*No one else but banks are allowed to create money.The details of which banks and how they do it is a carefully guarded secret.*

Wrong Arjay. Credit unions do what banks do. They take money from
depositors and lend it out once again. The same money circulating
increases the money supply, or "creates money" as you call it.

No carefully guarded secrets either, its all public information.

UOG, frankly you post so much rubbish, that I just pick one of
your many claims and show it to be rubbish. I can't be bothered dealing with all of them.

Banks hold tier 1 capital (shareholder capital) to the tune of
about 8% of their loan book.

Arjay,

Your reference to lack of research and due diligence is a very important point further underlining most politican's - and certainly Rudd's - total lack of business acumen.

Government's can put up ideas in two ways: as a political initiative (which is just a vote-catching promise), or as an evidence-based proposal which has been carefully researched and proven to be necessary and viable.

Everything Rudd has come up with, including the 'stimulus' packages and the fast broad band idea are merely 'political initiatives': all spin and no substance. A bank would be just the same.

If Rudd were to be asked for a business plan for any of his extremely costly (to taxpayers)rabbit-out-of-the hat ideas, he wouldn't know what it meant. Too long in the public service.

Yabby,"Wrong Arjay,credit unions do what banks do.The same circulating money increases the suply and lend it out once again.The same circulating money increases the supply or 'creates money' as you called it."

Now Yabby,how does a closed system self propergate?Is it having sex with itself? On this dilemma,I well may ask the same question of yourself. How can a static system create an expandable supply of money? This is economic double speak.As far as I'm able to assertain,credit unions can only loan out money equal to the deposits of their shareholders and what they borrow from the banks.The banks have an edge that no other institution on the planet has,ie they can create credit many times greater than their deposits.This is undisputed.Even Ben Bernanke has talked of "leverage" of 30 times real deposits which even he thought was excessive.

Leigh,Kevin Rudd will prove to be the most shallow PM in our history.Julia Jillard will probably be our first woman PM.
Just before the last election I wrote a ditty,
"The Cliche kid is tough and strong,
The cliche kid just can't go wrong
The cliche kid,eats me too bars
And that is the sum of his song."

Hence Tony Abbott and others now refer to Kevin as the "Milky Bar Kid".The election before that,I did a rip snorter cartoon that the Coalition used to lambast Labor and they still do know who created it.

*Even Ben Bernanke has talked of "leverage" of 30 times real deposits which even he thought was excessive*

Arjay, Bernanke would have been referring to 30 times of equity,
which certainly was the case with US investment banks, which in
the traditional sense, are not really banks (as in savings banks)
They are not regulated by the Fed, so can literally do as they
please. Those banks which went broke, Lehman, Merryl, etc, were
all investment banks.

Savings banks, ie real banks, have to comply to strict criteria,
carry adequate reserves (around 8% of tier one capital) and
are inspected regularly. Not so with all other money lenders.

If savings banks could just create money as you call it, pay nobody
any interest and charge Pericles and others 10% for his business
loans, rest assured I would be rushing to buy lots more bank
shares! For the balance sheet would show huge interest income
and hardly any interest payments, which is or course not the case.
Only Federal Reserve banks can do that.

Our banks would have no need to go cap in hand to overseas lenders,
they could simply push their computer buttons! Again that is not
the case.

But yes, the money supply is increased, every time another loan is
signed, so in that sense, more money is created. If I had 1000$
and put it in a bank for safe guarding and they were not allowed to
lend it out, only I could spend that money at my choosing. It would
be in the bank vault waiting for me. So there is 1000$ in the economy
so to speak. You would have to do without credit to build your house
or whatever. Pay cash or go without.

But banks have the right to lend you that money, so for all intensive
purposes, I can still draw out my money at any time, but you also
have 1000$ in your pocket from the loan they gave you. There is
now twice as much money in the economy, my 1000$ and your 1000$.

Perhaps Yabby ,you could give us a link on the WEB that gives us some detail of which banks create credit and how the whole process works.

The investment banks in the US and here must have some regulation on the amount of credit they can create otherwise there would be complete anarchy.

Arjay, in Australia it is APRA, which regulates so called
ADIs or authorised deposit taking institutions. That includes
banks, building societies, credit unions, super funds and insurance
companies.

http://www.apra.gov.au/aboutapra/

AFAIK they don't regulate merchant banks or investment banks, for
they are not really banks in the true sense of word. They don't do
retail deposits etc, its all about corportate lending, takeovers,
capital equity raisings, deals etc. Thats no different to what
you could do, ie you could borrow money, then lend it to a friend,
if you wished.