Central Banks, Financial System and the Creation of Money (and Deficit)

In the market economy, the financial system gives money from the positive savers (i.e. depositors) to the negative savers (i.e. people with shortage of funds which need loans to buy property etc.). Furthermore, the financial systems facilitate non-cash payments. from individuals or legal entities.

The financial system has by law a monopoly of services. Only banks can accept deposits, only insurance companies can provide insurance services and mutual funds management can be done better by a large bank rather than by an individual investor.

How money is created

In the past, one of the reasons the ancient Greek states were strong was the ability to create their own currency. In the times of Pericles, the silver Drachma was the reserve currency of that era. The same applied for the golden currency of Philippe from Macedonia. Each of these currencies could have been exchanged with a certain amount of gold.

Nowadays, Fed creates USD and ECB Euro which both is fiat money I.e money with no intrinsic value that has been established as real money by government regulation and we, therefore, have to accept it as real money. Central banks circulate coins and paper money in most countries that they are just 5%-15% of the money supply, the rest is virtual money, an accounting data entry.

Depending on the amount of money central banks create, we live in a crisis or we have economic development. It should be noted that central banks are not state banks but private companies. The countries have given the right of issuing money to private bankers. In turn, these private central banks lend the states with interest and therefore, have economic and of course, political power. The paper money circulated in a country is actually public debt i.e. countries owe money to the private central bankers and the payment of this debt is ensured by issuing bonds. The warranty given by the government to private central bankers for debt repayment is the taxes imposed on people. The bigger public debt is the bigger the taxes, the more common people suffer.

The presidents of these central banks cannot be fired by the governments and do not report to the governments. In Europe, they report to ECB which sets the monetary policy of EU. ECB is not controlled by the European Parliament or the European Commission.

The state or borrower issues bonds, in other words, it accepts that it has an equal amount of debt to the central bank which based on this acceptance creates money from zero and lends it with interest. This money is lent through an accounting entry however, interest rate does not exist as money in any form, it is just on the loan contract obligations. This is the reason why global debt is bigger than real or accounting debt. Therefore, people become slaves since they have to work to get real money to pay off debts either public or individual debts. Very few ones manage to pay off the loan but the rest get bankrupted and lose everything.

When a country has its own currency as it is the case of the USA and other countries, it can “oblige” central bank to accept its state bonds and lend the state with interest. Therefore, a country bankruptcy is avoided since the central bank acts as a lender of last resort. ECB is another case since it does not lend Eurozone member-states. The non-existence of a Europe safe bond leaves the Eurozone countries at the mercy of the “markets” which by being afraid of not getting their money back they impose high interest rates. However, quite recently the European safe bonds have gained ground despite the differences in Europe policymakers whereas the Germans are the main cause for not having this bond since they do not want national obligations to be single European ones. There is also another reason (probably the most serious one) which is that by having this bond, Euro as a currency would be devaluated and Germany’s borrowing interest rates would rise.

In the USA things are different since the state borrows its own currency (USD) from Fed so local currency is devaluated and therefore state debt is devaluated. When a currency is devaluated the products of a country become cheaper without reducing wages but imported products become more expensive. A country which has a strong primary (agriculture) and secondary (industry) sector can become more competitive by having its own currency provided that it has its own energy sources i.e. it should be energy sufficient. Banks with between $16 million and $122.3 million in deposits have a reserve requirement of 3%, and banks with over $122.3 million in deposits have a reserve requirement of 10%. Therefore, if all depositors decide to take their money from the banks at the same time, banks cannot give it to them and bankrun is created. At this point, it should be mentioned that for each USD, Euro etc deposited in a bank, the banking system creates and lends ten. Banks create money each time they give loans and the money they create is money that appears on the computer screen, not real money deposited in the bank’s treasury that lends it. However, the bank lends virtual money but gets real money plus interest from the borrower.

As Professor Mark Joob stated no-one can escape from paying interest rates. When someone borrows money from the bank, s/he has to pay interest rates for the loan but all who pay taxes and buy goods and services pay the interest rate of the initial borrower since taxes have to be collected to pay the interest rates of the public debt. All companies and individuals that sell goods and services have to include the cost of loans in their prices and this way the whole society subsidizes banks although part of this subsidy is given as interest rate to depositors. Professor Mark Joob goes on and writes that the interest rate paid to the banks is a subsidy to them since the fiat/accounting money they create is considered as legal money. This is why bankers have these large salaries and this is why the banking sector is so huge, it is because the society subsidizes banks. Concerning interest rates, poor people usually have more loans than savings whereas rich people have more saving than loans. When interest rates are paid, money is transferred from poor to the rich therefore, interest rates are favourable for wealth accumulation. Commercial banks gain from investments and from the difference between interest rates for deposits and interest rates for loans. When interest rate is added regularly to the initial investment, it brings more interest since there is compound interest which increases exponentially initial capital. Real money by itself is not increased since this interest rate is not derived from production. Only human labour can create interest rate of increasing value but there is a downward pressure for salaries cost and at the same time increase of productivity. This happens because human labour needs to satisfy the demands of exponentially increased compound interest.

The borrower has to work to get the real money, in other words, banks lend virtual money and get real money in return. Since the lent money is more than the real one, the banks should create new money in the form of loans and credits. When they increase the quantity of money there is growth (however, even in this case with the specific banking and monetary system debt is also increased) but when they want to create a crisis, they stop giving loans and due to the lack of money a lot of people bankrupt and depression starts.

This is a “clever trick” created by the bankers who have noticed that they can lend more money than the one they have since depositors would not take their money, altogether and at the same time, from the banks. This is called fractional reserve banking. The definition given by Quickonomics for fractional reserve banking is the following: “Fractional reserve banking is a banking system in which banks only hold a fraction of the money their customers deposit as reserves. This allows them to use the rest of it to make loans and thereby essentially create new money. This gives commercial banks the power to directly affect money supply. In fact, even though central banks are in charge of controlling money supply, most of the money in modern economies is created by commercial banks through fractional reserve banking”.

Are savings protected?

In the case of Italian debt as in the case of Greek debt, we have heard from politicians (actually paid employees by the bankers) that they want to protect people’s savings. However, are these savings protected in this monetary and banking system? The answer is a simple NO. As mentioned, the banks have low reserves in cash. This is the reason that they need their customers’ trust. In case of a bankrun there would face liquidity problems and they would bankrupt. There are deposit guarantee schemes that reimburse, under EU rules, that protect depositors’ savings by guaranteeing deposits of up to €100,000 but in case of chain reactions, commercial banks need to be saved by the governments and central banks act as lenders’ of last resort.

What next?

The economic system as it is shaped by the power of banks is not viable and it does not serve human values such as freedom, justice and democracy. It is irrational and should be immediately changed if we want humanity to survive.

The Ultimate Guide to Cooking With Canola Oil

From delicious jalebis to your favorite vegetable fried rice, canola oil is the perfect cooking oil for frying. Pure canola oil is an edible oil derived from the plants of the Brassicaceae family, the same family to which mustard and rapeseed belong.

Canola oil is deemed as one of the most versatile cooking oil due to its light flavor, high smoke point and smooth texture. Its light texture makes it suitable for sauteing and stir-frying purposes; it is perfect for deep-frying due to its high smoke point, and being neutral in taste, it is the right choice for traditional Indian dishes with their trademark spices and flavors. This oil can even be used as an oil for baking delightful cakes and muffins as it reduces the overall fat content of these tasty dishes while maintaining moisture at the same time.

According to the leading chefs at various hotels across India, the high smoke point of canola oil makes it an ideal choice for Indian kitchens as it only enhances the taste of the dishes and makes them healthier. In fact, the consumption of canola oil is continuously increasing in India due to its various health benefits and suitability for all cooking methods and cuisines.

An Indian consumer survey recently showed that more and more people are now preferring canola oil over other cooking oils. Being a vitamin enriched cooking oil, it provides the perfect cooking experience which essentially means less burning and more cooking. Apart from this, canola oil is termed as one of the “heart healthy oils” and “diabetes care oils” which make it easily fall into the category of “healthy oils.”

Whatever you want to cook – parathas, sabzis or samosas, using this oil will fill your entire kitchen with a delicious smell and provide your taste buds a perfect experience. The best part is that you don’t have to compromise on your health as it is an Omega-3 oil which is rich in antioxidants and “good fats” like monounsaturated fatty acids.

If you’re in search for the best oil for frying, try using Hudson Canola Oil which is a light and non-greasy oil that will provide you with a smoke-free experience. It will fry your favorite foods without coating them with a heavy layer of grease and keep the overall fat content low. Even when deep frying dishes like jalebis, you’ll enjoy less greasy food without compromising on taste.

Tech Gadgets Revolutions – How Android Changed the Game

Are you thinking of buying a new mobile device or something else from the tech gadgets category? Within the past few years we have seen an explosion in the market of handheld devices and new tech gadgets.

These cool new tech gadgets can do as much, if not more in some cases, than an old PC could. Like any device that runs programs they need an operating system to do so. There are a few of these operating systems to choose from; the one everyone is talking about now is the Android OS from Google.

What is Android?

This is an operating system or OS that runs mobile devices. This OS is based on a modified version of the Linux kernel. Google originally purchased the system from Android Inc and have continued to adapt and evolve it.

Other Mobile Operating Systems

The most commonly known operating systems to date have been Windows Mobile OS, Apple Mobile OS and Linux.

As time goes on we are seeing more operating systems being introduced which is forcing all the fore mentioned software providers to adapt and strive to be the best in the hi tech gadgets market.

So which tech gadgets use which operating systems and what are their advantages and disadvantages?

Windows Mobile OS/Windows CE

The Windows Mobile OS can be found on a wide range of phones from many different brands. So let’s look at its good points:

  • Reliable and stable
  • A wide range of programs are available
  • Touch navigation has been improved by new interface
  • Very good sync capability with Google Mobile and Exchange
  • Handsets available on networks

Now what are the bad points:

  • Old operating systems and is at time chunky and slow
  • Inconsistent interface
  • Browser is slower than others like Safari
  • Interface is not yet very user friendly

The reason for its success up until now has been the fact that Microsoft generally know what they are doing and come with a proven track record, especially on some of the more commonly used tech gadgets like cell phones, car DVD players and GPS navigators.

Apple

Apple commanded a huge share of the mobile device market with the introduction of the iPhone which has been named amongst the best tech gadgets by various writers and pundits.

The iPhone OS for now only runs comfortably on the iPhone itself, with the iPad and iTouch running a version of this.

What are the pros and cons of the iPhone OS?

What are the pros?

  • Very reliable
  • Lots of apps to choose from
  • The best touch navigation interface
  • Switch between apps seamlessly
  • Quick and slick

What are the cons?

  • Apple devices can be expensive
  • Apps only available from Apple The Apple OS has been successful because it was the best when it was released and when Apple released its iPhone series it was new and designed for the masses.

Linux

Again with the Linux Mobile OS it is available on a number of hi tech gadgets, but what are the advantages and disadvantages?

Advantages:

  • Many Linux apps are free
  • Open source means anyone can write programs for it
  • Lots of support available on the internet

Disadvantages:

  • Still has some bugs
  • No official help line
  • Cannot run Microsoft apps

Other operating systems that are widely used are the Symbian OS, the Palm OS and BlackBerry.

At the moment it seems that these operating systems are falling behind the ones mention previously in the article.

It is new innovations and mass appeal that are the main reasons for this.

So why has the Android operating system gain so much popularity?

Well the main reason for this the fact that it’s Linux based. This means it has a lot more third party applications available for it.

So what are the pros and cons?

Pros:

  • As mentioned before it is open source
  • Easily hacked
  • Powerful
  • Constant updates provided
  • Lots of providers designing apps for it

Cons:

  • Handsets limited
  • Power management issues
  • Interface not user friendly

With the relative cheapness of Chinese OEM products we have seen the android being brought to more people quickly. After reading this article you should have a better idea of what mobile OS suits you.

Introduction To Home Improvement

Most of us are amazed how some show on television showcase their home improvement prowess such as installing portable canopy fittings & parts and using tarp repair kit. We might wonder, is this too good to be true? Could I do it myself? Will the home improvement thing make a significant change in the value of my home?

Know what you want and what you can afford

There are lots of good reasons for you to remodel and improve your own home. If the looks of your home is getting into your nerve and is becoming boring and tasteless, then you might as well do some changes. Changing the color theme, landscaping your garden and some kitchen and bathroom upgrades are just some of the basic home improvement projects that can bring huge impact in your home in terms of appearance and feel. If you're considering to move in the near future, you should do some home improvements to get a much higher value and pay-out for your home.

Whatever you motives may be in improving your home, always have a wish list having this three basic categories:

  • Must have
  • Wants to have
  • Dream

When you have finished creating the list, consider the amount or budget that you need to prepare or loan. Unless you have a bottomless pit of cash, make a realistic and rough estimate on how far you can spend. Are you planning a major overhaul and needs the services of an architect, engineer or contractor? Will you need skilled professionals such as painters, plumbers, electricians and carpenters? Can you do it yourself? These are just some of the factors that you need to consider before you start.

How to begin

Having a plan is a good start when you decide to start your home improvement projects. Start off by proposing a budget plan. Do some window shopping and compare prices of materials. This will help you maximize your budget and get the best out of it. Contact people you need ahead of time so that they can give you the estimates on how much will you spend.

What project to choose

The best projects to invest are the ones that will highly increase the value of your home. This will give you good ROI when the time that you need to sell your property comes. Consider projects that are easy to manage. Kitchen and bathroom projects are the ones that usually require professional help. These kind of upgrades add value to your property. The real estate industry can provide statistics to prove this notice.

Prioritize kitchen and bathroom

Kitchen improvement is a daunting task. Complete overhauling your kitchen solits good value for your home and can bringing good ROI come selling time. Purchase new appliances and furniture such as cabinets to enhance the looks of your kitchen.

Bathroom remodeling is one of the most important aspect of home remodeling. A huge chunk of the budget typically goes to new sink, bathtub, toilet and other bathroom fixtures. Also, do not forget to change the bathroom styles. Choose colors wisely. And if you can not afford a major make-over, at least change the faucet, shower heads or you can paint the cabinets.

Next time you see TV shows showcasing professionals installing portable canopy fittings & parts and using tarp repair kit, you'll not be as amazed as before. You now know to do it yourself.