Yesterday’s article on banking prompted a reply from Chris:
I read your latest post on outersite.org, and while I’m convinced that there has been massive fraud in the financial industry for many years, your argument against Lloyd’s Bank isn’t correct.
“My understanding of the process is as follows:
- In granting the facility, Lloyds Bank digitally created an asset on its balance sheet representing the £50,000 credited to our account.”
That’s not correct. The £50,000 credited to your account (the new money or credit, called a deposit) is a liability of the bank i.e. a debt owed by it to you. It reduces the net worth of the bank’s owners by £50,000.
There is a new asset on the bank’s balance sheet: a new debt (called a loan) of £50,000 owed by you to the bank. This increases the net worth of the bank’s owners by £50,000, cancelling out the reduction from the deposit. So all that happened was that you and the bank swapped equal IOUs, as Perry Mehrling confirms (see his lecture series at https://www.youtube.com/watch?v=KNEouYM5wRE&list=PLSuwqsAnJMtwZEwkJgHZCod2xP9b7skF5).
“2. Over the 12 months since the money was credited to our account, the UK government has paid £1250.00 in interest payments to Lloyds Bank.”
I don’t know your situation, but that seems plausible. Taxpayers have funded the loan to you.
“3. When the money is repaid, be it now or in six years time, the asset of £50,000 is removed from the Bank’s balance sheet, i.e. the £50,000 that was created is then destroyed.”
The loan is repaid by both you and the bank simultaneously writing off your IOUs to each other. Each of you removes a £50,000 asset and a £50,000 liability from your balance sheets.
So if you repay the loan in full, the bank has gained £1250.00 from the interest payment. But if you only pay £500 of the £50,000, the bank has in fact lost £48,250.
Think of it this way:
1. You and the bank swap IOUs for £50,000 each.
2. You transfer £48,250 of the bank’s IOU to someone else in exchange for a tonne of cheese, which you eat.
3. You pay £1750 (interest + £500) to the bank by writing off your remaining deposit, but they write off your whole £50,000 debt to them.
You got to eat a tonne of cheese, and it cost you nothing. The bank now owes £48,250 to whoever sold you the cheese. That’s not the bank ripping you off.
Banks have to charge interest (or fees) because there is no other way to cover the costs of default as well as the running costs of the bank.
I hope that helps to bring some clarity to your dispute with Lloyd’s Bank. Your current line of argument for why you are not obliged to repay £50,000 isn’t going to wash.
To which I responded as follows:
Many thanks Chris
I appreciate the double entry nature of accounting that creates simultaneous assets and liabilities. There’s an excellent article by Colin McKay on the “alchemy” of double-entry bookkeeping to mask the bankers’ usurious profits:
The points raised with the bank were framed/phrased to keep things as simple as possible for clarity. It is telling that they haven’t answered in the manner you describe (they’ve had plenty of opportunity to do so). To open that particular Pandora’s box will unleash some unpalatable truths. 🙂
Money is (or should be) a lubricant to sustain life through human activity. I refer you to the paper enclosed with the letter to Lloyds Bank which I’ve attached.
The privilege of money creation has been appropriated by the banks due to an historic misunderstanding of what preceded money. As explained in the attached paper, simple “exchange” money created the competitive environment that has much less to do with sustaining humans than optimising exchange value. This is leading us towards an existential crisis.
To say that the bank owes £48,250 to whoever sold me cheese is incorrect in the sense that the money has already been created and has lubricated the activity of cheese production and consumption. A form of quantitative easing if you will. The fact that the bank has to write off the £50,000 is a function of the current system, although there is the third option not mentioned, that they call on the UK government to make good their fictional “loss”.
There is an urgency to rethink money in order to create ways of organising that sustain life rather than destroy it. This is why I’ve chosen to fight this particular battle.
Given that all institutions, including the law, are controlled by money, whether this case is won or not isn’t important. It is the visibility of the dysfunctional money system that is the purpose of this approach.
It’s important that people understand why the world is as it is and that we cannot rely on the institutions and practices that got us into this mess, to get us out of it.
There is the additional value in exposing the covid fraud that has expedited yet another round of debt enslavement. The COVID trojan is driven by simple, exchangeable money because everyone is motivated and rewarded for perpetuating the myth and promoting/complying with the attendant policies etc.
Now is the time to fight for our future and that of our children. We each must do what we can to expose reality. Then reality will change.
Before you get the wrong idea, I am NOT advocating QE (quantitative easing) for everyone on the planet. Simple exchangeable money is fundamentally flawed because it separates our activities from what we need to sustain ourselves, our families, communities and wider society.
However, this email exchange raises an interesting point. QE has been dolled out to global cartel banks from 2008, supposedly to alleviate the global financial crisis but in reality to benefit those least in need of more money.
Richard Werner, who coined the phrase “quantitative easing”, proposed it as a means to extend credit to people not banks but like most potentially useful ideas it was co-opted to benefit those controlling the levers of power. We’ve seen the exponential rise in inequality as a result.
In the paper referred to in my email above, Money Methodologies for Sustainability and Inclusion we’re aren’t proposing QE for humans because it would give rise to undesirable spending on things we don’t need.
What we’re proposing is unfettered access for all humans to satisfy and utilise their unique needs and capacities to benefit themselves, their families and communities and wider society. By this means, only that which is useful gets produced or delivered, removing most of the waste, pollution and destruction that arises from proxying the value of human activity to simple exchangeable money, the value of which has no relationship with what is useful to humans, individually and collectively.
To give you an idea of the urgency with which we need to act (if “mandatory vaccination” being rolled out and the widespread tyranny unfolding aren’t enough to alert everyone); in the time it has taken me to write the final paragraphs of this post, the BBC article, I linked to in respect of Richard Werner coining the phrase “quantitative easing”, was removed.
You’ll note that I’ve now linked to the copy of the article in the WayBackMachine.