Friday, 8 August 2008

Financial basics : Banking Part 1

Warehouse banking (unique item.)

A warehouse bank is one where you go and leave your valuable for later collection. You pay a fee to the banker to look after your stuff and he keeps it safe and sound for you. If this is an antique piano or a distinctive bit of jewelry then it is obvious when your item is or isn't in the bank.

Warehouse banking (non unique items.)

A warehouse bank is one where you go and leave your valuables for later collection. You pay a fee to the banker and he puts your non unique item (grain, gold coin, fiat paper money etc) into a big pot with other similar looking items and when you come back to reclaim you are given an equivalent amount in return, but it almost certainly won't be the exact same items as you deposited, just a replacement that is very ,very similar.

If I put £100 in pound coins into a bank on Monday, the odds of me getting the exact same pound coins back are almost nil if I return a week later.

Why is this distinction important?

Simply because ownership is incredibly hard to prove in the case of non unique items, especially if no attempt is made to keep track of who owns what.

Right...so what?

If no attempt is made to keep track of who owns what then an unscrupulous person can use that "fog of war" to their advantage. To give an example from our unique item warehouse bank -

I give the banker my antique Bentley piano to look after and pay him a fee. I think that my piano is safe in storage, being well looked after and have paid a sum of money to the banker to do this looking after. One night I go out to a concert hall to watch a performance...there, on the stage is what looks surprisingly like my piano. It can't be, can it?

I wait impatiently through the performance and then explain the situation to the management, who are anxious to quell my fears and so let me have a (supervised of course) look at the piano after the performance is done. My god! It IS my piano, I can tell by the markings, the security ink and so on.

Surely the banker would have called me to tell me he had been robbed?

No?

Ahhh...the banker has loaned my piano for a fee to the pianist! The swine! But at least he has now been caught and both the pianist and I can reclaim our money and the banker can go to jail for his fraud.

But...what if....I cannot tell my item apart from all others?

So..what if I gave the banker some fiat currency and he loaned it to someone else...would I be able to tell? Would anyone?

Probably not. Even the banker would become hopelessly confused once the paper had started to circulate. Lets have a three man analogy. Dave, Bob and John.

Dave owns a shop, Bob has £3,000 which he wants the bank to look after and John has next to nothing but is willing to work and borrow. Bob puts his £3,000 in the bank, the banker tells him it will be safe.

John agrees to borrow the £3,000 from the banker at interest, and then he spends it at Daves shop. Dave, fearing theft, sensibly puts it into the bank. There is still only £3,000, but the bankers books show much more money than that (called broad money by bankers, this is just a recording of frauds like double billing, double counting, misplacing assets in the liability column and so on.)

As we see, the situation is already extremely complicated. Several people all think they have claims to the £3,000 but actually it was only ever owned by Bob. It never ceases to be Bob's money. Everyone else has just used it. Such procedures if done openly would no doubt attract a fee, if left in the dark and ownership is claimed by multiple people they are flat out fraud. Fraud done in ignorance by some, but deliberately by others, but fraud all the same.

This leads to the interesting position where the banker can have the £3,000 in his possession but be also at the same time on the phone to John asking him when he is going to "get his money back." Worse, John will probably believe that the banker is somehow out of pocket. Even worse, the banker can make a good show of having lost money in a courtroom and so John will probably go bankrupt, even if he works out he has been defrauded. Unless he can come up with something like proof of what the banker has done or can find some way to highlight the fraud he is snookered.

Similarly, it can lead to the position where two people arrive at the bank to pick up "their" £3,000 at the same time and both of them will be going home empty handed because the banker has loaned it to someone who hasn't brought it back to the bank (yet.)

This whole complicated mess can be easily avoided by keeping track of whose property is where.

Accurate recording could end all banking crisis forever, this is blatantly obvious - but then there are no opportuinites for the bankers to misrepresent their way to wealth and power.

For example - right now there are roughly £50billion in legal tender in the united kingdom, most of which is in the possession of the bankers and there are also trillions of pounds of imaginary debts.

No one owes them anything, they already have it.

7 comments:

Curious said...

related to your story and so far i dont know what the answer is, those mistrusting Germans have begun asking for German paper Euros which begin with an X in the serial number. Now if you deposit your X serial number euros in a bank are they deposited as X serial numbers? Can you ask for your X serial numbers back? What if you dont know that you deposited X numbers in and only get Greek ones out? What happens when it all goes to custard and you find you have spanish euros that are worth nothing? Seems strange to me that you can have a single currency with different notes? Plus ca change plus que c'est la meme chose! Kind of funny really!

Injin said...

THe germans have a long and painful history with the bankers, it's where a lot of Hitlers original support came from - the reparations, the hyperinflations, the collapses were all pinned on the bankers...who were mostly jewish.

This then got subverted and lead to the terrible evil that was unleashed.

It really doesn't matter though, the bankers have everything "legally" locked up very tightly indeed. Any legal tender note is payment for a debt, so until there is a legal or societal change the bankers will be able to hand over whatever sort of euro they like and it will have to be accepted, however grudgingly.

Obviously in the near future the banks will collapse due to hyperinflation, pretty much everywhere in the western hemisphere.

I'll explain why once I have the basics of banking covered, but it's all to do with printing money to replace lies.

Builder said...

"there are many ways to expose a fraudster, not just by releasing money as debt videos."

That video says clearly that banks *must* maintain a deposit to loan ratio of 10:9. It also says that the ratio can be anything at all. But if you assume it is 10:9 then 1111.11 of Central bank money deposited at the central bank allows a loan of 10,000 to be created *if* the deposit ratio is maintained.

The video seems to be saying that theoretically a bank can create 100,000 of money from debt from its 1111.11 high power money on central bank deposit but it seems to omit to mention that to do that it needs on deposit 100,000 of new money that it never had to lend out the additional 90,000 that supposedly it has conjured up out of thin air. No matter how many banks you have in this closed system they still do not create any money if they have to maintain the deposit ratio.

The first loan to buy the car makes the bank in breach of central bank regulations unless they have *already* collected deposits to cover that loan - dispite all the words and pictures used.

Everything you need to know is in the video. But the videos conclusions seem totally wrong.

Injin said...

The actual banking system doesn't work anything like the money as debt video.

Although it does describe the various contractual arrangements pretty well, those arrangements do not match reality much.

It's a bit like a priest waving his hands over a piece of unleavened bread. If you ask an empiricist he'll say "he's waving his hands over unleavened bread."

If you ask a believer he'll say "he's turning the bread into the body of christ."

Similarly, if we believe the contracts and the accounting then we think the money from nowhere myth is true. The laws of physics tell us this is impossible, therefore the myth has to give way.

If we look at it emprically we say "that man is asking to have returned to him something he already has."

Builder said...

I do not think christians believe priests perform miracles with bread. It is just symbolic.

You can though argue as you are doing that priests are performing miracles in the christian tradition and we would have to agree to disagree on that one.

From my point of view a bank loan gives me an opportunity to use the accumulated labour of another mans life so that i can do work with his labour in return for an hourly charge so that when i return the loan i have done work i could never have done without the claim on that other mans labour that was given to me by the bank.

So it is no different to me to hiring a digger to dig a trench i could never dig with my own labour.

To suggest i have this power already at this point in time is totally nonesensical to me.

The bank provides me with power and i pay them for that privelidge.

I come though from an old fashioned time where getting a loan from a bank was a privelidge rather than a right.

Nobody has a right to get a claim on another mans labour, instead by some method they need to "earn" the right to get hold of that claim. How we earn the right then depends on our character and if we want to work for the right or just rob it or cheat our way to it.

Either way the bank requires effectively a piece of our flesh until we return the claim to the mans labour with interest and fees as agreed by us with them.

KM said...

Just came across your blog from listening to an archive of the No State Project so forgive me for commenting so late after its original posting.

I'm not sure that your premise is correct here. You are saying that the bank loaned John Bob's 3000 pounds but that just isn't the case. Let's say that Bob had banknotes designated as 3000 pounds. When he puts that cash in the bank it is converted into a credit (what you call PC money). What happens to the actual banknotes I don't know. But Bob has what he considers an equivalent 3000 pounds of credit in ones and zeros on the banks books. This is separate from John or Dave's dealings with the bank.

Now John comes along and wants to get a 'loan.' Of course I know that you know that banks don't loan anything b/c I heard you talk about the creation of money on the NSP. In fact they are not permitted to loan out their depositors' credits. All they do is monetize your promissory note. They take your promissory note as a gift (a demand deposit item) and give you 3000 pounds of credit in return.

At this point there is no fraud involved. The bank performed a valuable service in monetizing your note for which they get paid (usually loans have points on them that you pay at closing). The fraud in my opinion is the taking of interest on your note!

You created the note as a promise to pay so much in equivalent labor. Labor is the only real capital we have and is the substance upon which this whole system is based. So if it's a 30 year loan, your agreeing to labor at interest for 30 years for a house!? That seems a little long to me but to each their own. Now it seems to me since you created the note which backs the money (which in return is another note!) you are entitled to the interest paid for the use of your principle. After all the bank uses your 'loan' to allow them to secure other 'loans' thus allowing them to collect more fees. They are making money of your sweat equity!

Of course the bank doesn't see it this way. So they charge you the interest and usually over 30 yrs the interest is near equivalent to the loan amount! Not only that but they shift the tax burden to you in many cases (but that's another story).

This is how I understand the system to work so far. It is an unnecessarily complicated one so maybe I'm not seeing all the angles. Although I can smell that something rotten is going on.

Look forward to reading your blog! Especially like to hear your views on commercial slavery. I tend to think that is the consequence of what we are involved in as well.

Anonymous said...

Rubbish.

Ever heard of balance? You give an equal amount of the item class that you took and restore the balance.

Trees are money. I borrow A tree. I have to return A tree. Not THE tree.

Anyone who can't see this is a simpleton.