Only £4.4m left to protect UK's bank deposits

[Legal Beagles]

Britain's deposit protection scheme currently holds funds of just £4.4m, it emerged yesterday as banks warned that consumers face sharp price rises to pay for the Chancellor's plans to offer a £100,000 guarantee.

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[pam1]

Re: Only £4.4m left to protect UK's bank deposits

What a load of Bull, consumers paying extra just for for wanting to remove their own money...:devil:

The cash went in so the cash should be available to come back out, don't see much difference to a handbag snatcher, but they do it in suites while sat in leather swivel chairs.

Either way the victim looses out.

[iancognito]

Re: Only £4.4m left to protect UK's bank deposits

.....and I suppose we'll see a drop in banks profits to about £3.50 will we?

[Guest]

Re: Only £4.4m left to protect UK's bank deposits

What a load of Bull, consumers paying extra just for for wanting to remove their own money...:devil:

The cash went in so the cash should be available to come back out, don't see much difference to a handbag snatcher, but they do it in suites while sat in leather swivel chairs.

Either way the victim looses out.

This is not how it works.

It would be normal to suppose that the money that you borrow from a bank is some other customer’s hard-earned savings. It is not. Banks do not lend ‘real’ money when they grant a loan. Instead they grant credit. This credit can be spent like money and to all intents and purposes it is money. Money is created out of thin air by the banks.

The banks have been able to extend their credit creation to its present 97% of the total money supply because in today’s economy, with increasing use of credit cards, debit cards, cheques and BACS transfers, very little of the money that we use, either as individuals or as organisations, exists in the form of cash.

Banks only need to retain very small reserves of government-created money (notes and coins) in order to meet the dwindling demand for cash. The rest of the time, they happily pass cheques and similar payments between each other which are ‘backed’ by nothing more than a ledger or computer entry in the form of somebody’s debt.

Money created as a debt by the banks bears a charge of interest. This increases the amount of money that the economy owes by an amount greater than the amount in existence. This means that the economy is a saddled with a debt that can never be paid off, merely passed around like a game of Pass-the-Parcel.

Within Britain, like most countries around the world, money has two origins. The first of these is a government agency, the Bank of England, which oversees the production of the actual notes and coins that circulate around the economy in the form of cash. This is ‘fiat’ money, intrinsically worthless bits of printed paper and base metal, which has a value because it is enshrined in law as ‘legal tender’ - that is, money that may not refused in the payment of a debt.This money is not backed by gold nor even by the sterling silver which gave our currency its name and of which a pound in weight was the original pound.

The second source of money is ‘bank credit’. This is the money that resides in our bank accounts or, perhaps more accurately, ‘negatively resides’ in the form of mortgages, loans and overdrafts. The amount of savings in the accounts of individuals, businesses and the government is tiny in comparison to the massive levels of debt, so whence has it come?

The answer is - thin air!

When a bank lends money it does not draw on the savings of its depositors, instead it creates the money out of thin air as pure numbers based on nothing other than the debt imposed upon the borrower. This money is created as a debt, bearing a charge of interest, which has profound ramifications for the economy.

The proportion of Britain’s money that is now produced as an interest-bearing debt has grown steadily over the decades. It now stands at over 97% - the remaining 3% being the notes and coins created as non-debt money by the nationalised Bank of England.

With any interest-bearing debt, the amount of money needed to repay the debt is always greater than the amount borrowed, because the repayment will include a sum of interest, however small the rate of interest charged. This means that the amount of money created (the principal of the debt) is always less than the amount owed (the principal + interest). So the economy as a whole is saddled with a debt than can never be paid off, because there can never be more money in existence than the amount created!

This is not a matter complex economics, but of simple logic. There can never be more money in existence than the total money supply, even though more is needed to pay the interest on the amount created. The ‘missing’ money, the interest charged by the banks, adds to their £ billions of annual profit, but little of this money is spent back into the economy, instead it is traded on the money markets like a commodity.

In order to find out how this practice started, we need to go back several hundred years. The modern age of banking began in 1640 when King Charles I, needing cash to pay the English army that he was raising against Scotland (of which he was also king!), seized the gold bullion that many merchants and nobles had placed in the Tower of London for safe-keeping.

However, this war soon petered out and, with Parliament and its powers of taxation recalled, the bullion was returned to its owners.

in 1642, further warfare broke out with the Great Civil War between the King and Parliament. London was the stronghold of Parliament and was the safest city in the Kingdom. So those who desired not to have their bullion seized by one side or the other placed their gold in the hands of goldsmiths in the city, who naturally had their own methods of safe-keeping.

In exchange for this gold, the depositors received 'goldsmith's notes'. These notes, the first bank notes, once their veracity was established proved to be very popular with their recipients, as gold was heavy and cumbersome. Soon, these notes began to be used as currency, with everyone happy to accept that each was backed 100% by a deposit of gold.

Except that very quickly the goldsmiths realised that few people actually wanted to redeem their notes so they began very secretly to issue more than they had gold to back them. This newly-created money was then lent out to people who wished to borrow it at a rate of interest. This was a practice of highly dubious legality, but was never tested in court.

Then in 1694, this practice of creating money out of thin air was effectively legitimised with the founding of the Bank of England. It was not the first bank to be founded (Coutts was founded in 1690), but the nature of its creation was central to the role that banks went on the play in the supply of money.

In 1694, England was still a predominantly rural country. Most people still grew their own food, built their own homes, collected their own firewood for fuel, drew their own water from wells and frequently made their own clothes. Money was not the necessity that it is today for most people, but it was still needed in large amounts when the nation went to war.

The then King (William III) needed money to fight his war against the French. Both the King's capacity to tax and his authority was limited, so the quickest and easiest way to acquire his needs was to borrow. A consortium of six London goldsmiths, lead by one William Paterson, were given royal authority to the create the first 'joint-stock' bank on the condition that they lent the King £1.2 million in gold at 8%. This was the start of the National Debt.

More importantly, however, they were given the authority to create £1.2 million in paper money for private lending. This paper money was theoretically backed by the gold, but as that had been lent to the King, it meant that the same sum of money was lent out twice over. The validity of this practice was never tested in a court of law, as it remained a matter that was hidden from the general public. A practice that continues today, with the banks keeping a great deal of what they do and how they do it a secret.

[pam1]

Re: Only £4.4m left to protect UK's bank deposits

The link to the 45 minute cartoon is a brilliant way to show the money trail and its problems, Nattie put it up ii was looking for it the other day for a friend will find it again now so members can view it here to.

However my view is writing unseen money is OK in theory but its definitely got its flaws as is showing now, but...... if i hand in a fiver which is real money ( my real money) then i want my real money back.

p

Heres the link and its on eof the most interesting 45minutes ive spent with my eyes at a screen for a long time, If anyone has the time please watch it, its an eye opener

http://video.google.co.uk/videoplay?...=money+as+debt