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Dear God, the cretin’s gone and said it

There is no natural reason why anybody should pay interest.


So why do we pay interest? Well, simply so that the banks can compensate themselves in two ways. One is so that they can actually cover their costs of making the loan. I accept that’s a real thing that they should be paid for.

Secondly, the risk is that you won’t repay them. I accept that’s a risk that they should be compensated for.

And thirdly, there isn’t a third thing. It used to be that they would say you’ve got to compensate their savers. But you haven’t because they don’t need to have any savings in their bank to be able to make you the loan in the first place and they never lend you other people’s money.

So, that third argument disappears.

He’s forgotten again that the bank is bust by 4.30 in the afternoon if it does not attract a deposit to finance that loan its just made.

33 thoughts on “Dear God, the cretin’s gone and said it”

  1. I refer to a comment I made on another thread. Money is tokens of value exchangeable for goods & services. And thus possession of money entitles the possessor to G & S. When they deposit the money in a bank, the bank hold that entitlement. And when it makes a loan, the borrower gets & uses that entitlement. So the question for the illustrious would be; if what he says is true, where would the goods & services come from?
    Like I said before, he doesn’t really understand money? Mind of a book keeper. All money rests on the creation of value in commerce. And all money is ultimately exchanged for goods & services. There is nothing else* in an economy.

    *You can look at assets as a service. The only value an asset has in the now is its utility value in the now. As commerce can only happen in the now. It’s book value refers to future nows, not the present. If you buy an asset with your money, the seller must end up with your entitlement to goods & services.

  2. Well, Tim, it pains me to say it but you really are a dreadful bully.
    It was the same years ago, with Princess Mary Louisa Toynbee – known to her subjects as “Polly”.
    People let loose their treasured flights of fancy, doing no one any harm, then you rudely come up with FACTS and casually show them up to be simpletons. You’ll be in trouble when Sir Kneel gets in and appoints an intelligent, incisive Home Secretary. I’m sure Polly’s got connections.
    Oh, wait, he won’t be able to…
    Mind you, he could ask Call Me Dave, who’d probably jump at it.

  3. There’s photos of La Toynbee at 15, where she seems not unattractive. Sad what 60 years of hardline socialist beliefs will do.

  4. There is no natural reason why anybody should pay interest.

    Surely ‘so people will be prepared to lend you money’ is a natural reason to pay interest?

  5. Much to my embarrassment, I’ve read my own comment and realised that I’ve inferred that Call Me Dave is intelligent and incisive, thus displaying my own simpleton qualifications. Everyone knows he just an imbecilic pig head fucker. Allegedly…

  6. Is there room for banks to charge interest to make a profit in J P Murphys world? Or is this a complimentary service?

    His most exciting words were these…

    And thirdly, there isn’t a third thing

    Finally – no more ninthlys

  7. He’s just following fundamental Christian ( and RoP ) teaching.

    It’s all the Joos’ fault as any fule kno.

  8. Ottokring

    You nailed it to a degree. His support of Hamas and overt anti- semitism has led him to embrace other aspects of Islamic teaching! Given he wants to outlaw meat eating and I think Booze there’s fertile ground there .

  9. “There’s photos of La Toynbee at 15, where she seems not unattractive. Sad what 60 years of hardline socialist beliefs will do.”

    I once had a dream where I was in the doorway of Lidl in Taunton late on a Saturday night, and Polly Toynbee was giving me a blow job.

    Charged me £25 for it too, which I didn’t think was very socialist.

  10. Steve across the Pond

    I don’t remember much from an economics class I had to take, but I remember that interest is the cost of money, and inflation is an excess of currency in the market.

    If that makes me smarter than this guy, we’re in trouble.

  11. Blimey Paul, can you remember what you had to eat that night? I think we’d all be grateful if you could let us know. And I thought I had some scary nightmares…

  12. Spud is coming under some strong competition in the field of the least knowledgeable economist on social media. A guy called Gary on YouTube is probably galloping ahead at the moment

  13. Toynbee used to float around Notting Hill in the late sixties when it was Portabello Road antiques market on Saturdays, the Mangrove in All Saints Road (subject of a film – & no he wasn’t busted unrighteously), somewhat black (why Carnival) with a leavening of hippies. As far as I’m aware she wasn’t renting out the assets. More of a socialist, if you see what I mean.

  14. I noticed this point in Roger Bootle’s piece in the Telegraph today, concerning ways labour could possibly increase spending:

    “One partial way around the fiscal constraints would be for the Treasury to instruct the Bank of England to cease paying interest on the banks’ deposits with it. At current interest rates this would save the Exchequer about £40bn a year, allowing government spending to be increased by just over 3pc.”

    As understand it, this is also Reform UK’s policy. My question – and this is a genuine question – is why this would not fail for the same reasons Murphy’s dismissal of the need for interest payments also fails.

  15. “There is no natural reason why anybody should pay interest.”

    The first and second law of Thermodynamics would like to have a quiet chat with mr. Potato behind the shed…

  16. Otto and VP,

    Maybe the Ayatollah Spud could square that particular circle (or crescent) by allowing banks to charge interest as long as they call it zakat?

  17. I’m strongly thinking of a quickie book on that specific guy. It’s gonna cost 3 grand to redo the garden wall and he might be (in) famous enough to raise that amount for me…

  18. OK, given that banks are required to cover their loans by the close of business EVERY DAY – can anybody figure out how he keeps trying to make this claim? It’s a bit like the dead parrot sketch “this parrot’s dead” – “no it isn’t”.

    Srsly – has he explained somewhere how the laws & regulations could be changed to make this possible?

  19. BiS

    All Saints Road brings back fond memories as my first rented flat in the 1970s was in Basing Street, one road along from All Saints and directly opposite the tiny studio where many of the Stiff records were recorded.

    I’m pretty sure I never bumped into anyone called Polly although there was no shortage of lefties. The difference was that in those days even wannabe anarchists had a sense of fun and were interesting enough company within limits. I don’t recall too many hippies, maybe they were scared of the punks?

  20. Wouldn’t it be wonderful if you could borrow money at a super low interest rate that would just cover the risk and admin cost. I would take out a huge loan and enjoy the benefits. As inflation would be soaring thanks to the ease of borrowing, paying it back after a few years would be trivial.

  21. I used to tell my students “interest is the rent you pay for money”. Partly because it’s true, and partly because it was endlessly amusing seeing some of them trying to get their indoctrinated heads around it. Then I would elaborate:

    “You pay Hertz a hire fee for using one of their cars, you pay your college a rent for using one of their rooms, so why shouldn’t you pay the bank interest for using some of their money? After all they pay you a rent for money you deposit with them.”

    Even the ones who were grumpy about interest used to see the point of “comparative advantage” right away. Or supply and demand curves. Or economies of scale. Or division of labour. The “Learning Curve” was quickly accepted (and not misinterpreted à la football managers: “it’s a steep learning curve for the boy, Clive.”)

    Given how elementary these ideas are it takes a near genius of folly to bugger them up routinely.

  22. @John
    A near neighbour in Powis Square. But somewhat earlier. Pol & I were sort of on the same circuit because we were the same sort of people. With a regular & reliable source of income in a place where the majority were living on fresh air & hope. Funny how much of memory is olfactory. Now I can’t get smells of patchouli oil & damp embroidered Afghan sheepskin coats out of my head. The Stiff studio? Did that eventually mutate into SARM WEST over in Ladbroke Grove?

  23. Esteban

    He certainly hasn’t explained – he simply clings to his belief that a document more than a decade old backs his contention that deposits aren’t needed to make loans (Which is true as an isolated statement to a degree) – even if a bank was insolvent, there could still be loan deals being made until the insolvency was declared.

    Despite his contention to be a thinker, he’s not really someone who deals in the details of policy. As BiS points out he doesn’t understand Money, and if we also make the observations he has no understanding of:

    – Economics
    – Business
    – Markets
    – Human Nature
    – The real world

    Then we can marvel at how he is able to command any attention whatsoever.

    Additionally anyone who works in financial services and points out his idiocy is automatically either derided as having a vested interest in opposing his ‘commonsense’ contentions or blocked outright if they point out his ignorance.

  24. You’re right V_P. He’s incapable of thinking it through.
    his contention that deposits aren’t needed to make loans
    Let’s think that one through.
    People create value (in their work, say) & are given money (tokens of value exchangeable for goods & services – consumption) in exchange. Commerce. They forego immediate & consumption deposit the money in a bank. The bank lends to a borrower who uses those tokens to consume something of value. So there’s both production & consumption of value. The commerce books balance.
    If banks don’t need deposits to make loans where does the value being consumed by the borrower come from?
    It might look all right to the mind of an accountant (allegedly). But it can’t work in the real world.

  25. BiS

    Agree with you with one small caveat.

    might look all right to the mind of an accountant (allegedly

    Bear in mind he is not an accountant. I think he has been excommunicated by the ICAEW as he wanted them to give him £10 million to train. The general populace and started questioning their motives when they looked askance at the proposition.

    I’m also fairly convinced he actually didn’t take the exams himself and had a ringer do it for him. This explains his absolute failure to understand GAAP and lack of understanding of accounting basics. He never had to learn this stuff!!

  26. So those guys who went to jail for fixing LIBOR did nothing wrong. Indeed they did nothing at all because LIBOR didn’t exist.

  27. The Meissen Bison

    V_P: «Then we can marvel at how he is able to command any attention whatsoever.»

    Un sot trouve toujours un plus sot qui l’admire. (Nicolas Boileau)

    Surprisingly, Boileau who has been dead for 400 years, has yet to point this out chez Maître Patate.

  28. Are you sure the people at the Bank of England understand this stuff V_P?. On their recent performance, I’m not convinced. Like I’ve said before, it’s Murphy’s World. We only have the dubious pleasure of living in it.

  29. V_P: “Then we can marvel at how he is able to command any attention whatsoever”

    Villagers! You are dying from the plague. These so-called doctors have not been able to cure you. I have wonderful snake-oil which will cure everything.

    Or, as Charles McKay wrote….

    “During seasons of great pestilence men have often believed the prophecies of crazed fanatics, that the end of the world was come. Credulity is always greatest in times of calamity. Prophecies of all sorts are rife on such occasions, and are readily believed…”

  30. BiS

    Yes it’s the same place. Trevor Horn and Jill Sinclair bought it from Island and renamed it SARM WEST. Wiki has a lot of good detail, I hadn’t realised quite how much seminal music had been recorded there.

    I also hadn’t realised it has been converted to bloody luxury flats.

  31. I hadn’t realised quite how much seminal music had been recorded there.
    Mick Hucknell got told to fuck off & make your own coffee there, pretentious ginger cvnt that he no doubt still is..

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