Understanding Money & Banking Pt. 2: Anatomy of a Bank Loan

[TheUtube4ever]

great vid! taught me a lot. thanks

[ott0Kitam]

banks neither loan nor create money, people do(an obligor does) with a promissory obligation, which banks steal on conception obfuscating into a debt owed to itself... just for publishing evidence of our promissory obligations into existence

theyre artificial debts to banks, the purported banking system gives up no lawful consideration in any "loan"... banks have no claim to the principle(it should be retired from circulation) or any justification in charging people interest(their 2nd crime)

[thinkfree41]

The bank's credibility is bestowed upon it by law - credit issued by a bank is regarded as valid national currency and acceptable for all forms of payment. In effect, this means that the law entitles banks to create the national currency, which is expressly forbidden to all other businesses and individuals. A wealthy individual - say Warren Buffet - may issue IOUs that most are willing to accept as payment, but they would not be interchangeable with the national currency at the central bank.

[FortNikitaBullion]

If interest is the cost of using the bank's credibility, why does the bank pay you interest on deposits?

[matthew376]

What debt does the bank give to you - does he mean a cheque?

[FortNikitaBullion]

Can you make another video to elaborate on how credit scoring factors into the loan process?

[kjpradeep]

Nice series Paul . thanks for posting.

[gogolando]

This dude is confused. When a person walks into a bank they do so with credit--which is the persons credit history, present earnings, and future earning potential. A bank then lends the person credits, notes, bank depsosits or whatever, and then the person is alowed to consume at present what he has to pay back with his future production. What you are really trading is present consumtion for future production.

[TheRamstoss]

@gogolando In other words an "IOU". How is that any different from what he said?

[bergweg]

Well the bank actually brings nothing to the table, its basically daylight robbery. Only human beings can create anything, can work .... Legal fictions (corporations e.g. Banks...etc) can not create anything since they have no legs, arms, brains, souls, they only exist on paper, so a "bank" loan is not really a loan, the bank has nothing to loan, it's all a SCAM!

[kebmann]

So you want to buy the Ice Cream producing machine. Only you can't afford it. For a fee, you can lend the money to buy it in a bank - if they let you (that business is highly regulated) - and then produce Ice Cream and bring more sweetness to the world. If you do well, you can pay back the loan. If you don't do so well, then you're bust. Both you and the bank carry the risk involved in making the Ice Cream a success, and that's why loans aren't free.

[bergweg]

Hmm. Lemme see. I work to produce the ice cream (as you say bring sweetness to the world), I have to run the enterprise, etc.. So I can loose all of that (my time, effort...). What about the bank? What does the bank have to loose? since the bank just creates the "money" as soon as I sign the promissory note.

[kebmann]

Well, you're taking a risk that bringing sweetness into the world may be profitable. The bank makes it possible to do that, 'cause you couldn't have afforded the machine anyway. And that's their service. Alas, they want the money back no matter what, so you better lona it as an incorporation. Thus if the inc doesn't do well, you don't have to incur personal loss. But yeah, you loose all you loaned money to work for. The bank doesn't get back most of it's money. I.e. this is the banks risk.

[bergweg]

You didn't really answer the question. The bank does not bring anything to the table. The money is created by me with my signature. Technically speaking it is an exchange of my debt for the banks debt, an exchange o IOU's, but the thing is that my debt is backed by my energy, time, etc.. The banks debt is backed by nothing. The only thing that the bank looses is the administrative costs, which are minute in comparison to what I or any other human being loses.

[bergweg]

See Modern Money Mechanics publication from the Federal Reserve, this process is explained there.

[thinkfree41]

@bergweg the bank's debt is backed by its capital.

[bergweg]

@thinkfree41 so if there is a run on the bank the banks capital will cover all the demands for cash?

[thinkfree41]

@bergweg No, it's only a fractional backing. If a run occurs, the bank will lose capital. I agree that fractional reserve commercial banking is a scam.

[bjorinn]

I'm just starting out in understanding banking and money, and so far I've learned that through fractional reserve banking, a bank when issuing a loan (IOU), creates this out of thin air, since it just has to have 10% of it's deposits in reserve.

So this contradicts the bank's debt that it issues to the borrower, because who has issued that debt to the bank? No one, since the bank created it.

[babapoopoo]

so in other words; the more loans we take from a bank, the more of "what we have", we give To the banks???? in other words... the more we play into their "scheme", the richer They get???? ..... i.. don't know what to say..

[nooriginalthoughts]

by citizens, corporations, the government, and a sufficient time lag between the new debt being created and the existing debt repayments falling due, or else the "system" will collapse (as has happened all over the world from time to time).

The system is unsustainable, and is the reason people feel trapped in a rat race, forced to consume more and more crap they don't need.

Meanwhile, ALL property eventually comes back to the bankers, because there is inadequate "money" to pay the debt...

[nooriginalthoughts]

It's interesting, but please comment on the sense and sustainability of the system. The banks "create" the principal of the "loan" (out of thin air, they add no value, other than credibility). Credit (debt) accounts for 95% of an economy's money supply. Banks do NOT create "money" to cover the interest on the credit. That has to come from the overall nation's money supply, which we now know is 95% existing debt money.

The system requires ever increasing amounts of debt to be entered into

[ryanburbridge]

@nooriginalthoughts great comment have you found an answer?

[yuukannahoshi]

Hey Paul,

Really good and informative while understandable video's. I plan to watch them all. I wanted to know for a while how money works.

[marklethanarkle]

awesome video! please make more.

[glennyh]

Great stuff, Paul! Certainly an original way of looking at this topic.

[PaulMcKeever]

I just wish the youtube video conversion process didn't (sometimes) stretch the video. I feel like I'm watching a movie at the drive-in.