Every week brings refutation
Every week brings refutation of the view that banks can create money out of thin air and confirmation that they can only lend money they have got (whether from savers or what they have themselves borrowed). We may as well record them here as anywhere. So, here’s a BBC report on Halifax’s decision to raise the rate of interest on their loans to housebuyers:
Quote:
The UK’s biggest mortgage lender, the Halifax, has confirmed it is raising its standard variable mortgage rate (SVR) from 1 May.The Halifax said the rise – from 3.5% to 3.99% – was due to the higher cost of raising funds for mortgages from both savers and the financial markets.(…)It argued that its hand had been forced by market conditions.”The change acknowledges that the cost of funding a mortgage in today’s market remains significantly higher than the longer term average,” the Halifax said.”The increase to the rate reflects the fact that raising money through retail savings and in the wholesale markets is currently very expensive by historical standards.”
The report said other banks were doing the same and for the same reason:
Quote:
On Friday, RBS raised the rate on two of its mortgages from 3.75% to 4%. (…) An RBS spokesman said the rises were down to the higher costs they were incurring borrowing money, which they had absorbed for some time before opting to pass it on to some of their customers.
Banks are essentially financial intermediaries whose main income comes from borrowing money at one rate of interest and lending it at a higher rate. They can’t simply conjure money up out of thin air and then charge interest on it, as numerous currency cranks claim.