Banks

You too need to do some research. Lending out savings is not how banks create their profits.

The BoE website admits that money is created when banks make 'loans' of money they do not have.

Martin.

Please link to the text in question.

https://www.bankofengland.co.uk/-/media/boe/files/quarterly-bulletin/2014/money-creation-in-the-modern-economy.pdf

Money creation.

I thought they were only allowed to lend out a multiple of the actual deposits. No matter how governments try to regulate banks and other financial institutions they will find a way out. According to a radio programme recently banks found a way of frustrating the Breton Woods agreement, which was intended to keep markets stable, by inventing the Euro-dollar (nothing to do with the EU, so Brexiteers can keep calm), and when Maggie tried to control money supply, the banks just invented new kinds of money, basically IOUs (which is all money is after all).

I'd happily line all currency speculators and Hedge Fund managers up and force them to get a proper job, perhaps clearing fat bergs, rather than making money off the back of the real economy.

My bank the TSB like others have closed local branches so were are left with just the one in the town center with limited disabled parking, I don't like loose change in my pocket so thrown £1 coins in a jar couple of months back I took £575 in £1 coins to the bank and was extremely lucky to park got into the bank and after a wait got to the counter only to be told they only would take £200 at a time as they did not have anywhere behind the counter to keep money. I asked to see someone in charge who confirmed what I'd been told so I said I was not going to make two return journeys to pay in the rest of my coin's but whilst I was there I asked what steps do I need to take to empty my account this got the 'boss lady's' attention and she said that she would make an exception and take all of my £1 coins.

I said to her the way your going none of you will have a job and you either can;t see it or you have not got the guts to say the the powers that be 'No'. Due to medical reasons I not moved my banking but come the new year I will.

H

"Money creation" and a bank's actual income are different phenomena.

Blowlamp is right, in that banks lend more money than they actually have. It's called 'leverage'. The extent to which they do sois controlled, basically they have to stay within a safe limit whereby normal withdrawals can always be met, or covered by normal inter-bank borrowing.

The system can and does go wrong! The last biggie was the collapse of US banks in 2008 due them over-extending on "sub-prime mortgages". These lent money to high-risk people on low incomes so they could buy homes on the assumption that house prices would continue to rise and the value of the property would protect the bank's investment. Unfortunately, when recession hit, very large numbers of customers defaulted, were evicted, and the banks found themselves responsible for maintaining masses of property that was rapidly losing value.

As the whole financial system depends utterly on people being confident in money (whatever that is!), banks who get it wrong are almost invariably propped up by governmentd. In the US crisis, the Federal Reserve bought $2.5 Trillion of bad bank debt, which was horrible enough except the shock extended around the world. In Europe the Central Banks, especially the Bank of England, purchased another 1.5 Trillion dollars worth of related bad debts. Not a dead loss fortunately because the world economy recovered and many bad debts regained some value, such that many of them were bought back again by banks.

The Bank of England both borrowed and printed money to buy these bad debts. Government borrowing becomes dangerous when international lenders lose confidence in the government's ability to repay. This happened recently when a British Prime Minister announced heavy spending and big cuts without explaining how it was to be funded. The Bank of England spent £9Bn propping up pension funds, who would otherwise have been unable to meet their commitments, the Chancellor was sacked, then the PM resigned, and her replacement introduced tough austerity measures, which we are yet to experience in full! The Internation Monetary Fund exists to lend money to Central Banks going bust, and the IMF announced they would not support our UK government's policy. In the absence of a plan, and against advice, the policy looked to lenders like an unwise gamble.

Interestingly the British mistake has also left the Italian government tottering. They too were recently elected after promising unaffordable tax cuts, and now find they're considered high-risk, with money only available at extortionate rates. They can't deliver on promises, and voters don't like being conned...

Money is all about confidence, and confidence is worryingly fragile.

Dave

Something else that I think is worth bearing in mind, is that when Governments borrow money, that money also is created on demand - it doesn't already exist in a vault somewhere - it's created as a matter of convenience, but with added interest for you-know-who to pay.

Martin.

I think it was Mark Carney who remarked that trust arrives on foot and departs in a Ferrari.

Economics - you couldn't make it up. Oh, wait a minute, someone did...

My Father-in-law received a letter from a building society stating that he had £300 in an account that was to be declared "Dormant" He did remember it so he went about retrieving it.

The company had been taken over about 10 years ago by a much larger bank so he was instructed to go to the local branch (60 miles away) with his paperwork. He is 85 but active so he took 3 buses to the city to be met with no branch and locals saying it closed about 2005!

So after a journey home he wrote (he struggles to hear properly on the phone) to the head office and received a letter apologising for the error and to contact the local branch at, you guessed it! The non-existant address he was complaining about!!

His neighbour telephoned on his behalf to be told that was the bank branch address they had on record and they couldn't give him a telephone number for it!

They then said the paperwork could be sent to the head office with all copies of driving licence, bus pass, television licence to be signed by his doctor or a registered Notaries Public or High Court Judge. Two utilities bill (including a mobile phone bill, he has a PAYG phone so no bill!) that had to be original, no copies.

He has reached the stage that he is prepared to tell them to keep the money as he doesn't need the hassle.

That is terrible.

I don't like conspiracy theories / fantasies but it is tempting to see this as a deliberate attempt by the bank to keep the money for itself... even though that would be theft.

I think problems like that have many causes, but suggest:

. - managers coming in at quite high levels with "ologies" in book-keeping and management-ese but little or no experience of the trade itself,

- such managers being so brought up on computers, the Internet and so-called "smart"-'phones they just cannot comprehend life without these,

- rigid adherence to impersonal "Procedures", databases, web-sites,etc., especially if accredited to ISO 9001 or similar schemes that encourage heirarchical rigidity.

- such Procedures and software written to very narrowly-specified situations, and often poorly specified and designed.

- generally inept management and poor internal communications.

So when they meet something that does not match their expectations and their Great God Procedures, or it requires (if allowed) thinking and initiative to solve, they react like like all who are bureaucrats rather than administrators. By instinct or by being barred from acting properly, they hide behind denial, refusal, obfuscation and obstruction.

In that case I'd be tempted to find as many names as possible, write to the Directors explaining the whole saga and asking if this is a theft attempt or mere incompetence by middle-managers, as well wilful inhumanity.

The money in a dormant account can be retrieved for 25 years (IIRC), after that it goes to charity.

I've had a few accounts go dormant, really wasn't worth the hassle of doing anything about the sums involved.

Jim

In my case with Nationwide, I applied online to convert my passbook account to an online one, and everything went smoothly until I found I couldn't log in to my account unless I first rang and gave them a mobile phone number.

Several times I rang...and rang... and rang....and nobody ever picked up. I tried several times to use the online chat during hours they said it was available, but it was never available.

So I felt the only way to proceed was to submit a complaint. I did so, only to be told, at the moment of submitting the complaint, that they couldn't do anything with my account even if I supplied my mobile number because the account was dormant and I would need to go into a branch with specific paperwork and ID in order to change its status from dormant to active again.

Except it wasn't dormant, or at least shouldn't have been, because in 2018 I received a letter saying my account would soon go dormant and if I wanted it to remain active I would have to either write or ring to say as much. A handwritten note on the 2018 letter in my file states that at 2.15 pm two days after the date on the letter I rang to confirm that I wanted the account to remain active.

So the complaint was now about two separate matters. I've received two written assurances that the complaint will be dealt with "on" [not "by"] a certain date, but Nationwide have already twice kicked the can down the road saying they can't deal with the complaint "on" the stated date because they "need to gather more information". I then get a new later date "on" which the complaint will be dealt with.

We're now six weeks down the line since the opening of the complaint and nothing has been done. I can see an unavoidable trip to a branch looming, and who knows what feckery with intransigent bank staff, who will probably claim they can't deal with the matter in the branch because it's an online account, and I need to contact Nationwide on the following number to discuss the matter further.

If that happens, fists are going to fly.

Bill -

Please don't take it out on the unfortunate bank staff.

It's not their fault and they are already under the strain of now knowing if Nationwide won't suddenly announce their branch closure and them redundant, probably by bland text message just before Christmas as many company Boards have been cowardly and cynical enough to do.

It is very likely if you respect them they will be sympathetic; but still genuinely be unable to help because they are bound by rigid processes set by remote managers, software-writers and hermetic departmentalism. They might not even know whom to contact for best results!

You could try insisting firmly but politely that you are fed up with the head office lying to you (for that is what they are doing to avoid acting as they are over-paid to act, so use that word), and that the local cashier telephones that number in front of you and requests immediate resolution; but be prepared for him or her being fobbed off with the same lies.

They don't want that and nor do you, but in matters like this they are as much victims of senior-management incompetence, idleness and complacency, as you are.

Edited By Frances IoM on 06/12/2022 16:15:33

What's worth repeating for those that don't know, is that deposits made into a bank are seen legally as an unsecured loan to the bank. The bank is then at liberty to treat it as if it were its own property.

See here.

Martin.

Edited By blowlamp on 06/12/2022 16:39:15

FWIW

A few days ago, SWMBO tokk an elderly (90+ mbut VERY with it ) shopping. Her cards was refused.

It turns out that it expired 30th November., but no replacement had been received. She spent 2 hours on the phone without being able to speak to anyone.

Another friend, with P o A took her to the Bank and wanted to initiate the Lost Card procedure for a replacement.

"Oh, we haven't sent them out yet" AFTER it had expired!!!!!!!!!!!!!!

Some time ago, I moved my account from that far eastern bank because I did not like them seeming to be in thrall to Beijing

Glad that i did!

Howard

John Dow, in my opinion you have valid questions. What is happenninmg Worldwide for that matter, is what you see is ONE of the Symptoms of modern corruption since around 1992+ when the digital era started to gain momentum. In short the Service/Product became a medium to channell money over and above the profit of olds, therefore the rediculous banking fees and charges, the short version, its abstract but easy to spot once you get the method of operation. In the long term societies will not be able to afford this game.