Not in any disagreement with your point, but are you able to be more specific?
Financial services and it’s infrastructure is important and it requires labour, there are many busnisses and sole traders in the UK and financial services do help organise, the 2% you say is extracted does this include the cost of labour/equipment? or are you saying that this money is extracted in addition to the labour and equipment costs?
well over 90% of the value has been extracted by banks and their minions since federal reserve act and income tax (same ppl same year) https://www.usgoldbureau.com/gold-vs-inflation
I wasn’t that interested in the article and this was a number of years ago. My understanding was that the financial industry has corporate profits each year that amount to about 2% of the US GDP. This would naturally exclude all of the costs of doing business, including labor.
It is most likely just a funny coincidence that the financial industry profits from inflation and their profits are the same as what the rest of us lose to inflation each year.
wth… bring the old wardec system to real life
Well they are. It’s the people who are closest to the money printer who profit the most of it. The money printer is in this case the banks, and the people who can turn it on are those who already have a pile of capital they can use as security to get new credit (which created new money)
The way this works is, if this person or corporation goes to the bank and gets a new credit for $1 bil, there is now $1 bil more dollars they can use to for example buy real estate. The result is that there is now $1 bil more on the market, which drives up monetary inflation and devalues the money, and at the same time it drives up the real estate value.
It’s simple, but very effective. And now they have real estate they can use as a security to start this game all over again.
I think i figured it out. When the interest rate drops money becomes cheaper which means there will be more money chasing the same amount of goods so prices go up and vice versa.
Yes, the repayment of loans is cheaper in times of low interest rates, You’ll see things like people buying new cars on credit (this secures many car manufacture jobs) and people enjoy low cost living on their low interest only mortgage.
There are a couple of current world wide event like war affecting decisions to print money, It does seem to me interest rates currently being high are the result of money being burned and removed from the economy in order to stabilize and hopefully return it’s productivity to pre-covid levels.
In the UK I am noticing a cut back on everything, many seem to be holding on to what they have in order to service normal household bills, even nurses who are mothers are having to attend food banks to help make ends meet. It seems like more labour is required to live at the same standard.
Also, I would have thought with low interest rates more people could afford to get into any market and sell their wares which could flood the market, I can see why interest rates need to be adjusted as adjusting it too much in one direction makes it difficult for the economy,
In theory it is all a circular system. The Federal Reserve prints money, which then goes to a few special banks that in turn sell the money at interest to the everyday banks. This is where the interest rates really come in, as they determine the ‘base lending rate’ and thus how much the banks themselves can borrow and pass on to customers.
The money then passes round the economy, being taxed on numerous occasions, which then completes the cycle. Except that if the money goes abroad or is held in offshore funds then it doesn’t get taxed and doesn’t return and that becomes the trade deficit…which is a bogus form of deflation because prices may be cheaper, but only because the Federal Reserve is printing billions that leave the economy altogether.
The money you borrow from a bank is not the same money the federal reserve or similar central banks created. The regular banks can create as much dollars on their balance sheets as they want. They just have to make sure if that money moves to another bank, they can settle this with that other bank with something, inside the US it is usually with FED dollars.
But US banks that are within the system of the FED are not the only banks that create dollars on their balance sheet. There is an even bigger pile of so called Eurodollars (has nothing to do with the Euro) that are created by banks all over the world which are not under the jurisdiction of the FED. They will settle with all sorts of assets with each other to balance the books.
The only reason the banks want your deposits is because that is money flow in their direction from other banks. And since they only need to settle the difference it allows them to operate with a lot less reserves without risking to become insolvent.
The federal reserve printing money doesn’t actually do much. The problem with this system is that rich players have access to basically unlimited credit from the banks, they will then use to buy real assets like real estate. In the end that money will make its way into the pockets of regular people, where it devalues the currency and props up the rich peoples assets, which become more and more unaffordable for regular people this way.
This topic was automatically closed 90 days after the last reply. New replies are no longer allowed.