Is that what he means IB?
I kinda disagree, the bank is loaning to people, it has costs for doing that, if people need a loan then the bank is providing a service, why shouldn't they charge?

Is that what he means IB?
I kinda disagree, the bank is loaning to people, it has costs for doing that, if people need a loan then the bank is providing a service, why shouldn't they charge?

Mike wrote:
Well only he can really answer what he means but when you think about it....They let you borrow 100 and you pay back 125 or whatever it might be. They produce anything. They don`t go and dig up more gold or silver or anything. Yet now they have 125. Tomorrow they let you borrow 125 and you pay back 156. So on and so on but they only started out wit 100 and have done nothing more than physically print that note and in most cases they don`t even need to do that since it is just a number on a screen.

i-baster wrote: They've given you a loan, they have produced a loan for you to use that isn't nothing.

Mike wrote:
If people had decent wages then they would not need loans,thats if you can get a decent well paid job in the first place.

Mike wrote:

Right but where did they get all this money from? I am not talking about me letting you borrow a few quid. I am talking about banks loaning you money for a house or car or something. They don`t just have all this wealth because otherwise everybody would be rich bankers. I have no problem with the principle of interest but you have to have it based on something tangible in my view.

They get it from deposits, because people deposit money in the banks, that's the first cause of a bank's wealth, banks compete to have the most attractive interest rates on personal savings accounts to get more depositers than their competitors, that's the basis/reserve of the money a bank can loan as it appears to me, I'm not an expert.

LightGiver wrote:
Well you would not be able to get a house unless you saved first which would be tough going.

Mike wrote: Just to let you know, there is no reserve requirement where we live. You can read more about this starting here:

sanctumzone.co.uk/forum/General/91820-to...-economy.html#116275

deadgauge? what does that mean?

Graham Hodgson January 2012
Reserve ratios and capital-adequacy ratios serve separate purposes and are not interchangeable. Reserve ratios were designed to ensure that banks always had enough cash to meet customer demand for withdrawals. These requirements have largely been abandoned as regulatory constraints. Banks are free to make their own prudential provisions and make full use of inter-bank borrowing to make up any shortfall. This was considered possible because reserves form a closed pool of money held by the clearing banks, those with accounts at the Bank of England. If one bank has a shortage, another must necessarily have a surplus so there should always be money available to borrow to cover the shortage. This is the reason for the regulatory angst at banks' refusal to lend to each other. However, the Bank of England does require that the larger banks deposit securities to the value of 0.11% of their customer deposits and other short-term borrowing. These cash-ratio reserves are not available to finance the banks' operations but are intended to provide an income for the Bank of England (the revenue stream from the securities).

Capital adequacy ratios are designed to ensure that banks are able to absorb losses in the event that loans default or the market price of financial assets falls. In such events, the reported value of total assets falls and there must also be a corresponding fall, therefore, on the liabilities side, and that is the function of capital. Capital is the record of the funding made available to the bank by shareholders and bondholders, and it includes the accumulated balances of the retained earnings, provisions for bad debts and depreciation and other contingency accounts. When assets decline in value, the corresponding amount is written off against one of these capital accounts. The Basel Accords defines how banks are to calculate adequate levels of capital based on the risk that the value of their assets may prove to have been overstated.