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NO, because all the money (apart from reserves) is loaned out all the time, as I have already said. If it’s not loaned out to someone’s LOC it’s loaned out to someone else. The banks are not sitting on big bags of money.

Isn’t it self-evident that if banks are willing to pay x% interest on deposits, they must be lending the money out to somebody?

Money supply is contracting because of loan losses, which reduce bank reserves, which reduce the amount of money they can lend out.

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During this little credit crisis, is the money supply shrinking because less borrowers are maxing out their lines of credit? Are we then in period when money is being destroyed faster then it is being being created?

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In fact the credit union loans out all its money all the time, subject to reserve requirements. If it hadn’t loaned the money to you it would have loaned the money to someone else. That’s what the bond markets all are about. All the money loaned out, all the time.

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My parents and aunts and uncles save some of their money and deposit it in the local credit union. All together, they deposit 10,000. that is the base money supply. I use my credit card to buy a cheap flight to Mexico. The credit union transfers $400 to the bank account of the airline. The credit union now has 9600 in cash plus 400 in debt owed to it. All counts as “money” assets. The airlines bank has 400. Total money supply $10,400. By going to Mexico, I have created money.

When I get back, I get a job with the airline unloading luggage. They pay me $400 from their bank account. I pay that back to the credit union. Now the credit union has $10,000 cash again, the airlines bank has $0. Total money supply is $10,000 again. By unloading luggage, I have destroyed money.

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“Commercial banks and other financial institutions provide the greater part of assets used as money through loans made to individuals and businesses. In that sense, financial institutions are creating money.”

Or, to put the shoe on the other foot, borrowers create money when they take out a loan, use their line of credit or credit card. And then destroy money (supply) when they pay off those loans.

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It is your friend and people like him who were directly responsible for the massive rise in prices in the first place, so why should anyone feel sorry for them?

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Sellers who can afford to seem to be waiting it out, hoping for better news – which just won’t be coming any time soon.

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Big business leaders in Spain are stepping up their demands for labour reforms following the crash of regional savings bank Caja Castilla la Mancha, the first since 1993. After attempts to coordinate a buyout failed, the Spanish government was forced to inject €3 billion ($4 billion) into the bank to plug a “hole” in its finances and provide €9 billion ($12 billion) in loan guarantees.

The bailout has destroyed the myth that Spain’s banking system was “immune” from the global financial crisis. According to economics professor Antoni Espasa at Madrid’s Carlos III University, “The Spanish economy is in for a ferocious fall… It’s going to suffer more than Europe and take longer to recover.”

Dominic Bryant, Spain expert at BNP Paribas added, “The economy is in dire straits… The adjustment will be enormous.”

When the economic crisis first broke José Luis Zapatero’s Socialist Workers Party (PSOE) government boasted that the country’s large budget surplus and tough regulations and controls on financial transactions would allow the country to resist the worst of the global crisis. This nationalist chimera has been burst. This month, the Economist warned, “Back in September Mr Zapatero had expressed his confidence that the downturn would bottom out fairly quickly, helped by ‘perhaps the most robust financial system in the world’. The recent rush of policy action would suggest that the outlook is now not quite so rosy.”

Since the beginning of this year one million workers have lost their jobs in Spain, bringing the number of those officially unemployed to nearly 3.5 million. The country’s second-largest bank, BBVA, issued a study recently saying that unemployment will rise to 4.1 million by the end of this year and hit 4.5 million in 2010.

Spain’s auto industry, which employs 350,000 is in a particularly desperate condition. Whereas Nissan’s production world-wide fell by 54 percent “year-on-year,” in Spain it dropped by a staggering 90 percent. The drive to cut costs and increase efficiencies in what one government minister described as the “export lungs” of the economy has relied almost entirely on the trade unions. At Nissan the trade unions have agreed to slash 1,680 jobs at its plants in Barcelona.

Last week, the Associated Press carried a report on the situation facing construction worker Antonio Montoya, who until recently “could afford two cars and a nice duplex for his family of six, with a sunny patio and pet canaries singing away. Spanish real estate was booming, jobs were abundant, and as Montoya would drive past the unemployment office, he felt like he was gazing at another planet. ‘I would say to myself, I’d never be in that situation.’

Now Montoya has been forced to go to that same office, “catching a bus to save on gasoline, and joins the sullen, ever-growing line. He sniffs out job offers, signs for his 750-euro ($970) monthly benefit and goes back home, often to meals of leftovers. In disgust Montoya states “Imagine now, here I am at age 54, without a job… I don’t know how long I will be able to hold on.”

http://www.globalresearch.ca/i.....;aid=13056

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My guess is that these people are still borrowing to keep current on payments, using rental payments to partially cover the monthly payments and using the last savings they have have built up due to using credit to cover 100% of the purchase. How long can it take to bleed them dry? Obviously a job loss will blow anyone out of the game, but I think the low intrest rates are keeping a huge number of people from getting blown out. It’s a very temporary situation, inflation is raging, the government is going to have to act at some point. Are many specuvestors just 1 or 2 basis points away from disaster.

”

I have a friend who lives in the Mission and used a HELOC as a downpayment to buy several condos. He has to subsidize his condos because the rent doesn’t cover the mortgage. He did this because he was relying on the annual price increase to guarantee a good return on his investment when he decided to sell. Now he can’t sell because the condo’s are worth less than what he owes, and if the value of his own home continues to drop he could wind up owing more on his HELOC than his home is worth. So he has the potential to go from “riches to rags” virtually overnight. Obviously he made some very foolish decisions and is the author of his own misfortune. I’m not defending his behaviour. But when people ask how a massive drop in prices could affect some, my friend is a good example. Because I’m willing to bet there are hundreds more just like him out there.”

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Comments (0) Add to My Stories

Record numbers of middle-class homeowners are trying desperately to sell and move to smaller properties.
As a ‘white-collar recession’ begins to bite deeply, new figures show a sharp jump in families looking for a quick sale on houses worth £500,000 or more.

http://www.dailymail.co.uk/new.....homes.html

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“Besides layoffs, salary reductions and other recessionary factors, many suburban homeowners are watching their adjustable rate Alt-A mortgages — which are between prime and subprime mortgages in interest rates and risk for the bank — reset with higher payments.

That is forcing some families who owe more on their homes than they are worth to walk away from their property, sell at a loss or face foreclosure. A growing number of owners are rushing toward the brink because home values have fallen so precipitously in recent months: Local prices have, on average, fallen to levels not seen since the mid-1990s. ”

http://www.detnews.com/article.....ages+reset

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1) Stock market will rally sometime in the next 10 years
2) House prices will go down in the next twenty years and up again too
3) Oil will go up in the next 30-40 years
4) My books will continue to sell well
5) Don’t take my advice, use a professional financial advisor just like I do
6) Buy Nortel stock while it’s cheap, you won’t regret it
7) Vote for me!

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An increase in potential money supply. The reserves allow loans to be made; whether they are actually made is another story. When a loan is re-paid, another is not always issued.

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“For months into the economic downturn, Gordon Campbell told British Columbians not to worry. He had no idea what was going on for working families in the province. He responded slowly, and even today he stands alone among western leaders in calling for tax increases and program cuts,” Ralston said.

B.C. job losses largest in the country

‘A lot of hurt out there’

Statistics Canada reports 16,000 B.C. jobs were lost in construction last month, 8,500 in real estate and finance and 6,600 in manufacturing. (Sectors like transportation and food services saw increases, bringing total losses to under 23,000.)

The province has lost a total of 69,000 jobs since October and 73,000 jobs over the past 12 months.

http://www.theprovince.com/bus.....story.html

This is great news for the real estate bulls and the whores who love and support them….not

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If someone takes the money out of another bank account to repay the loan, it reduces that banks reserves, and hence its lending ceiling, so I’m not sure if it evens out as you say.

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a) someone repaying their debt to a charter bank

Yes but where does that money come from? Someone else’s bank account, i.e. I sell some stocks to pay off my debt to the bank, the money comes from the buyer’s bank account. Or I pay off a debt with my earnings, the money comes from my employer’s bank account.

Or to make it really simple, if I owe the bank 10K, and my dad writes me a cheque for 10K to pay it off.

If someone repaying their debt to a bank destroys money, a bank repaying its debt to someone – i.e. someone taking money out of a bank account – has to create money. It evens out.

Actually people taking money out of a bank (which is the bank paying off its debts, not the other way around), and hiding the cash at home, i.e. a run on the banks – decreases the money supply. I think everyone understands that.

And someone paying off a debt to a bank with cash results in an increase in money supply because that cash increases the bank’s reserves which increases the amount of money it can lend out. Functionally that is no different from someone with no debt to the bank making a cash deposit.

Defaulted debts do result in a contraction in the money supply because they decrease the bank’s reserves.

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Actually, money IS destroyed by

a) someone repaying their debt to a charter bank or
b) someone defaulting on their debt at a charter bank

Not all loans being repaid or defaulted result in money supply contraction but a large portion do.

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In the immortal words of Gregg Halsey-Brandt ( ex-mayor of Richmond)

” Living in Richmond is never having to say you’re Surrey”.

The irrelevance of someone who trys to justify his existence in the Sewer ( surrey) is not lost on the knowlegable members of this forum. There are a plethora of reasons why The Sewer has earned it’s reputation as ‘loserville’. Surrey is synonomous with destitution and denial.

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As George Bernard Shaw once stated never wrestle with a pig, you get dirty and besides the pig likes it.What a juvenile and disgusting statement. The relevancy of this forum has been lost. Have fun preaching to the choir.

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#76 , well said, what kind of a retard would live in Surrey ( The Sewer) at all. Why not not just whack off on the john and flush your sperm down the toilet instead of brutalizing your children with having to grow up ( thrown up) in that shithole of shitholes. It’s a deadend community without peers. You have to really have shit for brains and be so covetous about this whole cheaper real estate thing to make a decision where Surrey ( The Sewer) becomes a viable option.

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