Will someone please buy Kruddy some good sleeping tablets, or find him a nice young mistress.

Every time he has another sleepless night, we get another couple of damn fool new policies.

If we can't get him to sleep nights, we will, like the wahoo bird, end up chasing our tails all over creation, & back.

Ok Arjay, I did a bit of homework for you, so that you can try to
understand it all. So I dug deep into the online bowels of the
Westpace financial report, to find the figures:

http://info.westpac.com.au/Sites/1/pdf/WBC08AR_Financials.xls

Its a Microsoft Excel file, so I hope that you can open it. Look
along the bottom and go to "Fin Data"

Its shows you interest received at 29 billion, interest paid at
21.8 billion. Banks work on a spread of around 2%, ie if money
costs them 4%, they lend it out at 6%. Years ago, before deregulation, it used to be twice as much, but competition has
halved it.

Now if all this "magic money" was available to them, as some on OLO
seem to think, then clearly there would be no need to pay out
so much interest, in relation to interest received!

So yes, banks create money in the way I explained with my 1000$
example, but not in the way which you seem to think, ie the
computer button. Only reserve banks can do that.

ok here we go gabby
so the banks paid intrest to the fed...[of 21 billion using your egsample]

so i googled [who owns the fed
http://www.google.com/search?ie=UTF-8&oe=UTF-8&sourceid=gd&q=who+owns+the+fed&hl=en-GB&rls=MEDA,MEDA:2008-36,MEDA:en-GB

went to the reserve bank..[spin site]
quote<<..the Reserve Banks issue shares of stock to member banks.

However,owning Reserve Bank stock is quite different from owning stock in a private company.

The Reserve Banks are not operated for profit,and ownership of a certain amount of stock is,..by law,..a condition of membership in the System....>>ie the boys club

<<The stock may not be sold,traded,or pledged as security for a loan; dividends are,..by law,..6 percent per year.>>>..ok so the 6 percent of the dividend...[the fed creates from a fiction...goes to member banks..and 'others'..WHO OWN THE FED reserve stock...

govt gets it pitance as you previously revealed...it should be getting the 21 billion

world wide its a hell of a lot more..[where your 21 billion come from]?

lets just audit the fed and find who is getting the loans and the ursury..[that sure as heck isnt going to govt..[thats why we need to pay tax...

while the owners of the fed/banks.. get our bailouts..[and create any ammount of credit they like...giving it to who ever..they chose

Yabby.We seem to have a conflict of opinions here.See Ellen Brown http://www.webofdebt.com/articles/dollar-deception.php
Robert Anderson was the Secretary of the US Treasury in 1959.said,"When a bank makes a loan it simply adds to the borrowers depsoit acccount in the bankby the amount of the loan.The money is not taken from anyone else's deposits,it was not previously paid into the bankby anyone.It is new money ,created by the bank fro the use of the borrower."

Ellen Brown also goes on to say that banks include in their reserves the loan money sitting in accounts waiting to be used by the borrower.So here we have the mulitiplier effect,of credit being created on the basis of existing credit sitting in accounts.

With the knowledege that investment banks even have greater leverage in creating new money,the whole system needs a drastic overhaul.It is totally obscene.

Arjay, in accounting terms, yes the money is created, as it again
vanishes, when the loan is paid back. The bank's money after all
comes from all sorts of sources. There is no bookeeping entry
showing a transfer from Mrs Jones deposit account to Mr Arjay's
loan account!

Check out Apra and Basel 2, to see what kind of reserves banks must
carry. Tier 1 Capital is basically shareholder capital. Now just
recently Australian banks, to boost their reserves, turned to shareholders for another 16 billion $.

The point is, banks still need to borrow their money and cannot
just add numbers to a computer. As you can see from the
Westpac data, right here in Australia, they pay out one hell
of a lot of interest. Now even you would have to accept that
Westpac would not pay out 21 billion$ in interest, if they
did not have to borrow money.

The alternate to the fractional reserve system, is of course
that banks would simply store your money as a place of safe
keeping and not lend it out, as the original goldsmiths did.
They would charge you a fee to store it and there would be no
credit. Only the rich with cash could afford houses etc,
workers would simply have to do without.

UOG, as usual you muddle up and confuse everything :) For a start,
separate the Australian and American systems please, they are not
the same.

Yes, all American banks have to be members of the Fed. They are
paid 6% on money they have deposited with the Fed, not 6% on
money which the Fed owns, big difference. Profits from the Fed,
are paid back to the US treasury.

Yes yabby,the principal that is repaid enters oblivion,ie does not circulate in the economy,but the seller of the property[the recipient of the loan money] now has this new money,then either re-invests it or puts it in a bank.This new money then acts as a reserve which banks can then create more money to loan.

Thus we have the expodential growth if inflation especially since 1974 when we went off the gold standard.We also have the depreciation of our currencies.