How it all works part 1

Lol are you saying a 12 year old kid understands...and I don't?

Eddie, I thought I had stopped thinking about these issues years ago. After all I can't change a thing on my own can I? So why worry about it? I'm not sure yet whether I'm glad you brought them to the surface again or not.

zand wrote:Lol are you saying a 12 year old kid understands...and I don't?

Eddie, I thought I had stopped thinking about these issues years ago.  After all I can't change a thing on my own can I?  So why worry about it?  I'm not sure yet whether I'm glad you brought them to the surface again or not.    

No, I am not saying you do not understand it. What I am saying if you accept money is created from nothing, which it is, why should the state (i.e us) pay interest on it.

I have been thinking about this since the last time you put up these videos. This is the way I see it. Just my own opinion.

I don't agree that money is created from nothing. If you look at a town that has printed it's own local currency to try to keep money in the area. That money is created from nothing. It has no substance. It is just printed pieces of paper that are used as a replacement for pounds sterling. How would the government printing money be any different to this? Where's the value?

Money is created by loans and loan interest and the re-lending of those loans, yes I agree. But that's not nothing, that's based on a debt which is classed as an asset. Are you telling me that on a balance sheet the terms 'debtors' and 'creditors' have no value?

Money is no longer backed by gold but by intangible assets, but they are assets all the same. Just like when a business is sold there is often a charge for goodwill. That's not nothing! That's possibly the most important bit of the deal.

So like everything else today, the way money is 'made' has become complicated, but it has built up that way over a long period of time. You can't just simplify it and cut out all those steps that got us where we are today.

Actual money or cash is going out of style. Most transactions now are via debit card, credit card or bank transfer. My guess is in 20 or so years, cash will be rarely seen. Gone, just like the good old cheque book. As for interest, I do find it somewhat confusing. Yes, the bankers have ripped us off, so has the Gov't. I guess this has been going on for years, although it does seem to have gotten worse. I borrowed money for a house about 28 years ago. I paid a lot of interest on that money but I never actually saw any of it. I borrowed money from a building society ( remember those lol ) but there was never a huge case full of cash. So, it was virtual money and yes, I paid a lot of interest on it. I had no other option though unfortunately.

I always chuckle when I see the term 'Homeowner'...Unless you hold the deeds in your hand or have them in a vault,it doesn't mean much unless you have a load of equity and sell up and move into private rented and then you will have some 'Real money' to play with-Until your mortgage is paid off you're really only a tenant to your lender effectively your landlord and just a few months of bad luck and it's game over...Assets can be just an illusion sometimes.

Paul wrote:I always chuckle when I see the term 'Homeowner'...Unless you hold the deeds in your hand or have them in a vault,it doesn't mean much unless you have a load of equity and sell up and move into private rented and then you will have some 'Real money' to play with-Until your mortgage is paid off you're really only a tenant to your lender effectively your landlord and just a few months of bad luck and it's game over...Assets can be just an illusion sometimes.

Yep, I agree with you........except that in my view it's worse than being a 'tenant to your lender'. A tenant can complain to the landlord to get repairs done.....as a ' borrowing homeowner' you have to do them all yourself.

zand wrote:

Paul wrote:I always chuckle when I see the term 'Homeowner'...Unless you hold the deeds in your hand or have them in a vault,it doesn't mean much unless you have a load of equity and sell up and move into private rented and then you will have some 'Real money' to play with-Until your mortgage is paid off you're really only a tenant to your lender effectively your landlord and just a few months of bad luck and it's game over...Assets can be just an illusion sometimes.

Yep, I agree with you........except that in my view it's worse than being a 'tenant to your lender'.  A tenant can complain to the landlord to get repairs done.....as a ' borrowing homeowner' you have to do them all yourself.

Exactly!!

eddie1 wrote:Rod thanks for coming back to me. As you can see it's a complex subject and worth watching parts 2 3 4 and five. The video below is a good and quick way to understand the situation, a situation that seems so incredible it could not possibly be true, but it is. Think about this, why does the Government borrow money from banks and pay interest (our money) when it could issue it's own money interest free.

Yes it is complex, and I ought to read more about it (has anyone written a book about this, an economic Ben Goldacre or similar?). I can't say I've thought about it much before, to the average person it's just the life you inhabit in the developed world. I guess it goes back to the original hypothetical goldsmith in the first video - if he's the one holding the original pot of money is he not entitled to say "I'm providing this service (lending) and therefore I must get something out of it because I have my own expenses and mouths to feed"? That seems fine to me, presumably it goes awry when they get greedy and start gambling with the funds and issue loans backed by it many times over. But it seems you don't actually have to have the pot of gold to start with. My brain's hurting now.

What about the original cooperative building societies supposedly owned by their investors, were they OK?

sanguine wrote:

eddie1 wrote:Rod thanks for coming back to me. As you can see it's a complex subject and worth watching parts 2 3 4 and five. The video below is a good and quick way to understand the situation, a situation that seems so incredible it could not possibly be true, but it is. Think about this, why does the Government borrow money from banks and pay interest (our money) when it could issue it's own money interest free.

Yes it is complex, and I ought to read more about it (has anyone written a book about this, an economic Ben Goldacre or similar?).  I can't say I've thought about it much before, to the average person it's just the life you inhabit in the developed world.  I guess it goes back to the original hypothetical goldsmith in the first video - if he's the one holding the original pot of money is he not entitled to say "I'm providing this service (lending) and therefore I must get something out of it because I have my own expenses and mouths to feed"?  That seems fine to me, presumably it goes awry when they get greedy and start gambling with the funds and issue loans backed by it many times over.  But it seems you don't actually have to have the pot of gold to start with.  My brain's hurting now.

What about the original cooperative building societies supposedly owned by their investors, were they OK?

Well my answer is:- Yep I agree it all goes wrong when they start gambling with other people's money. And yes I would say the original building societies were fine as they just acted as the respected middlemen between savers and borrowers. You don't necessarily need a pot of gold to start with - a damn good reputation will do.

This may be a 'Light hearted' take on things performed by puppets but it hit the nail on the head Re Assets not being worth the paper they're written on at times.

Yes it also hits the nail on the head re some of Margaret Thatcher's policies. Home ownership was foisted on some who never ever could or would afford it. Sell council houses? Fine, no problem with that - but you have to replace the stock by building new council houses. Massive mistake. Also the 'on your bike' policy of forcing people to move out of areas where there were no jobs to more affluent areas - ridiculous, encourage companies to move to where the employment is needed instead. Sod industrial inertia, overcome it.

Mortgage rules were relaxed so instead of being able to borrow 3.5x the husband's salary like when we bought our first house (1982) wives salaries were taken into account too. All this did was put house prices up. Of course it all comes tumbling down at the first sign of trouble - people were allowed to borrow too much. Once this happened everyone had to follow suit or they couldn't afford to buy and there was very little social housing to fall back on. Criminal.

And no I don't always vote tory lol, so don't throw that lot back at me!