Greece, the gloves are off

[RandBlade]

Banks do not lose money.
Banks create money out of thin air and then they lend it.
Unlike loses in productive companies where losses represent real assets, in the banking industry a loss is failure to fulfill repay promises of money that was created out of thin air, a broken promise on money that did not exist.

Imagine this. Someone deposits $10 in my bank. The current reserve requirement ratio allows me to create $100 out of $10 of deposits. Then I create $100 in my accounting books and now I can lend $100.

You come and borrow $100 and then you default. How much money did I lose? Nothing. I only would need to reduce $100 from the assets, but since they were never backed by real assets, but merely a promise to repay money that did not exist, the loss is not real.

You're an idiot.

Even in your insanely simplistic model, the banks did lose money. The banks lost the $10. Then how much did the banks pay the employees who dealt with your loan every step of the way, lawyers to try and enforce it from start to chasing it up unsuccessfully at court to finish it, the buildings the bank owns where you went into to borrow the money etc, etc, etc

Yes there's a multiplier, but you can't multiply nothing - the banks had their own money involved, and they spend their money every step of the way. Besides you should know that multiple banks have been reporting massive losses in recent years while some banks have failed - while more would have without state support. So you're ignorant too.

[ar81]

You're an idiot.

Even in your insanely simplistic model, the banks did lose money. The banks lost the $10. Then how much did the banks pay the employees who dealt with your loan every step of the way, lawyers to try and enforce it from start to chasing it up unsuccessfully at court to finish it, the buildings the bank owns where you went into to borrow the money etc, etc, etc

Yes there's a multiplier, but you can't multiply nothing - the banks had their own money involved, and they spend their money every step of the way. Besides you should know that multiple banks have been reporting massive losses in recent years while some banks have failed - while more would have without state support. So you're ignorant too.

I do not think I am ignorant or idiot, perhaps someone else is.

First, the bank did not lose the $10. When you deposit money in the US it goes to the FDIC. Banks are not risking "their" money. They just lose money they created out of thin air. But accounting tricks allow to disguise many things. The amount of money paid, compared to the amount of money that the bank creates and lends is insignificant. Banking is not a manpower intensive activity.

You may like to read this: I want Earth plus 5% It explains finances in a simple way. Or you may want to watch: Money as debt and Money as Debt II Promises Unleashed

Or if you do not believe those source, you may read the book "Agenda for a New Economy: From Phantom Wealth To Real Wealth" by David C. Korten where he wrote:

It seems a bit odd that we have experienced economic collapse because of a credit crunch, an inability to borrow, at a time when the world is awash not only in debt but also in money. Business Week’s July 11, 2005, cover story shouted “Too Much Money” and spoke of a savings glut. Its June 11, 2008, European issue reiterated the theme, “Too Much Money, Inflation Goes Global.”
Most discussion of the financial crisis focuses on the details and misses the big picture. The problem is twofold. The economic system is awash in money, but it is in the wrong places. Second, virtually every dollar in the system is borrowed, because we rely on banks to create our money by lending it into existence. No debt, no money.

As wages fall relative to inflation, the bottom 90 percent of the population is increasingly dependent on borrowing from the top 10 percent to put food on the table. But when the less fortunate can’t repay their loans, the rich people stop lending. Most loans continue to be repaid, but because the default rate is rising and the crazy system of derivatives trading makes it impossible to separate good debts and responsible borrowers from bad debts and deadbeats, banks are afraid to lend to anyone. As the good loans are repaid, the supply of money shrinks because new loans are not being issued.

The demand for real goods and services begins to fall because people don’t have the money to pay for them. Businesses lay off workers, who consequently cannot afford either to repay their debts or to put food on the table. The problem appears to be a lack of money, even though the total money in the financial system is far more than enough to cover real-wealth exchanges in a rational real-wealth economy.

It all traces back to a money system that issues money as debt and seeks economic expansion for the sole purpose of generating new demand for debt to create the money to pay the interest on existing debt in an ever-escalating spiral to a never-never land high in the clouds.

Korten earned his MBA and PhD degrees at the Stanford University Graduate School of Business. He served for five and a half years as a faculty member of the Harvard University Graduate School of Business, where he taught in Harvard’s middle management, MBA, and doctoral programs and served as Harvard’s adviser to the Central American Management Institute in Nicaragua.

He was regional adviser on development management to the U.S. Agency for International Development.

Korten’s publications are required reading in university courses around the world. He has written numerous books, including the international best seller When Corporations Rule the World, The Great Turning: From Empire to Earth Community, and The Post-Corporate World: Life after Capitalism.

[Lewkowski]

So if Banks aren't risking their own money why have several failed recently? Including some big names.

[Hazir]

It seems like Alberjohns has made a convert? I advise everybody not to waste time with the sources offered in AR's post. The time you watch that nonsense is time you will never get back.

[ar81]

So if Banks aren't risking their own money why have several failed recently? Including some big names.

Because of the methods used for accounting that define losses in a certain way and bankruptcy is defined by certain parameters of "solvency" which of course does not mean the same for banks as for productive companies.

Banks create so much money in accounting books that the amount of real money is so small that it could never repay all the debts it has. Bankruptcy is issued before it becomes evident, because if people knew that bank losses are only promises of repayment that were not fulfilled on money that did not exist, the whole financial scheme would colapse and financial people would have to produce something real, instead of leeching people's pockets. Watch the videos about "Money as debt" and you will see it more clearly.

You may say it wold be illogical that in a time of crisis a factory would stop selling, just like banks stopped lending. But since banks losses are defined by promises not fulfilled, and there is no real loss of a real asset, they do not lend because they do not want to have more promises people can't fulfill. By not lending, they turn their money created in the books into real assets when people repay the loan or when foreclosures take place.

When banks have losses, since people default, it means that money they created in the books will never become a real asset, so it is money not backed by real assets, an inexistent asset, "toxic asset", "troubled asset" or just fake money. TARP program is aimed at covering toxic assets with real assets, and it of course causes no losses but profit, and this is how banks recovered so fast. The banking scheme is so different than the normal business considerations for productive companies that people hardly understand it, and of course bankers do nothing to help people to understand it.

What they call "products" are not such. One clear example is the Synthetic CDO.
Look how the financial scam works:

VIDEO: Synthetic collateralized debt obligation (synthetic CDO)

With Synthetic CDOs you invest, thinking that they will pay interest, but indeed they use your money to cover defaults and you end up paying for those who did not pay their loans. And of course, banks created the money and ended up with no loss. This is how investment banks passed losses from the housing crisis to Wall Street.

You also may like to read these news about "bank ethics"

BBC: US bank reports $3.3bn profits

New York Times: Bank Earns $11.7 Billion in Year

New York Times: Bankers Without a Clue

New York Times: Wall St. Ethos Under Scrutiny at Hearing

New York Times: Banks Bundled Bad Debt, Bet Against It and Won

New York Times: Bankers in Their Own Words

Among the proposed solutions, one interesting one is Sharia banking, a concept that came 40 years ago. It is some sort of islamic way of banking that collects no interests, but a share of profit, so risk is shared between lender and borrower. However, sharia banks were tempted by the juicy profits of western banks that used "risky practices" (creating money out of thin air) and this is how you have the Dubai scandal.

Notice that sharia banking as originally conceived, creates no money in accounting books, therefore causing no inflationary pressures. Under islamic religion, collecting interests is a sin called "Riba" (usury). By the year 1300 AC collecting interests was also seen as a sin. This is why in Europe, jewish lenders were sent to the Frankfurt ghetto, an idea that Hitler used later.

But Medici family in Italy came with the word "comission" to disguise interests and since then we have the immoral lenders turned into respectable bankers.

Indeed many jewish during WWII deposited their money in the banks and when they died their sons did not receive the money. In 1932 bankers gathered in Düsseldorf to finance Adolf Hitler. The financial crisis caused by the bankers after the crisis of 1914 that led to the Great Depression in 1929 and the 1923 hyperinflation in Germany in 1923 caused by deficit and easy money policy, was not repaid by bankers, but by the jewish who became scapegoats of this crisis. So bankers caused the crisis and turned fake money into real assets, they took the money from jewish and on top they financed Hitler who blamed jewish.

[Hazir]

Righteo... so WW II had nothing to do with the big reset?

[ar81]

Righteo... so WW II had nothing to do with the big reset?

I was mentioning several moments when "respectable bankers" were stars who "guided" humanity.
Today it is the first time in which they are shown as the ones who caused the problem.

[Hazir]

Oh, I see. So this is just another Jewish conspiracy. Did you read the 'Protocols of the elders of Zion' to obtain this knowledge or did you just watch the crap you promoted above?

By the way, do you mind if we go back on topic and leave your drivel for what it is?

[Dreadnaught]

To Dread, GS is supposedly the financial wizard of the world, with teams of attorneys and people who should know better. Helping Greece hide debt violates at least the spirit of regulation law. I wouldn't be so quick to give them the banker's pass around the board....

But they didn't do anything wrong. They made a series of debt deals, and the Greeks hid them in their budget. It would be as if I gave you $50,000 but you didn't report it to the IRS.

[Being]

But they didn't do anything wrong. They made a series of debt deals, and the Greeks hid them in their budget. It would be as if I gave you $50,000 but you didn't report it to the IRS.

It would be as if I gave you $50,000 but I didn't report it to the IRS. Whoops, I broke the law.

[Dreadnaught]

You don't have to report personal expenditures to the IRS. Ultimately, the Greece political establishment cooked the books on those deals.

How is that Goldman's fault? They don't detail every trade in their income statements.

[Being]

You don't have to report personal expenditures to the IRS.

Any transaction $10,000 or above you are required to report to the IRS. Yes, and the IRS uses that info to check up on the person you gave it too because they are the ones who have to report the income.

We can stretch this in any direction you like. At the end of the day, Goldman made a fairly normal loan in exchange for an uncertain future revenue stream from things like the airport operations in Athens.

And the Greeks decided to count the money as revenue and not mention what they were trading for it in their budget numbers.

Who is being shadier here? Goldman or the Greeks? Please explain how Goldman somehow crossed the line. Curious what you're going to squeeze out.

[Hazir]

But they didn't do anything wrong. They made a series of debt deals, and the Greeks hid them in their budget. It would be as if I gave you $50,000 but you didn't report it to the IRS.

A little snippet I read about GS is that the current stance isn't that they necessarily did something wrong. The Greeks though did, so now it's investigated if its bankers stayed on the right side of the law.

It's not that strange really.

[GGT]

"Greece still needs to raise 20 billion euros ($27.2 billion) by the end of the year. And if the EU decides to give debt guarantees to banks willing to buy Greek bonds, that will be a bailout and will firmly hurt the Lisbon Treaty", says a lawyer based in Brussels.

"The problem is that, once the EU doesn't respect its own rules, how can it keep fining companies for not respecting them either? It creates a huge authority problem for the Commission", he says.

This is because of the so-called "no bailout clause" of the Lisbon Treaty, which states that "the Union shall not be liable for or assume the commitments of central governments".

The only way around this article would be another one, which says: "when a member-state is in difficulties or is seriously threatened with severe difficulties caused by natural disasters or exceptional occurrences beyond its control, the Council (...) may grant Union financial assistance to the member-state concerned".

If the European Commission manages to state that the CDS market amplified the Greek crisis beyond Greece's control, maybe then the EU as a whole will be able to give Greece a hand without loosing its authority.

http://www.cnbc.com/id/35721306

[ar81]

Greek reported a loan using derivatives as if was just a money exchange transaction, the gain and huge debt came from money exchange comissions and overestimated currency value. It seemed to come when EU did not have proper regulation on derivatives.

Now who's to blame? If I John makes a "deal" with a US politician to cause problems to US government, who is to blame?
Here it comes the concept of law and also ethics.

[Hazir]

http://www.cnbc.com/id/35721306

That whole 'can't bail out' angle is a bit silly in my eyes. The clause is one that protects members from irresponsable peers. It's intention is to not have an obligation to bail out, not to bind the member's hands if he wants to bail out.

The 'external factors' angle (speculators) would enable politicians to say that they have no other choice than to bail out Greece. But I think they are keeping that in reserve just in case Greece really is going to default. So far that's still not happened.

Also AR, the legality of the deals at this moment no longer is in question. The legality question is of limited relevance anyway, because this is a crisis of trust.

[Being]

Any transaction $10,000 or above you are required to report to the IRS.

Yes, and the IRS uses that info to check up on the person you gave it too because they are the ones who have to report the income.

We can stretch this in any direction you like. At the end of the day, Goldman made a fairly normal loan in exchange for an uncertain future revenue stream from things like the airport operations in Athens.

And the Greeks decided to count the money as revenue and not mention what they were trading for it in their budget numbers.

Who is being shadier here? Goldman or the Greeks? Please explain how Goldman somehow crossed the line. Curious what you're going to squeeze out.

For the record, that is not my post. Dread must have mistakenly edited my post instead of replying to.

The first sentence is mine. And I stand by it. Any transaction of $10,000 dollars or more you are required to report to the IRS.

[ar81]

Oh, I see. So this is just another Jewish conspiracy. Did you read the 'Protocols of the elders of Zion' to obtain this knowledge or did you just watch the crap you promoted above?

Ah, do you mean the secret plan to use their psychotronic influence on us, to poison and kill us all?
I have some news. What they are trying to attempt is to pretend to be God and be above nature.
Unfortunately God is good to screw human plans, and nature can't be tamed.
They will fail miserably. There are laws of life that are above them. Unlike Timmy at AtariCC, the elders are not the rules.

I refuse to judge all Israelis and Jewish as a block, let alone to think that what their politicias do represent them.
It would be like saying that since Bush caused this global crisis, all Americans should bailout the rest of the planet.
It would be like saying that since Greek politicians and bankers cheated, Greek population should pay for it.

There is a human rights group called B'Tselem, a watchdog that cares about abuse in occupied territories that are subject to apartheid.
I strongly disagree with violations of human rights, but I have no feelings against jewish. They are just like you and me.
And there is a jewish among us (not me, of course).

As for the Greece issue it is clear that transparency and ethics are scarse nowadays.
Refusal to bailout seems fine in my eyes, since it would open a door so one country may want to be bailed out by another.

[Hazir]

Ok, so now let's assume I understood what you wrote above and think you try to tell us that you are not an anti-semite per sé; why then are you promoting blatantly anti-semite desinformation?

[ar81]

No. Human rights is not antisemite.
People can do right or wrong. I support the right and I condemn the wrong.
I have mexican friends and still I disagree with the actions of mexican politicians.
Same happens with anyone on Earth.
Israel is just an administrative jurisdiction, like US or Spain.
I do not care about taking sides in futile administrative wars.
If someone does something right, that's good. If someone does something wrong, I can't support it. But it does not make people good or bad, because people are not their actions. Actions can be changed.

The problem is that people use to have binary perception: Friend or foe, 0 or 1, black or white, semite or antisemite.
The color of truth is grey. I do not like binary labels.
Bytes allow 256 ways of seeing the world, and truecolor allows 16 million.
16 million can't be understood with a single binary bit.

I recall that in september 2008 I said elsewhere that US unempoyment would become a problem.
I was labeled "socialist" by people with binary views.
Who is the socialist now?

For binary people, antisemite means everything that doesn't read "jewish are perfect".
I am not perfect. Does it make me "anti-me"?

[Hazir]

Good, so it's ok to be an anti-semite for a good cause or something?

[Dreadnaught]

I don't even know what happened to Being's post...the edit button is actually not close to the quote button in this version of VB.

Sorry about that.

[Nessus]

I don't even know what happened to Being's post...the edit button is actually not close to the quote button in this version of VB.

Sorry about that.

DER EWIGE JUDE

[Being]

I don't even know what happened to Being's post...the edit button is actually not close to the quote button in this version of VB.

Sorry about that.

Alcohol induced blackouts, again?

[ar81]

Good, so it's ok to be an anti-semite for a good cause or something?

It seems to me that your binary reality does not embrace something else than friend or foe.
I advocate human welfare. Period. I will not compromise human welfare in the name of human welfare.
I am not going to answer binary questions that refer to a non binary world.
The right answer for your question is "Error: Overflow, answer is out of bounds".

[Hazir]

Actually that question was about as relativist as it comes.

[Hazir]

Today the EMU has decided that €30bn against 5% will be available to Greece if it indicates it would need (bilateral) credits from the other members. That's more than 2% less than Greece has to pay at the moment. I foresee a dramatic drop in the market rate for Greece tomorrow. I also think the euro will get a bump up and maybe a smart English eurosceptic will pick up on this as yet another step towards political union in the EU.

[Dreadnaught]

Meanwhile, Portugal and Italy will keep on borrowing borrowing borrowing.

[Hazir]

Meanwhile, Portugal and Italy will keep on borrowing borrowing borrowing.

I don't see any evidence that Italy is really such a big problem. Portugal I know too little of to know what they are doing. It also doesn't matter too much as everybody knows that this 30bn is just a promise, it will never be used. Anybody though who was bettin on a Greek default got his fingers burnt bad. Just like when a similar deal was done for Hungary.

[Dreadnaught]

It's a promise, but one that is likely to be used if Tuesday's Greek debt auction goes terribly. Obviously, this is meant to make the rates on that auction fall bu I think there's a decent chance that may not work at all. In which case this is a de-facto bailout.