Question For Financial Gurus

[Pangurban]

Why to governments borrow money from Banks. Most off the worlds Banks are themselves insolvent and relying on quantitive easing and bail outs from the same governments too whom they are lending money. Why can government not just print money and release it into the economy themselves, without the Banking middlemen

[seafoid]

Why to governments borrow money from Banks. Most off the worlds Banks are themselves insolvent and relying on quantitive easing and bail outs from the same governments too whom they are lending money. Why can government not just print money and release it into the economy themselves, without the Banking middlemen

Do you mean Central banks ?

[Pangurban]

Yes, also the Bond Markets

[armaghniac]

In the ordinary course of events.
I deposit some money in a bank and they lend it to someone else including the government. This way the amount of money stays the same, more or less. If the government just prints money then you get more and more money, i.e. inflation and you end up like Germany 1923, Hungary 1946 or Zimbabwe 2008 and a loaf costs RM3 billion.

Now.
The banks have fecked things up, people are not repaying the loans. Nobody knows what to do. The UK is printing money and there is so far modest inflation. The ECB is less enthusiastic for printing money because of Germany (see above). 

[lawnseed]

Why to governments borrow money from Banks. Most off the worlds Banks are themselves insolvent and relying on quantitative easing and bail outs from the same governments too whom they are lending money. Why can government not just print money and release it into the economy themselves, without the Banking middlemen

i think the practice started in America during the depression. there was a rule that the paper dollar had to be backed up by actual gold bullion. but all the money got trapped in the hands of the rich who just hoarded it and there were places in the midwest where there was actually no cash. banker jp morgan i think came up with the idea of just printing paper without 'actual value' and just dishing it out to lubricate the economy and he and a couple of other bankers would 'pay the bearer on demand' for a small fee of course. this worked very well.. in the beginning but the money still ended up in the hands of the very wealthy. therefore the need to continue the practice of borrowing valueless paper from these banks continued. then to circumvent a law in the us that only the government could actually print dollars  these banks became 'the federal bank' nothing federal about them they are private printing presses except now they don't even print dollars they just make up virtual cash that still ends up in the coffers of the extremely rich and on and on. the American government borrow virtual money from 'the federal bank' it doesn't exist its just computer credits and they pay interest on the virtual credits to the bankers. the money at street level doesn't exist it can be credit cards only at the very lowest level does it become actual worthless paper that you can see and feel. but very quickly the credit is hoovered up by big business, or by taxes that the government use to... guess what? that's right PAY BACK THE FEDERAL BANK! so the poor get poorer and the rich get more credits    

i recommend you google bill still.  he advocates going back to a system of banking where the amount of valueless credits/paper is slashed, and only the US government is allow to print dollars and only to the amount of actual gold or other precious metals in American vaults

which brings me on to fort knox you know where bond and pussy galore were at it. several U.S senators have requested access to the vault to see the actual gold but have been refused fueling speculation that the vault is empty and that the gold has been sold off

[Main Street]

Why to governments borrow money from Banks. Most off the worlds Banks are themselves insolvent and relying on quantitive easing and bail outs from the same governments too whom they are lending money. Why can government not just print money and release it into the economy themselves, without the Banking middlemen

If the State just prints without paying it back, leads to too much money in circulation, therefore the value depreciates, inflation.
Quantitive easing is also the CB printing money, but the theory is the Banks return to buy back  the toxic assets they left as guarantee with the CB and if the theory works then the CB burns the money the banks return to buy back those toxic assets.
Now that Eire is in the Euro, they can't print money themselves.

[lawnseed]

disaster looming-- computer money this is where there is no evidence of the existance of the credit except in cyberspace and you can only access the cyber money by means of a gadget/phone/tablet etc these credits are already being lawded as the new currency and your bank account will be with your server/phone company etc.. 

[lawnseed]

disaster looming-- computer money this is where there is no evidence of the existance of the credit except in cyberspace and you can only access the cyber money by means of a gadget/phone/tablet etc these credits are already being lawded as the new currency and your bank account will be with your server/phone company etc.. 

ps i'm not a financial guru i just watch alot of PSB

[haranguerer]

I'd say he worked that out

[muppet]

Why to governments borrow money from Banks. Most off the worlds Banks are themselves insolvent and relying on quantitive easing and bail outs from the same governments too whom they are lending money. Why can government not just print money and release it into the economy themselves, without the Banking middlemen

http://www.youtube.com/watch?v=OrHeg77LF4Y

Skip parts I & II and go to 1 hour 16 mins for part III.

[lawnseed]

Why to governments borrow money from Banks. Most off the worlds Banks are themselves insolvent and relying on quantitive easing and bail outs from the same governments too whom they are lending money. Why can government not just print money and release it into the economy themselves, without the Banking middlemen

http://www.youtube.com/watch?v=OrHeg77LF4Y

Skip parts I & II and go to 1 hour 16 mins for part III.

YES THATS HOW IT WORKS your fukd from the minute you're conceived

[Pangurban]

That is what i am trying to understand, how most of the money currently being traded does not actually exist. Therefore governments printing Money to finance their own projects, could not actually cause inflation, as the money will return to them in one form or another. I read recently that threequarters of the actual wealth in the world is hidden away in safety deposit boxes in Tax Havens, accruing interest but not being employed for any useful purpose. In most  cases the interest on these accounts is being paid by the money which governments raise from their citizens to lend to these encumbered Banks , who operate the Tax Havens. Flann O Brien could not have this up

[heganboy]

That is what i am trying to understand, how most of the money currently being traded does not actually exist. Therefore governments printing Money to finance their own projects, could not actually cause inflation, as the money will return to them in one form or another. I read recently that threequarters of the actual wealth in the world is hidden away in safety deposit boxes in Tax Havens, accruing interest but not being employed for any useful purpose. In most  cases the interest on these accounts is being paid by the money which governments raise from their citizens to lend to these encumbered Banks , who operate the Tax Havens. Flann O Brien could not have this up

none of the above makes any sense to me.

money traded does actually exist- everything based on the first statement is inherently wrong.

Start with the premise that money is really just a common denominator for a barter system. After that it all gets easier.

[muppet]

That is what i am trying to understand, how most of the money currently being traded does not actually exist. Therefore governments printing Money to finance their own projects, could not actually cause inflation, as the money will return to them in one form or another. I read recently that threequarters of the actual wealth in the world is hidden away in safety deposit boxes in Tax Havens, accruing interest but not being employed for any useful purpose. In most  cases the interest on these accounts is being paid by the money which governments raise from their citizens to lend to these encumbered Banks , who operate the Tax Havens. Flann O Brien could not have this up

none of the above makes any sense to me.

money traded does actually exist- everything based on the first statement is inherently wrong.

Start with the premise that money is really just a common denominator for a barter system. After that it all gets easier.

This is not completely correct.

Fractional reserve banking means lots of debt is created on the basis of a small deposit.

Fractional-reserve banking is the practice whereby a bank retains funds equal to only a portion of the amount of its customers' deposits as readily available reserves (currency on hand at the bank plus deposit accounts for that bank at the central bank) from which to satisfy demands for payment. The remainder of customer-deposited funds is used to fund investments or loans that the bank makes to other customers.[1] Most of these loaned funds are later redeposited into banks, allowing further lending. Because bank deposits are usually considered money in their own right, fractional-reserve banking permits the money supply to grow to a multiple of the underlying reserves of base money originally created by the central bank.[2][3]

In theory if all of the debt is paid back it should simply end up with the original amount of money (which is usually owed to a Treasury or Exchequer or other Bondholder). However, each bank along the line, including the Central Banks, charges interest on top, so by definition there is never enough money in the system to pay back the debt PLUS the interest.

[Main Street]

That is what i am trying to understand, how most of the money currently being traded does not actually exist. Therefore governments printing Money to finance their own projects, could not actually cause inflation, as the money will return to them in one form or another.

Money may not exist in printed form but it has a value based on the value of something else, whether the value of the something else is real or speculative.

Your scenario is okay in a self sufficient economy but it depends also on the type of project.
If the economy has increased in value with that new project therefore more money can be printed without causing inflation.
But when material for that construction has to be imported, when migrant labour want to transfer earnings out, when say the construction company is  foreign, then it becomes inflationary to print money to fund a project.
The foreign currency for that purchase and for migrant labour can not be printed.  Therefore the local currency becomes weaker

If eg it was a hydro electricity construction project which will reduce oil imports. Then eventually that project will make economic sense.
Trade balance means  enough foreign currency earned from exports is available for purchase to importers.
Currency balance is achieved when there is enough foreign currency available to meet all demands eg imports/foreign currency loans, foreign currency purchases etc
Inflation also happens when not enough money is earned from exports to cover those costs.
Just as local currency inflation happens when a State prints money to cover running cost expenses.