Can a bank become bankrupt if it creates the money it lends out of thin air?
It'd really be the world becoming bankrupt.

Watch "Money as Debt" on youtube. Someone here pointed it out the other day, makes very interesting watching.

If you're feeling too lazy, or in the office, or both, the jist is this:

Banks are allowed to lend up to 9 times more than they have in their vaults. We'll ignore the fact it isn't gold in their vaults any more, it is just paper money, making it kinda a figment of its own imagination.

When you take a loan, they invent some money to give you. You buy a car with that, which gets deposited in another bank. The bank can then loan nine times that amount to someone else.

When you pay it back, the bank takes the interest, so makes money out of nothing.

Now the crunch: Because all the money in existence is conjoured (sp?!) from thin air in this way, the interest you pay back you made from someone else's debt. The total interest owed by everyone rises much faster than the total capital borrowed. So the only way the world can pay back all its debts is for the economy to expand forever, making enough surplus to pay back the interest.

It can't, it doesn't and the whole world goes pop. Like now.

Coincidentally, this growth we 'need' is directly proportional to how much of the earth we mine/harvest, destroying the world at an ever increasing rate.

OK, so that turned out to not be the short version ;-)

Still worth a watch though.
(MrOli is ugly, but in the morning you will be sober, Thu 29 Jan 2009, 13:35, Reply)