Mortgage rates / interest etc

[Thingybob]

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.

See I told you it would come round on this global topic thread . Its a bit off world topic though

 

[Keith Cocker]

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.


View attachment 146894


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?


View attachment 146896

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.

View attachment 146893

No wonder Economics is called the dismal science.

 

[Phill05]

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

He's reading this thread!!! from page 1:

 

[evildrome]

Tax is a dreadful tool. If you increase taxes all that happens is that those at the top move their money, or themselves to a lower tax environment. The top 1% pay most of the personal taxes in the UK, so if you tax them out of the country, then the tax burden falls more heavily on those left. Equally, if you tax business too heavily you simply see businesses move to a more tax efficient environment. This reduces employment and tax revenue. If you want the largest tax income for the country you move to a single rate for everyone. Yes, it sounds counter intuitive, but there are enough studies to demonstrate that this is the best system. With a low rate of tax, tax sheltering becomes un-necessary, and in fact you attract more of the seriously wealth people to move their tax domicile to the UK. The stumbling block is that the left, who are adamant that this a folly, ‘it’s the rich getting richer’ (the problem with this argument is they do anyway, but not necessarily whilst paying tax in the UK) and it strikes a cord with the larger population. Higher taxes stifles a country, reduces economic activity, the wealthy move out and the less wealthy are worse off.

An example of a low tax environment is Singapore. The max personal tax is 22% for nine residents, and a graduated scale up to 22% for residents. I’ve avoided Monty Carlow that has no income tax at all, the government derives its income from VAT.

Tax doesn't do what you think it does.

You've been told that tax "pays for things". Sorry to be the bearer of bad news but your tax pays for nothing.

In point of fact, it is destroyed on receipt. This is because the purpose of taxation is not revenue.

Think about it for 2 seconds... why would a currency issuing government that can create as much money as it likes need your money?

If HMG stopped taking in tax tomorrow, could it continue to make all payments required of it?

Yes.

However, there would be inflation. Therefore the purpose of taxation is? The control of inflation.

The purpose of taxation is to take money from you so that you can't spend it.

There is no other purpose. Government doesn't need your money.


Day 1

Government pays someone £100

Government Debt ______________ Private sector

-£100 __________________________ +£100



Day 2

Government taxes back £100

Government Debt ______________ Private sector

£0 _______________________________ £0



When government taxes you, it destroys the money it created.


Its no different to a bank loan.


Day 1

Someone borrows £100 from a bank.

Bank __________________________ Private sector

-£100 _________________________ +£100



Day 2

Someone pays back £100.

Bank __________________________ Private sector

£0 ____________________________ £0



When you borrow £100 from a bank and pay it back, the bank doesn't pretend it still exists.


You can't warehouse your settled liabilities.


This is what government does to gaslight you into thinking your tax money pays for stuff.


Day 2 using government accounting

Government taxes back £100

Government Debt _____________ Private sector ________ Consolidated Fund

-£100 __________________________ £0 ____________________ +£100


It uses an accounting fiction called the "Consolidated Fund" to pretend that your tax money still exists but that's plainly cobblers.

The sides of the equation sum to zero.

When it wants to spend it has to create new money regardless of what fancy footwork its doing with its accounts.

The reality is that all government spending is "new". None of it is tax.

 

[Jacob]

Tax doesn't do what you think it does.

You've been told that tax "pays for things". Sorry to be the bearer of bad news but your tax pays for nothing.

In point of fact, it is destroyed on receipt. This is because the purpose of taxation is not revenue.

Think about it for 2 seconds... why would a currency issuing government that can create as much money as it likes need your money?

If HMG stopped taking in tax tomorrow, could it continue to make all payments required of it?

Yes.

However, there would be inflation. Therefore the purpose of taxation is? The control of inflation.

The purpose of taxation is to take money from you so that you can't spend it.

There is no other purpose. Government doesn't need your money.


Day 1

Government pays someone £100

Government Debt Private sector

-£100 +£100



Day 2

Government taxes back £100

Government Debt Private sector

£0 £0



When government taxes you, it destroys the money it created.


Its no different to a bank loan.


Day 1

Someone borrows £100 from a bank.

Bank Private sector

-£100 +£100



Day 2

Someone pays back £100.

Bank Private sector

£0 £0



When you borrow £100 from a bank and pay it back, the bank doesn't pretend it still exists.


You can't warehouse your settled liabilities.


This is what government does to gaslight you into thinking your tax money pays for stuff.


Day 2 using government accounting

Government taxes back £100

Government Debt Private sector Consolidated Fund

-£100 £0 +£100


It uses an accounting fiction called the "Consolidated Fund" to pretend that your tax money still exists but that's plainly cobblers.

The sides of the equation sum to zero.

When it wants to spend it has to create new money regardless of what fancy footwork its doing with its accounts.

The reality is that all government spending is "new". None of it is tax.

er sounds like nonsense but too long to read anyway.
Money is just a transactional tool and can be confusing!
Tax is wealth diverted from wealthier individuals or organisations for the benefit of things organised for the common good.
In other words it's taken from where it is not needed to where it can be used constructively.
The more the better - taxation currently is much too low and public services are suffering across the board.

 

[Jacob]

No wonder Economics is called the dismal science.

It's not really a science at all.
Kate Raworth is a good read. Doughnut | Kate Raworth

 

[evildrome]

er sounds like nonsense but too long to read anyway.
Money is just a transactional tool and can be confusing!
Tax is wealth diverted from wealthier individuals or organisations for the benefit of things organised for the common good.
In other words it's taken from where it is not needed to where it can be used constructively.
The more the better - taxation currently is much too low and public services are suffering across the board.

OK, I'll summarise.

When the umpire issues points, where do they come from?

When the umpire fines players points, where do they go to?

That's how currency works for government.

Being the currency issuer is not the same as being a currency user.

With me so far?

 

[Jacob]

OK, I'll summarise.

When the umpire issues points, where do they come from?

When the umpire fines players points, where do they go to?

That's how currency works for government.

Being the currency issuer is not the same as being a currency user.

With me so far?

Nope, sorry.
David Graeber is good too, but a bit meandering and long winded.
https://www.theguardian.com/comment...netanyahu-israel-jewish-diaspora-palestinians

 

[Spectric]

Think about it for 2 seconds... why would a currency issuing government that can create as much money as it likes need your money?

You don't understand economics, it is not just a case of lets print more money otherwise we would not have a national debt of around 2.4 Trillion pounds.

You need a strong economy otherwise just increasing the amount of money around will only increase demand and that leads to price hikes and inflation ending up going round in circles.

 

[jcassidy]

Tax doesn't do what you think it does.

You've been told that tax "pays for things". Sorry to be the bearer of bad news but your tax pays for nothing.

In point of fact, it is destroyed on receipt.

LOL
How does taxation work in Eurozone countries?

 

[Jameshow]

Tax doesn't do what you think it does.

You've been told that tax "pays for things". Sorry to be the bearer of bad news but your tax pays for nothing.

In point of fact, it is destroyed on receipt. This is because the purpose of taxation is not revenue.

Think about it for 2 seconds... why would a currency issuing government that can create as much money as it likes need your money?

If HMG stopped taking in tax tomorrow, could it continue to make all payments required of it?

Yes.

However, there would be inflation. Therefore the purpose of taxation is? The control of inflation.

The purpose of taxation is to take money from you so that you can't spend it.

There is no other purpose. Government doesn't need your money.


Day 1

Government pays someone £100

Government Debt ______________ Private sector

-£100 __________________________ +£100



Day 2

Government taxes back £100

Government Debt ______________ Private sector

£0 _______________________________ £0



When government taxes you, it destroys the money it created.


Its no different to a bank loan.


Day 1

Someone borrows £100 from a bank.

Bank __________________________ Private sector

-£100 _________________________ +£100



Day 2

Someone pays back £100.

Bank __________________________ Private sector

£0 ____________________________ £0



When you borrow £100 from a bank and pay it back, the bank doesn't pretend it still exists.


You can't warehouse your settled liabilities.


This is what government does to gaslight you into thinking your tax money pays for stuff.


Day 2 using government accounting

Government taxes back £100

Government Debt _____________ Private sector ________ Consolidated Fund

-£100 __________________________ £0 ____________________ +£100


It uses an accounting fiction called the "Consolidated Fund" to pretend that your tax money still exists but that's plainly cobblers.

The sides of the equation sum to zero.

When it wants to spend it has to create new money regardless of what fancy footwork its doing with its accounts.

The reality is that all government spending is "new". None of it is tax.

What ever your on I want some!!!!

 

[baldkev]

How on earth did this get ressurected????
If anyone gives a toss, i went 2 year fixed and then interest rates dropped

Hey ho.

 

[Noel]

How on earth did this get ressurected????
If anyone gives a toss, i went 2 year fixed and then interest rates dropped

Hey ho.

Kev, don't forget to come back to us in March 2025........

 

[Daniel2]

How on earth did this get ressurected????
If anyone gives a toss, i went 2 year fixed and then interest rates dropped

Hey ho.

I care ...
Oh well, you make your choice and take your chances.
Sorry for you, though, that the rates went the "wrong" way.

 

[Daniel2]

Tax doesn't do what you think it does.

You've been told that tax "pays for things". Sorry to be the bearer of bad news but your tax pays for nothing.

In point of fact, it is destroyed on receipt. This is because the purpose of taxation is not revenue.

Think about it for 2 seconds... why would a currency issuing government that can create as much money as it likes need your money?

If HMG stopped taking in tax tomorrow, could it continue to make all payments required of it?

Yes.

However, there would be inflation. Therefore the purpose of taxation is? The control of inflation.

The purpose of taxation is to take money from you so that you can't spend it.

There is no other purpose. Government doesn't need your money.


Day 1

Government pays someone £100

Government Debt ______________ Private sector

-£100 __________________________ +£100



Day 2

Government taxes back £100

Government Debt ______________ Private sector

£0 _______________________________ £0



When government taxes you, it destroys the money it created.


Its no different to a bank loan.


Day 1

Someone borrows £100 from a bank.

Bank __________________________ Private sector

-£100 _________________________ +£100



Day 2

Someone pays back £100.

Bank __________________________ Private sector

£0 ____________________________ £0



When you borrow £100 from a bank and pay it back, the bank doesn't pretend it still exists.


You can't warehouse your settled liabilities.


This is what government does to gaslight you into thinking your tax money pays for stuff.


Day 2 using government accounting

Government taxes back £100

Government Debt _____________ Private sector ________ Consolidated Fund

-£100 __________________________ £0 ____________________ +£100


It uses an accounting fiction called the "Consolidated Fund" to pretend that your tax money still exists but that's plainly cobblers.

The sides of the equation sum to zero.

When it wants to spend it has to create new money regardless of what fancy footwork its doing with its accounts.

The reality is that all government spending is "new". None of it is tax.

Meanwhile, back on planet Earth ........

 

[baldkev]

Kev, don't forget to come back to us in March 2025........

After 40 pages and nearly 800 posts ( most of which werent even about my mortgage ) i dont think I'll ever ask the internet community for advice ever again!! In fact, next time I'll either ask that chatgpt thing or jump off a cliff

 

[seanf]

…or jump off a cliff

Make sure you post which one so people can debate whether it’s a cliff, a clift or something else. Arguing microscopic details is what the Internet was invented for after all

Sean

 

[Southdownswolf]

After 40 pages and nearly 800 posts ( most of which werent even about my mortgage ) i dont think I'll ever ask the internet community for advice ever again!! In fact, next time I'll either ask that chatgpt thing or jump off a cliff

Problem with jumping off a cliff is that a lot of people land on a ledge part way down and end up living with not much brain capacity. Let us know if you need advice on cliffs.

 

[Scruples]

Problem with jumping off a cliff is that a lot of people land on a ledge part way down and end up living with not much brain capacity. Let us know if you need advice on cliffs.

If you end up half way down a cliff, you might meet evildrome with the stories about taxes and currency. That'll finish you off.

 

[Jameshow]

If you end up half way down a cliff, you might meet evildrome with the stories about taxes and currency. That'll finish you off.

But just remember his economic theory might just past muster with the Mrs and the latest woodworking machine purchase - all money is meaningless and isn't really that much it's just a number without any value, just like the holiday we could have had...!