Credible Argument for Keeping the Fed

[WatertheTree]

repeated lending by multiple banks increases the original deposit by nine times

Yes. Yet each bank lent less than deposits.

Name Amount deposit Amount lent Reserve
John $100,000.00 $90,000.00 $10,000.00
Mary $90,000.00 $81,000.00 $9,000.00
George $81,000.00 $72,900.00 $8,100.00
Mike $72,900.00 $65,610.00 $7,290.00
Sue $65,610.00 $59,049.00 $6,561.00
Tom $59,049.00 $53,144.00 $5,904.90
Dick $53,144.00 $47,829.69 $5,314.40
Harry $47,829.69 $43,046.72 $4,782.97
Bess $43,046.72
Totals $512,579.41 $56,593.27

John 's deposit was money he made working in the economy. Everyone else obtained a loan and deposited the money in a different bank. As you see here a total of $512,579.41 was loan out. All created out of thin air. Each person in the example has their deposit available and an equal amount of debt. This is how bubbles are created. You don't see any thing wrong with this?

Excellent example.
9 deposits, totalling $612,579.41.
8 loans, totalling $512,579.41
9 reserve "deposits", totalling $100,000

You see every loan is less than the deposit that precedes it.

As you see here a total of $512,579.41 was loan out. All created out of thin air.

Yes, that was the loan total. Not created out of thin air, created from deposits.

Each person in the example has their deposit available and an equal amount of debt.

Yes. Except for John. Simple accounting.

You don't see any thing wrong with this?

I see nothing wrong with people depositing or borrowing money.
Do you see anything wrong with it?

I see something wrong with them creating a half million dollars so easily, even if your just to plain stupid to.

 

[Toddsterpatriot]

Name Amount deposit Amount lent Reserve
John $100,000.00 $90,000.00 $10,000.00
Mary $90,000.00 $81,000.00 $9,000.00
George $81,000.00 $72,900.00 $8,100.00
Mike $72,900.00 $65,610.00 $7,290.00
Sue $65,610.00 $59,049.00 $6,561.00
Tom $59,049.00 $53,144.00 $5,904.90
Dick $53,144.00 $47,829.69 $5,314.40
Harry $47,829.69 $43,046.72 $4,782.97
Bess $43,046.72
Totals $512,579.41 $56,593.27

John 's deposit was money he made working in the economy. Everyone else obtained a loan and deposited the money in a different bank. As you see here a total of $512,579.41 was loan out. All created out of thin air. Each person in the example has their deposit available and an equal amount of debt. This is how bubbles are created. You don't see any thing wrong with this?

Excellent example.
9 deposits, totalling $612,579.41.
8 loans, totalling $512,579.41
9 reserve "deposits", totalling $100,000

You see every loan is less than the deposit that precedes it.

As you see here a total of $512,579.41 was loan out. All created out of thin air.

Yes, that was the loan total. Not created out of thin air, created from deposits.

Each person in the example has their deposit available and an equal amount of debt.

Yes. Except for John. Simple accounting.

You don't see any thing wrong with this?

I see nothing wrong with people depositing or borrowing money.
Do you see anything wrong with it?

I see something wrong with them creating a half million dollars so easily, even if your just to plain stupid to.

Have you ever had a mortgage? A car loan?
You created money.
I won't tell if you won't.

 

[WatertheTree]

Excellent example.
9 deposits, totalling $612,579.41.
8 loans, totalling $512,579.41
9 reserve "deposits", totalling $100,000

You see every loan is less than the deposit that precedes it.

As you see here a total of $512,579.41 was loan out. All created out of thin air.

Yes, that was the loan total. Not created out of thin air, created from deposits.

Each person in the example has their deposit available and an equal amount of debt.

Yes. Except for John. Simple accounting.

You don't see any thing wrong with this?

I see nothing wrong with people depositing or borrowing money.
Do you see anything wrong with it?

I see something wrong with them creating a half million dollars so easily, even if your just to plain stupid to.

Have you ever had a mortgage? A car loan?
You created money.
I won't tell if you won't.

I didnt create that money dipshit, I borrowed it, and repayed it with interest. Which is the point, which is what you dont understand, cause your fucking retarded.

 

[Toddsterpatriot]

I see something wrong with them creating a half million dollars so easily, even if your just to plain stupid to.

Have you ever had a mortgage? A car loan?
You created money.
I won't tell if you won't.

I didnt create that money dipshit, I borrowed it, and repayed it with interest. Which is the point, which is what you dont understand, cause your fucking retarded.

When you borrowed money, the money supply increased.
I could explain further, but you and your double digit IQ probably can't grasp it.

 

[Kevin_Kennedy]

Isn't the converse actually the case?

No, because inflation is defined as the increase in the supply of money. So as interest rates are kept artificially low through inflation malinvestment begins to occur which causes a bubble which must ultimately go bust.

Inflation is caused by, but is not the definition of increase in the money supply. But I'll cede the point, because in that scenario they are one in the same. However, as you know, inflation can exist, and often does, without an increase in the money supply.

As to the effects of inflation;

The elderly can benefit, because the basket of goods they need to survive is limited, and can be adjusted, and their savings can earn interest premiums in savings, the safest place to store their money. They can also pay back old mortgage dollars with inflated new dollars, and their medical, at least hospital benefits are secure with Medicare, while their real property values are remaining constant.

Young adults are hurt more because they may not yet have any significant savings to shelter in higher interest bearing instruments, and they are spending their limited income less discriminately securing their survival on items like gasoline needed to get to work, auto repairs and maintenance, rent on a residence to maintain relocation flexibility, while homes they might purchase are increasing in price, along with mortgage rates increasing, medical costs to stay healthy to maintain their working position increasing. Still if they hang in they are being driven to compete in the contest for survival which has character building benefits. But maintaining location flexibility can be worth a lot to secure opportunities that would otherwise be foregone when tied to a home with mortgage.

Middle age folks are in a better position to benefit because real property prices are more dynamic and they are in a better position to sell high and buy low if they buy distressed inventory, which is more common in inflationary periods.

I’m not very certain of the relative weight of the above components, but having been in all those demographic groups, I have benefitted more significantly from inflation than been hurt by it.

Your opinion?

Inflation hurts savers, and those on a fixed income. Inflation devalues the currency, and those who are saving have less value in the dollar they're saving than if they would have just gone out and spent it right away. The interest they collect on their devalued saved currency is a joke because interest rates are being kept artificially low through the inflation. People on a fixed income are hurt by inflation because their income doesn't rise. They're simply being paid in dollars that are less and less valuable, and as prices rise they get poorer and poorer. As for property prices being dynamic, that's because it's in a bubble. Property prices were great between 2001 and 2008. Then the bubble burst as was inevitable. We need real growth, not inflationary bubbles.

 

[Kevin_Kennedy]

The big Banks would have the control of the money supply, and in the free market, they don't have to act in America's best interest, but in their own best interest.

You think GS having all the say when it comes to money is in our best interest?

You either have an oligarchy controlling everything, government, or a hybrid of private sector and qualified economist civil servants like the fed....imo the fed would be the choice.

Not if you had competing currencies.

Competing currencies? Great idea. How many should we have? What if your boss paid you with one but your mortgage was in another? How many separate bank accounts will you need?

Since all of the currencies would be something valuable, say gold, or redeemable in something valuable, it wouldn't matter.

 

[Kevin_Kennedy]

And strangely enough preferred by the Founders that opted for NO Central banking authority.

They foretold what WE are experiencing now thanks to the asshat Progressives 100 years ago.

Ummmm....the Founders created our first central back under George Washington.

Guy if you are comparing the First Bank to the Federal Reserve we have now you have a very shallow knowledge of history. I suggest reading up on it.

They're both inflationary institutions. Very similar.

 

[Kevin_Kennedy]

Not if you had competing currencies.

Competing currencies? Great idea. How many should we have? What if your boss paid you with one but your mortgage was in another? How many separate bank accounts will you need?

Competing currencies would never happen, although it is not explicitly written in the Constitution, the way the Constitution is written makes it unconstitutional.

I'm not sure why it was even brought up what a dumb idea.

Where in the Constitution does it say that competing currencies are illegal?

 

[Kevin_Kennedy]

I was responding to the claim the founders "opted for NO Central banking authority". Clearly they did opt for a central bank.

Some did (Hamilton) Some didn't (Jefferson) who said this:"I believe that banking institutions are more dangerous to our liberties than standing armies. Already they have raised up a moneyed aristocracy that has set the government at defiance. The issuing power (of money) should be taken away from the banks and restored to the people to whom it properly belongs."
I agree with Jefferson.

Yea well history proves Hamilton correct. This country would never have made it to the 19th century if it wasn't for him.

Jefferson hated the banks because he couldn't afford the Monticello even with his slaves. Jefferson was an outright hypocrite... I suggest if you haven't read the book Hamilton by Ron Chernow. Don't get indebted and you won't have a problem with the banks. I don't know the more I read about Jefferson, he was brilliant, but the more I can't stand him.

To say that we wouldn't have made it to the 19th century without Hamilton's mercantilist policies is a joke. We only had two national banks for very limited time periods at that point.

As to Jefferson, he certainly did lead a life of contradictions.

 

[Kevin_Kennedy]

The Fed has a responsibility to maintain the value of the currency. The "dollar" is the stock in trade of the Fed and they no more want to create new dollars than does a corporation to issue new stock, because the net affect is to devalue or erode their stock in trade. If it weren't for the existence of the Fed, both monetary and fiscal policy would be in the province of the politicians, and if you think we can trust them to be responsible managers of both fiscal and monetary policy, I've got a bridge to sell you, because they have been fiscal failures.

The 2011 dollar is worth the same as $0.04 in 1913, the year the Fed was established. That's the opposite of maintaining the value of the dollar.

Inflation Calculator: Bureau of Labor Statistics

You're completely missing the point of monetary policy.

That expansion of specie reflects the expansion of goods and services on hand.

While we may have 50 times the amount of cash in ciculation, we also have 50 times (or more) the amount of wealth that those dollars represent.

Some of that "inflation" is appropriate to the inflating amount of wealth that has been generated since 1913.

Probably not all of it, of course, but a lot.

Inflation doesn't create wealth, however. There's no reason that the supply of money has to expand as our wealth expands.

 

[8537]

The other option is to allow Congress to determine the money supply. That's a wrap.

The other option is called "free banking." It worked great in this country until the Civil War.

This is a joke, right?

right?

First of all, we did not have free banking until the Civil War. Secondly, during the period we did have something that resembled free banking we coined the term Wildcat banks - and not because wildcats were cute and fuzzy, but because they were sneaky, fast and could run away with your shit.

 

[8537]

The other option is to allow Congress to determine the money supply. That's a wrap.

The other option is called "free banking." It worked great in this country until the Civil War.

And strangely enough preferred by the Founders that opted for NO Central banking authority.

Huh? Do you know why Andrew Jackson had to speak out against the 2nd bank of the US and not the First bank of the US?

 

[Toddsterpatriot]

Not if you had competing currencies.

Competing currencies? Great idea. How many should we have? What if your boss paid you with one but your mortgage was in another? How many separate bank accounts will you need?

Since all of the currencies would be something valuable, say gold, or redeemable in something valuable, it wouldn't matter.

I didn't see the claim that the competing currencies all had to be backed by something.
If some were backed by oil and others by gold or silver, why wouldn't it matter?
Those things don't fluctuate in value?

 

[Toddsterpatriot]

Inflation doesn't create wealth, however. There's no reason that the supply of money has to expand as our wealth expands.

Really? The money supply should hold where it is now? As the GDP gets ever larger?
Is deflation a good idea?

 

[Kevin_Kennedy]

Competing currencies? Great idea. How many should we have? What if your boss paid you with one but your mortgage was in another? How many separate bank accounts will you need?

Since all of the currencies would be something valuable, say gold, or redeemable in something valuable, it wouldn't matter.

I didn't see the claim that the competing currencies all had to be backed by something.
If some were backed by oil and others by gold or silver, why wouldn't it matter?
Those things don't fluctuate in value?

Well technically a currency wouldn't have to be backed by something of value, but if you have a choice which are you going to use? Worthless paper money, or something of value?

Oil wouldn't make a very good medium of exchange, because it's not as easy to transport as some other choices like gold or silver. Not that it couldn't, but I just don't see it happening. Regardless, it wouldn't be that difficult to transfer from one currency to another if necessary. It happens all the time with people who trade in currencies now, so there's no reason it couldn't be done at a more local level.

 

[Kevin_Kennedy]

Inflation doesn't create wealth, however. There's no reason that the supply of money has to expand as our wealth expands.

Really? The money supply should hold where it is now? As the GDP gets ever larger?
Is deflation a good idea?

It just means that the currency gains in value. I see no problem with that. As for GDP, that's not a very reliable statistic since government spending causes GDP to rise.

 

[Toddsterpatriot]

Since all of the currencies would be something valuable, say gold, or redeemable in something valuable, it wouldn't matter.

I didn't see the claim that the competing currencies all had to be backed by something.
If some were backed by oil and others by gold or silver, why wouldn't it matter?
Those things don't fluctuate in value?

Well technically a currency wouldn't have to be backed by something of value, but if you have a choice which are you going to use? Worthless paper money, or something of value?

Oil wouldn't make a very good medium of exchange, because it's not as easy to transport as some other choices like gold or silver. Not that it couldn't, but I just don't see it happening. Regardless, it wouldn't be that difficult to transfer from one currency to another if necessary. It happens all the time with people who trade in currencies now, so there's no reason it couldn't be done at a more local level.

Right, you could convert from one currency to another. So which currency do you keep in your bank account? Just one? Ten? More?

That was my question. If you're paid in one and you've borrowed in another, is that an issue for you?

 

[Toddsterpatriot]

Inflation doesn't create wealth, however. There's no reason that the supply of money has to expand as our wealth expands.

Really? The money supply should hold where it is now? As the GDP gets ever larger?
Is deflation a good idea?

It just means that the currency gains in value. I see no problem with that. As for GDP, that's not a very reliable statistic since government spending causes GDP to rise.

It just means that the currency gains in value. I see no problem with that.

So if you borrow $1 million to open a factory and the currency gains 5% in value every year, that's not a problem?

 

[8537]

Inflation doesn't create wealth, however. There's no reason that the supply of money has to expand as our wealth expands.

Really? The money supply should hold where it is now? As the GDP gets ever larger?
Is deflation a good idea?

It just means that the currency gains in value. I see no problem with that.

No one would ever offer a home loan if we established a built-in system of deflation - which is exactly what would happen if we moved to a fixed standard. There's a limited supply of precious metals. Now, if you want to suggest we fraction those precious metals...well, we're back to the same problem.

We had a deflationary period for about 30 years during the last gold standard, and we experienced a host of contractionary panics.

 

[Kevin_Kennedy]

I didn't see the claim that the competing currencies all had to be backed by something.
If some were backed by oil and others by gold or silver, why wouldn't it matter?
Those things don't fluctuate in value?

Well technically a currency wouldn't have to be backed by something of value, but if you have a choice which are you going to use? Worthless paper money, or something of value?

Oil wouldn't make a very good medium of exchange, because it's not as easy to transport as some other choices like gold or silver. Not that it couldn't, but I just don't see it happening. Regardless, it wouldn't be that difficult to transfer from one currency to another if necessary. It happens all the time with people who trade in currencies now, so there's no reason it couldn't be done at a more local level.

Right, you could convert from one currency to another. So which currency do you keep in your bank account? Just one? Ten? More?

That was my question. If you're paid in one and you've borrowed in another, is that an issue for you?

I don't see why it would be. Like I said you could just transfer. I don't see what it would matter what somebody chose to keep in their bank account, except to them.