwood]

But, as I said, I am no expert so your thoughts would be very welcome.

Banks have to hold capital - if you cannot sleep Google Basel III. Since the credit crunch when banking regulation was arguably flawed the amount of capital needing to be held has increased (as has the level of scrutiny by regulators). So, a bank needs to hold a significant amount of money on deposit itself deposited with the Bank of England (if a UK Bank).

Banks are regularly stress tested - the regulator says assume the economy goes to hell in a handcart and if they wouldn’t have enough capital to survive banks have to produce a plan and quickly deposit more money with the BoE.

Banks have had to structure themselves so if they do get into trouble part can be allowed to fail (go bust) but those parts that are essential can continue. Deposits are protected to a well advertised limit but their shareholders are not. Unlike what happened after the credit crunch the regulatory regime holds the people who make decisions in banks personally liable and accountable if they screw things up.

After three beers on a Friday night that’s a quick explanation. Banks where you live may be different and don’t get me wrong there are things that could be better in the banking and financial system but I just don’t believe the conspiracy rollocks!

Anyway - how are you getting on with your Walnut timber harvesting? I was hoping they were going to come out like Turkish Walnut and was a bit surprised when you posted the pictures.

Cheers.

 

[Trainee neophyte]

But, as I said, I am no expert so your thoughts would be very welcome.

Banks have to hold capital - if you cannot sleep Google Basel III. Since the credit crunch when banking regulation was arguably flawed the amount of capital needing to be held has increased (as has the level of scrutiny by regulators). So, a bank needs to hold a significant amount of money on deposit itself deposited with the Bank of England (if a UK Bank).

Banks are regularly stress tested - the regulator says assume the economy goes to hell in a handcart and if they wouldn’t have enough capital to survive banks have to produce a plan and quickly deposit more money with the BoE.

Banks have had to structure themselves so if they do get into trouble part can be allowed to fail (go bust) but those parts that are essential can continue. Deposits are protected to a well advertised limit but their shareholders are not. Unlike what happened after the credit crunch the regulatory regime holds the people who make decisions in banks personally liable and accountable if they screw things up.

After three beers on a Friday night that’s a quick explanation. Banks where you live may be different and don’t get me wrong there are things that could be better in the banking and financial system but I just don’t believe the conspiracy rollocks!

Anyway - how are you getting on with your Walnut timber harvesting? I was hoping they were going to come out like Turkish Walnut and was a bit surprised when you posted the pictures.

Cheers.

Every time I almost finish, someone gives me another tree! Poplar this time, which is very straight, and not as bland as I expected. The walnut is almost all done - not sure what to make of it, or from it - at least I have a year to puzzle over it all. I have run out of sticks to sticker it, so using bamboo as a temporary freebie resource, but it's not ideal.

Re stress tests and Basel III etc - Deutsche Bank passes with flying colours, every time, so what could possibly go wrong?

 

[RogerS]

..

Could you share the secret of creating money out of nothing ... this could solve a lot of problems :roll:

Ahh, well - if you or I do it, we go to prison. Banks can do it with impunity. Funny old thing, life.

Edit: here's how it works: https://www.bankofengland.co.uk/quarter ... rn-economy

This article explains how the majority of money in the modern economy is created by commercial banks making loans.
· Money creation in practice differs from some popular misconceptions -- banks do not act simply as intermediaries, lending out deposits that savers place with them, and nor do they ‘multiply up’ central bank money to create new loans and deposits

Yes, I’m familiar with that article. You’ve missed a couple of key points though - it’s not out of nothing or at no cost.

It is in TN's alternative universe that only he is privy to.

 

[Trainee neophyte]

It is in TN's alternative universe that only he is privy to.

By all means put me straight - the government (probably all governments) are about to increase spending radically, by increasing borrowing. The "money" that they will borrow doesn't exist yet - where will it come from? What makes the magic happen? Why should you, as a tax payer, be saddled with perpetual interest payments on the debt, if it was created out if nothing?

We can talk about QE, direct monetisation and other such excitement, but the majority of debt, both public and private,will be issued by private banks. How? From where? It didn't exist yesterday, but tody it does - where did it come from? More importantly, why can they do it, but I can't?

 

[Chris152]

Trying to understand the very basics of this! Just looked at: https://www.bbc.co.uk/news/business-15198789

Is it like a confidence trick? You want more money circulating so you make the gold-buying-power of GBP (for example) lower and print/ create more. So now it costs £200 to buy the bit of gold that yesterday cost £100? (Does the gold still come into it at all?) GBP is worth less in reality, but in practice it carries on being used as before - so a house that was worth £500K before QE should now cost £1000K but it doesn't, so there's 500K left over to buy other stuff and keep the economy going. And that's fine til someone asks about the true correlation between GBP and gold/ house (once the house has risen in value to £750K), we realise there's a gap, and we have 2008 again?

 

[Trainee neophyte]

Trying to understand the very basics of this! Just looked at: https://www.bbc.co.uk/news/business-15198789

Is it like a confidence trick? You want more money circulating so you make the gold-buying-power of GBP (for example) lower and print/ create more. So now it costs £200 to buy the bit of gold that yesterday cost £100? (Does the gold still come into it at all?) GBP is worth less in reality, but in practice it carries on being used as before - so a house that was worth £500K before QE should now cost £1000K but it doesn't, so there's 500K left over to buy other stuff and keep the economy going. And that's fine til someone asks about the true correlation between GBP and gold/ house (once the house has risen in value to £750K), we realise there's a gap, and we have 2008 again?

Modern currency has no underlying value. Zip. Nada. Nothing. It is fiat currency. From Wikipedia:

" Fiat money is a currency established as money, often by government regulation, but that has no intrinsic value. Fiat money does not have use value, and has value only because a government maintains its value, or because parties engaging in exchange agree on its value.[1] It was introduced as an alternative to commodity money and representative money. Representative money is similar to fiat money, but it represents a claim on a commodity (which can be redeemed to a greater or lesser extent)."

All currencies have been removed from any underlying value since 1971. Guess when inflation went stratospheric...

“Lenin is said to have declared that the best way to destroy the Capitalist System was to debauch the currency. By a continuing process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens. By this method they not only confiscate, but they confiscate arbitrarily; and, while the process impoverishes many, it actually enriches some.”
― John Maynard Keynes, The Economic Consequences of the Peace

 

[Trainee neophyte]

How to win with inflation: own assets. Assets increase in "value" faster than wages increase. Asset owners win out over labourers.

During deflation, asset "values" decrease faster than wages, so the labourer wins. This is why deflation is sold as being the most evil, dangerous thing that could ever happen to an economy. Imagine enriching the workers at the expense of the asset owners! Blasphemy!!!

 

[Blackswanwood]

It is in TN's alternative universe that only he is privy to.

By all means put me straight - the government (probably all governments) are about to increase spending radically, by increasing borrowing. The "money" that they will borrow doesn't exist yet - where will it come from? What makes the magic happen? Why should you, as a tax payer, be saddled with perpetual interest payments on the debt, if it was created out if nothing?

We can talk about QE, direct monetisation and other such excitement, but the majority of debt, both public and private,will be issued by private banks. How? From where? It didn't exist yesterday, but tody it does - where did it come from? More importantly, why can they do it, but I can't?

You cannot do it because I am guessing that you don’t have the billions of capital needed to lodge with a central bank to convince them to give you a licence to do it. This then becomes a bit circular as clearly you need the capital (and a whole host of other things) to be a Bank so you are not making money out of nothing. (The Bank of Trainee Neophyte Plc also doesn’t sound quite right :lol: :lol: )

If we take a step back though when Adam met Eve no money existed. (If it had he might have taken her to the cinema rather than just nicking an apple). Money is a promise that enables a transaction to take place with a party making a promise to make good the transfer of value. The note, coin or whatever else is used to represent it is a record of the promise. Where a loan is involved the interest relates to the risk of default and the cost of the use of the capital (i.e. the money stumped up by the shareholders to set up the bank)

Obviously the morals, pros and cons of the monetary system, regulation, pricing of credit and banking ownership can all be debated but I won’t be doing as it risks getting into politics which isn’t for this forum. I would just say again though that I am not arguing that any of them are without fault but the conspiracy angle is just utter rubbish.

I’m off to do some woodwork - have a good day!

 

[doctor Bob]

These threads seem to go the same way, most of the last 2 pages is a repeat of the brexit thread. seemed like incoherent ramblings back then as well.

 

[Chris152]

Modern currency has no underlying value. Zip. Nada. Nothing. It is fiat currency. From Wikipedia:

" Fiat money is a currency established as money, often by government regulation, but that has no intrinsic value. Fiat money does not have use value, and has value only because a government maintains its value, or because parties engaging in exchange agree on its value.[1] It was introduced as an alternative to commodity money and representative money. Representative money is similar to fiat money, but it represents a claim on a commodity (which can be redeemed to a greater or lesser extent)."

Strewth. So the 'promise' on my £10 note to pay the bearer on demand 'the sum of' means nothing, because there's nothing beyond it apart from a number in an account on a computer that allowed for the printing of the note? I'm sorry to be so utterly naive, but this is mind blowing - or, rather, I'm amazed that I didn't know. I assumed there was still a little bit of gold that i could trade the piece of paper in for. There's got to be an introductory book for idiots on how all this works - can anyone recommend one?