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Britain's bust banks buying bulk of Britain's debt
If you have a current account, in credit, then that is money the bank is holding. So you'd be paying them to profit from your money.
Banks view deposits with them as 'Liabilities', and money people owe to them as 'Assets', for a multitude of reasons, interest & charges being a couple. It would be a fairly screwy world if we were all paying to save, and it exceeded the interest gained. Unless the benefits outweighed the losses in the form of insurance, favourable deals and the like... but even that sounds like yet another way to obfuscate the true costs. Also, see: Utilities companies; National Insurance; Sales; Service Charges; Stamp Duty, CRBs, ad nauseum.
It would be a fairly screwy world if we were all paying to save
Saving rate is negative or around zero in this country - way too many people live from pay cheque to another very close to slipping into ovedraft. This means they don't keep anywhere near enough in bank account to make up for fixed costs of having it.
If you have a current account, in credit, then that is money the bank is holding. So you'd be paying them to profit from your money.
Banking has changed beyond recognition over the past 40 years grandad.
The banks don't make money from savers, these days they make it from the borrowers and they don't need the savers any more to be able to service the borrowers.
Just hold on here a minute! We print a load of money and capitalise the banks with it. The banks then have bought the UK's debt with it. So we own our own debt then? So (in theory) we could just cancel it. Job done!
But considering the banks have their hands up the puppets in no.10, not likely to happen.
McCoy: "Medical men are trained in logic." Spock: "Trained? Judging from you, I would have guessed it was trial and error."
Just hold on here a minute! We print a load of money and capitalise the banks with it. The banks then have bought the UK's debt with it. So we own our own debt then? So (in theory) we could just cancel it. Job done! But considering the banks have their hands up the puppets in no.10, not likely to happen.
Here how it works:
1) Govt wants cash in exchange for paper (gilts) - it offers them for sale
2) Banks bid for it without having cash to pay for
3) Banks win auction and need cash to pay up - they borrow from BoE under 0.5% per year real cash to pay Govt, this is the point when BoE actually prints non-existant money
4) Govt gets cash and uses it cover budget deficit
So end result is:
1) Banks are quids in and end up holding "AAA" security (so good balance sheet)
2) Govt gets cash without increasing servicing costs
3) BoE prints money without being too obvious (ie buying gilts directly)
4) DimPrawn goes bonkers about his puny virtual gold holding
The banks don't make money from savers, these days they make it from the borrowers and they don't need the savers any more to be able to service the borrowers.
And there we have it, in one sentence. The way banks work nowadays.
They make more money on promises than they do as a vault. Securities are more important than security.
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