again with the deceptions periculeiour...banks dont give cash for gold[plus we arnt on the gold standard..[plus in a cash box..my asset isnt registered on the banks assets...till they say its abandoned

till it seises it..[under the new laws that deem the cash box abandond[then it goes into internal revenue,..auctioned and the cash deposited into the fed reserve bank/treasury account..as its dollarised value..[dollar's the fed issues and owns..[you ignored the rest of my post as usual]

so will quote you on your limeted delusional reply..<<this is the interesting bit>>....lol

<<You deposit the nugget,on the basis that the Bank can use its value,>>>rubbish i cant deposit gold with a bank..[only cash]i can put it into a box..i rent from the bank

<<in exchange for interest.>>but cannot draw intrest..[on the deposited gold,..it retains its value as gold[no liability]..and an ever increasing value..in the rapidly devalueing fiat fed reserve dollars..

[look at who signs your fiat dollar]..its only a check..they can print as many as they need for 7 cents each[regardless of face value printed on em[thus hyperinflation,boom/bust]

<<You can withdraw your $1,000 at any time,>>if it were monetised[BUT im not monetising it..[and the bank cant either]

<<or,because we are on the gold standard - demand $1,000 in gold at any time.>>>mate that is how it WAS

[not how it is now,..we used to be able to claim silver/gold from the bankers..but not anymore..[go to a bank and try to get 1000 in nickle/coin..[they say make an appointment]..ask for silver/gold they say your nuts..[legal FIAT/tender only]

<<you have allowed the Bank to use its value.>>no i risk the bank stealing it from my cash box...its in the bank..[not in my possesion, they often refuse even to give us our own money back..[see argentina]limit our withdrawel to 1000 per day..besides they dont know whats in my box..[and dont insure it if it gets stolen]

reply the rest of my points..[like them selling..[securitising our iou's..,getting their cash back..[yet still claiming ursury and return of its principle]..

on second thought..im so over your deceptions and distortions..[to what end trying to explain to you..believe as you chose

I am trying to help here, oug. If you're determined not to listen, that's fine.

>>so will quote you on your limeted delusional reply<<

The question I was addressing was (remember?) the creation of a liability to go along with the asset.

But if the Bank doesn't take gold, fair enough.

You sell the gold to a gold dealer, and take the $1,000 to the Bank, they recognize the $1,000 asset (cash) and the $1,000 liability (accepting that you can withdraw that cash at any time).

As I have explained, there cannot be an asset on the books without a corresponding liability. It simply cannot happen.

>>reply the rest of my points..[like them selling..[securitising our iou's..,getting their cash back..[yet still claiming ursury and return of its principle]..<<

I can certainly do that oug, but you really need to grasp and accept the basic principles of double-entry bookkeeping, otherwise I'm not sure we'll make too much progress.

But here goes.

You borrow from the Bank. They give you money that you use to buy a house (car, golf course, whatever), and you agree to pay them interest, say, 10% for 10 years.

A lot of others do the same.

The Bank has a bunch of IOUs that generate a million dollars a year in interest.

They "securitize" these by pooling them together and selling them as securities (hence the name). They receive cash for these, but the underlying assets - the IOUs themselves - disappear from their balance sheet, along with the credit risk.

Wikipedia does a pretty good job of explaining all this, so you don't have to take my word for it

http://en.wikipedia.org/wiki/Asset-backed_security

The risk is effectively spread across all the loans that are packaged, and transferred to someone else.

You of course still have to pay interest. That was the deal you made. And of course you still owe the principal. That was also the deal you made

The fact that someone else is actually holding your IOU shouldn't worry you in the slightest. Your - and the Bank's - responsibilities haven't changed one bit.

Hope this helps.

Pericles with his smug aristocratic posts thinks that he is the font of all wisdom.The simple logic is this,Pericles cannot create currency from nothing since this is counterfeiting,yet this avaricious banking system which he supports,can and does counterfeit money legally.

If we as individuals counterfeit $22 million the equal of every person in Australia,then this dilutes the wealth of all Australians by $1.00 per person.Since 1970 banks have increased the amount of currency above productivity by at least 1500% and now we have over inflated houses/share prices which has led to this collapse.

The Global Reserve Banks inflate the currency as they did in the Great Depression,then they restrict money supply causing deflation.They then go about buying undervalued assets to increase their power base.

We are now seeing credit shrinking even though the US Federal Reserve is creating more and more cyber money.The Fed is bailing out it's mates and using tax payer debt money to buy up cheap assets.That is why the Banks here are putting up interest rates.We are locked into this global rort of a finance system and our own RBA is powerless as witnessed by the fact that as they decrease rates the private banks take the profits with little relief for borrowers.

We should be the richest country on the planet with all our resources and small population.We should be more wealthy than Dubai,yet we cannot even build basic infrastructure, have proper medical care and decent aged pensions.

The peasants will become more revolting very soon and people like Pericles had better wake up to that reality.

That's cute, Arjay. I think I'll frame it.

>>Pericles with his smug aristocratic posts thinks that he is the font of all wisdom.<<

Not at all dear boy (might as well play up to the image a little), as far as this thread goes, a little light bookkeeping knowledge is ample.

>>The simple logic is this,Pericles cannot create currency from nothing since this is counterfeiting,yet this avaricious banking system which he supports,can and does counterfeit money legally.<<

Sorry, but this is pure fantasy.

I have tried to explain in the simplest language why it is fantasy. Unfortunately I am unable to draw pictures for you, otherwise I would. It is such basic, easy stuff.

There is no doubt at all that there has been insufficient oversight of the system, and that its poisonous loans were too well hidden under the weight of "sophisticated" hedging instruments.

But as I have pointed out, it is "we the people" who have been enjoying the fruits of all this, spending like drunken sailors on McMansions, Made-in-China plasma screens for the family room, and collecting iPhones and Blackberries as fashion accessories.

You see the Banks as drug dealers, and the peasants as hopeless addicts with no willpower to resist, gorging on all this money as if there were no tomorrow.

And you are right about one thing - if the Banks hadn't been willing to lend us the stuff, we wouldn't be in nearly as much strife. But it's pretty insulting to your friends and neighbours to label them helpless idiots, mesmerised by the Big Bad Banks into stretching their credit past the limit.

>>We should be more wealthy than Dubai,yet we cannot even build basic infrastructure, have proper medical care and decent aged pensions.<<

Maybe so, Arjay, maybe so.

But I can guarantee you one thing. We'd never stand a ghost of a chance achieving those riches without the availability, from those horrid Banks, of that nasty, evil... credit

Obviously Pericles is caught in the circular argument of accounting, i.e. assets must always equal the sum of liabilities and shareholders' equity.

He seems to have missed the argument that banks have grown so large (unlinited power given to them to create worthless fiat money, derivatives, etc) through unethical and corrupt means that they have made the lives of the common people difficult. (We are not excusing those who have brought financial ruin upon themselves through excessive spending).

The concept and practice of fractional reserve banking has been abused by the big banks. This has brought about financial disasters in many countries.

The present economic woe is due to a large extent by present banking practices, the monetary system and other factors.

This theory is supported by eminent economists (from the Austrian School) like Ludwig von Mises, Nobel laureate for economics F A Hayek and Murray Rothbard. They were responsible for starting the Ludwig von Mises Institute which published several books and documentaries.

A good one to watch is “ Money, Banking and the Federal Reserve”
http://video.google.com/videoplay?docid=-466210540567002553

Ah, so you do understand a little about bookkeeping, Philip Tang.

>>Obviously Pericles is caught in the circular argument of accounting, i.e. assets must always equal the sum of liabilities and shareholders' equity.<<

Hardly a "circular argument".

More a known fact.

>>He seems to have missed the argument that banks have grown so large (unlinited power given to them to create worthless fiat money, derivatives, etc) through unethical and corrupt means that they have made the lives of the common people difficult.<<

I have not "missed the argument", Philip Tang. You and Arjay and to some extent oug are all completely devoted to it.

Unfortunately, you don't actually have any evidence for it, other than you hate Banks and think they have too much power. Not an uncommon position, it has to be said, in fact to a great extent I agree with it.

But that doesn't automatically brand them as being unethical and corrupt, nor provide any illumination as to how they "have made the lives of the common people difficult"

The biggest misconception that you all seem to be under is that a Bank can simply create currency at will, and without any corrsponding liability.

Which is utter nonsense.

>>This theory is supported by eminent economists (from the Austrian School) like Ludwig von Mises<<

I am familiar with the Austrian School, and with the work of von Mises.

He's a theorist, and has developed some interesting "if only" theories about money and the economy.

There are two aspects of his work that are important in 2009.

One is that his theories cannot cure what ails us at present. They could only ever have worked as a starting-point for an entire economy. If you doubt that, simply explain to us how you would have advised Kevin Rudd to address the global economic downturn, using only Austrian School concepts.

Can't be done, can it?

The second is that any economy, that adheres to these theories, would experience exceptionally low growth.

The closest example of a real-life community that follows his dicta would be the Amish.

Thoroughly worthy. Limited economic horizons.