Bill Still's Money Masters

[Toro]

That doesn't fit with the fact that it's labour which is far out of line with everything else. If that story were true, and the cause were a misallocation of capital, it would be investment which shows up as being far out of line with other variables, like it does in most business cycles. A misallocation of capital story doesn't make any sense for this recession.

Sure it does. According to some estimates, something like 40% of all the jobs created in the 00s before the crisis were directly or indirectly related to the housing or the mortgage market. Without the housing bubble, those jobs would not have been created.

Too much capital went into the telecomy in the 90s. To counter the depression in the teleconomy, a bubble was created in the housing market, and we built too many homes. The normalized run rate of homes is about 1.1 million units a year. We were building 2 million in the mid-00s, which was unsustainable. This is a problem of mal-investment and too much supply, not a problem of insufficient demand.

How are they creating "excesses" at all?

By mis-pricing credit.

Nature of what problem? The nature of the problem in financial markets? Maybe that's true. But the problem economists are looking at isn't regarding the valuation of assets, because that's not economics; that's finance. The problem economists are looking at is "how does this affect macroeconomic variables". How does a financial crisis result in a retail worker being long term unemployed 5 years later? Since it's a financial crisis, the obvious answer is to go to a story about financial intermediation and the allocation of capital. Except those stories don't jive with the data. It's a case of post hoc ergo propter hoc; there was a financial crisis, we are in a slump, people assume that A caused B.

A is the primary cause B if you see the relationship between B, C and D.

Finance is a branch of economics.

The nature of the problem is excess supply and mal-investment due to the mis-pricing of credit.

Most economists do not understand the effects of valuation on markets and the aftermath of the mis-pricing of assets. This is a big problem. This is why Ben Bernanke can testify at Humphrey-Hawkins in 2006 and dumbfoundingly say that off the charts housing prices reflect a strong economy, or why Greenspan can wonder if tech stocks really were a bubble, as he did in 98 and 99. That our top economists cannot identify asset bubbles is stunning to me. I've spent 20 years in financial markets, and I have found that most economists are generally clueless about how markets and real economy works, at least at the extremes.

 

[Toddsterpatriot]

And since every single dollar was created as debt

If the Fed creates $1 million in new reserves and buys a bond with it, how was that created as debt?

They don't create that million and go on a cruise with it, do they?

The only purpose they ever create money for is to buy debt. Actually, it happens at the same time. They write the debt into the books as an asset, and write the money into the preferred dealers account.

POOF! New money, created from debt. Capise? Let me know when it finally dawns on you that somebody, somewhere is paying interest on that $20 in your pocket, ok?

The only purpose they ever create money for is to buy debt.

So the debt already existed?

New money, created from debt.

I disagree. When commercial banks create money, that's from debt, but not the Fed.

Let me know when it finally dawns on you that somebody, somewhere is paying interest on that $20 in your pocket

Sorry, that just isn't how it works.

 

[joewp]

And since every single dollar was created as debt

If the Fed creates $1 million in new reserves and buys a bond with it, how was that created as debt?

They don't create that million and go on a cruise with it, do they?

The only purpose they ever create money for is to buy debt. Actually, it happens at the same time. They write the debt into the books as an asset, and write the money into the preferred dealers account.

POOF! New money, created from debt. Capise? Let me know when it finally dawns on you that somebody, somewhere is paying interest on that $20 in your pocket, ok?

The only purpose they ever create money for is to buy debt.

So the debt already existed?

It doesn't matter, does it? If the debt existed already like mortgage backed securities, it's still band new money. If it didn't, like a member bank requesting a loan, it's still new money, and they're both debt contracts, doesn't matter how old they are.

New money, created from debt.

I disagree. When commercial banks create money, that's from debt, but not the Fed.

Pray tell then, on what basis does the Fed create money? And please make a more convincing argument than below, huh?

Let me know when it finally dawns on you that somebody, somewhere is paying interest on that $20 in your pocket

Sorry, that just isn't how it works.

What a devastating response! (does purple indicate sarcasm here?)

Would you like to elucidate here, or can I just interpret your response as stomping feet, red face and screaming "because I said so!!!!" over and over?

 

[EdwardBaiamonte]

The nature of the problem is excess supply and mal-investment due to the mis-pricing of credit.

ok

Most economists do not understand the effects of valuation on markets and the aftermath of the mis-pricing of assets.

not accurate since no one understands, or at least no one understood. You are speaking with hindsight only. We can count on one hand the number of people who saw the housing crisis coming and made money off it whether economists or not!!

What we have learned since the Fed was created is that bank runs, inflation, and bubbles are unacceptable. That may be enough to keep us on a steady course from here.

 

[Toro]

not accurate since no one understands, or at least no one understood. You are speaking with hindsight only. We can count on one hand the number of people who saw the housing crisis coming and made money off it whether economists or not!!

Very accurate. Don't talk about things of which you don't know.

I made money off the housing bubble. I was short at the beginning of 08. I would have made a hell of a lot more had I not covered too early a few days after Lehman collapsed.

And just to counter the notion that I'm touting myself, I've been poor the past two years. But I saw both the Housing and Tech Bubbles and made money off both. If you understood economic and financial history, and basic fundamental valuation, it wasn't hard. What was hard was the timing.

 

[Toddsterpatriot]

They don't create that million and go on a cruise with it, do they?

The only purpose they ever create money for is to buy debt. Actually, it happens at the same time. They write the debt into the books as an asset, and write the money into the preferred dealers account.

POOF! New money, created from debt. Capise? Let me know when it finally dawns on you that somebody, somewhere is paying interest on that $20 in your pocket, ok?

The only purpose they ever create money for is to buy debt.

So the debt already existed?

It doesn't matter, does it? If the debt existed already like mortgage backed securities, it's still band new money. If it didn't, like a member bank requesting a loan, it's still new money, and they're both debt contracts, doesn't matter how old they are.

New money, created from debt.

I disagree. When commercial banks create money, that's from debt, but not the Fed.

Pray tell then, on what basis does the Fed create money? And please make a more convincing argument than below, huh?

Let me know when it finally dawns on you that somebody, somewhere is paying interest on that $20 in your pocket

Sorry, that just isn't how it works.

What a devastating response! (does purple indicate sarcasm here?)

Would you like to elucidate here, or can I just interpret your response as stomping feet, red face and screaming "because I said so!!!!" over and over?

It doesn't matter, does it?

Sure it does. You said they created money as debt. There was $1 million in debt before the Fed bought it and $1 million in debt after, no new debt.
The interest due on the $1 million was the same before as after, no new interest.


If the debt existed already like mortgage backed securities, it's still band new money.

Brand new money, not brand new debt.

Pray tell then, on what basis does the Fed create money?

They can print new $20s, no debt needed.

They can create new reserves and buy something with them.
If they bought lunch, would you say money was created with Big Macs attached?

Would you like to elucidate here, or can I just interpret your response as stomping feet, red face and screaming "because I said so!!!!" over and over?

You're funny when you're projecting.

 

[Cabron]

You gotta love the euphemisms banks use to hide their true meaning.
"liquidity constrained" = Out of cash.
Can I use that excuse with my landlord?

It's not a euphemism banks use. I'm using it. Sorry, economics jargon slips out when i'm talking about economics.

Oh, they probably use it alright. After all, they call loans to them from customers "deposits".



I usually say, "I'm a little short until the 5th". It seems to work.

Sorry, page 4, heading 7. Withdrawals. About the only time it even sounds close to the truth is when they say they might refuse a large withdrawal due to "cash processing" problems.

Hmm, is that another euphemism for "we ain't got it"?


Nah, they incorporate the laws of the state and feds into the agreement, which covers their ass on that. The crime "fraud" is for illegal deception, the bank's deception is perfectly legal.



Well, since you don't think the problem is banks creating money as debt, I think you saying they need to be more clear about what they're doing is kind of a waste of time to the readers, since if you don't think A is a problem, your solution B is never going to solve A.

I'm still really puzzled why people who work for a living would ever support banks creating money from debt. Unless you work for a bank or are an economist. Economists think constant growth in a finite environment is not only possible, but desirable.

Who would listen to people with such a poor grasp of reality?

No, the problem is fractional reserve banking. I'll make that clearer in my response to the toddster below. If I get to it tonight...

I thought the problem with fractional reserve was that it's fraud? If it's fraud, that means they just have to make it clear to customers what's going on. Then it stops being fraud. So fraud doesn't justify getting rid of fractional reserve. If you want to get rid of fractional reserve, there has to be a better argument, not revolving around fraud.

Oh, there are! That's just my "worst" problem.
Another one is Edison's (posted above). That people who actually do constructive work are all basically enslaved to people who do nothing except exercise their unique privilege to create our money with a stroke of a pen.

Nobody can give me an answer to the question Why doesn't the federal government print the money instead of debt certificates they give to the Fed and have to pay back, with interest.

This is how I understand the whole Guvmint' having the FR "print" the money for them.
Is like a fat person that doesn't trust itself to have cookies and ice cream around the house. So it hires the "FED" to control the cookie/ice cream allowance. And it leaves it up to the "FED" discretion to let her/him have a treat when it deems necessary. Now you can argue that this arrangement adds unnecessary cost and adds some inefficiency but I think is the better than letting the fatso eat all the ice cream at once!
But I could be wrong.

 

[EdwardBaiamonte]

but I think is the better than letting the fatso eat all the ice cream at once!

what????????? one could eat all the ice cream around in theory since there is unusually limited supply and a finite appetite but not eat or print all the money since you could run the presses forever. Dumb analogy. Why not start with Econ 101?? Its very obvious when you're faking it

Sorry

 

[Cabron]

but I think is the better than letting the fatso eat all the ice cream at once!

what????????? one could eat all the ice cream around in theory since there is unusually limited supply and a finite appetite but not eat or print all the money since you could run the presses forever. Dumb analogy. Why not start with Econ 101?? Its very obvious when you're faking it

Sorry

Ed,
My analogy wasn't perfect, few analogies are. But I thought it illustrated the reasoning behind using a quasi private central bank for a country monetary policies.
It was a response to JoeWP question on why use a middle man like the FED, instead of the government issuing money.
And what am I "faking"?

 

[joewp]

It doesn't matter, does it?

Sure it does. You said they created money as debt. There was $1 million in debt before the Fed bought it and $1 million in debt after, no new debt.
The interest due on the $1 million was the same before as after, no new interest.

This small but pertinent fact seems to escape you:
I'm not talking about debt creation, I don't care about debt creation, I'm talking about money creation.
Get it?

Now obviously, you're trying hard to not admit that money is created from debt. But too bad, your example shows that existing debt can also create money (when the Fed poofs the money into existence to buy the debt). In addition to that. the Fed and commercial banks can also create money for new debt, they do it every day. The point you seem to be helping me make is that the money is the thing created when the Fed and banks buy debt, and it doesn't matter if it's new or old debt, there's still interest attached.

If the debt existed already like mortgage backed securities, it's still band new money.

Brand new money, not brand new debt.

So? Really, who said it had to be new debt? What you're doing is arguing against your own straw man, a sure sign you lost the debate.

Pray tell then, on what basis does the Fed create money?

They can print new $20s, no debt needed.

Nope, sorry. The Bureau of Printing and Engraving does that. And the Fed buys the FRNs at cost, the cost to print those inherently worthless pieces of paper.

The Federal Reserve pays the BEP the cost of printing new currency and arranges and pays the cost of transporting the currency from the BEP facilities in Washington, D.C., and Fort Worth, Texas, to Reserve Bank cash offices.
FRB: Currency and Coin Services

Of course, what that means is that the Fed AND the federal government don't consider those pieces of paper as "money", just pieces of nicely engraved and printed pieces of paper. They don't become "money" until they're distributed to the public as tokens of what the Federal Reserve System owes you.

By the way, my link goes on to say that the Fed trades those pieces of paper to the regional reserve banks for 'collateral', i.e. debt. There's were your $20 gets its interest, dude.

I'm not sure how any sane person can impeach my source and stomp and cry "because I sad so". But i bet you'll try!

They can create new reserves and buy something with them.
If they bought lunch, would you say money was created with Big Macs attached?

Not only legally they can't, they would never even want to. A Big Mac is not an asset. It doesn't come with an income stream like debt does.

Now, if the government issued the money, like it's supposed to do under the US Constitution, then paying for a new dam would cost just the amount of the new dam, and not have interest attached that would amount to two times plus the cost of the dam, and taxpayers wouldn't have to pay that extra cost.

I have no idea why anyone would support a system that allows people who simply write numbers into bookkeeping entries "earn" more than the people who actually do the work.

Would you like to elucidate here, or can I just interpret your response as stomping feet, red face and screaming "because I said so!!!!" over and over?

You're funny when you're projecting.

Gee, I post links to support my facts from places like the Federal Reserve itself, and you say stuff like "It doesn't work that way" with no evidence showing how you think it works, and you argue against self-created straw men.

I'm just waiting for you to admit you're wrong, or stop posting in this thread. Which means the same thing.

 

[joewp]

This is how I understand the whole Guvmint' having the FR "print" the money for them.
Is like a fat person that doesn't trust itself to have cookies and ice cream around the house. So it hires the "FED" to control the cookie/ice cream allowance. And it leaves it up to the "FED" discretion to let her/him have a treat when it deems necessary. Now you can argue that this arrangement adds unnecessary cost and adds some inefficiency but I think is the better than letting the fatso eat all the ice cream at once!
But I could be wrong.

Well, you're right about the justification for the Fed in the first place.

But that's wrong on it's face. You've replaced one fatso with another, and the other fatso has an appetite that has devalued the dollar some 98% since they took over.

Personally, I'd rather have that "fatso" spend new money into the system re-building the nation's roads and bridges and other infrastructure, rather than a group of "intellects" collect more in payments than the workers who built the roads and bridges, wouldn't you?

And if inflation results from excess government spending, the people can always vote for those who would raise taxes and cut spending and bring inflation into control.

At least the people would have a voice in monetary policy, instead of being dictated to by the Fed, for the 'small' fee of perpetual debt.


ALERT TO TODDSTER: Please page back to see my reply to you.

 

[Toddsterpatriot]

It doesn't matter, does it?

Sure it does. You said they created money as debt. There was $1 million in debt before the Fed bought it and $1 million in debt after, no new debt.
The interest due on the $1 million was the same before as after, no new interest.

This small but pertinent fact seems to escape you:
I'm not talking about debt creation, I don't care about debt creation, I'm talking about money creation.
Get it?

Now obviously, you're trying hard to not admit that money is created from debt. But too bad, your example shows that existing debt can also create money (when the Fed poofs the money into existence to buy the debt). In addition to that. the Fed and commercial banks can also create money for new debt, they do it every day. The point you seem to be helping me make is that the money is the thing created when the Fed and banks buy debt, and it doesn't matter if it's new or old debt, there's still interest attached.

If the debt existed already like mortgage backed securities, it's still band new money.

Brand new money, not brand new debt.

So? Really, who said it had to be new debt? What you're doing is arguing against your own straw man, a sure sign you lost the debate.



Nope, sorry. The Bureau of Printing and Engraving does that. And the Fed buys the FRNs at cost, the cost to print those inherently worthless pieces of paper.


Of course, what that means is that the Fed AND the federal government don't consider those pieces of paper as "money", just pieces of nicely engraved and printed pieces of paper. They don't become "money" until they're distributed to the public as tokens of what the Federal Reserve System owes you.

By the way, my link goes on to say that the Fed trades those pieces of paper to the regional reserve banks for 'collateral', i.e. debt. There's were your $20 gets its interest, dude.

I'm not sure how any sane person can impeach my source and stomp and cry "because I sad so". But i bet you'll try!

They can create new reserves and buy something with them.
If they bought lunch, would you say money was created with Big Macs attached?

Not only legally they can't, they would never even want to. A Big Mac is not an asset. It doesn't come with an income stream like debt does.

Now, if the government issued the money, like it's supposed to do under the US Constitution, then paying for a new dam would cost just the amount of the new dam, and not have interest attached that would amount to two times plus the cost of the dam, and taxpayers wouldn't have to pay that extra cost.

I have no idea why anyone would support a system that allows people who simply write numbers into bookkeeping entries "earn" more than the people who actually do the work.

Would you like to elucidate here, or can I just interpret your response as stomping feet, red face and screaming "because I said so!!!!" over and over?

You're funny when you're projecting.

Gee, I post links to support my facts from places like the Federal Reserve itself, and you say stuff like "It doesn't work that way" with no evidence showing how you think it works, and you argue against self-created straw men.

I'm just waiting for you to admit you're wrong, or stop posting in this thread. Which means the same thing.

Now obviously, you're trying hard to not admit that money is created from debt.

Where do you imagine I said that?
When you borrow from a bank, the money supply increases.
Still doesn't have interest attached.

I'm not talking about debt creation, I don't care about debt creation, I'm talking about money creation.

Awesome!

Get it?

You finally realized your error, congrats.

 

[editec]

Um, probably that it's based on fraud. The fraud is that the bank promises every depositor immediate access to his money, but if every depositor tried to withdraw his money, the bank would have to close because they don't have it.

Here's a simple explanation. Hopefully simple enough for even you to understand.

Although restrictions placed on access depend upon the terms and conditions of the account and the provider, the account holder retains rights to have their funds repaid on demand. The customer may or may not be able to pay the funds in the account by cheque, internet banking, EFTPOS or other channels depending on those provided by the bank and offered or activated in respect of the account.

The banking terms "deposit" and "withdrawal" tend to obscure the economic substance and legal essence of transactions in a deposit account. From a legal and financial accounting standpoint, the term "deposit" is used by the banking industry in financial statements to describe the liability owed by the bank to its depositor, and not the funds that the bank holds as a result of the deposit, which are shown as assets of the bank.

For example, a depositor opening a checking account at a bank in the United States with $100 in cash surrenders legal title to the $100 in cash, which becomes an asset of the bank. On the bank's books, the bank debits its currency and coin on hand account for the $100 in cash, and credits a liability account (called a demand deposit account, checking account, etc.) for an equal amount. (See double-entry bookkeeping system.)

Deposit account - Wikipedia, the free encyclopedia

Please explain where the fraud is involved.
After you explain where "attached interest" is involved with FRNs.

That's easy. You take out a $10,000 loan and then withdraw the money as cash. You're not paying interest on that cash? Of course you are. And since every single dollar was created as debt, then it follows that every single dollar bill carries interest. Not that you're paying it, but somebody, somewhere is, otherwise, that cash wouldn't exist.

Get it?

The ponzi scheme fraud is easy to detect. Just get a few million people to withdraw their funds from banks and see what happens.

You got it.

There's the crux of the ripoff.

For every dollar that exists, there exists debt in excess of those dollars.

Which makes who the most people on the planet?

Those who issue those debt ridden dollars.

Why people have trouble understanding this math I surely do NOT know.

 

[EdwardBaiamonte]

Here's a simple explanation. Hopefully simple enough for even you to understand.

Although restrictions placed on access depend upon the terms and conditions of the account and the provider, the account holder retains rights to have their funds repaid on demand. The customer may or may not be able to pay the funds in the account by cheque, internet banking, EFTPOS or other channels depending on those provided by the bank and offered or activated in respect of the account.

The banking terms "deposit" and "withdrawal" tend to obscure the economic substance and legal essence of transactions in a deposit account. From a legal and financial accounting standpoint, the term "deposit" is used by the banking industry in financial statements to describe the liability owed by the bank to its depositor, and not the funds that the bank holds as a result of the deposit, which are shown as assets of the bank.

For example, a depositor opening a checking account at a bank in the United States with $100 in cash surrenders legal title to the $100 in cash, which becomes an asset of the bank. On the bank's books, the bank debits its currency and coin on hand account for the $100 in cash, and credits a liability account (called a demand deposit account, checking account, etc.) for an equal amount. (See double-entry bookkeeping system.)

Deposit account - Wikipedia, the free encyclopedia

Please explain where the fraud is involved.
After you explain where "attached interest" is involved with FRNs.

That's easy. You take out a $10,000 loan and then withdraw the money as cash. You're not paying interest on that cash? Of course you are. And since every single dollar was created as debt, then it follows that every single dollar bill carries interest. Not that you're paying it, but somebody, somewhere is, otherwise, that cash wouldn't exist.

Get it?

The ponzi scheme fraud is easy to detect. Just get a few million people to withdraw their funds from banks and see what happens.

You got it.

There's the crux of the ripoff.

For every dollar that exists, there exists debt in excess of those dollars.

Which makes who the most people on the planet?

Those who issue those debt ridden dollars.

Why people have trouble understanding this math I surely do NOT know.

and once you understand the math does it lead you to a policy recommendation?? IF so what is it?

 

[Toddsterpatriot]

It doesn't matter, does it?

Sure it does. You said they created money as debt. There was $1 million in debt before the Fed bought it and $1 million in debt after, no new debt.
The interest due on the $1 million was the same before as after, no new interest.

This small but pertinent fact seems to escape you:
I'm not talking about debt creation, I don't care about debt creation, I'm talking about money creation.
Get it?

Now obviously, you're trying hard to not admit that money is created from debt. But too bad, your example shows that existing debt can also create money (when the Fed poofs the money into existence to buy the debt). In addition to that. the Fed and commercial banks can also create money for new debt, they do it every day. The point you seem to be helping me make is that the money is the thing created when the Fed and banks buy debt, and it doesn't matter if it's new or old debt, there's still interest attached.

If the debt existed already like mortgage backed securities, it's still band new money.

Brand new money, not brand new debt.

So? Really, who said it had to be new debt? What you're doing is arguing against your own straw man, a sure sign you lost the debate.



Nope, sorry. The Bureau of Printing and Engraving does that. And the Fed buys the FRNs at cost, the cost to print those inherently worthless pieces of paper.


Of course, what that means is that the Fed AND the federal government don't consider those pieces of paper as "money", just pieces of nicely engraved and printed pieces of paper. They don't become "money" until they're distributed to the public as tokens of what the Federal Reserve System owes you.

By the way, my link goes on to say that the Fed trades those pieces of paper to the regional reserve banks for 'collateral', i.e. debt. There's were your $20 gets its interest, dude.

I'm not sure how any sane person can impeach my source and stomp and cry "because I sad so". But i bet you'll try!

They can create new reserves and buy something with them.
If they bought lunch, would you say money was created with Big Macs attached?

Not only legally they can't, they would never even want to. A Big Mac is not an asset. It doesn't come with an income stream like debt does.

Now, if the government issued the money, like it's supposed to do under the US Constitution, then paying for a new dam would cost just the amount of the new dam, and not have interest attached that would amount to two times plus the cost of the dam, and taxpayers wouldn't have to pay that extra cost.

I have no idea why anyone would support a system that allows people who simply write numbers into bookkeeping entries "earn" more than the people who actually do the work.

Would you like to elucidate here, or can I just interpret your response as stomping feet, red face and screaming "because I said so!!!!" over and over?

You're funny when you're projecting.

Gee, I post links to support my facts from places like the Federal Reserve itself, and you say stuff like "It doesn't work that way" with no evidence showing how you think it works, and you argue against self-created straw men.

I'm just waiting for you to admit you're wrong, or stop posting in this thread. Which means the same thing.

They can create new reserves and buy something with them.
If they bought lunch, would you say money was created with Big Macs attached?

Not only legally they can't, they would never even want to. A Big Mac is not an asset. It doesn't come with an income stream like debt does.

They wouldn't want to buy lunch? Don't they get hungry?
I buy lunch all the time, even though it isn't debt.

By the way, my link goes on to say that the Fed trades those pieces of paper to the regional reserve banks for 'collateral', i.e. debt.

Sorry, but banks buy FRNs from the Fed, no debt involved. The Fed reduces their balance held in reserve, the Fed doesn't loan them $20s.

There's were your $20 gets its interest, dude.

Damn, interest is paid by the bond issuer to the bond holder. The fact that someone somewhere touches a $20 doesn't mean interest is attached to the $20.
I neither pay nor collect interest on my $20s, sorry if that is too simple a concept for you.

Now, if the government issued the money, like it's supposed to do under the US Constitution, then paying for a new dam would cost just the amount of the new dam

If the government paid using tax revenues, instead of borrowing, there would be no interest expense.
It's easy, cut out all wasteful spending and only spend on important things.
Printing money to pay bills is the dumbest suggestion you've made, and that's saying a lot.

and not have interest attached that would amount to two times plus the cost of the dam, and taxpayers wouldn't have to pay that extra cost.

If you don't want taxpayers to pay extra, get politicians to stop borrowing.

I have no idea why anyone would support a system that allows people who simply write numbers into bookkeeping entries "earn" more than the people who actually do the work.

Yes, it's awful that banks take deposits and loan out a portion of them.
Just awful! We were better off before banking allowed savings and investment and growth.
Put your money under your pillow, fight the power!

 

[Toddsterpatriot]

Here's a simple explanation. Hopefully simple enough for even you to understand.

Although restrictions placed on access depend upon the terms and conditions of the account and the provider, the account holder retains rights to have their funds repaid on demand. The customer may or may not be able to pay the funds in the account by cheque, internet banking, EFTPOS or other channels depending on those provided by the bank and offered or activated in respect of the account.

The banking terms "deposit" and "withdrawal" tend to obscure the economic substance and legal essence of transactions in a deposit account. From a legal and financial accounting standpoint, the term "deposit" is used by the banking industry in financial statements to describe the liability owed by the bank to its depositor, and not the funds that the bank holds as a result of the deposit, which are shown as assets of the bank.

For example, a depositor opening a checking account at a bank in the United States with $100 in cash surrenders legal title to the $100 in cash, which becomes an asset of the bank. On the bank's books, the bank debits its currency and coin on hand account for the $100 in cash, and credits a liability account (called a demand deposit account, checking account, etc.) for an equal amount. (See double-entry bookkeeping system.)

Deposit account - Wikipedia, the free encyclopedia

Please explain where the fraud is involved.
After you explain where "attached interest" is involved with FRNs.

That's easy. You take out a $10,000 loan and then withdraw the money as cash. You're not paying interest on that cash? Of course you are. And since every single dollar was created as debt, then it follows that every single dollar bill carries interest. Not that you're paying it, but somebody, somewhere is, otherwise, that cash wouldn't exist.

Get it?

The ponzi scheme fraud is easy to detect. Just get a few million people to withdraw their funds from banks and see what happens.

You got it.

There's the crux of the ripoff.

For every dollar that exists, there exists debt in excess of those dollars.

Which makes who the most people on the planet?

Those who issue those debt ridden dollars.

Why people have trouble understanding this math I surely do NOT know.

For every dollar that exists, there exists debt in excess of those dollars.

For every dollar that exists, there exists assets in excess of those dollars.
So what?

 

[EdwardBaiamonte]

It doesn't matter, does it?

Sure it does. You said they created money as debt. There was $1 million in debt before the Fed bought it and $1 million in debt after, no new debt.
The interest due on the $1 million was the same before as after, no new interest.

This small but pertinent fact seems to escape you:
I'm not talking about debt creation, I don't care about debt creation, I'm talking about money creation.
Get it?

Now obviously, you're trying hard to not admit that money is created from debt. But too bad, your example shows that existing debt can also create money (when the Fed poofs the money into existence to buy the debt). In addition to that. the Fed and commercial banks can also create money for new debt, they do it every day. The point you seem to be helping me make is that the money is the thing created when the Fed and banks buy debt, and it doesn't matter if it's new or old debt, there's still interest attached.



So? Really, who said it had to be new debt? What you're doing is arguing against your own straw man, a sure sign you lost the debate.



Nope, sorry. The Bureau of Printing and Engraving does that. And the Fed buys the FRNs at cost, the cost to print those inherently worthless pieces of paper.


Of course, what that means is that the Fed AND the federal government don't consider those pieces of paper as "money", just pieces of nicely engraved and printed pieces of paper. They don't become "money" until they're distributed to the public as tokens of what the Federal Reserve System owes you.

By the way, my link goes on to say that the Fed trades those pieces of paper to the regional reserve banks for 'collateral', i.e. debt. There's were your $20 gets its interest, dude.

I'm not sure how any sane person can impeach my source and stomp and cry "because I sad so". But i bet you'll try!


Not only legally they can't, they would never even want to. A Big Mac is not an asset. It doesn't come with an income stream like debt does.

Now, if the government issued the money, like it's supposed to do under the US Constitution, then paying for a new dam would cost just the amount of the new dam, and not have interest attached that would amount to two times plus the cost of the dam, and taxpayers wouldn't have to pay that extra cost.

I have no idea why anyone would support a system that allows people who simply write numbers into bookkeeping entries "earn" more than the people who actually do the work.

Would you like to elucidate here, or can I just interpret your response as stomping feet, red face and screaming "because I said so!!!!" over and over?

You're funny when you're projecting.

Gee, I post links to support my facts from places like the Federal Reserve itself, and you say stuff like "It doesn't work that way" with no evidence showing how you think it works, and you argue against self-created straw men.

I'm just waiting for you to admit you're wrong, or stop posting in this thread. Which means the same thing.

They can create new reserves and buy something with them.
If they bought lunch, would you say money was created with Big Macs attached?

Not only legally they can't, they would never even want to. A Big Mac is not an asset. It doesn't come with an income stream like debt does.

They wouldn't want to buy lunch? Don't they get hungry?
I buy lunch all the time, even though it isn't debt.

By the way, my link goes on to say that the Fed trades those pieces of paper to the regional reserve banks for 'collateral', i.e. debt.

Sorry, but banks buy FRNs from the Fed, no debt involved. The Fed reduces their balance held in reserve, the Fed doesn't loan them $20s.

There's were your $20 gets its interest, dude.

Damn, interest is paid by the bond issuer to the bond holder. The fact that someone somewhere touches a $20 doesn't mean interest is attached to the $20.
I neither pay nor collect interest on my $20s, sorry if that is too simple a concept for you.

Now, if the government issued the money, like it's supposed to do under the US Constitution, then paying for a new dam would cost just the amount of the new dam

If the government paid using tax revenues, instead of borrowing, there would be no interest expense.
It's easy, cut out all wasteful spending and only spend on important things.
Printing money to pay bills is the dumbest suggestion you've made, and that's saying a lot.

and not have interest attached that would amount to two times plus the cost of the dam, and taxpayers wouldn't have to pay that extra cost.

If you don't want taxpayers to pay extra, get politicians to stop borrowing.

I have no idea why anyone would support a system that allows people who simply write numbers into bookkeeping entries "earn" more than the people who actually do the work.

Yes, it's awful that banks take deposits and loan out a portion of them.
Just awful! We were better off before banking allowed savings and investment and growth.
Put your money under your pillow, fight the power!

Has the liberal ever said what he wants to replace fractional reserve banking? His objection it seems to be that he lacks the IQ to understand it.

 

[Toddsterpatriot]

This small but pertinent fact seems to escape you:
I'm not talking about debt creation, I don't care about debt creation, I'm talking about money creation.
Get it?

Now obviously, you're trying hard to not admit that money is created from debt. But too bad, your example shows that existing debt can also create money (when the Fed poofs the money into existence to buy the debt). In addition to that. the Fed and commercial banks can also create money for new debt, they do it every day. The point you seem to be helping me make is that the money is the thing created when the Fed and banks buy debt, and it doesn't matter if it's new or old debt, there's still interest attached.



So? Really, who said it had to be new debt? What you're doing is arguing against your own straw man, a sure sign you lost the debate.



Nope, sorry. The Bureau of Printing and Engraving does that. And the Fed buys the FRNs at cost, the cost to print those inherently worthless pieces of paper.


Of course, what that means is that the Fed AND the federal government don't consider those pieces of paper as "money", just pieces of nicely engraved and printed pieces of paper. They don't become "money" until they're distributed to the public as tokens of what the Federal Reserve System owes you.

By the way, my link goes on to say that the Fed trades those pieces of paper to the regional reserve banks for 'collateral', i.e. debt. There's were your $20 gets its interest, dude.

I'm not sure how any sane person can impeach my source and stomp and cry "because I sad so". But i bet you'll try!


Not only legally they can't, they would never even want to. A Big Mac is not an asset. It doesn't come with an income stream like debt does.

Now, if the government issued the money, like it's supposed to do under the US Constitution, then paying for a new dam would cost just the amount of the new dam, and not have interest attached that would amount to two times plus the cost of the dam, and taxpayers wouldn't have to pay that extra cost.

I have no idea why anyone would support a system that allows people who simply write numbers into bookkeeping entries "earn" more than the people who actually do the work.



Gee, I post links to support my facts from places like the Federal Reserve itself, and you say stuff like "It doesn't work that way" with no evidence showing how you think it works, and you argue against self-created straw men.

I'm just waiting for you to admit you're wrong, or stop posting in this thread. Which means the same thing.

They can create new reserves and buy something with them.
If they bought lunch, would you say money was created with Big Macs attached?

Not only legally they can't, they would never even want to. A Big Mac is not an asset. It doesn't come with an income stream like debt does.

They wouldn't want to buy lunch? Don't they get hungry?
I buy lunch all the time, even though it isn't debt.

By the way, my link goes on to say that the Fed trades those pieces of paper to the regional reserve banks for 'collateral', i.e. debt.

Sorry, but banks buy FRNs from the Fed, no debt involved. The Fed reduces their balance held in reserve, the Fed doesn't loan them $20s.

There's were your $20 gets its interest, dude.

Damn, interest is paid by the bond issuer to the bond holder. The fact that someone somewhere touches a $20 doesn't mean interest is attached to the $20.
I neither pay nor collect interest on my $20s, sorry if that is too simple a concept for you.

Now, if the government issued the money, like it's supposed to do under the US Constitution, then paying for a new dam would cost just the amount of the new dam

If the government paid using tax revenues, instead of borrowing, there would be no interest expense.
It's easy, cut out all wasteful spending and only spend on important things.
Printing money to pay bills is the dumbest suggestion you've made, and that's saying a lot.

and not have interest attached that would amount to two times plus the cost of the dam, and taxpayers wouldn't have to pay that extra cost.

If you don't want taxpayers to pay extra, get politicians to stop borrowing.

I have no idea why anyone would support a system that allows people who simply write numbers into bookkeeping entries "earn" more than the people who actually do the work.

Yes, it's awful that banks take deposits and loan out a portion of them.
Just awful! We were better off before banking allowed savings and investment and growth.
Put your money under your pillow, fight the power!

Has the liberal ever said what he wants to replace fractional reserve banking? His objection it seems to be that he lacks the IQ to understand it.

He wants full reserve banking.
That means instead of holding 10% of demand deposits in reserve, banks must hold 100% of demand deposits in reserve. Banks can lend 100% of time deposits.
So even "full reserve" banking allows banks to hold less than all of their deposits in reserve.

Not sure why he feels that would be better.

 

[EdwardBaiamonte]

They can create new reserves and buy something with them.
If they bought lunch, would you say money was created with Big Macs attached?

Not only legally they can't, they would never even want to. A Big Mac is not an asset. It doesn't come with an income stream like debt does.

They wouldn't want to buy lunch? Don't they get hungry?
I buy lunch all the time, even though it isn't debt.

By the way, my link goes on to say that the Fed trades those pieces of paper to the regional reserve banks for 'collateral', i.e. debt.

Sorry, but banks buy FRNs from the Fed, no debt involved. The Fed reduces their balance held in reserve, the Fed doesn't loan them $20s.

There's were your $20 gets its interest, dude.

Damn, interest is paid by the bond issuer to the bond holder. The fact that someone somewhere touches a $20 doesn't mean interest is attached to the $20.
I neither pay nor collect interest on my $20s, sorry if that is too simple a concept for you.

Now, if the government issued the money, like it's supposed to do under the US Constitution, then paying for a new dam would cost just the amount of the new dam

If the government paid using tax revenues, instead of borrowing, there would be no interest expense.
It's easy, cut out all wasteful spending and only spend on important things.
Printing money to pay bills is the dumbest suggestion you've made, and that's saying a lot.

and not have interest attached that would amount to two times plus the cost of the dam, and taxpayers wouldn't have to pay that extra cost.

If you don't want taxpayers to pay extra, get politicians to stop borrowing.

I have no idea why anyone would support a system that allows people who simply write numbers into bookkeeping entries "earn" more than the people who actually do the work.

Yes, it's awful that banks take deposits and loan out a portion of them.
Just awful! We were better off before banking allowed savings and investment and growth.
Put your money under your pillow, fight the power!

Has the liberal ever said what he wants to replace fractional reserve banking? His objection it seems to be that he lacks the IQ to understand it.

He wants full reserve banking.
That means instead of holding 10% of demand deposits in reserve, banks must hold 100% of demand deposits in reserve. Banks can lend 100% of time deposits.
So even "full reserve" banking allows banks to hold less than all of their deposits in reserve.

Not sure why he feels that would be better.

especially since depositors will always want to earn interest on their money and thus require their banks to make loans to earn that interest.

 

[joewp]

They can create new reserves and buy something with them.
If they bought lunch, would you say money was created with Big Macs attached?

Not only legally they can't, they would never even want to. A Big Mac is not an asset. It doesn't come with an income stream like debt does.

They wouldn't want to buy lunch? Don't they get hungry?
I buy lunch all the time, even though it isn't debt.

Stop being stupid, ok?

By the way, my link goes on to say that the Fed trades those pieces of paper to the regional reserve banks for 'collateral', i.e. debt.

Sorry, but banks buy FRNs from the Fed, no debt involved. The Fed reduces their balance held in reserve, the Fed doesn't loan them $20s.

That was your chance to post a link with supporting evidence, but you blew it.

There's were your $20 gets its interest, dude.

Damn, interest is paid by the bond issuer to the bond holder. The fact that someone somewhere touches a $20 doesn't mean interest is attached to the $20.
I neither pay nor collect interest on my $20s, sorry if that is too simple a concept for you.

Straw man time again? I didn't say you paid the interest, I said someone, somewhere is paying interest on the bank debt that $20 represents.

But here, let me keep it simple for you. Imagine no money exists. The Fed is started, and the government goes to the Fed with a $20 bond at 7% and gets a $20 bill. They pay you $20 to stop bogging down discussions on the Internet.

Are you going to deny that the government is paying interest on that $20?

Now, if the government issued the money, like it's supposed to do under the US Constitution, then paying for a new dam would cost just the amount of the new dam

If the government paid using tax revenues, instead of borrowing, there would be no interest expense.

Right there's where you exhibit your deep misunderstanding of the money system.
If the government wasn't in debt, there would be no money

Chartered banks create money—create demand deposits, or deposit money—when they make loans. The creation of demand deposits by bank lending is the most important source of money in the Canadian economy. Money is destroyed when bank loans are repaid.

Macroeconomics*|*Chapter Highlights

The Fed initially creates the money when it loans it to the government, and when that loan is paid back, there's no monetary base left and the banks have to call in all the loans and destroy the money.

So no government borrowing, no money supply.
Of course, it you understand it differently, it would help if you posted a link so I can learn the source of your deep wisdom.

It's easy, cut out all wasteful spending and only spend on important things.
Printing money to pay bills is the dumbest suggestion you've made, and that's saying a lot.

I'm glad you feel that way. That's exactly what's happening today, except for the expensive fact that the Fed prints it at interest, and the government would print it free of interest.

and not have interest attached that would amount to two times plus the cost of the dam, and taxpayers wouldn't have to pay that extra cost.

If you don't want taxpayers to pay extra, get politicians to stop borrowing.

I'm trying to. That's why elimination of the Fed and fractional reserve banking is really quite important. Jefferson wanted an amendment forbidding the federal government from borrowing. I do too.

But before that can happen, you and millions of others have to understand the fact that we can't ever get out of debt when the money supply is created from debt.

I have no idea why anyone would support a system that allows people who simply write numbers into bookkeeping entries "earn" more than the people who actually do the work.

Yes, it's awful that banks take deposits and loan out a portion of them.
Just awful! We were better off before banking allowed savings and investment and growth.

We certainly were. And I see your misinformation extends to the natural world and arithmetic too. You seem to like 'growth', probably 'constant growth'. Watch this video...
[ame=http://www.youtube.com/watch?v=cOrvGDRLT7A&feature=player_embedded]Arithmetic, Population and Energy - YouTube[/ame]