It only dips into mortgages and interest rates because Kev keeps going off topic. We've tried to warn him
Mortgage rates / interest etc
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It only dips into mortgages and interest rates because Kev keeps going off topic. We've tried to warn him
I'm rubbish at woodwork but have been studying macro-economics for 5 years. In particular, government finance & banking.
Now I'm going to tell you some things you are not going to like.
Are we sitting comfortably? Then I will begin.
1) When banks lend you money, they create it.
Billy buys a house from Johnny for £120k.
Billy & Johnny both bank at the Nat West.
Billy borrows £120k from the Nat West. (Nat West create a debit account for £120k and a credit account for £120k, note that the sum is ZERO)
Billy pays Johnny £120k.
The Nat West are now even (they lent £120k and got back £120k) but they now have Billy's mortgage upon which he pays 5% interest.
So Billy is going to pay them 5% for 20 years on £120k the Nat West conjured out of double entry book keeping.
So, you will ask, what if Billy and Johnny had different banks?
The banks only have to borrow settlement funds. Many transactions pass between, for example, LLoyds and the Nat West.
Lets say on Monday, for mortgages, the Nat West pays LLoyds £130m and Lloyds pay the Nay West £120m.
Lloyds needs to borrow £10m for a day from other banks at the LIBOR (interbank lending rate).
But that payment is peanuts compared to the interest on the £120m that Lloyds created out of thin air.
2) When banks pay you interest, government actually pays the interest.
Lets say you've got a bank. Billy comes and deposits £100k at your bank.
You run out and buy £100k of 10 year Gilts paying 4.25%.
You pay Billy 2% a year and trouser the difference.
Sweeeeet !
3) Gilts have no purpose other than giving free money to banks.
When government wants to spend it instructs the Exchequer to instruct the BOE to credit the reserve account of the payee's bank.
That banks then credits the deposit account of the payee.
This is how all governments spend. Reserve creation by central banks is "ex novo" i.e. out of thin air.
No Fiat currency government borrows in its own currency. That's ********. Does the umpire borrow points from the players?
But don't governments have "debt"? Well, sort of. All money is debt.
Take a piece of paper, draw a line down the middle.
Write "One pound" on one side and "I owe One pound" on the other.
Tear down the line. Spend the bit of paper with "One pound" written on it into the economy and put the bit with "I owe One pound" in a drawer labelled "National Debt".
Congratulations! You have just created money, spent it and are now running a deficit.
For every pound that exists there is a pound of “national debt”.
So you can see that every pound of “national debt” is the counterpart of every pound created.
Every public liability is a private asset.
The "National debt" is just the sum total of a country's currency which has been issued and not yet taxed back.
This is why the USA & China have huge "national debts" because their citizens have huge amounts of money.
4) Tax pays for nothing. All tax is destroyed.
If the UK stopped taking in tax tomorrow, could it continue to make all payments required of it?
The answer, clearly, is yes. It is a Fiat currency government & it can simply create as much money as it likes.
However, while it would be *mechanically* possible for the UK to simply print all the money it needs, there would be dire financial repercussions.
Namely inflation.
Therefore the purpose of taxation is?
Come on! Strain those mental muscles! The purpose of taxation is?
Its….
Its….
The control of inflation.
Taxation is there to sink money out of the economy.
Even if government wanted to spend it they couldn’t or they’d negate the very purpose of collecting it in the first place.
Don't believe me? Go and look at the UK's tax take as a percentage of GDP. Its about 33% and has been since 1950.
Which seems odd doesn't it given some of the exception line items we've had in the last 70 years.
We all remember that special tax we paid for:
Korea
Argentina
Iraq
Afghanistan
The Bankster's bailout
There were no 'special taxes' and tax did not rise to pay for anything because tax pays for nothing.
It is not its purpose.
Now I'm going to tell you some things you are not going to like.
Are we sitting comfortably? Then I will begin.
1) When banks lend you money, they create it.
Billy buys a house from Johnny for £120k.
Billy & Johnny both bank at the Nat West.
Billy borrows £120k from the Nat West. (Nat West create a debit account for £120k and a credit account for £120k, note that the sum is ZERO)
Billy pays Johnny £120k.
The Nat West are now even (they lent £120k and got back £120k) but they now have Billy's mortgage upon which he pays 5% interest.
So Billy is going to pay them 5% for 20 years on £120k the Nat West conjured out of double entry book keeping.
So, you will ask, what if Billy and Johnny had different banks?
The banks only have to borrow settlement funds. Many transactions pass between, for example, LLoyds and the Nat West.
Lets say on Monday, for mortgages, the Nat West pays LLoyds £130m and Lloyds pay the Nay West £120m.
Lloyds needs to borrow £10m for a day from other banks at the LIBOR (interbank lending rate).
But that payment is peanuts compared to the interest on the £120m that Lloyds created out of thin air.
2) When banks pay you interest, government actually pays the interest.
Lets say you've got a bank. Billy comes and deposits £100k at your bank.
You run out and buy £100k of 10 year Gilts paying 4.25%.
You pay Billy 2% a year and trouser the difference.
Sweeeeet !
3) Gilts have no purpose other than giving free money to banks.
When government wants to spend it instructs the Exchequer to instruct the BOE to credit the reserve account of the payee's bank.
That banks then credits the deposit account of the payee.
This is how all governments spend. Reserve creation by central banks is "ex novo" i.e. out of thin air.
No Fiat currency government borrows in its own currency. That's ********. Does the umpire borrow points from the players?
But don't governments have "debt"? Well, sort of. All money is debt.
Take a piece of paper, draw a line down the middle.
Write "One pound" on one side and "I owe One pound" on the other.
Tear down the line. Spend the bit of paper with "One pound" written on it into the economy and put the bit with "I owe One pound" in a drawer labelled "National Debt".
Congratulations! You have just created money, spent it and are now running a deficit.
For every pound that exists there is a pound of “national debt”.
So you can see that every pound of “national debt” is the counterpart of every pound created.
Every public liability is a private asset.
The "National debt" is just the sum total of a country's currency which has been issued and not yet taxed back.
This is why the USA & China have huge "national debts" because their citizens have huge amounts of money.
4) Tax pays for nothing. All tax is destroyed.
If the UK stopped taking in tax tomorrow, could it continue to make all payments required of it?
The answer, clearly, is yes. It is a Fiat currency government & it can simply create as much money as it likes.
However, while it would be *mechanically* possible for the UK to simply print all the money it needs, there would be dire financial repercussions.
Namely inflation.
Therefore the purpose of taxation is?
Come on! Strain those mental muscles! The purpose of taxation is?
Its….
Its….
The control of inflation.
Taxation is there to sink money out of the economy.
Even if government wanted to spend it they couldn’t or they’d negate the very purpose of collecting it in the first place.
Don't believe me? Go and look at the UK's tax take as a percentage of GDP. Its about 33% and has been since 1950.
Which seems odd doesn't it given some of the exception line items we've had in the last 70 years.
We all remember that special tax we paid for:
Korea
Argentina
Iraq
Afghanistan
The Bankster's bailout
There were no 'special taxes' and tax did not rise to pay for anything because tax pays for nothing.
It is not its purpose.
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Jacob
What goes around comes around.
So, what?
johna.clements
Established Member
Despite the pretend liberals in wealthy areas there appears to be a tendency to vote Democrat.
If the only jobs for more educated people in rural areas "tended to be government employees, college employees and teachers" then the people who are not suited or want to do those jobs will leave, generally to a more wealthy area.
Mortgage rates are overweight.
johna.clements
Established Member
Mortgage rates are going to go higher then they will fall.
John Brown
Freeloading Social media influenza
Or vice versa.
All subjects in the world will be aired before this thread ends . Im waiting avidly for UFO s
All subjects in the world will be aired before this thread ends . Im waiting avidly for UFO s
say something rude to your wife, and you'll see them in person!
sploo
Somewhat extinguished member
Unidentified Flying Object. Likely a frying pan or rolling pin.
Not in our house i can identify every thing she throws at me from the sound it makes on contact
johna.clements
Established Member
A confirmed UFO sighting or more likely conformation of life on another planet around another star would certainly effect the money markets.
Would people be scarred take out all their money and buy top of the range sharpening kit. Sharp tools may be needed. That would cause inflation which would be countered by higher interest rate.
Or would we all pull together and cooperate more. Share our honing devices. That may result in lower inflation and so lower interest rates.
Would people be scarred take out all their money and buy top of the range sharpening kit. Sharp tools may be needed. That would cause inflation which would be countered by higher interest rate.
Or would we all pull together and cooperate more. Share our honing devices. That may result in lower inflation and so lower interest rates.
I dunno... maybe you think its cool & normal that governments provide free money for banks to pay depositors interest and when they lend they create the money (for free) to lend to you at interest.
Personally I find that disturbing AF.
And you'll also not be bothered that the government is raising tax when:
A) It has no need to do so.
B) It will certainly cause a recession.
And the lying.... they're just lying to us about how government finance works.
I know we all expect governments to lie but Jesus...
Its not a little white lie either... people will die. People have died.
Jacob
What goes around comes around.
Is this "Modern Monetary Theory"? I've heard about it but haven't tried bending my brain around it yet!
My favourite radical theory so far is Gary Stevensons's. What do you think of this? The Plan Is to Make You Permanently Poorer | Aaron Meets Gary Stevenson | Novara Media
Not yet, the guy is seriously slow to respond! He confirmed a few things i had asked, but it took 4 days! Ive asked to go see it and no reply yet!! He's probably using it
johna.clements
Established Member
That does not sound to great. Obviously he will not respond to any questions after you have paid and taken the excavator.
No, but to be honest It's cheap enough not to worry. It needs the arm repinning and king pin doing, which my brother and i can do easy enough. My brother has worked on it for th guy before, so we know theres a cpuple of issues, but the price would make up for that
He s a subscriber on here and he read you were remortgaging so hes going to put the price upNot yet, the guy is seriously slow to respond! He confirmed a few things i had asked, but it took 4 days! Ive asked to go see it and no reply yet!! He's probably using it
