Great link. Thanks Shaun.

Hi FallingLeaf

Monday 19th Nov might be best for me. Perhaps meet at the Occupy Economics WG at Friends House.

Drop me a note nearer the time, either on here or at Forensic Statistician site.

Russian money in Cyprus; http://www.zerohedge.com/contributed/2012-11-04/bailout-russian-%E2%80%9Cblack-money%E2%80%9D-cyprus

German (secret service) report slipped out somehow. 150% of Cyprus GNP – at least.

Good one ! Distributed to my mates.

Joe, according to the Bank of England, they are a wholly owned subsidiary of the Department of the Treasury, and any profits made by the Bank are paid directly to Treasury. Another view is that the Bank is a private company that masks itself by having subsidiary status but, like the Federal Reserve, having certain ‘original’ shareholders (identities unknown) who benefit from Bank policy. The Bank has the independent ability to set interest rates since Gordon Brown changed the rule under New Labour, although how independent that is in practice I don’t know.

What is true is tax revenues are gathered, government bond sale revenue received, public services paid for and interest on national debt paid from a unified account, making it very difficult indeed to know whether our taxes actually go towards any services at all, or whether we are merely taxed to pay interest on the debt, and the debt is rolled over and grown to supply services.

Opaque isn’t the word.

Drfrank,

A major problem in the system is that a bank account is required. So there is a de facto monopoly by the cartel which no amount of caveat emptor or smell-testing can bypass. If a worker is required to have a bank account in order to have a job, then there is no way that it is really down to the worker to choose a bank which behaves properly and take the hit if it doesn’t because in a captive market, nobody behaves properly. That’s what cartels are. OPEC doesn’t give a damn what we think of them because they know we need their oil, and no matter what they do, we will still buy oil from them. If access to work means access to a bank account, then the banks have carte blanche to do their worst, end of story.

M_T_Wallet, you’ve asked the question. Here’s the answer:

With a deposit insurance scheme in place, it is guaranteed that banks will always be bailed out, as a bailout will always be cheaper for the government than paying off the deposits insured under the scheme. Absolute ironclad guarantee.

That in turn means that once the bailouts begin, a cycle of crisis/bailout/austerity/crisis again puts the country in question into a death spiral, the consequence of which is eventual default by government, full nationalisation or a total redesigning of the banking system. The only variables are the speed with which it takes place and the black swan/social distortions caused by ongoing austerity/crisis, e.g. the unexpected rise of fascism in Greece.

Neil Wilson and John Souter:

97% of the UK’s money supply is created by commercial banks themselves at the point where they make a loan. The loan itself is an additional deposit, not based on money presently on the bank’s books. The additional 3% is made up of notes and coin upon which the Bank of England reaps seignorage for the Treasury.

The Bank of England also creates ‘central bank money’ when it initiates bond purchases or other ‘asset relief’; the main function of Bank of England thin-air money creation however is to credit the central bank accounts of commercial banks in order to raise their allowed loan capabilities. That is what QE is – a simple accounting trick whereby the central bank credits the central bank accounts of the commercial banks participating in the central bank system (in the UK this is all banks above a certain balance sheet level, £50 million I believe).

Commercial bank deposits have nothing to do with the amount those banks lend – the capital reserve requirement applies to the central bank account balance of that bank in relation to its declared balance sheet. A bank does not lend money that it has on deposit. A bank loan is by definition the creation of additional deposits. The ‘fractional reserve’ system applies to central bank account/balance sheet ratios, not high street deposits.

As for deposit insurance, how many people would use a bank these days if (A) it wasn’t required in order to have a job or a home and (B) their money was not insured by the government? Not many, I’d venture. So we can see what the insurance scheme is for, to keep people comfortable with the idea of having their money in the bank.

So why do we insure the banks? Because they have our establishment in their pockets, plain and simple. For the cost of the bailout, we could have sent a cheque for £4000 to every person in the UK – do you think we would have had a recession if that had happened?

Max Keiser on coruscating form.

Hawkeye – great post. Groop – great suggestion re deposit insurance being tied to “originate and hold” banks. But with housing booms lasting quite a few years, as a CEO at a major bank, making huge compensation and gigantic bonuses, would I really care if it all fell apart several years down the line? By the time the boom ends, these guys are filthy rich, the company explodes, and the government ends up bailing out the depositors.

It’s a start, but has to go further. Interest rates, being kept artificially low, just cried out to speculators to enter the housing (and commodity) markets, which drove prices higher. Many banks were accepting 0% down. It needs to get back to where down payments are substantial, where people have to save for a few years before entering the market. That slows the process down, and since speculators want to get in and out, they’d think twice too.

And the amount of warehousing of commodities by major Wall Street banks (probably the same in Britain) and in China is unbelievable! There are warehouses full of copper (and other metals) in city after city in the U.S., artificially keeping prices up.

It’s a free-for-all fraud-fest.