Triton
King of the Sea
End the Fed and revoke the 16th amendment.
Get rid of corporations as legal persons
Get rid of corporations as legal persons
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Here's the website that spells out the federal reserve requirements and it has links to publications that get into more detail. The bottom line is that there is a maximum portion of the bank deposits that banks are allowed to loan out and private banks are required by the Fed to hold the remainder (eg. $31B in 1989) in vaults as cash or as deposits with the district banks....You do realize that currently banks loan out more money that exist in deposits, don't you?...
I'm sure I'm just roiling the water here, and probably wrong to boot. But here goes:
Say I put in 100 bucks into the bank at 5% interest (yr). The bank loans out 100 bucks to somebody at 10% interest (yr) to go into business. Evidently a small one. (Assume the bank has reserves so it can pay me if I want my money.)
Now it's one year later, and the appropriate payments have been made. I now have 105 bucks in the bank, which is both money and wealth. The bank made a $5 net profit (also money) on the two deals, and the guy who took out the loan made however much profit in his enterprise after he pays off the interest to the bank. If his ROI is 20% then he made 20 bucks minus 10 to the bank, so he's now got $10 money and wealth that he did not have before.
So - that 100 bucks is now grown to 120 bucks, in one year. Is the money supply still 100 or 120? Dunno, but the total wealth is now 120 bucks. Of course this is before taxes, no doubt those effers will wipe us all out.
Yes, so banks will always have to be able to meet 10% of the demand deposits. But they are still loaning out money to debtors while still claiming that the money of all depositors is there. Your bank account will say you have $1000 even if your $1000 was loaned out, and you will still have access to it. Both the depositor and the creditor under the current system have claims to the same money.Here's the website that spells out the federal reserve requirements and it has links to publications that get into more detail. The bottom line is that there is a maximum portion of the bank deposits that banks are allowed to loan out and private banks are required by the Fed to hold the remainder (eg. $31B in 1989) in vaults as cash or as deposits with the district banks....You do realize that currently banks loan out more money that exist in deposits, don't you?...
Hey that's neat, and I did all that while doing a level 4 mission for EveOnline too! OK, you're giving me credit for mental abilities far beyond my meager resources here, I was just getting us to agree that regardless of what "dollar backed by nothing" means you and I both know dollars are good money and the mere thought of someone helping themselves to our own private dollars can make us mad....Wow. Talk about taking an entire reply out of context and then following up with ad hominem...
Ok, that is fine then lol. I don't want anyone to touch my private dollars. Although...their value is constantly decreasing.Hey that's neat, and I did all that while doing a level 4 mission for EveOnline too! OK, you're giving me credit for mental abilities far beyond my meager resources here, I was just getting us to agree that regardless of what "dollar backed by nothing" means you and I both know dollars are good money and the mere thought of someone helping themselves to our own private dollars can make us mad....Wow. Talk about taking an entire reply out of context and then following up with ad hominem...
Fiat money, at least.Is this the point at which I note money is an illusion anyway? I guess it is...
Fiat money, at least.Is this the point at which I note money is an illusion anyway? I guess it is...
True, and the reason it's worked so well for half a millennium is the fact that since the early 1600's, both the depositor and creditor have had claims on collateral too. Given how banks habitually make loans for a fraction of the property being mortgaged, we end up with recourse way over face value of deposits....banks will always have to be able to meet 10% of the demand deposits. But they are still loaning out money to debtors while still claiming that the money of all depositors is there. Your bank account will say you have $1000 even if your $1000 was loaned out, and you will still have access to it. Both the depositor and the creditor under the current system have claims to the same money...
Yes, but money is still created under fractional reserve banking. Also, bank runs have shown how the system is inherently unstable. Some economist even like the idea that money is created, saying it is necessary. My view is that when money is created, it is not good.True, and the reason it's worked so well for half a millennium is the fact that since the early 1600's, both the depositor and creditor have had claims on collateral too. Given how banks habitually make loans for a fraction of the property being mortgaged, we end up with recourse way over face value of deposits....banks will always have to be able to meet 10% of the demand deposits. But they are still loaning out money to debtors while still claiming that the money of all depositors is there. Your bank account will say you have $1000 even if your $1000 was loaned out, and you will still have access to it. Both the depositor and the creditor under the current system have claims to the same money...
You will have to explain that a little more, at least what you mean by illusion. Because if you use gold (not paper receipts to gold) as money, the gold is not an illusion. Are you saying money is not synonymous to wealth? Because I agree with that. You can't eat gold anymore than you can eat paper.Fiat money, at least.Is this the point at which I note money is an illusion anyway? I guess it is...
Commodity and representative money are too.
You will have to explain that a little more, at least what you mean by illusion. Because if you use gold (not paper receipts to gold) as money, the gold is not an illusion. Are you saying money is not synonymous to wealth? Because I agree with that. You can't eat gold anymore than you can eat paper.Fiat money, at least.
Commodity and representative money are too.
You do realize that currently banks loan out more money that exist in deposits, don't you? The money creation is simply done electronically. That is the definition of fractional reserve banking and what is happening...this isn't some conspiracy theory. Nowadays banks all use the same receipt, dollars, so they can't create the physical currency. That is why they go to Federal Reserve banks, which can get physical money printed from the US treasury.
Ummmmm.....I was the borrower, you made the deposit. After I borrowed the $20s, they were indeed an asset in my hand, not a liability. And if I were the depositor in my example, the $1000 isn't a liability to me, the depositor had no liability, just the bank and the borrower.Here is your scenario. You deposit $1000 in a bank in the form of a time deposit. Without fractional reserve banking, the bank would loan out that same $1000. You are incorrect that the loaned money is counted as currency in your hand. To YOU, that $1000 is not an asset, it is a liability. You owe the bank money. It is not new money, it is the depositor's money. If you read my example with a commodity currency (gold), this would be much more apparent. Again, you are assuming fractional reserve banking is occuring. Everything you say is true of a fractional reserve banking system because the deposits can be used both by the depositor and the debtor at the same time. With true time deposits and no fractional reserve banking, the depositor can never use his time deposit money if it is being loaned out. That is what you are not understanding.
With the $1000 deposit, the bank loans out $900. Often banks loan to their own customers, and the bank electronically adds the money to the customer's own deposit account with the bank. This means the bank has an additional $900 all of a sudden that it can loan out. It will loan out $810 in the same fashion. (It may loan it to non customers of the bank, but that doesn't change anything for all banks do the same thing). So the bank loaned out $900 and then $810, totaling $1710 (and the process continues so the final number is much higher). The only real money deposited is the original $1000. It is harder to see what is going on with a fiat currency.You do realize that currently banks loan out more money that exist in deposits, don't you? The money creation is simply done electronically. That is the definition of fractional reserve banking and what is happening...this isn't some conspiracy theory. Nowadays banks all use the same receipt, dollars, so they can't create the physical currency. That is why they go to Federal Reserve banks, which can get physical money printed from the US treasury.
Your claim is incorrect. Go back to my example. You deposit 50 $20s in the bank. The only deposit the bank has received. I claim they can loan less than $1000 because they hold 10% in reserve as vault cash.
Please run thru the scenario which allows them to loan out more than that deposit amount of $1000. Please show all your steps. Thanks.
I don't think you are following me.Ummmmm.....I was the borrower, you made the deposit. After I borrowed the $20s, they were indeed an asset in my hand, not a liability. And if I were the depositor in my example, the $1000 isn't a liability to me, the depositor had no liability, just the bank and the borrower.Here is your scenario. You deposit $1000 in a bank in the form of a time deposit. Without fractional reserve banking, the bank would loan out that same $1000. You are incorrect that the loaned money is counted as currency in your hand. To YOU, that $1000 is not an asset, it is a liability. You owe the bank money. It is not new money, it is the depositor's money. If you read my example with a commodity currency (gold), this would be much more apparent. Again, you are assuming fractional reserve banking is occuring. Everything you say is true of a fractional reserve banking system because the deposits can be used both by the depositor and the debtor at the same time. With true time deposits and no fractional reserve banking, the depositor can never use his time deposit money if it is being loaned out. That is what you are not understanding.
You are forgetting time deposits vs. demand deposits.So how is $1000 in loans based on $1000 in deposits somehow safer than $900 in loans based on $1000 in deposits anyway?
Please, explain to me how time deposits can expand the money supply when you have a full-reserve system (referring to the demand side of course).If you're convinced that loans from time deposits don't increase the money supply, feel free, but maybe you need to convince the people who came up with the M2 measurement?
With the $1000 deposit, the bank loans out $900. Often banks loan to their own customers, and the bank electronically adds the money to the customer's own deposit account with the bank. This means the bank has an additional $900 all of a sudden that it can loan out. It will loan out $810 in the same fashion. (It may loan it to non customers of the bank, but that doesn't change anything for all banks do the same thing). So the bank loaned out $900 and then $810, totaling $1710 (and the process continues so the final number is much higher). The only real money deposited is the original $1000. It is harder to see what is going on with a fiat currency.You do realize that currently banks loan out more money that exist in deposits, don't you? The money creation is simply done electronically. That is the definition of fractional reserve banking and what is happening...this isn't some conspiracy theory. Nowadays banks all use the same receipt, dollars, so they can't create the physical currency. That is why they go to Federal Reserve banks, which can get physical money printed from the US treasury.
Your claim is incorrect. Go back to my example. You deposit 50 $20s in the bank. The only deposit the bank has received. I claim they can loan less than $1000 because they hold 10% in reserve as vault cash.
Please run thru the scenario which allows them to loan out more than that deposit amount of $1000. Please show all your steps. Thanks.
I don't think you are following me.Ummmmm.....I was the borrower, you made the deposit. After I borrowed the $20s, they were indeed an asset in my hand, not a liability. And if I were the depositor in my example, the $1000 isn't a liability to me, the depositor had no liability, just the bank and the borrower.Here is your scenario. You deposit $1000 in a bank in the form of a time deposit. Without fractional reserve banking, the bank would loan out that same $1000. You are incorrect that the loaned money is counted as currency in your hand. To YOU, that $1000 is not an asset, it is a liability. You owe the bank money. It is not new money, it is the depositor's money. If you read my example with a commodity currency (gold), this would be much more apparent. Again, you are assuming fractional reserve banking is occuring. Everything you say is true of a fractional reserve banking system because the deposits can be used both by the depositor and the debtor at the same time. With true time deposits and no fractional reserve banking, the depositor can never use his time deposit money if it is being loaned out. That is what you are not understanding.
So how is $1000 in loans based on $1000 in deposits somehow safer than $900 in loans based on $1000 in deposits anyway?
No I'm not. You seem to think loans strictly from time deposits (0% reserve requirement) are somehow safer for the banks or safer for the economy. So explain how a 0% reserve is safer than a 10% reserve.ShackledNation said:You are forgetting time deposits vs. demand deposits.
If you're convinced that loans from time deposits don't increase the money supply, feel free, but maybe you need to convince the people who came up with the M2 measurement?
I already told you, the time deposit doesn't increase the money supply, the loan from the deposit does.ShackledNation said:Please, explain to me how time deposits can expand the money supply when you have a full-reserve system (referring to the demand side of course).
That is a liquidity issue for the bank, doesn't change the fact that loans, whether based on 0% reserves or 10% reserves, increase the money supply.ShackledNation said:If you have $1000 in a time deposit, you can no longer use that money. If you have $1000 in a demand deposit:
1. Under fractional reserve banking, you can still spend that money and the same money is lent out. So you may have only $50 left in your account, but the bank has at the same time loaned out the full $900. That is what I am trying to explain to you by saying loans exceed real deposits. I do realize I am being unclear, because the whole system is odd and confusing and I am not the best at explaining it.
Under your 100% reserve banking, time deposits still have a 0% requirement.ShackledNation said:2. Under 100% reserve banking, you can still spend that money but that money is not loaned out to debtors. You are the only one who can access that money. Demand deposits will never be loaned out.
If you make a time deposit and I get a loan and spend the money, the new money holder can make a time deposit and a new borrower can take the money and spend it, etc. etc.ShackledNation said:What about time deposits? In fractional reserve banking, they can create new money just like any other deposit would if the money is loaned out and put into a demand deposit. The bank can reloan this demand deposit out depending on the reserves, just like it does with all others. But under 100% reserve banking, the bank cannot loan out the demand deposit funds, so if the money is put in a demand deposit, it will just sit there.
Please stop. LOL!ShackledNation said:I really am just trying to explain this to you. Here is a more streamlined explanation.
Stop, get out your calculator. Bob has an account with $100 (that's M2) , Jill has an account with $100 (that's M2) , Moses has a hand full of cash (that's M1 and M2) , the money supply is $300.ShackledNation said:SCENARIO A: FRACTIONAL RESERVE BANKING IN $100 ECONOMY
1. Bob deposits $100 in a checking account (demand deposit).
2. Bank A loans out $90 to Jill because the RRR is 10%
3. Both Bob and Jill can actively use $90. Bob also can use $10 more. There are now $190 in the economy.
4. Jill deposits the $90 into Bank A.
5. Bank A loans $81 out to Moses.
6. Both Bob, Jill, and Moses can actively use $81. Bob and Jill both can use an additional $9, and Bob finally can use $10 more. There are now $271 in the economy.
7. Bank A loans out...etc. Process continues until all possible money is loaned, resulting in about $1,000 total of created new money (it may be more or less, but that is irrelevent. What is certain is there is more money than before. It depends on the money multiplier. I used 10).
Starting deposit: $100.
Loan values financed directly or indirectly because of that deposit: $900
Final money supply: $1,000.
SCENARIO B: FULL RESERVE BANKING IN A $100 ECONOMY
1. Bob deposits $100 in a time deposit.
2. Bank B loans out $100 to Jill.
3. Jill can use $100. Bob cannot use $100. Money is only transferred. The money supply is $100.
4. Jill deposits the $100 in Bank A.
5. Bank A loans out $100 to Moses.
6. Moses can use $100. Neither Bob nor Jill can use any money. The money supply is $100.
7. The final money supply is $100.