How the banks steal your money in the form of a loan

@Glennn,

Glennn wrote:

I have no idea what you think that means, but what it is saying is that rather than count the disbursement of a loan as a negative entry in their books, the bank writes it up as an asset, which is impossible due to the fact that it is now allegedly in someone else's hands.

It absolutely is an asset. Max is one the hook for the value of that loan and it is legally enforceable. A loan is an asset that can be sold to a third party or held on to. I own bonds which are loans to corporations. They pay me interest and if I tire of them or need my money back, I can sell them. No one would consider them anything but assets. Bank loans are exactly the same.

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You believe that your opinion concerning the operation of banks is superior to the former president of the Bank of England, the former Credit Manager of the Federal Reserve Bank of Atlanta, the former Governor of the Bank of Canada (all of whom I have quoted)

No, I think my opinion is superior to yours. I can answer a simple question about a bank, Max's car loan and a car dealership. You cannot.

1 Reply

@engineer,

Earlier in this thread you declared your belief that banks loaned money from deposits. You've offered nothing to support your belief. I've provided credible sources that show your belief to be false. That's where you stand on that issue.

I've also brought to light a court case in which bank president admitted that his bank routinely created money out of thin air for its loans, and that this was standard banking practice, which means that the money for loans first came into existence when they created it for the loan, which means that there was no lawful consideration tendered to support the note, and that the bank president admitted that no U.S. law or statute existed which gave him the right to do this. In addition, I've provided information and quotes from professionals in positions of finance that support my argument. You've offered nothing to refute this other than waving your hands and calling them ignorant, which doesn't count for anything. That's where you stand on that issue.

The fact is that if a loan is nothing more than a book entry, and the bank receives a lender's fee for the money it didn't loan, the implications of that process is self evident, especially when that alleged loan is for two-hundred and fifty thousand dollars with a $150.000.00 lender's fee attached.

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No, I think my opinion is superior to yours. I can answer a simple question about a bank, Max's car loan and a car dealership. You cannot.

My opinion is based on research that includes opinions of people in positions whose understanding of the operational processes are superior to your hand waving.

As to Max's car loan, you keep forgetting that since the loan was just a book entry with no lawful consideration tendered to support the note, the bank is unduly enriched.

1 Reply

@Glennn,

Quote:

Where does the money come from to pay the national debt?

Although the title of your thread is
(How the banks steal your money in the form of a loan),
I suspect the real reason you started this thread was to discuss the issue of the national debt.

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@Real Music,

This is not my thread.

1 Reply

@Glennn,

My mistake

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@maxdancona,

Of course it's an asset to the lender. The borrower acquires both an asset (cash) and a liability (the note payable).

That's what is called double entry accounting. I realize you already understand this.

I wish they would have started with different terms. Debit sounds like debt and Credit sounds like a good thing to have.

I'm staying away from fractional reserve banking on purpose.

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@roger,

I had an accounting teacher who said that in his mind always called them dammits and cram its.

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@chai2,

Never heard that one, but there is a story of a senior accountant who started work every morning by consulting a little book in his desk. When he died, they just had to see what he had been reading. "Debits on left; credits on right"

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@Glennn,

Glennn wrote:

Earlier in this thread you declared your belief that banks loaned money from deposits.

Except a link to the BofA annual report and a quote showing the deposits and loan amounts.

Glennn wrote:

You've offered nothing to support your belief. I've provided credible sources that show your belief to be false.

Except, you know real annual reports with real deposits and stuff.

Glennn wrote:

The fact is that if a loan is nothing more than a book entry, and the bank receives a lender's fee for the money it didn't loan, the implications of that process is self evident, especially when that alleged loan is for two-hundred and fifty thousand dollars with a $150.000.00 lender's fee attached.

I don't know how you can (repeatedly) say that no money was loaned when Max has a car and the car dealer has a stack of $100's on his desk. Isn't that stuff on the car dealer's desk money? You routinely stumble on the most simple of examples.

Glennn wrote:

As to Max's car loan, you keep forgetting that since the loan was just a book entry with no lawful consideration tendered to support the note, the bank is unduly enriched.

So if the bank is "unduly enriched", then someone has to lose. That is how zero sum games work. Who was that person? Max, car dealer, who was it?

1 Reply

@engineer,

Quote:

Except a link to the BofA annual report and a quote showing the deposits and loan amounts.

I've already explained to you that when a bank makes a loan, it simultaneously creates a matching deposit in the borrower's bank account, thereby creating new money. So the bank considers the loan amount and deposit as the same thing. I've provide you with reference to this information, and will do so again:

Commercial banks create money, in the form of bank deposits, by making new loans. When a bank makes a loan, for example to someone taking out a mortgage to buy a house, it does not typically do so by giving them thousands of pounds worth of banknotes. Instead, it credits their bank account with a bank deposit of the size of the mortgage. At that moment, new money is created. For this reason, some economists have referred to bank deposits as ‘fountain pen money’, created at the stroke of bankers’ pens when they approve loans.

http://www.bankofengland.co.uk/publications/Documents/quarterlybulletin/2014/qb14q1prereleasemoneycreation.pdf

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Except, you know real annual reports with real deposits and stuff.

See above . . . again.

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I don't know how you can (repeatedly) say that no money was loaned when Max has a car

Actually it's me who doesn't know how you can repeatedly say that real money value was loaned when it's been established that the money for the loan was created by the stroke of a pen.

Quote:

So if the bank is "unduly enriched", then someone has to lose.

I've also explained this several times. The person paying for the privilege of using money that was never really there is the loser. I gave you the example of a $250,000.00 home loan costing the borrower $150.000.00 in interest when the money was created out of thin air at the time of signing.

By the way, who has the power to coin money?

1 Reply

@Glennn,

Glennn wrote:

Quote:
Except a link to the BofA annual report and a quote showing the deposits and loan amounts.

I've already explained to you that when a bank makes a loan, it simultaneously creates a matching deposit in the borrower's bank account, thereby creating new money. So the bank considers the loan amount and deposit as the same thing.

No, it considers the loan amount and the deposit as opposite things, one is an asset and the other is a liability. I went ahead and looked at some of the stuff you posted and see your confusion. The part you miss is that after the bank "simultaneously creates a matching deposit in the borrower's bank account", Max (our borrower) removes the money. (Actually, the bank doesn't deposit money in Max's account, it writes the dealer a check directly.
Same with a home loan.) Max doesn't let the money sit there, he withdraws it (real money), goes to the car dealership and buys a car. Now the car dealer has money, again, real money. What has got you so twisted is just the accounting process used to document the transaction. The bank still gives out real money that other people have deposited. That is what ends up on the car dealers desk.

Glennn wrote:

Quote:
I don't know how you can (repeatedly) say that no money was loaned when Max has a car

Actually it's me who doesn't know how you can repeatedly say that real money value was loaned when it's been established that the money for the loan was created by the stroke of a pen.

No, an accounting entry was created and it was created on both sides of the ledger. It's like adding a number to both sides of an equation. The equation is still valid.

Glennn wrote:

Quote:
So if the bank is "unduly enriched", then someone has to lose.

I've also explained this several times.

No you haven't. You haven't shown Max or anyone else has been harmed in any way.

Glennn wrote:

The person paying for the privilege of using money that was never really there is the loser. I gave you the example of a $250,000.00 home loan costing the borrower $150.000.00 in interest when the money was created out of thin air at the time of signing.

No, the money was withdrawn at the time of closing and paid to the previous owner of the home. The previous owner is sitting on $250,000. That's not funny money.

Let's step through Max's car loan.

At time zero
-The bank has $25,000 of deposits
-Max has nothing that he wants to contribute to the transaction
-The car dealer has a car worth $20,000.

At the time the loan is approved but before the purchase
- The bank has $25,000 of deposits, a note from Max for $20,000 and a liability of $20,000 owed to Max. Total assests $25,000, no change.
- Max has $20,000 in his account at the bank and a loan for $20,000, total value $0, no change.
- The car dealer still has a car worth $20,000

At the purchase, Max takes the money and buys the car
- The bank has $5,000 in deposits (because it gave Max $20k for his car), a note from Max for $20,000, so a total of $25,000
- Max has a $20,000 car and a loan for $20,000, so net zero.
- The car dealership has $20,000 in cash and no car, so $20,000 total.

At no time does the bank balance sheet show more a worth different than $25,000. Yes, the assets go up to $45k and the liabilities rise to $20k, but the net worth is still the same.

Glennn wrote:

The person paying for the privilege of using money that was never really there is the loser.

Max is not a loser here. He's told you repeatedly he is completely happy. You are upset over an accounting technique that at no time paints an inaccurate picture of the bank situation. Let's say that instead of using an evil bank, Max borrow the money directly from Alphabeta. AB has a $25k in cash, he goes with Max to the dealership, has Max sign a loan for $20k, gives the $20k to the dealer and Max drives off with a car. Now Max has borrowed from his A2K friend AB, no banks involved. How is he better off? He still has a car and a car loan. AB has $5k and a note from Max. No difference than if Max had used a bank.

1 Reply

@engineer,

Quote:

No, the money was withdrawn at the time of closing and paid to the previous owner of the home. The previous owner is sitting on $250,000. That's not funny money.

You're overlooking a point that has already been established which I've provided ample sources to support. The bank loaned money that did not exist at the time the loan contract was signed. The fact that there was no actual value transferred in the transaction means that there was no lawful consideration tendered to support the contract; the bank did not put up anything. That's a legal issue that you will not acknowledge. And to that point, I've asked you a couple of times who has the power to coin money. You haven't responded to that either. So you start from a position of defending an institution that mistakenly assumes the power to coin money.

Putting that aside, we'll look at the consequences of financial institutions creating money out of nothing; consequences that go a wee bit beyond the benefits to Max when he buys a car. When a bank makes loans, it creates additional deposits for those who have borrowed the money. Those additional deposits are just the numbers that appear in your account, which you can use to pay for your new house. In fact, about ninety-seven percent of all the money that exists is created in this way--out of nothing when banks make loans. So much for your idea that the bank loans from deposits, since that source accounts for only three percent of existing money. So, every loan they make creates brand new money in the economy, whether it's a personal loan, car finance, or mortgage.

Now here's the problem. If almost all of the money we use is created by banks when they make the loans, then for every dollar, there has to be a dollar of debt. If we want more money in the economy, we have to go further in debt to the banks because more borrowing from banks means more new money is created. But the process happens in reverse when we repay loans. When we pay off our loans, the money effectively disappears. This makes it impossible for all of us to reduce our debts. If we start paying it off, then the amount of money in the economy shrinks. Less money in the economy means less spending, and less spending means fewer jobs. So you can have either more money and more debt, or we can have less debt and less money. Some choice.

When the only way to get money into the economy is to borrow it from the banks and thus creating it, then we'll always be trapped under a load of debt. But it doesn't have to be that way. If we took the power to create money away from the banks, and instead have money created by a public institution whose purpose isn't to create short-term profits for itself, then this new money would not only supports jobs and the economy, but could also be used to pay down the debt.

And this is to say nothing about the central banks, which are not really controlled by elected governments. They're controlled by private interest from the world of commerial banking. Banks are businesses out to make profits from the interest on the loans they make from the money they create. They decide who they will lend to. They also decide what is produced, where it will be produced, and who will produce it, and all on the basis of profitability to themselves, and not on the basis of what is beneficial to the community. Entire economies are run for the profit of financial institutions. All of us, including governments, are subject to them.

Instead of being supplied interest-free money as a means of exchange, it comes as a debt owed to bankers, providing them with vast profits, power, and control. The rest of us are saddled with debt. By supplying credit to those who they approve of, and denying it to those they don't approve of, international bankers can create booms or busts, and support or undermine governments.

1 Reply

@Glennn,

Glennn wrote:

You're overlooking a point that has already been established which I've provided ample sources to support. The bank loaned money that did not exist at the time the loan contract was signed.

The bank disbursed real money to the seller. I don't know why that is controversial. Max bought a car, the dealer got real money. I recently bought a house and the second I signed the paperwork, the seller got real money, dispersed from the bank, that existed when I signed the paperwork. You keep saying you have established a point that is wrong on its face. When you take out a loan, you are given real money.

Glennn wrote:

I've asked you a couple of times who has the power to coin money. You haven't responded to that either.

Yes, you keep trying to derail the conversation that direction. You don't understand basic accounting and keep insisting that Max has been harmed by the bank in a simple loan transaction but can't explain how and you think someone would find merit in discussing more complex topics? Try answering the simple ones first.

Glennn wrote:

So, every loan they make creates brand new money in the economy, whether it's a personal loan, car finance, or mortgage.

No, it is just an accounting convention. The bank is loaning out money it has received from depositors.

Ok, let's try this. You believe the bank is hurting Max by loaning him money "that doesn't exist". Ok, let's say I loan the money to Max. I earned the money, it is sitting at home. I'm going to loan it to Max and he is going to pay me a fair interest rate back. No banks involved, no ledger entries, no depositing of money in accounts and recording of assets, just me loaning Max money, him paying it back with a fair interest rate. How (exactly) does Max come out better for this?

1 Reply

You two need to get a room.

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@engineer,

Quote:

When you take out a loan, you are given real money.

Really? If you were aware of how fractional reserve banking works, you wouldn't make such a statement. You should google that.

Also, you've apparently missed all of the references I've provided from people involved in the finance and banking industry who confirm that banks create money for loans out of thin air. I'm not going to repeat it all for you again, though I will bring to your attention that I even referenced a bank president who testified in court that they routinely created money out of thin air for their loans. How you came away from that with the idea that it's all real money being loaned is beyond me.

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Yes, you keep trying to derail the conversation that direction.

Oh I think the question of who has the power to coin money is very pertinent to a discussion of banks creating money out of thin air, don't you? So who has the power to create money?

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The bank is loaning out money it has received from depositors.

Wow! I've provided so many things from so many credible sources that blows your idea out of the water that I have to believe that you aren't reading them. But I'll provide you with another:

Firstly, here’s a short explanation of bank lending. Under normal circumstances, deposits and loans are more-or-less equal across the banking system as a whole. This is because when a bank creates a new loan, it also creates a new balancing deposit. It creates this "from thin air", not from existing money: banks do not "lend out" existing deposits, as is commonly thought.

https://www.forbes.com/sites/francescoppola/2014/01/21/banks-dont-lend-out-reserves/#6d9363c47d20

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The bank is loaning out money it has received from depositors.

*sighs* Please see above.

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Ok, let's say I loan the money to Max. I earned the money, it is sitting at home. I'm going to loan it to Max and he is going to pay me a fair interest rate back.

So you want to compare the consequences of you lending another man money that is sitting at home with a bank who is lending everyone money that it created out of thin air? Sure, let's do that. Actually I've already done that, but you've forgotten, and so I'll post it again.

. . . we'll look at the consequences of financial institutions creating money out of nothing; consequences that go a wee bit beyond the benefits to Max when he buys a car. When a bank makes loans, it creates additional deposits for those who have borrowed the money. Those additional deposits are just the numbers that appear in your account, which you can use to pay for your new house. In fact, about ninety-seven percent of all the money that exists is created in this way--out of nothing when banks make loans. So much for your idea that the bank loans from deposits, since that source accounts for only three percent of existing money. So, every loan they make creates brand new money in the economy, whether it's a personal loan, car finance, or mortgage.

Now here's the problem. If almost all of the money we use is created by banks when they make the loans, then for every dollar, there has to be a dollar of debt. If we want more money in the economy, we have to go further in debt to the banks because more borrowing from banks means more new money is created. But the process happens in reverse when we repay loans. When we pay off our loans, the money effectively disappears. This makes it impossible for all of us to reduce our debts. If we start paying it off, then the amount of money in the economy shrinks. Less money in the economy means less spending, and less spending means fewer jobs. So you can have either more money and more debt, or we can have less debt and less money. Some choice.

When the only way to get money into the economy is to borrow it from the banks and thus creating it, then we'll always be trapped under a load of debt. But it doesn't have to be that way. If we took the power to create money away from the banks, and instead have money created by a public institution whose purpose isn't to create short-term profits for itself, then this new money would not only supports jobs and the economy, but could also be used to pay down the debt.
______________________________________________

Also, though I recommend watching at least the first fifty minutes of the video below, at the 46:55 mark there is a rather humorous animated video that explains what the banking system, from the Federal Reserve down to local commercial banks are doing with the money they create, and how it affects us.

https://www.youtube.com/watch?v=W3zVHaVyfxc

1 Reply

@Glennn,

Glennn wrote:

Quote:
When you take out a loan, you are given real money.

Really? If you were aware of how fractional reserve banking works, you wouldn't make such a statement. You should google that.

Or I could take out a loan and look at the money in my hand.

Glennn wrote:

Also, you've apparently missed all of the references I've provided from people involved in the finance and banking industry who confirm that banks create money for loans out of thin air.

No, I've looked at them and your interpretation is absolutely incorrect. I've walked you through a simple loan examples showing all the accounting and explaining the various paper and real transactions. "I'm not going to repeat it all for you again."

Glennn wrote:

How you came away from that with the idea that it's all real money being loaned is beyond me.

Because when someone walks into a lender and walks out with US currency, it looks like real money. It's not all that difficult.

Glennn wrote:

Quote:
Ok, let's say I loan the money to Max. I earned the money, it is sitting at home. I'm going to loan it to Max and he is going to pay me a fair interest rate back.

So you want to compare the consequences of you lending another man money that is sitting at home with a bank who is lending everyone money that it created out of thin air? Sure, let's do that. Actually I've already done that, but you've forgotten, and so I'll post it again.

No, you've posted lots of other people's words which you choose to misunderstand, but you have never explained your interpretation of how this very simple car loan which you claim the bank profits unduly hurts Max, the person who must provide this profit. All you have to do to prove your point is to show that Max has suffered financially from the bank's actions, and if you had any understanding of what you have posted, you could apply it to this very simple, direct problem. Heck, I'm arguing the opposite point but I stepped through the car loan with the accounting included for you. But you can't because Max hasn't been hurt. He comes out the same if he borrows from a bank or a person. You've built an elaborate house of cards but at the end of the day, if you are correct, Max has to suffer for it - and he doesn't. The entire premise you are trying to defend is exposed as invalid from the very first statement - The bank hasn't unduly profited because Max hasn't been harmed. You haven't explained how Max would come out better borrowing from a person than from a bank, because he wouldn't.

1 Reply

@engineer,

Quote:

Or I could take out a loan and look at the money in my hand.

You still don't get it. A bank takes one-hundred dollars in its reserves and loans out eight to ten times that amount without touching the original hundred. That means it's creating nine-hundred dollars out of nothing and collecting interest on that money that never really was. The money in your hand is part of that created money. This was explained to you when you were shown that ninety seven percent of the banks' loans are simply tapped into a computer screen.

Quote:

No, I've looked at them and your interpretation is absolutely incorrect.

Firstly, here’s a short explanation of bank lending. Under normal circumstances, deposits and loans are more-or-less equal across the banking system as a whole. This is because when a bank creates a new loan, it also creates a new balancing deposit. It creates this "from thin air", not from existing money: banks do not "lend out" existing deposits, as is commonly thought.

https://www.forbes.com/sites/francescoppola/2014/01/21/banks-dont-lend-out-reserves/#6d9363c47d20

Since you believe I've misinterpreted this by thinking that it means exactly what it says, why don't you interpret it.

Quote:

No, you've posted lots of other people's words which you choose to misunderstand

Quote:

All you have to do to prove your point is to show that Max has suffered financially from the bank's actions

Now you're being deliberately obtuse. Rather than claim that I choose to misunderstand, explain how what I've written below concerning the consequences of pumping extra money into the economy and the consequences of having it disappear should debts be paid off is a misunderstanding on my part.

If almost all of the money we use is created by banks when they make the loans, then for every dollar, there has to be a dollar of debt. If we want more money in the economy, we have to go further in debt to the banks because more borrowing from banks means more new money is created. But the process happens in reverse when we repay loans. When we pay off our loans, the money effectively disappears. This makes it impossible for all of us to reduce our debts. If we start paying it off, then the amount of money in the economy shrinks. Less money in the economy means less spending, and less spending means fewer jobs. So you can have either more money and more debt, or we can have less debt and less money. Some choice.

When the only way to get money into the economy is to borrow it from the banks and thus creating it, then we'll always be trapped under a load of debt. But it doesn't have to be that way. If we took the power to create money away from the banks, and instead have money created by a public institution whose purpose isn't to create short-term profits for itself, then this new money would not only supports jobs and the economy, but could also be used to pay down the debt.
_______________________________________________

Now, who has the power to coin money?

1 Reply

@Glennn,

Great, apply all of that and tell me how Max is a loser.

1 Reply

Here’s a real life one.

I got a loan to buy a duplex.
I rent out the two units in the duplex.
I take the money that people pay in rent and pay the loan.
My hard earned W2 money never goes to the bank.

Since I have the loan, am I getting robbed (what am I losing)? Or am I robbing the people who rent my condos (what are they losing)?

1 Reply

@maporsche,

I 100% Agee with you. However I think Glenn is going to say you’re being robbed of the opportunity of pocketing rent money that you earned.

0 Replies

How the banks steal your money in the form of a loan

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