why does (-5)*(-4)=20 ?, eom

[Aractus]

Hmmmmm. So, I'm an idiot because you didn't realise that banks do create money from nothing when giving out loans?

Um, how about because: banks can not create money.

Why exactly do you think the problems US banks had, ended up causing such problems throughout the world? Why do you think governments had to "print" money (more generating money out of thin air there) to prop up failed banks? Why do you think Cyprus (one of the worst hit Eurozone countries) had to restrict bank withdrawals (they actually stopped people withdrawing their own money)? Why do think UK banks had to increase their debt cover (cash reserves vs debt) from 5% to 10%?

Firstly, the RBA (in Australia) or the Federal Reserve in the USA determines the legal amount of "reserves" that banks have to hold, and as you well know much of their customers money is used for investments.

Secondly, the money is upfront, what was happening in the USA is that certain banks were accepting bad loans, and shorting on the loans - that's it, that's what caused the GFC. If you want a more detailed description of how it works generally, it works like this: a bank accepts a loan, for arguments sake we'll say that they've put their own money up for the loan (you seem to think this is creating money from nothing, it isn't). Then the mortgage is split into short term, medium term and long term. I'm not exactly sure what the exact details are on it, but let's say for argument's sake "short term" is year 1-5, medium 6-15 and long 16-30 or something like that. The original bank that has now sold off the loan, has made their profit already, and has no downfall if a default happens. If a default happens during the "short term" phase, than all three investors will loose their money, if it's during the medium then two of them loose money.

Basically that's it, and that's how the GFC happened was because you had a number of greedy banks shorting on loans and then passing on the "risk" to other investors (other banks, etc).

And irrespective of this small aside, it still comes back to the fact that money is as abstract a thing as debt and negativity is a tangible physical quantity.

Again, you are wrong. Bonds and Money are not the same thing.