[ExI] Money Games
pharos at gmail.com
Mon Dec 15 19:36:20 UTC 2008
On Mon, Dec 15, 2008 at 6:26 PM, Damien Broderick wrote:
> Barbara adds
> "Real" money in this context is money that represents past or
> present value, as opposed to "bogus" money that represents only
> future value. I was referring to the latter part of the video where
> Grignon talks about moving to a sustainable economy. He argued that a
> government (presumably a central bank) should own the lending
> industry. At the heart of his case for government ownership was his
> claim that, even if loans were made on "real" money, privately owned
> banks would end up with all the money via the process of earning
> interest on loans.
Apparently Grignon was referring to real estate where the bank lends
money to buy property. ('Real' value at the time, even though everyone
involved was lying about the valuations). The bank gets their fees and
the ongoing interest and eventually when the property is sold, the
bank gets the capital back. Especially when foreclosure happens and
the bank gets the property instead. So long as the music keeps
playing nobody loses. But now the music has stopped. The 'real'
present value at the time of the loan has evaporated into thin air.
The borrower loses his property *and* the bank loses its capital.
Unfortunately the bank lent its capital 10, 20 or even 30 times over.
So the banks have accordingly lost many times their capital reserves.
(As an aside, some people have doubts that the banks have declared all
their losses to date. The suspicion is that off-balance sheet losses
are being hidden in case the panic gets even worse).
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