That would suite me cos then i wont need to pay back the money i supposedly owe them. (which they pulled outa their arses to start off with) :lol:
lol - so you actually believe that story? :lol: Man - you really are in for a few shocks to the ol' system when you find out how banks really operate! :lol:
2 reasons why banks raise borrowing rates: 1) Their own funding costs rise (5y bank snr bonds are at 5.6%.. so mortgage rates at 7.6% are not unreasonable) 2) The perceived riskiness of mortgages rises, and banks need more of an incentive to lend against riskier assets: given that the property market is starting to look shakier.. rasing mortgage rates only seems prudent risk management. Very little attention is being paid to problem 2
:lol: Banks don't need to source any money to lend - therefore funding costs are mostly a croc! They create the money (or at least about 90% of it) it from fresh air. :lol:
Umm... tell me mechanism how a bank can create moeny out of thin air? A bank can only lend money it sources from deposits, or by issuing bonds. Only the central bank can create new money - which it then can lend to commercial banks, who the lend to consumers.
True.. money raised as equity can also be used to lend out.. although good luck rasing enough equity to suppost a serious lending book. Money raised through equity is genreally around 10% of a banks assets - it is the most expensive form of capital there is!
Im watching an listening.. and as much as i press the button on my keyboard... im not creating any more dollars.
Aaargghhh, not the Money As Debt video!! I thought this was true, along with my friends when I first saw it. The problem I had was that it didn't match reality and I eventually figured out how it actually works. I say this quite often, it's actually really simple (the basics of it anyway), but takes quite an initial shift in thinking. ie. "it can't be that simple!" But it is, you just have to play it out in your mind. Or real life. Just pretend to be a bank and lend and re-lend money between yourself and some friends and record all the loans and see what happens. The money multiplies magically... It's all to do with TIME.
A bank run is only a thing of the past because the sheeple believe that their money is safe and the government will never let them lose thier money. Banks can ASK for three days notice before handing out large deposits.... This is suppose to be for security reasons, but we all know different. Pick one of the big four banks, any one, and get even half of its net worth depositors to give that three days notice OR EVEN BETTER get them to walk into the bank, tell the bank to electronically transfer every cent they have to an account in another bank and watch the house of cards come down. Please describe (or post a link) to the legislative protection that would prevent this from happening.
I highly doubt they are lending at a loss. 30% of the mortgage market is borrowed offshore. With the US Fed lending at zero percent interest to US whole sale markets, I highly doubt those offshore lenders can't lend the big 4 at less than the 6.7% so that the big four ans the US banks can make dollars on the spread. That's at least a 6% spread between two lenders.
Yes fractional reserve banking does seem like money creation.. but these loans do get paid back. If you borrow money to buy a house, you pay it back, if a bank borrows money to fund new mortgages, they have to pay it back (unless they issue equity). The moeny in the system that the bank suposedly create isnt real... its just a book entry on the assets and liabilities side. If a bank borrows $1, it can only most lend out $1.. Sure, that is recorded as capital on the balance sheet of every bank in the fractional system, but thats it - its just CAPITAL. The amount of actual money that can be withdrawn as cash is $1...
You forget that banks can only borrow overnight USD at 0%... converting that to AUD and hedging your term and FX risk (using FX forwards and interest rate swaps or cross currency basis swaps) and you are suddenly borrowing at... 5.6%!!
Let's say I am the bank and you deposit $10 in a standard savings account. I then lend out $9 to A. There's now $19 in existence from that $10. The $10 in your account and the $9 cash that A has. Plus, the $1 that I, the bank, still have. Then A spends the $9 and that person(B) then deposits the $9 in his account at my bank. I then lend out $8.10 to C. Now there's your $10 plus B has $9 in his account plus C has $8.10 cash for grand total of $27.10 . And so on...
