Isn’t it Time to Stop Calling it “The National Debt”?

[Toddsterpatriot]

And you said it again in post #42.

They loan money they have. From the deposits. <andylusion

Nonsense. Deposits are liabilities on the banks balance sheet, and there's nothing in a deposit to lend out

And holy crap, the money deposited is the asset, the depositor account is the liability.
Keep getting that wrong and I'm gonna keep mocking your idiocy.

If someone deposits physical cash, the cash goes into the vault (reserves) and the bank simply marks up their account. The bank doesn't worry about loaning out reserves when it originates, it simply creates the deposit and gets the reserves overnight to meet the requirement.

They have reserves in the vault and you think instead of lending them out, they go out and borrow additional reserves to make good on their loan?

Why in the hell would they do that?

Yeah, that is what makes no sense whatsoever.

I'm a bank. I have $10,000 in my bank vault. I am going to lend out $9,000.

Now I'm already paying interest on the deposits of $10,000.

But I'm not going to loan that out. No no, I'm going to borrow cash reserves from another bank, and pay interest to them as well, and loan that money, not the money I already have.... and am already paying interest on.... but rather the new money I am going to borrow from someone else, to lend to someone else...

WHY?!?!?!?

He is either incorrect, and has been mis-informed... or there is a ton more to this, that we don't know. If he's right, then banks are doing this because of some insane regulation, we are not aware of. It makes no logical sense.

But I'm not going to loan that out. No no, I'm going to borrow cash reserves from another bank, and pay interest to them as well, and loan that money, not the money I already have.... and am already paying interest on.... but rather the new money I am going to borrow from someone else, to lend to someone else...

That's exactly why I mock him, and everyone else who insist banks don't lend out deposits.

https://www.kreditopferhilfe.net/docs/S_and_P__Repeat_After_Me_8_14_13.pdf

This goes against the grain of the usual way of describing bank lending, which suggests that banks "collect" deposits and then "lend them out." That is not the way it happens at all. In a closed economy (or the world as a whole), fundamentally, (8) deposits come from only two places: new bank lending and government deficits (9). Banks create deposits when they create loans, as explained above. Governments also create deposits when they run budget deficits because they are putting more money into the public's bank accounts than they are taking out. This net flow creates new deposits in the banking system, which has its counterpart on the bank's balance sheet as an increase in reserves: And on the central bank's balance sheet, as we saw before. Banks don't lend out of deposits; nor do they lend out of reserves. They lend by creating deposits. And deposits are also created by government deficits.

Seriously, we can argue technicalities, but deposits have to first ORIGINATE from one of two places.

Page 4 of the S&P paper.

Neither individual banks nor banks as a whole can "lend out" reserves, but individual banks can and do offload their reserves (particularly excess reserves) by lending them to other banks or by buying assets; but the banks in aggregate cannot do this--in such cases, the reserves that leave one bank's balance sheet just pop up on another, remaining on the central bank's balance sheet all the while.

Lending to other banks, buying assets or by lending them to borrowers, obviously. So what they're saying by "banks don't lend out reserves" is that banks as a whole cannot reduce the reserves in the system. Only the Fed, by selling securities (or letting them mature and not rolling them) or customers by withdrawing and holding cash, can reduce total reserves held by the banking system.

They aren't saying banks hold their own excess reserves and borrow another bank's excess reserves to make an actual loan. Because that would be moronic. So you should probably stop repeating that idiocy, because it's annoying.

I thought we were talking about deposits held by individuals at the bank. I've only ever argued that banks can't lend reserves to customers, I never said they can't lend reserves to other banks. Did you ignore this part?

They lend by creating deposits. And deposits are also created by government deficits.

I've only ever argued that banks can't lend reserves to customers,

And I keep showing that claim is wrong.

They lend by creating deposits.

Yup. And it works best if they already have deposits to lend.

 

[edthecynic]

You seem especially agitated by Dick Cheney and his profiteering. How do you feel about the widening of the wealth gap under Obama?

The widening wealth gap was set up by Bush's Bubble long before Obama came into office. The cash rich swoop in when the bubble bursts and scoff up everything of value at a small fraction of what it is worth and then sell it at full value during the following Obama recovery. That is why the GOP, who are nothing but shills for the mega wealthy, always want to overheat the economy with ever greater yearly increases in GDP. The inevitable bust that follows each boom pays big dividends for the cash rich. That is why they hate Obama's slow and steady GDP growth with no boom or bust, because their get rich quick scheme no longer works.

I'll let Elitist Trump explain it like he does in his Trump University:

Two years before the housing market collapsed in 2008 and millions of Americans lost their homes, Donald Trump said he was hoping for a crash.

"I sort of hope that happens because then people like me would go in and buy," Trump said in a 2006 audiobook from Trump University, answering a question about "gloomy predictions that the real estate market is heading for a spectacular crash."
The U.S. housing bubble burst two years later, triggering the stock market crash of 2008 that plunged the U.S. economy into a deep recession, leaving millions of Americans unemployed.
Trump was speaking with Jon Ward, a marketing consultant who "masterminded all the initial education programs for Trump University," according to his website. The audiobook is available on iTunes.

"If there is a bubble burst, as they call it, you know you can make a lot of money," Trump said in the 2006 audio book, "How to Build a Fortune." "If you're in a good cash position -- which I'm in a good cash position today -- then people like me would go in and buy like crazy."

The wealth gap has nothing to do with any president. You think some people blow all their money and become broke because of a president? You think others save and invest their entire lives, because of a president?

Stop wasting your life, trying to blame everything, good or bad, on who is in office. The longer you wait for a politician to fix your life, the poorer you will end up being.

The Republican Party has always overheated the economy creating a boom that they brag about creating, and always followed by a bust they always blame on everyone else. Boom and Bust always go together and always favor the cash rich, as Trump himself admitted!

Whenever the Democratic Party has the economy growing slow and steady, the GOP bitch that growth is too low and the economy needs to be heated up. Either the GOP is too stupid to ever learn from history or the they are in the pocket of the cash rich because they always aid and abet their get rich quick scheme.

 

[Norman]

Wow, you took that a lot

But I'm not going to loan that out. No no, I'm going to borrow cash reserves from another bank, and pay interest to them as well, and loan that money, not the money I already have.... and am already paying interest on.... but rather the new money I am going to borrow from someone else, to lend to someone else...

That's exactly why I mock him, and everyone else who insist banks don't lend out deposits.

I wish I could sit down with an actual banker, and ask them how it works. This isn't the first time I've heard this claim though, so clearly there are more people like this guy out there.

I tried to follow all the preceding comments, but I am not sure I did.

I have noticed that no one has mentioned the fractional reserve banking system used in the US and most of the large economy countries. Essential, banks loan much more out than they keep on reserve. This allows the creation of capital for economic growth. It is a very good system when the economy is growing and the central bank, i.e. The Federal Reserve, does not try to run the system in reverse with Quantitative easing. QE is thought to prime the pump by making more money available than banks require for loans. It encourages lending, or creation of money without economic growth. We will see how it all turns out. Many believe it has created malinvestments and bubbles. Might want to have a little gold on hand if their right.

I have never understood this "get gold" idea. Gold is a terrible investment, and we're in the middle of a 30 year price hike.

It's kinda like the opposite of Warren Buffet investing. Buffet famously said investing is simple. Buy low, and sell high.

But when the stock market crashed, people sold low, and bought gold which was high. Since 2010, gold has lost over 1/3rd it's value. I know people who literally bought gold when it was $1,900 an oz, and now it's $1,200 an oz. Well that was brilliant....

And what exactly is the end game? What do you think is going to happen, where gold is going to be brilliant?

It reminds me of all these dystopian books, where people hunting through the rubble for food and water, and clothing, constantly find boxes of gold and toss them aside because it has no value. If the economic system of the world crashes.... what do you think you are going to do with gold? Eat it? Drink it? Wear it to keep you warm at night?

If the economic system of the world doesn't crash.... at what point do you see us buying and selling with gold nuggets? Do you ever.... EVER... see a time where you are going to go the store, with 50 lbs bags of gold on your hip, and plopping down 5 gold coins?

Do you even know why the US Mint sells Gold Coins? Because they mark them up 20%. Yeah... the US government makes a KILLING off of selling gold coins to Prepers.

I for one, can't think of a single time in modern world history, where currency was eliminated, and people went back to trading in gold. Nor can I imagine any situation where having piles of gold laying around, would be of any benefit.

Wow, you took that a lot further than intended. I never suggested that we would be using gold as everyday currency., nor did I say gold was a good investment. I said you might want to own some gold. Gold is the accepted store of value, and when fiat currencies become less valuable, i.e. Inflation, and there is little economic growth, gold does well.

I know people who bought Gold under $300 around 2000. It's up 4 fold in. 16 years.

BTW- have you Taken a look at the Gold/S&P ratio lately?


This 50-year chart shows how cheap gold now is relative to stocks | MINING.com

Yeah, but there is a reason for that. Stocks produce more wealth. Gold does not. In fact, gold costs you wealth.

Let me explain.

Say I buy 100lbs of gold bars. And I keep them at a vault. I have to pay them money to keep that gold for me. But the gold doesn't grow. It doesn't produce. It doesn't create anything.

Same as any other commodity you buy.

If you buy gold coins. You don't have to pay someone to keep them, because you have them at your home. But, they charge a usually large markup on the coins, instead of a monthly storage fee. And still, they produce nothing of any value. Shiny rocks.

Now take my stocks. Stocks also generally grow in value, in relation to inflation. But unlike a metal paper weight, my stocks actually produce value.

It's called a Dividend. I own stock in, for example, Amazon, Home Depot, and BroadCom. These companies pay out a dividend, which is a share of their profits, that I as an owner of their company, am entitled to.

As a result, not only do I have the value of the stock itself, but I also have a share of the profits.

Thus while my entire portfolio is worth tens of thousands, I only put in a few thousand. That few thousand grew, to much more, because of the dividends, the creation of profits.

If I had Gold... that wouldn't happen. If I have 6 bars of gold, in 10 years, they wouldn't breed and have 20 bars of gold.

Unlike my purchase of stocks, where I bought 10, and now I have 46 today.

So when you say gold is cheaper than stocks.... well yeah. Stocks create income. Stocks have growth. Gold bricks do not. Again, this is why I say with certainty... gold will fall in value. I am positive.

Like the OP, you could have just explained this in one sentence "gold doesn't produce wealth, companies do".

To which I say, no shit Sherlock. But how again, is this relevant? For the record the alternative, which is currency, diminishes in value, and stocks can have crazy fluctuations. That's why you generally have a hedge... And gold doesn't seem to have performed too bad lately:

 

[BuckToothMoron]

You seem especially agitated by Dick Cheney and his profiteering. How do you feel about the widening of the wealth gap under Obama?

The widening wealth gap was set up by Bush's Bubble long before Obama came into office. The cash rich swoop in when the bubble bursts and scoff up everything of value at a small fraction of what it is worth and then sell it at full value during the following Obama recovery. That is why the GOP, who are nothing but shills for the mega wealthy, always want to overheat the economy with ever greater yearly increases in GDP. The inevitable bust that follows each boom pays big dividends for the cash rich. That is why they hate Obama's slow and steady GDP growth with no boom or bust, because their get rich quick scheme no longer works.

I'll let Elitist Trump explain it like he does in his Trump University:

Two years before the housing market collapsed in 2008 and millions of Americans lost their homes, Donald Trump said he was hoping for a crash.

"I sort of hope that happens because then people like me would go in and buy," Trump said in a 2006 audiobook from Trump University, answering a question about "gloomy predictions that the real estate market is heading for a spectacular crash."
The U.S. housing bubble burst two years later, triggering the stock market crash of 2008 that plunged the U.S. economy into a deep recession, leaving millions of Americans unemployed.
Trump was speaking with Jon Ward, a marketing consultant who "masterminded all the initial education programs for Trump University," according to his website. The audiobook is available on iTunes.

"If there is a bubble burst, as they call it, you know you can make a lot of money," Trump said in the 2006 audio book, "How to Build a Fortune." "If you're in a good cash position -- which I'm in a good cash position today -- then people like me would go in and buy like crazy."

The wealth gap has nothing to do with any president. You think some people blow all their money and become broke because of a president? You think others save and invest their entire lives, because of a president?

Stop wasting your life, trying to blame everything, good or bad, on who is in office. The longer you wait for a politician to fix your life, the poorer you will end up being.

The Republican Party has always overheated the economy creating a boom that they brag about creating, and always followed by a bust they always blame on everyone else. Boom and Bust always go together and always favor the cash rich, as Trump himself admitted!

Whenever the Democratic Party has the economy growing slow and steady, the GOP bitch that growth is too low and the economy needs to be heated up. Either the GOP is too stupid to ever learn from history or the they are in the pocket of the cash rich because they always aid and abet their get rich quick scheme.

So the Dems always get the economy right, the Reps always get it wrong. What a cozy little world you live in.

 

[Norman]

You seem especially agitated by Dick Cheney and his profiteering. How do you feel about the widening of the wealth gap under Obama?

The widening wealth gap was set up by Bush's Bubble long before Obama came into office. The cash rich swoop in when the bubble bursts and scoff up everything of value at a small fraction of what it is worth and then sell it at full value during the following Obama recovery. That is why the GOP, who are nothing but shills for the mega wealthy, always want to overheat the economy with ever greater yearly increases in GDP. The inevitable bust that follows each boom pays big dividends for the cash rich. That is why they hate Obama's slow and steady GDP growth with no boom or bust, because their get rich quick scheme no longer works.

I'll let Elitist Trump explain it like he does in his Trump University:

Two years before the housing market collapsed in 2008 and millions of Americans lost their homes, Donald Trump said he was hoping for a crash.

"I sort of hope that happens because then people like me would go in and buy," Trump said in a 2006 audiobook from Trump University, answering a question about "gloomy predictions that the real estate market is heading for a spectacular crash."
The U.S. housing bubble burst two years later, triggering the stock market crash of 2008 that plunged the U.S. economy into a deep recession, leaving millions of Americans unemployed.
Trump was speaking with Jon Ward, a marketing consultant who "masterminded all the initial education programs for Trump University," according to his website. The audiobook is available on iTunes.

"If there is a bubble burst, as they call it, you know you can make a lot of money," Trump said in the 2006 audio book, "How to Build a Fortune." "If you're in a good cash position -- which I'm in a good cash position today -- then people like me would go in and buy like crazy."

The wealth gap has nothing to do with any president. You think some people blow all their money and become broke because of a president? You think others save and invest their entire lives, because of a president?

Stop wasting your life, trying to blame everything, good or bad, on who is in office. The longer you wait for a politician to fix your life, the poorer you will end up being.

The Republican Party has always overheated the economy creating a boom that they brag about creating, and always followed by a bust they always blame on everyone else. Boom and Bust always go together and always favor the cash rich, as Trump himself admitted!

Whenever the Democratic Party has the economy growing slow and steady, the GOP bitch that growth is too low and the economy needs to be heated up. Either the GOP is too stupid to ever learn from history or the they are in the pocket of the cash rich because they always aid and abet their get rich quick scheme.

So the Dems always get the economy right, the Reps always get it wrong. What a cozy little world you live in.

Please someone get this person a ticket to Venezuela.

 

[Andylusion]

You seem especially agitated by Dick Cheney and his profiteering. How do you feel about the widening of the wealth gap under Obama?

The widening wealth gap was set up by Bush's Bubble long before Obama came into office. The cash rich swoop in when the bubble bursts and scoff up everything of value at a small fraction of what it is worth and then sell it at full value during the following Obama recovery. That is why the GOP, who are nothing but shills for the mega wealthy, always want to overheat the economy with ever greater yearly increases in GDP. The inevitable bust that follows each boom pays big dividends for the cash rich. That is why they hate Obama's slow and steady GDP growth with no boom or bust, because their get rich quick scheme no longer works.

I'll let Elitist Trump explain it like he does in his Trump University:

Two years before the housing market collapsed in 2008 and millions of Americans lost their homes, Donald Trump said he was hoping for a crash.

"I sort of hope that happens because then people like me would go in and buy," Trump said in a 2006 audiobook from Trump University, answering a question about "gloomy predictions that the real estate market is heading for a spectacular crash."
The U.S. housing bubble burst two years later, triggering the stock market crash of 2008 that plunged the U.S. economy into a deep recession, leaving millions of Americans unemployed.
Trump was speaking with Jon Ward, a marketing consultant who "masterminded all the initial education programs for Trump University," according to his website. The audiobook is available on iTunes.

"If there is a bubble burst, as they call it, you know you can make a lot of money," Trump said in the 2006 audio book, "How to Build a Fortune." "If you're in a good cash position -- which I'm in a good cash position today -- then people like me would go in and buy like crazy."

The wealth gap has nothing to do with any president. You think some people blow all their money and become broke because of a president? You think others save and invest their entire lives, because of a president?

Stop wasting your life, trying to blame everything, good or bad, on who is in office. The longer you wait for a politician to fix your life, the poorer you will end up being.

The Republican Party has always overheated the economy creating a boom that they brag about creating, and always followed by a bust they always blame on everyone else. Boom and Bust always go together and always favor the cash rich, as Trump himself admitted!

Whenever the Democratic Party has the economy growing slow and steady, the GOP bitch that growth is too low and the economy needs to be heated up. Either the GOP is too stupid to ever learn from history or the they are in the pocket of the cash rich because they always aid and abet their get rich quick scheme.

Well part of that is true.

The rich, are rich.... because they hold onto their cash and invest wisely. The poor are poor, because they blow their money and are stupid.

For example..... If you barely have $10,000 in the bank, and you borrow $200,000 on a house.... You are asking for a crash. When the economy takes a dive, you end up in foreclosure.

That is blowing money, and acting stupidly. People in the real-estate business call that "house poor". You got a house, but you are now impoverished, and can't handle it when the economy rocks your little boat.

Rich people on the other hand, will save up their money, and wait for the right time. When the economy rocks your little boat, because you have no money, and a house you can't afford, they step in at the foreclosure, and buy your home from you, for a fraction of the price.

That's how rich people are rich. They buy when they have the money, and buy when the price is low.

Poor people "I want it now!" buy when the price is high, and they have no money, and end up bankrupt.

This happens all the time. I knew a guy that didn't have 50¢ to his name, and bought a new Honda Accord, for 24% interest. He >HAD< to have it. Of course a year later it's repo'd. Did you know the average millionaire drives a 3 to 5 year old domestic car? That's WHY they are millionaires. They are not borrowing, and blowing cash. They are buying responsible.

Now I get it, you want to turn this into a partisan hack job, where it's Dems and Reps and blaw blaw blaw. As if there was no bubble that blew up in 2000.

You want to live in a world with zero booms and busts? Soviet Russia. No booms.... no busts... just endless misery. Great. Go live in Venezuela today. No boom or bust. Just misery.

I'll say it again.... stop living your life based on what group of politicians have control over government. Take control of your own life, and that includes blaming only yourself when things go wrong.