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AERAS KOPANISTOS

Συνεχίζεται η ύποπτη αποσάρθρωση και η σκοτεινή υπονόμευση της Ευρωπαικής πολιτικής και οικονομικής Ενωσης, καθώς σαν αποτέλεσμα των μυωπικών «Γερμανικών» χειρισμών του προβλήματος «PIIGS» τίθεται σε αμφισβήτηση η ανεξαρτησία της ευρωζώνης και έμμεσα περνάει σε παγκόσμια κηδεμονία.

Με δεδομένη την είσοδο των Αμερικανών στην όποια λύση – με όχημα το ΔΝΤ και μέσω της Τράπεζας της Ελλάδας- στα ενδότερα της Ευρωπαικής Κεντρικής Τράπεζας στην Φρανκφούρτη, ολοκληρώνεται πολιτικά και διοικητικά η προσχεδιασμένη οικονομοπολιτική προσάρτησή της σαν ενα ακόμα βαγόνι στο παγκόσμιο τραίνο της Τραπεζοκρατίας. Αν το μοντέλο της ενοποιημένης Τραπεζοκρατίας θα λειτουργήσει με βάση τις ίδιες τραπεζικές αρχές που οδήγησαν τον κόσμο στην «Κρίση», μάλλον δεν θα πρέπει να περιμένουμε μία άμεση βελτίωση στο οικονομικό και κοινωνικό τοπίο του Δυτικού κόσμου.

Το –δήθεν- σκληρό ευρώ, ακόμα ενα fiat χαρτονόμισμα του Δυτικού κόσμου¨ κατ’εικόνα και ομοίωση του δολλαρίου, στηρίζεται σε… φρέσκο αέρα. Διαβάσαμε εδω το παρακάτω σχετικό άρθρο που επιβεβαιώνει αυτές τις απόψεις και στηρίζεται σε εκδόσεις της γερμανικής ομοσπονδιακής FED, της περίφημης Μπούντεσμπανκ. Αναδημοσιεύουμε και τα σχόλια ως έχουν…

ΑΕΡΑ αεριτζήδες. ( Και παριστάνει και την δύσκολη η κα Μέρκελ!!! )

Friday, March 19, 2010

German Central Bank Admits that Credit is Created Out of Thin Air

Most people think that banks lend solely from their base of deposits. Some also know that with fractional reserve banking, they can loan out many times more than they actually have in reserves.

But very few people – with the exception of those in the banking industry and financial experts – know where credit really comes from.

Germany’s central bank – the Deutsche Bundesbank (German for German Federal Bank) – has admitted in writing that banks create credit out of thin air.

As the Bundesbank states in a publication entitled “Money and Monetary Policy” pages 88-93

4.4 Creation of the banks money

Money is created by “money creation”. Both [central banks] and private commercial banks can create money. In the euro monetary system [money creation] arises mainly through the granting of loans, as well as the fact that central banks or commercial banks to buy assets such as gold, foreign currencies, real estate or securities. If the central bank granted a loan from a commercial bank and crediting the amount in the account of the bank at the central bank, created “central bank money.”

***

Money creation by commercial banks

The commercial banks can create money itself, the so-called bank money. The money creation process through which commercial banks can be explained by the related postings: If a commercial bank to a customer a loan, they booked in its balance sheet as an asset against a loan receivable the client – for example, 100,000. At the same time, the bank writes down the customer’s checking account, which is run on the liabilities of the bank’s balance sheet, 100,000 euros good. This credit increases the deposits of customers on its current account – it creates deposit money, which increases the money supply.

In other words, money is created as book-entry by purchasing assets or entering credits on the left side of the balance-sheet and corresponding deposits on the right side. In other words, credit is created out of thin air.

Frontiers of money creation

The above description might leave the impression that the commercial banks are able to draw an infinite amount of money in bank accounts. If this were really so, this could be inflationary. The central bank therefore takes effect on the extent of lending and money creation. It requires commercial banks to hold the reserve.

As I’ve previously pointed out, the Federal Reserve is taking the same tack, creating conditions that guarantee that American banks will have huge excess reserves so as to prevent inflation. Back to the publication:

Central banks, commercial banks can typically obtain only by the fact that the central bank granted them credit. For these loans, commercial banks have to pay the central bank interest rate. Increase this rate, the central bank, the “prime rate”, the commercial banks usually raise their part, the rates at which they lend themselves. There will be a general rise in interest rates. This, however, dampens the tendency of businesses and households, the demand for loans. By raising or lowering the key interest rate the central bank can thus influence the business sector demand for credit – and thus on Lending and bank money creation.

The commercial banks need central bank money to cover not only for the reserve, but also to the cash needs of its customers. Each bank customer may be credit in the bank account into cash to pay off. If the stocks of the banks in cash to be in short supply, the central bank can create only remedy. Because only they are permitted to bring additional notes in circulation. To meet the cash needs of its clients, the commercial bank must therefore include, where appropriate, with the central bank for a loan. This leads to the creation of central bank money. The so-purchased assets for central bank money can pay off the commercial bank in cash let. Thus, the cash is in circulation: from the central bank to commercial banks and from these to the bank customers.

Central Bank money is also to cover the non-cash payments are required: a customer transfers money from its credit to a customer at another bank, this results in many cases led to the sending bank central bank needs to transfer money to the receiving bank. The central banks then moves from one bank to another.

***

The commercial banks can use the surplus of central bank money and to award additional credits to businesses and households. As previously described, arises from the award of additional credits additional demand for central bank money – which can be covered in this special situation of great uncertainty among banks by the existing excess liquidity. The abundant supply of liquidity relief, a bank that wants to provide a loan, from the traditional consideration of how much money they need after the award of credit is, how it is constituted, and at what cost. Using the so-called money creation multiplier can be estimated how large the potential for additional Credit limit is.

Do you get it now?

Private banks don’t make loans because they have extra deposits lying around. The process is the exact opposite:

(1) Each private bank “creates” loans out of thin air by entering into binding loan commitments with borrowers (of course, corresponding liabilities are created on their books at the same time. But see below); then

(2) If the bank doesn’t have the required level of reserves, it simply borrows them after the fact from the central bank (or from another bank);

(3) The central bank, in turn, creates the money which it lends to the private banks out of thin air.

It’s not just Bernanke … the central banks and their owners – the private commercial banks – have been running the printing presses for hundreds of years.

Of course, as I pointed out Tuesday, Bernanke is pushing to eliminate all reserve requirements in the U.S. If Bernanke has his way, American banks won’t even have to borrow from the Fed or other banks after the fact to have reserves. Instead, they can just enter into as many loans as they want and create endless money out of thin air (within Basel I and Basel II’s capital requirements – but since governments are backstopping their giant banks by overtly and covertly throwing bailout money, guarantees and various insider opportunities at them, capital requirements are somewhat meaningless).

The system is no longer based on assets (and remember that the giant banks have repeatedly become insolvent) It is based on creating new debts, and then backfilling from there.

It is – in fact – a monopoly system. Specifically, only private banks and their wholly-owned central banks can run printing presses. Governments and people do not have access to the printing presses (with some limited exceptions, like North Dakota), and thus have to pay the monopolists to run them (in the form of interest on the loans).

See this and this.

At the very least, the system must be changed so that it is not – by definition – perched atop a mountain of debt, and the monetary base must be maintained by an authority that is accountable to the people.

Note: When I receive a better translation I will post it.

10 comments:

Bill Bergman said…

With all very due respect, I’m just reacting to the headline here, and perhaps to some of the fundamentals of the hypothesis.

Why is it that the fact that credit is created out of thin air all that earthshaking?

Consider a community store in the early 1700s in the US. Assume no bank. A person who grows tomatoes comes in, and wants to buy a loaf of bread a week before the harvest. The retailer says sure, I know you are good for it.

Poof. Money/credit is created. Or not?

March 19, 2010 6:24 PM

George Washington said…

I greatly respect your opinions. You say:

“Why is it that the fact that credit is created out of thin air all that earthshaking?”

It is obvious to a savvy financial expert such as you (100% sincerely). But it is the exact opposite of what most Americans believe. They believe that excess reserves – coming from deposits into the bank – are the basis for loans.

I added the following preface to this essay when I posted it to a financial site read by savvy financial experts:

“While this concept might be obvious to the financial experts who read [this site], it is a startling revelation for most people.”

March 19, 2010 6:32 PM

Anonymous said…

“While this concept might be obvious to the financial experts who read [this site], it is a startling revelation for most people.”

This all seems -an- innocuous enough estimation of perceptions here there and everywhere else…

The delusion concerning common mistaken perceptions about competence in these matters would come more clearly into view -however-, were any one of the many fine financial experts here -or anywhere- give the milling crowd of economic-blind-men an estimation concerning the proportional relationship between size of the real economy of goods and services -and- the size of the extended credit-innovation-economy that so tenuously supports our modern economic-idiocy most seem so utterly incompetent in comprehending.

In other words, the world can easily suffer the guy with the tomato crop being wiped out by an unusually heavy hail storm in a single afternoon. (The shopkeeper is left a little short.)

BUT -this is not our case today in the credit economy built-up so incredibly disproportionate to the real economy.

Computers are absolutely necessary for this teetering debacle.

And Clever Ben’s innovation to remove all necessary reserve requirements, might seem like a good idea for a while, and even to some boing-boing Austrian economists here…

But not to anyone who is capable of assessing the overall trend in these matters.

Wylie E. Coyote is funny in part because he seems forever to get dropped from ever higher heights. He also seems funny because the bombs given to him also seem to grow exponentially larger.

The humor though -is less convincing with these endless credit bombs being dropped on our modernly bloated populations so utterly dependent upon everything working smoothly.

People are dying, kids.

World War III seems to have already begun, or so the relatives of the one million war dead in and around Mesopotamia would have us believe, -could we hear their cries of anguish and despair from here -on this board.

You can thank the credit economy for all of it beginning with those first tentative steps by the first lenders and the first borrowers.

Pull out your mirror, Monkey-face.

Humans are primates, and primates are thieves, -YES THIEVES.

And humans are warlike too. Humans are even more warlike than other primates.

We make both economic depressions -and- war with computers now -thanks to the cult of genius surrounding every new innovation.

All our recent history’s quick fixes are toppling over like dominoes now.

Stimulus was economic and social poison.

And now -none of these many geniuses has a permanent solution or even a quick fix for what is coming our way next.

What I find so amazing is, some of these people still think there’s like-maybe a rabbit in the hat?

It’s sort of like, we all know Bernanke and Geithner are faking it, total-bungling-frauds -without a clue, -but- maybe they got lucky, right?

Pinch yourself -again. Did that hurt?

Bingo. This is no joke.

March 19, 2010 8:20 PM

Anonymous said…

The rabbit hole gets deeper, however. As each loan is made, interest is charged out of ‘real’ money. That interest is not created out of whole cloth, and goes into the bank’s central assets. Eventually, the ‘real’ money all goes to the bank, followed by real property. As time wears on, all money, and all property belongs to the bank in the fiat system.

At which point you either work for the bank, or the bankers, or you receive what they choose to give you.

The banks own your homes, your transportation, control your goods and services you create, determine which businesses grow and fail, and then invest in the ‘stock market’, to make a profit from that growth or failure.

They are uniquely positioned to create panics, and boom times, to fail a bank, sell short their options, and still profit, because they are the ones that determine the future, by setting the rate of interest, who receives loans.. or strategically denying them.

And all poised with the ultimate of insider knowledge, unlimited fiat money creating unlimited debt, and then making it near impossible to live without that credit.

If you want to see the cause of consumerism, look no farther than the banks and credit.

March 19, 2010 9:37 PM

Anonymous said…

In essence banks don’t have to create money out of thin air. They should grant a loan against pledged goods or hard assets (which can’t be created as fast as the printing-press is able to run). In this way they bring into circulation not the present value of some goods and services as they ever did, but the present value of land and capital-goods which is rising through the emission of the newly printed money. Thus inflation is the very business of banks and central banks.

FESTANvonGELDERN@freenet.de

March 20, 2010 5:13 AM

Josh said…

@Bill Bergman

Bill, if two people trade tomatoes for bread, there are actual assets being exchanged.

In the banking system, there are no assets being exchanged (ok, maybe 1/10th what the borrower thinks being exchanged is exchanged), because the banks, due to fractional reserve lending, actually only have AT THE MOST 1/10th of what most people would think they have.

The real number is more like 1/100th because banks redeposit fractional reserve loans that borrowers get from other banks.

March 20, 2010 7:50 AM

Josh said…

@Bill Bergman

Woops. I misread that. I thought there was an actual trade going on in your example.

Part of the problem is that people have to accept bank debt as legal tender. It wasn’t always like that. A bank is a private institution whose ability to repay varies from bank to bank. But because of government fiat, there can be no rejection of a bank’s notes due to its credit-worthiness. If a bank issues debt, it must be accepted into the general economy as “good as gold,” so to speak.

So, in the tomato/bread example, let’s say the tomato guy writes the bread guy an IOU for 50 tomatoes. That’s all well and good. But then if the bread guy tries to pay let’s a say a third person who sells fish with that IOU. The fish guy doesn’t have to accept it, because the fish guy might not think that the tomato guy is good for it. That is precisely the option that we don’t have with bank credit.

March 20, 2010 7:58 AM

jomama said…

For 2000 years everyone believed that Earth was the center of the Universe also.

March 20, 2010 8:54 AM

Anonymous said…

Excellent post and reactions…don’t have a lot to add, maybe some bitting humor will do. Why are central bankers like the planet of the apes? Because the gorillas have all the weapons, nets, horses and ride around all day shooting the people.

March 20, 2010 2:42 PM

Anonymous said…

I’d like to know who was the ass hole who first let a private bank to come in and take the power away from the government to coin money? The idea of private individuals being able to creat money out of nother is crazy as well as dangerous as we all can see now!

March 20, 2010 7:14 PM

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