Not so long ago, American commentators talk about U.S. government debt redemption and a British minister has been spreading the "end of boom and bust."Now, Americans are increasingly involved in the day about ballooning budget deficit and the British in the middle of another unsustainable housing bubble
.The explanation for this economic cycle is relentless in its commercial banking practices that began hundreds of years ago. After its founding in 1694, the Bank of England printing on bits of paper that carried the promise of the holder of gold coin repayable on demand. Coin bank depositors, this one piece of paper as proof of their deposit. Any individual with a paper for the banks would then return the underlying gold every weekday. With his reputation is an instrument of government, people went to a bank trust paper receipts England.
Quickly began to use not only as receipts for money deposited in the bank, but as money itself. At this point the bank can print large quantities of paper money at almost no cost and lending at interest. Big profits, as it would for any person who acquires a "license to print money." Banka charters soon became very popular things. The government and people learn quickly, deeply in debt banks.
Today's modern money created from nothing into the banking system in a more sophisticated way, but the principles are the same and the most fundamental flaw in the remains. When banks create money, not enough to interest on the loan, that money primarily to repay. For example, if the banking system a total of 100 creëert today and borrows at 10% annual interest, then 110 will be returned to the borrowers of next year.
But where the other 10 come from? The answer, in the modern banking system is that the repayment of bank loans, the interest on them will require new sums of money to be made. This is a big problem, because in all developed countries today, most of the banking system creates new money. As banks create new money by lending in life, debt, and therefore the results of the cycle continues. More and more money in circulation, leading to higher and higher prices, and a pile of debt that never seems to shrink.
When the banking system is more money than is needed for the production of past debts, the company has a tree. General government tax revenue and increase the state budget is in surplus. Asset prices start to rise, commentators herald a "new economy", and politicians deserve recognition for their superb management. But when the banks are nervous about the lenders or the company is growing nervous about lending, and so at the right time to begin to slow bank lending. Early existing borrowers are finding they do not have enough money to pay its old debts. Business conditions deteriorate, government tax revenues are declining and the state budget goes into deficit. At this stage of the process, everyone will realize how foolish it was once the "new economy" story believed.
During the first years of the Bank of England, the limiting factor in the Bank's money, was the possibility that people would go to the bank to connect with paper receipts and ask banky promise to pay gold in exchange are met. So banks carefully calculated how much revenue would be presented to the bank on average each day for redemption in gold, and how much gold would be deposited in the bank every day in exchange for paper receipts. The calculation was crucial because it determines the ratio of reserves to be held against the persistent problem of the paper. The amount of the reserve ratio, of course, less than 100%. For example, with 100 pounds for their own gold coins in the safe and 50% reserve, the bank was able to create and issue up to 200 in the amount of paper receipts of interest on the loan. If the bank decides that the minimum reserve of 25% would be found safe, with 100 pounds in gold coins in the vault, less than 400 in the amount of paper receipts can be created for a loan at interest.
Of course, it was in the interest of commercial banks to lower fixed reserve ratio. A low ratio, however, and the bank may take the gold coins are not able to respond to requests for redemption of paper notes to meet. This could be the cause of great misfortune, because the bank will be forced to close the door and withstand any catastrophic loss of confidence in its activities. Well, that principle had been established at this time, the lower the reserve ratio, the higher the risk, but greater profit can be made. This principle will remain with us today in all the 'good' books that the financial relationship between risk and reward to preach. It is entirely artificial rule, which builds on the work of the early bankers.
If people could be encouraged to use paper bankers' money in their everyday lives, instead bank on the base to collect gold coins, then there would be fewer requests for redemption at the counter. The bank would accept a lower reserve ratio and produce more paper receipts for each unit of gold currency reserves. Money Bank is now made using these tools to check and book collections, and the state does not provide any gold coins, but notes on paper. But now people are encouraged to bank-created money, not government-created money to be used in their implementation. The strategic reason for the promotion of commercial banks' bank for credit, it is clear if we take into account the importance of their perspective, reducing the reserve.
Long results allow the monetary system could be developed included: If the American people ever allow banks to issue their currency, first by inflation then deflation control, banks and corporations that grow up around them, deprive the people of all property until their children wake up homeless on the continent their fathers occupied. Issuing a lot of money, should be taken from banks and restored to Congress and the people to whom they belong. I sincerely believe that banking institutions are more dangerous than standing armies. Thomas Jefferson, Jefferson Writings, Vol. 7, "Autobiography, letters, reports, messages, addresses and other writings," a committee of Congress, Washington DC, 1861, p. 685
Several measures are now in the bank executives to describe the relations major reserve. One such is the proportion that the amount of capital against risk-weighted assets "of a bank. It provides a measure of how much loss in value of the assets of the Bank's own resources in support of that position, where liabilities exceed assets of the depositors of banks. The greater the capital the more comfortable cushion for the bank.
To ensure risk-weighted value for each of its assets for production, the bank's management to assess the risk that the assets in accordance with prescribed guidelines. For example, short-term U.S. dollar bill is assumed that no risk becauseThe U.S. government has never assumed it does not meet its own currency obligations. The money would also be a zero-risk weighting. Meanwhile, one obtains a mortgage loan at 50% weighting. Therefore, if the bank has 200 of assets, consisting of 100 100 in cash and property loans mortgage, then the risk-weighted assets in this simple example, 50th in total so if our hypothetical bank wants 10% of capital adequacy to resist the risk-weighted assets must be at least 5 of its own funds as equity to maintain a bank balance of the price.
Principles established in 1988 Basle Capital Accord in principle with the above methods, proposing a minimum Tier 1 capital ratio of 4% of risk weighted assets and a minimum total capital of 8% of risk-weighted assets. Tier 1 capital consists of net book value of equity and retained earnings of the Bank as a "Tier 2" capital includes loan loss reserves and subordinated debt. The total capital is approximately equal to the sum of Tier 1 and Tier 2 capital. It should be clear that the total capital ratio is higher than the Tier 1 capital ratios. For example, on December 31, 1997 the HSBC Group's total assets were £ 286 391 million Tier 1 capital was £ 16,564 million (total equity shown on the balance sheet were £ 16,442 million) and Tier 2 capital was £ 9,772,000. After the risk weighting of assets, HSBC's Tier 1 capital was 9.3% and total capital ratio was 14.2%. (In June 1999 the Basel Committee on Banking Supervision proposed a new framework for capital adequacy for internationally active banks, often referred to as "Basel 2" guidelines aimed at ensuring more consistent with modern banking practices.)
The ratio is very different than the relationship liqudity. Liquidity indicators measure the amount of funds on deposit liabilities. The higher the liquidity ratio, the less likely it is that bank depositors of refund requests due to property must be liquidated fast enough. In other words, liquidity problems, which related to cases where a bank has insufficient assets to savers honor requests for withdrawal, but if the bank has assets in bad shape (real estate instead of cash, for example).
As with capital ratios, there are different types of liquidity ratio. For example, the broad liquidity ratio of cash and short-term securities on deposit liabilities. There is also a smaller degree of liquidity and cash reserve ratio, in which the proportion of cash in bank interventions in relation to the deposit liabilities. Of course money is already in the form of gold coins and deposits of commercial banks have already issued in the form of paper bills. Instead, the cash reserve ratio compares the state's population made money (the monetary base or "M0", as it's called) held by banks against the value of customer deposits. Commercial banks are usually subject to a minimum level of cash reserves controlled by the Central Bank or other competent authority.
In Great Britain, the cash reserve ratio decreased over time, and history was repeated decrease to some extent in other developed countries. Since 1971, the cash reserve ratio of 10% applies to the bank and this setting must also have at least 1.5% of the value of "eligible debt" to hold (as defined part of total deposits) with the Bank of England in non-interest-bearing account. Bank of England to invest balances in these accounts to a non-interest bearing money at interest, and thus generate profits to finance their own activities.
In 1981 the situation changed. Under the new monetary arrangements, commercial banks were required to 0.5% of eligible debt to the Bank of England in a non-interest bearing accounts maintained, and an average of 6% of their eligible liabilities to maintain liquid reserves in the form of short-term money market instruments. At a time when the Bank of England Act was passed in June 1998 was a non-interest bearing balance ratio was reduced to 0.15% (intermediate stage in 1986: 0.45% 1991 0.4% 1992: 0.35% in April 1998: 0.25%) and the requirement of a minimum liquidity reserve was completely abolished.
We should note the difference between legal or required cash reserve ratio (which is imposed by the Government and / or central bank), and free cash reserve ratio for banks themselves to choose to hold. 31 December 1997, the HSBC Group is held the balance of the monetary base +1.798 million pound commitment to customers against a million pound +81.960 deposits and other liabilities to customers to deliver a "pay term deposits of three months or less at 000 pounds 85 172 1000. This means that the HSBC Group opted for something smaller than the cash reserves of about 2.2% overnight, and less than 1.1% of the cash reserve account and deposit accounts.
The above ratios are the same size, which is the entire British economy. Bank of England figures for 1997 show that the British government of £ 27.80 billion of government money, while commercial banking system was created and lent to 721.16 billion pounds (this is the "M4" definition of money supply) produced. On this basis, the actual average cash reserve ratio for the banking sector in the United Kingdom was 3.8%.
According to Article 19.1 of the Statute of the European System of Central Banks (ESCB), the European Central Bank (ECB) in October 1998 ruled that the commercial banks operating in the euro area would be necessary for the ECB reserve of 2% of their deposits. Unlike the United Kingdom, but these reserves would pay interest (at near market rates), thereby competing with lower (but non-remunerated) reserve requirements in other jurisdictions.
Reduction of the required reserve is frequently quoted in the quietest of the fashion for these important changes. Sequential decline in the ratio, the theoretical limit on the amount of money that the bankers can create is relaxed. It is therefore not surprising that after the release of any required reserves, the share of bank money-making time and increasing trend of rapid economic bubble. But this is clearly only one side of the story, because even though they are not covered by the reserve, the amount of state money to raise the ceiling on total bank money in circulation increases.
A hike in bank funds and money to help both en geleidelijke roughly related to the prevailing level of interest rates and real economic growth, it is possible that such a course of events is consistent with economic stability for many years. This is a rare scenario of course (which country has the boom and bust cycle experienced in the last twenty years?) And that nothing remains the same for unrepayability debt, all political and commercial pressures that will cause the Company.
1968 1978 1988 1998
United States 12.3 10.1 8.5 10.3
United Kingdom 20.5 15.9 5.0 3.1
Germany 19.0 19.3 17.2 11.9
Turkey 58.3 62.7 30.8 18.0 *
* Data from 1997 Source: IMF Financial Statistics Yearbook 1998 and 2001
% Ratio of M0 to M2 (IMF definition) country
I think that the general trend to lower actual and desired cash reserve ratio will remain as it is in the interest of commercial banks that can do it. At the end of this road is one of the main objectives for the international banking lobby, which is to create a cashless society, where the use of bank created money, the only option. The state created the money would no longer relevant to the business of banking. Such a system would be a disaster for any nation, because the opportunity for interest-free money would be lost and provide a major breakthrough occurred in the setting of interest rates on the money that banks should be removed.
When it comes, will probably move innocent dressed in the appropriate language, something to do with "the need to increase efficiency, or the end of" old-fashioned pieces of paper "I was expecting. The result is placing even greater financial strength in the lap of banks (and credit rating agencies) and a digital record of every financial transaction by each person. What a nightmare.
One of the clearest signs of this process is contained in Article 104 of the Maastricht Treaty. In his speech on 13 May 1997 in the Oesterreichische Nationalbank in Vienna, Alexandre Lamfalussy, president of the European Monetary Institute is as follows: "Since the beginning of the second phase [EMU], Member States may no longer participate in the financing of budget deficits (Article 104) accordingly. For the third phase, it is expressly forbidden ESCB [European System of Central Banks] to provide credit facilities to ensure that public administration or government debt securities for purchase on the primary market. In addition, financial institutions are prohibited from lending to the government on preferential terms (Article 104a). In addition, bail-out of the state, with financial problems by other countries, is completely eliminated (§ 104). Finally, the Treaty requires the EU single currency in order to avoid excessive budgetary deficits, avoidance (Article 104 C). Compliance This requirement will be treated as part of a comprehensive procedure which will ultimately lead to imposition of sanctions if no effective action was taken in excessive deficit. preventive nature and effectiveness of this procedure has recently been strengthened by the Stability and Growth Pact, which sets out how the date for the steps in the procedure and scope of the sanctions. It also provides that every targeted the budget close to balance or in surplus over the medium term. "
This means that the governments of the European Monetary Union
can no longer raise their own interest-free money. Instead, the only permitted commercial banks to create money from nothing, then the money that governments have to pay interest for the privilege of borrowing (Article 104a). The speaker recognizes that the state may be too much of the banking system, so that inflation and higher interest rates and steady economic boom to borrow. Article 104 C and subsequent "Stability and Growth Pact" between Member States, see this issue. Article 104 is self-explanatory.We are constantly informed commentators in the media that the government Wreckless entrused the monetary printing press, but this argument completely ignores the possibility of commercial banks to create money for their own profits. It also ignores the fact that commercial banks can do Wreckless here.The obligation of Member States on a balanced budget in the long term goal is a fundamental error in the current monetary policy system. Balanced budget has never been in modern European history, it is impossible, because the mere fact that the debt created by the banking system total unrepayable. The requirement for a balanced budget will be so easily forgotten or be dogmatic attempt to hold on to the major political or economic unrest will follow.
Theory of Money
, which is related mainly been supported by many people over the centuries from fractional reserve banking began. Predicts monetary events that happened, explains how they occur and why they occur. This theory also explains why the debt, and money supply is growing in every developed economy, and why, no matter how hard we try otherwise, the debts of the company only seems to grow. The theory is basically sound easy to understand, easy to prove, and often very intuitive.Professional economists may sneer, but still produced a similar alternative.
Bankers are now presented as an ("We can only borrow money from other people"), when in fact they are the creators of money out of nothing. They are doing their best to their critics, who largely successful strategy is to ignore and systematically promote their views through schools, universities and media. U.S. Federal Reserve is spending millions to promote sound economic research each year. Bank of England as well. And since 1997, the HSBC Group's report: "HSBC Money Gallery at the British Museum attracted millions of visitors after the inauguration in 1997, resource pack for teachers" was designed to help history and teach students the value of money. And facilitate distance learning for those who do not go to the gallery, CD-ROMs in the world of money, will be released in June 1998 to visit the book, Money. history, will soon be available in Korean, Japanese, French and German, and a children's book, a story about money, was published in paperback in Danish. "Propagandize what you want, men Money Power
. Any form of oppression is over.