The ECB annual accounts: it’s highly profitable to be the lender of last resort
According to some economists, the ECB squandered money when it bought government bonds. According to others bail outs are a highly profitable business. Who’s right? From the ECB annual accounts (emphasis added):
Net interest income totalled €2,005 million in 2013 (2012: €2,289 million). It included interest income of €406 million earned on the ECB’s share of the total euro banknotes in circulation (2012: €633 million) and net interest income of €962 million (2012: €1,108 million) arising from securities purchased under the SMP, of which €437 million (2012: €555 million) arose from the ECB’s SMP holdings of Greek government bonds. It also included net interest income of €204 million (2012: €209 million) arising from securities purchased under the two covered bond purchase programmes.
The Governing Council decided to make an interim profit distribution, amounting to €1,370 million, to the euro area national central banks (NCBs)
A large part of this money goes to Germany, which owns the largest share of the capital of the bank.
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Real-World Economics Review Blog 
The Socialist Myth of the Greedy Banker http://iakal.wordpress.com/2014/02/24/the-socialist-myth-of-the-greedy-banker-the-gold-standard/
1) Why are you quoting a gold-bug?
2) 100% private banks with 100% voluntary depositors do not exist so greedy bankers are allowed to run wild.
3) Even 100% private banks with 100% voluntary depositors engage in gambling when they create more demand liabilities than they can service all at one time.
I clearly showed in my example that private banks cannot create inflationary money. Give an example that proves me wrong
Iakavos, either you are trying to muddy the waters or you do not understand the difference between arithmetic and a continuous algorithm, with interest and changes in security valuations modifying gross indebtedness so enough money can be created (i.e. issued by private banks as loans within their reserve limit) to both repay loans (primarily for stocks and shares at inflated prices) and to pay interest which business debtors have to recoup by inflating the prices of goods and services. The current problems arose with the stock markets selling junk bonds at face value, allowing the issue of more money than the “securities” proved to be worth, this lowering the reserve limit so that (short of governments raising it again by issuing bonds) the banking system was effectively bankrupt: hoist by its own petard.
The evil here has been that the banks and stock exchanges had trojan horses in government willing to bail them out at public expense rather than revalue the stock, compensating only long term holders of it. For speculators it should have been a case of “easy come, easy go”.
My dear friend do not try to sound smart. Just describe how in a world banking system without central banks, private banks could create money. In a simple way like the one I use in my document.
“My dear friend do not try to sound smart”. Iakovos, #5.
As I’m not trying to sound smart, just trying to spell out complicated relationships, how do you think that makes me feel?
We have a saying, “If ignorance is bliss, it’s folly to be wise”. But
the genie having got out of the bottle to leave Mankind seeking foolish wisdom, a price has had to be paid whereof “imitation is the sincerest form of thanksgiving”.
O loving wisdom of our God! When all was sin and shame,
A second Adam to the fight and to the rescue came.
O wisest Love! that flesh and blood, which did in Adam fail,
should strive afresh against the foe; should strive and should prevail.
And that a higher gift than grace should flesh and blood refine:
God’s presence and his very self, and essence all-divine.
O generous love, that he who smote in man for man the foe,
The double agony in man for man should undergo.
And in the garden, secretly, and on the cross on high,
Should teach his brethren to inspire to suffer and to die
So, praise to the Holiest in the height, and in the depth be praise:
In all his words most wonderful, most sure in all his ways.
I feel, then, it is not easy being “foolish for Christ’s sake” in blind Mammon’s world, but “if a job is worth doing it is worth doing badly”.
Very clever, but you did not say anything about why my examples of private banks not being able to create money is wrong. Try to reverse my example wise friend
Iakavos, “Little men stand on great men’s shoulders”; the verse is of course J H Newman’s.
In the blog appended to your article, Henry Law on 9th March said he’d referred your article to another commentator, Mark Wadsworth, with this response:
“Whether it’s Faux Libertarian or not doesn’t matter, the point is he is completely and utterly 100% wrong on the facts. Governments, central banks, commercial banks, building societies and anybody who has ever bought on credit creates money in the same way. There is only one way of doing it. What follows from that must also be rubbish.” ‘
I agree with Mark, but my interest is why you and so many others are going so wrong, and my difficulty is that not everyone has had Christian, historical and philosophical perspectives on economics in light of sixty years’ professional advancing of mathematical, physical, psychological and information science fundamentals at the level of http://en.wikipedia.org/wiki/Process_and_Reality.
I could have explained why money is like water, having four phases (there ionic, gaseous, liquid and solid) each having a different form, but I doubted you’d understand me. In any case, this gives rise to different conceptions of ‘money’, coins being one of them and bankers’ IOU’s for non-existent gold another: these whether in the form of paper notes, book entries, security values or electronic transmissions in transit. As for governments controlling creation of money, if you had known British constitutional history you might have realized that since the 1688 revolution in Britain, money-lenders have controlled the government here, the USA and now EU (via selection of political party representatives and a revolving door in the Treasury), not vice versa.
You haven’t read carefully my document. Of course banks can create money, but this money is based on the economy’s savings. They cannot create inflationary money. That is they cannot create money out of thin air, money out of nothing. Only governments can do so. Henry is a lot of publicity. If the issue wasn’t of great importance I would agree with him to please him. But it is very important.
Have you never heard of Reserve Banking? Back in 1998 Anthony Giddens,then Director of the London School of Economics, said “Of the trillion US dollars worth of currencies exchanged every day, only 5 per cent relate to trade and other substantive economic transactions. The other 95 per cent is made up of speculations and arbitrages, as traders weilding huge sums look for rapid profits on exchange rate fluctuations and interest rate differentials. … Central banks don’t have sufficient reserves to withstand the collective pressure of sppeculators gambling on weaker currencies”.
And how does that contradict my document?