BANK ROBBERY – HOW BANKS STEAL FROM EVERYONE

February 1, 2014

Article from the Positive Money Website – the campaign to reform the corrupt and self evidently broken monetary system

http://www.positivemoney.org.uk/wp-content/uploads/2012/06/Banking_Vs_Democracy_Web.pdf

Written By: Andrew Jackson and Ben Dyson 

Special thanks to: Anthony Molloy

Produced with the support of The JRSST Charitable Trust

© February 2012 Positive Money

PRIVATISATION BY STEALTH

The common misconception of how banks work is

that they take people’s savings and lend them out

in the form of loans. In this vision, banks merely

operate as the middlemen between savers and

borrowers, but this is simply not what happens.

When a bank makes a loan it does not take the

money out of anyone else’s account. Instead, it

simply creates a new account for the customer and

types a number into it.

When a customer is approved for a loan (of say

£1,000), she signs a contract with the bank obliging

her to pay back £1,000 plus interest over a period

of time. According to accounting conventions, the

£1,000 loan can then be recorded as an asset of the

bank. At the same time the bank opens an account

for the customer and types £1,000 into it. As the

bank owes the customer this money, it is recorded

on the liabilities side of the bank’s balance sheet. By

this process, the bank has simultaneously created

new money in the borrowing customer’s account

and a corresponding debt. The bank’s new asset

(the debt) balances out the new liability (the newly

created money) so that in accounting terms, the

books balance.

The customer now has £1,000 of new money to

spend on whatever they choose. No money was

taken out of anyone else’s bank account. New

money has been created out of nothing.

In the UK, over 97% of the entire money supply was

created in this way and exists in the form of ‘digital’

money, numbers in the bank accounts of members

of the public and businesses.

NO ACCOUNTABILITY TO CUSTOMERS

Unlike pension funds, banks are not required to

disclose how they will use their customers’ money.

As 97% of the UK’s money supply is effectively held

with banks, this allows them to allocate a larger

sum of money than either the entire pension fund

industry or the elected government itself. Conse-

quently the UK economy is shaped by the invest-

ment priorities of the banking sector, rather than

the priorities of society.

Just five banks hold 85% of the UK’s money, and

these five banks are steered by just 78 board

members whose decisions shape the UK economy.

This is a huge amount of power concentrated in very

few hands, with next to no transparency or account-

ability to wider society.

******

It is common knowledge that anyone found printing

their own bank notes can expect to find the police

kicking down the door at two o’clock in the morning.

However, it has only been illegal for individuals and

companies to create their own £5 or £10 notes since

1844.

Prior to 1844, the state had a legal monopoly only

over the creation of metal coins dating from the

time when this had been the only form of money.

But keeping lots of metal and carrying it around was

inconvenient so customers would typically deposit

their metal coins with the local jeweller or goldsmith

who would have secure storage facilities. Eventually

these goldsmiths started to focus more on holding

money and valuables on behalf of customers rather

than on actually working with gold, and thereby

became the first bankers.

A customer depositing coins would be given a piece

of paper stating the value of coins deposited. If the

customer wanted to spend his money, he could take

the piece of paper to the bank, get the coins back,

and then spend them in the high street. However,

the shopkeeper who received the coins would then

most likely take them straight back to the bank. To

avoid this hassle, shopkeepers would simply accept

the paper receipts as payment instead. As long as

the bank that issued the receipts was trusted, busi-

nesses and individuals would be happy to accept the

receipts, safe in the knowledge that they would be

able to get the coins out of the bank whenever they

needed to.

Over time, the paper receipts came to be accepted

as being as good as metal money. People effectively

forgot that they were just a substitute for money

and saw them as being equivalent to the coins.

The goldsmiths then noticed that the bulk of the

coins placed in their vaults would be gathering dust,

suggesting that they were never being taken out.

In fact, only a small percentage of all the deposits

were ever being claimed at any particular time. This

opened up a profit opportunity—if the bank had

£100 in the vault, but customers only ever withdrew

a maximum of £10 on any one day, then the other

£90 in the vault was effectively idle. The goldsmith could lend out that extra £90 to borrowers.

However, the borrowers again would choose to use

the paper receipts as money rather than taking out

the metal coins from the bank. This meant that the

bank could issue paper receipts to other borrowers

without necessarily needing to have many—or even

any—coins in the vault.

The banks had acquired the power to create a substitute for money which people would accept as being money. In effect, they had acquired the power to create money: perhaps this is when the goldsmiths became real bankers.

The profit potential drove bankers to over-issue

their paper receipts and lend excessive amounts,

creating masses of new paper money quite out of

proportion to the actual quantity of state-issued

metal money. As it always inevitably will, blowing

up the money supply pushed up prices and destabi-

lised the economy (of the many crises, particularly

galling was the Bank of England having to borrow £2

million from France in 1839). In 1844, the Conserva-

tive government of the day, led by Sir Robert Peel,

recognised that the problem was that they had

allowed the power to create money to slip into irre-

sponsible private hands and legislated to take back

control over the creation of bank notes through the

Bank Charter Act. This curtailed the private sector’s

right to print money (and eventually phased it out

altogether), transferring this power to the Bank of

England.

However, the 1844 Bank Charter Act only addressed

the creation of paper bank notes. It did not refer to

other substitutes for money. With growth in the use

of cheques, the banks had found another substitute.

When a cheque is used to make a payment, the

actual cash is not withdrawn from the bank. Instead,

the paying bank periodically communicates with the

receiving bank to settle any net difference remaining

between them once all customers’ payments in both

directions have been cancelled out against each

other. This means that payments can be made even

if the bank has only a fraction of the money that

depositors believe they have in their accounts.

Following on in the spirit of financial innovation,

after cheques came credit and debit cards, elec-

tronic fund transfers and internet banking. Cheques

are now almost irrelevant as a means of payment

but over 99% of payments[b] (by value) are made

electronically.

Today the electronic numbers in your bank account

do not represent real money. They simply give you a

right to demand that the bank gives you the physical

cash or makes an electronic payment on your

behalf.

In fact, if you and a lot of other customers

demanded your money back at the same time—a

bank run—it would soon become apparent that

the bank does not actually have your money.

For example, on the 31st of January 2007 banks held

just £12.50 of real money (in the form of electronic

money held at the Bank of England) for every £1000

shown in their customers’ accounts. Even among

those who are aware that what banks do is more

complicated than merely operating as middlemen

between savers and borrowers, there is a wide-

spread belief that banks are obliged to possess a

sum corresponding to a significant fraction of their

liabilities (their customers’ deposits) in liquid assets,

i.e. in cash or a form that can be rapidly converted

into cash. In fact, such laws were emasculated in

the 1980s in response to lobbying from the industry

(although some effort is now being made to

re-impose such rules in the aftermath of the crisis).

When a run starts (like the one on Northern Rock

on the 14th September 2007) it becomes almost

impossible to stop.

Once the bank has paid out any cash which it holds in the branch to individuals (and transferred all of its reserves to other banks) other depositors will have to wait for the bank to sell off its remaining assets before they see their money.

And because the bank has to sell these assets

quickly, it will find it hard to receive a fair price.

Because of this it is unlikely the proceeds from these

sales will cover the value of their deposits and other

liabilities, and therefore most customers are likely to

lose a large proportion of their savings. Because this

type of personal ruin is a tragedy and, even more

importantly, because one bank run is likely to lead

to others (as confidence in the banking system falls

through the floor) the government insures deposits,

guaranteeing some level of payback in the event of

bank failure. Thus, because the system is inherently

unstable, and because almost all of our money

exists on banks’ balance sheets, the banking sector

has to be underwritten and rescued by the taxpayer,

all as a result of the failure of legislation to keep up

with technology and financial innovation since 1844.

******

When money is created, it can be put into the

economy in two ways: it can either be spent in

exchange for goods and services or lent out. When

banks create money, they put most of it into the

economy through lending. Exactly who this newly-

created money is given to is crucial because it will

determine the shape of the economy.

Over the decade leading up to the 2008 financial

crisis, the amount of money lent out by banks

tripled but this steep rise is largely accounted for by

loans advanced for the purposes of buying property

and for financial speculation. The amount dedicated

to productive investment remained more or less

constant throughout this period meaning that the

proportion of the money supply that was dedicated

to enhancing production steadily waned.

*****

Between November 1982 and November 2006 the

banking sector increased the money supply—by

creating new money through lending—by an

average of 10% a year.

Between November 2007 and November

2008, £258 billion of new money was created. If

government were to increase the money supply

at this rate, it would be accused of following the

policies of Zimbabwe, but because few people

understand that banks create money via lending,

this is completely overlooked.

This huge growth in the money supply is hardly

surprising when we consider the incentives that

banks have to increase their lending. In confident

times, all of a banker’s incentives push him to

lend as much as possible: by lending more, they

maximise short-term profits and, more specifically

their own bonuses, commissions and prospects

of promotion and profits. There is no reward for

bankers who are prudent and choose not to lend

or only lend judicious sums. In short, the supply

of money into the economy depends on the confi-

dence and incentives of bankers rather than what is

best for society as a whole.

Investing in machinery to make factories

more efficient is productive investment whilst

lending to buy existing property through mortgages

is non-productive as it simply pushes up house

prices without increasing production.

The £1.16 trillion of new money created by

the banks over the last ten years could have been

used to: pay off the national debt (which currently

stands at around £977 billion); invest in public

transport, hospitals, schools or renewable energy;

or exempt the poorest ten per cent of the popula-

tion from tax. Instead, it has been used by the

banking sector to fuel a housing bubble that has

made buying a home unaffordable for all but the

very rich.

The last few years have proven the business model that enables banks to create money is fundamentally unstable, requiring rescue by the government from time to time.

When this happens, taxpayer funds are diverted

from public spending and spent on salvaging failing

corporations. This further reduces the power of

government to do what it was democratically

elected to do, weakening democracy in the process.

By handing the power to create money over to

the banks, the government reduces its revenue,

compromises its capacity to carry out the activities

that it has been mandated to carry out and under-

mines the potential of the democratic system to

change society for the better.

THE HIDDEN TAX THAT BANKS POCKET

Giving banks the power to create money results in

two hidden and undemocratic ‘taxes’ being levied

on the public.

The first of these ‘taxes’ is inflation, when increases

in the amount of money in the economy feed

through into higher prices. If the money supply

is increased quickly then the new money pushes

up prices, especially in housing to where much of the new lending is destined.

Of course, it is now banks that create the vast

majority of new money. They have increased the

amount of money in the economy at an average of

10% a year between 1981 and 2007, (by lending)

and pumped this money mainly into the housing

market.

As a result, house prices shot out of the

reach of ordinary people, whereas those who got

the ‘first use’ of the money (by borrowing first)

received most of the benefit. Meanwhile those who

were not already on the housing ladder became

significantly poorer, in real terms, because the

relative cost of housing doubled in just 10 years

(between 1997 and 2007).

Consequently, the inflation caused by allowing banks to create money is also effectively a ‘tax’ accruing to the banks (through their increased interest income on ever greater mortgages) and those who borrow early on (to buy property and other assets).

The second of these hidden taxes corresponds to

interest. Because banks create 97% of the UK’s

money supply, essentially through making loans,

the entire money supply is ‘on loan’ from the

banking sector. For every pound created, somebody

somewhere goes one pound into debt and starts

paying interest on it. By virtue of their power

to create money, banks have the right to collect

interest on nearly every pound in existence.

A hidden tax collected by private corporations

because they have a power that most people would

consider—and believe—to be a prerogative of the

state can hardly be considered democratic.

Written By: Andrew Jackson and Ben Dyson

Special thanks to: Anthony Molloy

Produced with the support of The JRSST Charitable Trust

© February 2012 Positive Money

DYSFUNCTIONAL BANKING – DOESN’T THAT MEAN CORRUPT BANKING ?

December 31, 2013

According to the New Economics Foundation a dysfunctional financial sector led us to the brink of disaster in 2008, and yet bank reforms aren’t going far enough to tackle the root causes of the economic crisis. The New Economics Foundation goes on to explain our four big banks remain too big to fail, and continue to engage in the risky and unproductive activities that caused the crash. We need to establish a more stable, sustainable and socially useful banking system.

Key Facts

The UK government pledged 89% of GDP to bail-out out our banks.

45% of Americans are members of their local credit union, compared to 2% of Britons.

The UK banking sector is one of the least diverse in the developed world – local banks make up just 3%, compared to 67% in Germany and 34% in the USA.

Read more from the New Economics Foundation about the dysfunctional financial sector here

*********************

BOZ  THINKS THE NEW ECONOMICS FOUNDATION PROBABLY REALLY MEANT TO SAY………..

- All the banking problems are caused by the stranglehold, or monopoly, banks have over absolutely everyone – the Government, businesses and all individuals.

- This allows the banks to become increasingly extortionate by constantly increasing the boundaries of what they charge to their customers for handling any kind of  financial transaction and also increasing rates of interest they charge for lending money.

- As they set increasingly higher boundaries for all their charges and discover they get can actually get away with it, they also become more confident in justifying increasing bank employee ‘bonuses’ to completely obscene levels on the basis the employees made all that extra profit for the bank, therefore they deserve to get a percentage of it.

- But that also just encourages bank employees to constantly invent new ways of charging bank customers even more money as well as perpetually increase bank lending as much as possible at all times, thus making it more and more risky, dangerous, often misleading borrowers and even behaving fraudulently and downright dishonestly.

- If you look at the interest rates bank customers were paying for overdraft, or credit cards and so on about forty years ago, the rates were vastly lower than they have been now and in the past two decades.

Some bank charges today are just obscene – just look at overdraft rates at least twice as high as they used to be and credit card interest rates even higher than twice as much as they used to be, now  hurtling past 30% and surreptitiously sidling up towards 40% and all this at a time when the Bank of England  base rate has been it’s lowest in  how many hundred years ?

- If there were lots of small banking type businesses taking in customer’s money, giving them  attractive rates of interest while making sure the savings deposited were always safe, and then using those savings deposits to lend safely, reliably and carefully to small businesses and individuals, all these smaller banking operations would reduce and hopefully completely destroy the ruthlessly extortionate  monopoly of the current banking system.

- But this can’t happen because the morass of controlling regulations and bureaucracy the banks have connived at conjuring up in conjunction with the official, Government inspired regulatory authorities which were supposed to be there to help the customers of the banking system and make sure their money was looked after safely, honestly and carefully.

In fact all this regulation is cunningly used by the existing banks to stifle any possible competition by preventing anyone else from setting up a rival bank to challenge their predatory behaviour towards bank customers.

- My oh my and haven’t those industrious little dears at the regulatory authorities been ever so busy during the past century or so !

Apparently, there has only been just one new High Street Bank license granted by them in the last 150 years !

- That’s a bit funny when there are only about five banks  controllinng the entire UK market  and there is such a desperate need for probably hundreds of small, local banks, isn’t it?

Are the regulatory Authorities  just bureaucratic lunatics or have they just been stuffed with people who used to work, or even still do work within the existing banks ?

Whatever the answer is, Does that actually just mean the system is completely corrupt ?

I think so . What do you think ?

2013 in review

December 31, 2013

The WordPress.com stats helper monkeys prepared a 2013 annual report for this blog.

Here’s an excerpt:

The concert hall at the Sydney Opera House holds 2,700 people. This blog was viewed about 10,000 times in 2013. If it were a concert at Sydney Opera House, it would take about 4 sold-out performances for that many people to see it.

Click here to see the complete report.

The single killer question from ATOS that drove a woman to suicide

November 27, 2013

Posted by Tom Pride 

Back in January I wrote a satirical blogpost about ATOS reducing their fit for work tests to one question:-

ATOS to reduce ‘fit for work’ test to one question: “Are you alive?”

Now it looks like ATOS have decided my blogpost was a good idea.

A partially-blind and disabled woman had her benefits stopped after she attended an interview with ATOS in which she was asked just one question.

And as a result of her one word answer to the question, the woman killed herself:

Bristol woman “killed herself after benefits were stopped”

What was the single question by ATOS’s so-called ‘expert’ which trumped a lifetime of professional doctor’s opinions and supporting medical evidence?

Did you come here by bus?

A killer question indeed.

.

Someone remind me – just exactly how many millions are we as taxpayers paying these cowboys at ATOS for this kind of incompetent, dangerous nonsense?

 

Tory and Lib Dem MPs have decided terminally ill patients should work or starve

November 26, 2013

written by Tom Pride  from Pride’s Purge – an irreverent look at UK politics

Back in 2011, Conservative and Liberal Democrat MPs joined together to reject an amendment which would have exempted terminally ill cancer patients from benefit cuts.

They decided that if you are diagnosed with a terminal illness such as cancer – but have been given more than 6 months to live – you will have to work or starve.

Here’s a previous blogpost about that:

The government has finally done something so outrageous even I can’t be bothered to satirise it

This decision by coalition MPs was so outrageous that after intense lobbying, there were some concessions made by the government.

However, in a bizarre piece of upside-down DWP logic, it now seems that if you have less than 6 months to live – you will be refused benefits.

This is from the Chester and Ellesmere Port Foodbank blog:

Jenny

Jenny came to the Chester and Ellesmere Port Foodbank last month, having been diagnosed with terminal Cancer. Her prognosis was three to six months. She already suffered with several chronic illnesses preventing her from working over the last two years and was in receipt of Disability Living Allowance. Having no family she was trying to “put her house in order”, ensuring all her bills were paid and saving up for her funeral. Her DLA was stopped; the reason given was that as she was not expected to survive the required time, she did not qualify for this benefit! She came to the Foodbank not for herself but to bring a neighbour who had mental health issues and short term memory problems. He had been 30 minutes late for his appointment at the Benefit office (he had forgotten the time!) and had therefore been sanctioned. He had not eaten for three days. They were both given a meal and the time to talk of their problems and referred to the appropriate agencies for food vouchers and further support and help. Several weeks later Jenny came to the Foodbank to thank everyone for the help and food that was given and the kindness and support that was shown in their time of need. Jenny died three weeks later.

.

So let’s be clear about this – if you are terminally ill and you don’t have the financial means to keep yourself for the remainder of your life – you will have to find work or starve.

I know some people will argue that Jenny could have appealed the decision which would have been overturned, or she made a mistake when she was filling in the forms which could have been rectified, or the DWP made an honest mistake themselves and Jenny should have gone back to them and argued her case harder. But she can’t now, can she?

Because she’s dead.

.

There are just 5 weeks left to reach 100,000 signatures to trigger a government debate on disability cuts. Please sign the War on Welfare petition:

War on Welfare 

GOVERNMENT INSPIRED FRAUD

October 26, 2013

SNOOPING COUNCILS ARE ALSO JUST PLAIN CORRUPT & EVIL

YES, THIS IS THE UK WE ARE TALKING ABOUT

I can top the story ‘Council Snoopers Check if Elderly Transfer Homes to Avoid Care fees’ (Daily Telegraph October 19 2013) with what is probably a nastier abuse of public office by councils I have experienced.

I became a single parent, entirely reliant on the benefit system because the mother of my baby son became acutely mentally ill with schizophrenia on his birth, causing maximum disruption to our lives.

Instead of the benefits system providing a ‘safety net’ enabling families to survive difficult circumstances, the maladministration of it systematically  destroyed our lives a little bit more every year, causing me to lose my house when it should never have been lost, for instance.

Finally becoming homeless in 2011 and evicted at only 24 hours notice by the fraudulent, dishonest Lehmans Bank’s equally fraudulent subsidiary mortgage lender SPML, the local council said it was not obliged to fulfill it’s statutory legal obligation of housing my son and me on the grounds that I was ‘Intentionally homeless’ because, in their view, I ‘should never have bought my house nine years previously because’,  the  council housing official said, ‘I’m gobsmacked you bought a house. As a single parent of your age, you should have realised you would never be able to work again’. This is a direct quote.

The poisonous council housing official said that it was her opinion that what I should have done was, instead of spending the £80 000 cash I had left from the forced sale of a previous, larger house (sold to avoid re-possession) to buy another one, I should have spent the £80k on renting a property. Then, when all that money ran out, I would have been able to claim the housing benefit allowance to pay the rent and therefore I would not have become homeless.

I was supposed  by this screamingly stupid person to have this gift of clairvoyance which if applied to everyone would require that no person should ever ‘take the risk’ of buying a house in case some time in the future unforeseen circumstances prevent them from earning an income and they cannot pay their mortgage which will inevitably lead to eviction – and it’s all their own fault for not being able to see into the future.

I was specifically told that I should have known that is what I should have done, rather than buy my own house ! It was made clear to me that the council official thought I had done something ‘wrong’ buying a house and she personally  disapproved of me buying a house and she had the opinion I should have rented accommodation and that is what she would have done, she said.

Therefore, this idiot continued, when I bought my house I would have known that because I would never work again I could not pay my mortgage and that would eventually cause me to be evicted (nine years later) & therefore I had willfully and deliberately caused my own eviction  thereby fulfilling the legal definition of being ‘Intentionally homeless’ by deliberately doing, or failing to do something that ultimately caused my homelessness.

This is a legal construct which allows councils to label a homeless person a ‘willful wrongdoer’ who because they made themselves deliberately homeless, does not deserve the support of the housing & benefits legislation designed to support people in statutory need.

While it may be reasonable to have the concept of being ‘deliberately homeless’ available so that it may be properly used to prevent obvious abuses of the social housing system, the sort of circumstances described above are a clear and quite ludicrous abuse of law. It seems impossible to imagine any court could allow this obvious abuse.

This is also not a unique case. I have come across many other examples of this legal point being mis-used and abused on a regular basis by many local councils up and down the country to enable them to avoid housing people they are legally obliged to house under Parliamentary legislation.

The completely sick joke about it all is that all of this is driven by the simple lack of having sufficient money in relevant housing budgets to properly deal with whatever housing issues need dealing with according to the law as it stands. But Government expenditure actually rises exponentially as a direct result of maladministration like this.

By mis-using and abusing law to weasel out of housing people in need just to apparently to save money, it actually ends up costing a vast amount more money because the State simply ends up spending much, much more money dealing with the various consequences resulting from people being made entirely homeless by a vindictive, deceitful & downright wicked State. This is demonstrated again and again by the disgusting behaviour of dim and small minded Government officials in both Central Government and in particular Local Councils who just make up the rules as they go along to suit their own warped minds.

So, in my particular case, no money whatever was actually saved by failing to obey the law which said the local council had a legal obligation to house a child & parent made street homeless overnight by a rapacious and dishonest and fraudulent mortgage lender.

My son and I spent over seven months in slum-like bed & breakfast accommodation in a cosy arrangement with Pakistani owners and the council which paid them about £1500 a month. I was told by one of these Pakistani’s colleagues how he also had a lucrative sideline in various criminal activities, including the criminal importing & exporting of empty container loads of wine to falsely evade & reclaim VAT and other customs duties.

Then there were other, huge, but not easily identified expenditures as a vast job creation scheme swung into action to gobble up thousands of hours of social services and council employees time dealing with all the ‘meetings’ ‘reports’ writing and box ticking that went on to deal with this ‘case’ which still rumbles on and looks set to continue rumbling on to infinity.

Finally, Government money is now being spent on paying an extortionate, unnaturally inflated rent to my private landlord who happens to be a banker, to pay his mortgage on the house I now live in, so he may become even richer by having the State buy him a house to rent out.

This house could, instead, be owned by the State, rather than a private banker landlord on the make and would then result in a mere fraction of the money that is being spent by this incompetent State maladministration being needed.

This particular maladministration of a housing issue I have personally experienced & described above comes at the end of a long catalogue of other abuses from my local council which include the ‘snooping’ whereby they discovered I was a company director by virtue of me having spent £20 on the paperwork of setting up a Ltd company with a view to becoming self employed in the future.

The council used this information (gained only by a ‘snooping’ process) to confabulate it into the idea of me earning money so justifying them to withhold council tax benefits and never repay what they wrongly/illegally withheld, thereby successfully milking me of some thousands of pounds from my sole income of single parent benefits.

It all quite takes your breath away really.


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