THE GREATEST DECEPTION OF ALL

Quantitative Easing: State sponsored theft on a larger-than-industrial scale from the working and middle classes to the mega rich. In addition to denuding the mass of the population of their meagre resources, employment and welfare, the proud cultural heritage of countries such as the United Kingdom is also being ruthlessly plundered.

It's Friday. It's Financial. It must be FRIDAY FINANCIAL

with the blog's money and banking expert JULIAN SAYER.

This week Julian takes a look at how RBS has managed to take billions of taxpayers’ money and, err, piss it against the wall.

MUCH to the dismay of the British taxpayer, the Royal Bank of Scotland (RBS) announced their latest financial results this week. Only another £8.2 billion pound loss, bringing the staggering total of losses since 2008 to £46 billion.

http://uk.reuters.com/article/2014/02/27/uk-rbs-earnings-idUKBREA1Q0ED20140227

This raises a lot of questions, but the one I want to illustrate today is how does a bank survive these losses, and continue to operate in the financial world. The very simple explanation is Quantitive Easing (QE.)

Quantitive Easing is simply the art of creating money out of thin air via central banks, in our case The Bank of England. That money is then given to commercial banks such as RBS, in exchange for huge chunks of toxic debts that the bank has on its balance sheet, and are effectively worthless. The commercial banks are then meant to use these magically created new funds to start lending to the economy and everything in the economy will be hunky dory.

However, that hasn't happened. So what has happened since the financial crisis broke in 2007? Well, first off, the banks moved the goal posts on lending. Fearing more losses they reduced the criteria on which they lent, cut the amount of mortgages they issued, reduced the overdrafts they lent, and cut new lending almost overnight. This in turn had a disastrous effect on the real economy, businesses cut back, many went to the wall and unemployment soared. Hundreds of thousands of businesses have gone to the wall over the last few years. So if the banks weren't lending this new money, what did they do with it?