Thursday, September 18, 2008

What's It All About ?

Global central banks are pumping $180bn (£99bn) of extra money into the markets in a co-ordinated move to lift the amount of funds available.

The $180bn has been released by the US Federal Reserve to five other main central banks, who in turn are issuing the funds in their own countries.

The Bank of England is making $40bn available, while the European Central Bank is to provide $55bn.

Central banks in Switzerland, Canada and Japan are also taking part.

The Swiss National Bank is releasing up to $15bn extra, while the Bank of Japan is offering $60bn, and the Bank of Canada $10bn.

Commercial banks in each country will be able to access the funds in the form of loans to boost their short-term funding requirements.

What exactly does all this mean ? No-one's pumping any money in my direction. And if the central banks are making loans to the commercial banks, where's that central bank cash coming from ? Reserves ? Are they just inventing the stuff ? And what are central bank reserves anyway - where did they come from ? In the days of Prudence, when the Government ran a budget surplus, was the unspent tax handed over to the Bank of England with a note saying "whack this lot in the reserves, my son" ?

I don't know. And in all the blogosphere, I've not seen anyone explaining it either. I've just about got my head round the concept of fractional reserve banking, that cunning wheeze that turns a £100 deposit into £500 of cash, £400 of which is lent out and which functions perfectly well until the day all the bank's depositors decide they want their cash back at the same time (a la Northern Rock) - but I'm generally as a babe unborn with these things.

Try this - the Mystery of Banking (19M pdf), by Murray Rothbard. He may bring bits of ideological baggage to the party - an anarcho-capitalist, what'e'er that may be - but he writes well. I'm still wading through it.


Anonymous said...

Re fractional reserve etc

When I did O level economics, the textbook example was something like 10:1. So you deposit a tenner, the bank loans out £90. I remember our teacher saying even that was a conservative fantasy, that the real ratio was often more like 100:1.

Unknown said...

20% of the UK economy is finance related.

So despite Gordon Brown's claims, we are NOT best-placed to weather the current financial sh*t storm.

The really big danger as far as I can see is that there will be a massive currency realignment. The real work is done by the people who actually manufacture the goods, not by those who hand over bits of paper promising to pay for them at some point. Sooner or later, (probably sooner), they will stop accepting Western paper and start trading more amongst each other.

And where will that leave us? England is now the most densely populated country in Europe. We need to import food to survive. What happens when the paper money we want to use to pay for that food isn't worth as much as it used to be?

Just what does it take to get this all through to the people at the top in their cosy Westminster bubble of reheated student politics?

Meanwhile of course, the Scottish Raj are insisting that Scottish jobs are safe-guarded in the Lloyds takeover of HBOS. They're only "British" when it suits them. "Britishness" is now nothing more than a convenient prop to ensure that we English always have to sacrifice our best interests in favour of theirs.

Anonymous said...

Where does it come from?

Where does paper money ever come from - the printing press, of course.

It's cleverly disguised, and done in all sorts of roundabout ways, but ultimately it works by reducing the value of everyone else's "money" (read, bits of paper) so that the bad debt is spread around.

That's all.

One way or another, we'll all be poorer, except those who get given the new "money" first, and spend it before anyone else notices.

Anonymous said...

...and history has taught us where printing money leads to...

Anonymous said...

"are they just inventing the stuff?"

Believe it or not it seems as if they are.Once you get your head around that,everything else becomes a lot more understandable.

Anonymous said...

Which country in Europe has the most solid foundations and is best placed to weather the storm?

Anonymous said...

Its simple, they inflate the money supply therefore devalue 'your' money.
So where is the money coming from? your pocket!

Ron Paul describes inflation as a massive hiden tax.

Anonymous said...

Video presentation of the corrupt money system

Anonymous said...

What about this shocker from (Pravda) the BBC:

"Viewpoints: Where now for Capitalism?"

"Leading economists and analysts give their veiws".

And three of these "leading economists and analysts" are:

Noam Chomsky (er, not an economist or economic analyst, just a Marxist)

Tony Benn (you fucking WHAT? Benn?)

Brendon Barber (TUC general secretary, not an economist or analyst by any description).

The Marxist who wrote this piece got all excited ("What does this mean for the future of capitalism?" etc).

BBC, just fuck off back to the 1970s communist squat you fester in.

Anonymous said...

Anon @ 8:13 says: "Ron Paul describes inflation as a massive hiden tax."

One of the reasons the government should abolish tax on savings interest.

Anonymous said...

"Which country in Europe has the most solid foundations and is best placed to weather the storm?"

for a clue, look at the exchange rates.

CHF is one. But like everything else it depends when you get into the deal.

Anonymous said...

rob: How awful that the BBC quotes a range of opinions and not just ones you agree with.

Stop throwing tantrums and grow up, there's a good lad.

While you're about it, try getting your facts straight. Noam Chomsky is not a Marxist.

Laban said...

Be fair. Asking Chomsky what he thinks of capitalism is like asking Kate Moss what she thinks of virginity.