Naked Science Forum
General Discussion & Feedback => Just Chat! => Topic started by: DoctorBeaver on 15/09/2009 00:25:24
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Economics has never been 1 of my strong subjects so this is probably a very silly question.
Billions (or was it trillions?) of pounds/dollars were lost by banks and the world was plunged into recession. But where did the money go?
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The money never existed in the first place.
Here's how it works.
Person A opens a savings account at the bank of, lets say 100,000 euro.
Person B goes to the bank and asks for a loan to buy a house of, lets say 100,000 euro.
The Bank uses the 100,000 euro of Person A to pay the guy that sells the house to Person B.
Then Person B seems not to be able to pay off his loan due to loss of job or whatever.
Now, if Person A wants to retrieve his savings, he'll notice it isn't there anymore.
consequence: Crisis!
Summarized: The banks gave away too much credit to people thinking that they'd all be able to repay the loan with some intrest. They did this beyond their own liquidity out of pure greed.
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Can't you guess:
(https://www.thenakedscientists.com/forum/proxy.php?request=http%3A%2F%2Fcache2.asset-cache.net%2Fxc%2Fstk33252bin.jpg%3Fv%3D1%26amp%3Bc%3DNewsMaker%26amp%3Bk%3D2%26amp%3Bd%3D8A33AE939F2E01FF565E5AB3E150343DC59CA42EA27CAC83E030CF731A2A8EB5E30A760B0D811297&hash=248b5cde7803d35ef092b28e50698dd1)
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The money never existed in the first place.
Here's how it works.
Person A opens a savings account at the bank of, lets say 100,000 euro.
Person B goes to the bank and asks for a loan to buy a house of, lets say 100,000 euro.
The Bank uses the 100,000 euro of Person A to pay the guy that sells the house to Person B.
Then Person B seems not to be able to pay off his loan due to loss of job or whatever.
Now, if Person A wants to retrieve his savings, he'll notice it isn't there anymore.
consequence: Crisis!
Summarized: The banks gave away too much credit to people thinking that they'd all be able to repay the loan with some intrest. They did this beyond their own liquidity out of pure greed.
They also sold bad debts to one another, piling bad credit on bad credit. As a result, one person's failure to pay resulted in hits to more than one bank.
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They are all Bankers !!
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Your spelling is definitely improving sheepy, just one letter wrong there!
They are all Bankers !!
9/10
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Your spelling is definitely improving sheepy, just one letter wrong there!
They are all Bankers !!
9/10
Ewe're right of course..I really meant 'They are all Bonkers ' [;)]
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They are all Bankers !!
With a capital W.
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They are all Bankers !!
With a capital W.
They are Wall bankers ????
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I heard they now have refrigerated beaches on those man-made islands in Dubai.
Perhaps some of lost money found its way there.
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A year on from the collapse of the banking system and where are we? Still up to our eyes in crap.
Bankers continue to award themselves with obscene salaries and bonuses and make money from money. They produce nothing with real value. The money they create is on paper only.
Politicians still have their fingers in the pie, so they do not want to change the system.
Years of low inflation have caused hardship for ordinary people. If you took out a mortgage 10 years ago, the burden of the repayments is as great today as they were then. With a reasonable rate of inflation, wages increase and the burden of the repayments lessens. This is known as 'debt erosion'. Low inflation has rendered debt erosion ineffective.
Low inflation also means that government income from income taxes do not increase. To counter this, 'stealth' taxes have been introduced, but this only serves to increase the amount of tax paid by the people, without them getting a higher wage to cover these extra taxes.
The shortfall in income to homes is often buffered by way of income support from social security. Stop taking the tax in the first place and you don't need to give income support. So you need employ fewer tax gatherers and fewer social security staff. This would cut the expense to the public purse.
Force employers, who make £millions in profits, to pay a living wage, not have their wage bill subsidised by the tax payer.
Of course nothing like this will ever happen. It is far better for big business and politicians alike, to keep the people in fear for their future, so they just get on and do as they are told.
Isn't it time politicians realised, they are meant to serve us, not the other way around.
Beef beef gripe gripe horizon horizon moan moan, I doubt the parenthood of the whole bunch of 'em!