Top 10 Ridiculous Examples of Corporate Greed

No, that money does come back. You don't seem to understand how reserve currency works.

Reserve currency, doesn't mean they have a big huge vault somewhere where scrooge McDuck swims through piles of $100 dollar bills.

Not how it works. Most of the reserve currency is in assets that are dollar dominated. Primarily Treasury securities.

It's the money the US government borrowed. By the way, you want to reduce how much reserve currency China holds? Just balance the budget, and start running a surplus, and China's dollar reserves will dwindle.

Now if you doubt that, all you have to do is look up how much US Dollar reserve currency the central bank of China has, and see they list roughly $2 Trillion in US dollar reserves.

Well we know from the fed, that there is only $1.4 Trillion in hard currency. So what the World Bank reports that China has, is a greater amount of US dollars, than what actually exists on the planet.

Moreover, if China had even half that much hard cash in Reserve, then finding a dollar in the US, should be like finding a Unicorn. We should be experiencing so much deflation from the reduced supply of dollars, that a new car should only be $100 by now.

All the money, even the USD reserves, all of it comes back to the US. All of it does.


All the money, even the USD reserves, all of it comes back to the US. All of it does.

Many countries with untrustworthy currencies will circulate FRNs as a parallel currency.
Hundreds of billions in physical currency that will never return.

Yes and no. If the situation remains, then yes it will stay as an unofficial parallel currency.

Currently the only non-US countries using USD, are Ecuador, East Timor, El Salvador, Marshall Islands, Micronesia, Palau, Turks and Caicos, British Virgin Islands, Zimbabwe.

The one thing you notice about nearly all of them, is that they are small, and poor. I highly doubt there are hundreds of billions, circulating in these countries.

Even so, in cases like Zimbabwe, or Ecuador, if the country ever recovers to the point they can implement their own currency, they will, and those dollars will return.

But let's even suggest for a moment that they don't. This is actually a good thing. We want more people to use dollars. The more countries that use our dollars, the more we have economic growth and influence. It's far easier for me to buy, or sell, to a country that already has actual US Dollars. That's a benefit to us. And it makes the dollar itself more valuable.

The value of Fiat Currency, is only in our ability to exchange our dollars, for goods and services. The more goods and services we can exchange dollars for, the more value the dollar has.

This is good thing. It really is.

You left out Panama.

I highly doubt there are hundreds of billions, circulating in these countries.

Countries like Russia, Venezuela and Cuba will always use dollars.

The most direct measurement, commercial bank shipments, the solid black line, suggests that
$200 billion has moved abroad since 1990, which would put the total at between $200 billion
and $400 billion, depending on the assumed initial value. The shipments proxy, the solid gray
line, suggests that about $350 billion moved abroad over the period, putting the total at $350 billion to $550 billion.25 Finally, the adjusted shipments and proxy figures, the dashed black and
gray lines respectively, suggest that about $550 billion moved abroad over the period, putting the
total at $550 billion to $750 billion. These ranges are, of course, large, though the simple
method proposed above in Section III.A.2 produces an estimate very close to the center of the
range.

http://www.federalreserve.gov/pubs/ifdp/2012/1058/ifdp1058.pdf

Interestingly, the first page, suggested exactly what I just said.

Second, economic stabilization and modernization appear to result in reversal of these inflows. Specifically, demand for U.S. currency was extremely strong through the 1990s, a period of turmoil for the former Soviet Union and for Argentina, two of the largest overseas users of
U.S. currency. Demand eased in the early 2000s as conditions gradually stabilized
and as financial in stitutions developed. However, this trend reversed sharply with the onset of the financial crisis in late 2008 and has continued since then.
So during a period of crisis, demand for US dollars goes up. That's exactly what you said before. Zimbabwe destroys their currency, and suddenly they are using Euros and Dollars.

Then as the economy stabilizes, and modernization happens, the flows reverse. Dollars start flowing back to the US, as the local currency gains credibility and acceptance.

If another crisis hits, then the flows reverse again, as people go back to what is considered stable and safe.

Now all that said..... your publication brings up a fascinating aspect I didn't realize before...

Many people, including myself, have been trying to figure out why the increase in the M2 base, has not resulted in the type of inflation we would expect. Up till now, I had always just guessed that the reason must be that the US economy is so large, that changes in the monetary base take longer to take effect.

But what if, as the link you provided suggest, there is a different aspect going on here. As with all things, the value is determined by supply and demand. The supply is the amount of money created by the government, and the demand is the public. We assume the public is static (increasing only with the birth rate and immigration), and drastically increasing supply, would cause inflation, where the value falls.

What I have not heard anyone suggest is, what if the problems in the EU, and in Latin America, and Russia and its trading partners.... is creating additional demand base. If dollars are being circulated more and more under the radar, then this would create additional demand, that would directly offset the increase in the M2 monetary base.

Now if that is true.... and I'm just connecting some dots that may or may not have anything in common.... that would seem to place us in a very dangerous position.

Because just as I quoted above, when these economies stabilize, they tend to reverse the trend. Dollars flow back to the US, as local currency takes over. The problem is, if too much currency flows back, then I would expect to see the inflation that we been waiting for.

If the economies in Russia, and Venezuela, and Argentina, were to stabilize, and go back to using local currency, the demand base for USD, would shrink. Unless the Federal Reserve has a plan to remove dollars from the monetary base.... The supply stays the same, but the demand base drastically falls.

That's going to cause problems, because everyone else still using dollars, the moment they see a spike in inflation, they are going to ditch those dollars, which will cause even faster inflows, which will cause more inflation, and the cycle will continue until there is a melt down.

Of course this is all speculation. But it all makes sense if there is a massive amount of USD, used by say Russia to by-pass sanctions, and Argentina to avoid their locked up import-export restrictions.... then that's a ton of non-reserve currency being used as normal tender. That demand would off set the increase in the money base. It all fits.... which is a little scary.

Then as the economy stabilizes, and modernization happens, the flows reverse. Dollars start flowing back to the US, as the local currency gains credibility and acceptance.

In many of those crappy countries, the local currency will never displace the dollar.

Many people, including myself, have been trying to figure out why the increase in the M2 base, has not resulted in the type of inflation we would expect.

Many people think there is a fixed relationship between Fed balance sheet growth and inflation. They look at supply and ignore changes in demand. During and after the crisis, demand for cash took off, that's why inflation hasn't.


Because just as I quoted above, when these economies stabilize, they tend to reverse the trend.

It said demand slowed, it didn't reverse.

That's going to cause problems, because everyone else still using dollars, the moment they see a spike in inflation, they are going to ditch those dollars

I don't think US inflation will impact foreign holdings of FRNs, especially because their domestic inflation is so much higher.

The US went from being a double digit inflation rate , to being 4% or under inflation rate, in just 3 years. Now if you read my comment completely, I said if they stabilize their economy and currency. That implies that their inflation rate would be...... stable. Not super high.

Second, it did not say slowed, it said reversed, and if you need more evidence, flip down to page 40, graph 7, 8, 9 or 10, all show very clearly a negative flow. That would mean money was flowing back into the US from foreign sources.

Lastly, it's not wise to make broad assumptions about countries. Yes, in the short term, they are not likely to turn everything around. But to say that they will never become strong economically with their own currency? I would not assume that.

After all, who in the 1990s, thought the Yuan would be a an international reserve currency? Who thought that the IMF would give the Yuan a 10% stake, while the Yen and the Pound dropped to 8% each.

And now China is pushing to replace the dollar as the international standard, and people are taking it seriously. You realize that even just in 2010, China only had about $200 billion in cross boarder transactions, and almost none were in Yuan. Now, we're looking at China doing $600 Billion on transactions, and $200 billion of it in Yuan, and this happened in just 5 years.

MI-CN013_CIMF_16U_20151129165105.jpg


So while you may be right, I just wouldn't assume that. Capitalism works every time it's tried, and if they try it in Argentina, or elsewhere, it will work. It will work just as well as it has here. They may not try it........ but then we never thought China would be a center of Capitalism, did we?
 
No they can't spend it anywhere. Reserve currency doesn't change anything. If I'm in China, and I have US dollars, I can't spend it anywhere. Maybe I can buy oil with it. Ok, but the person who sold me the oil from Saudi Arabia.... what can he do with US dollars? Nothing. Well maybe he can buy something from Norway or whatever. Ok, what can Norway do with US dollars? Nothing.

Have you been to these places? I have. You can't buy jack with US dollars. You have to convert to Euros. Or whatever the local legal tender is. You can't go to the UK and whip out your US dollars and buy stuff. You must buy with the local currency.

The fact that the US Dollar is the reserve currency changes it.
Countries tend to accumulate excess reserves. That money isn't comming back until those countries get rid of their excess reserves.
Second if A has a permanent trade deficit with countries B and C.
Countries B and C can swap their trade balances while A maintains its trade deficit.

Trade balance a b c Balance
a 0 -6 -3 -9
b 6 0 4 10
c 3 -4 0 -1
0
Trade balance a b c Balance
a 0 -6 -3 -9
b 6 0 -4 2
c 3 4 0 7
( sory about the format , this was pasted from excel )

No, that money does come back. You don't seem to understand how reserve currency works.

Reserve currency, doesn't mean they have a big huge vault somewhere where scrooge McDuck swims through piles of $100 dollar bills.

Not how it works. Most of the reserve currency is in assets that are dollar dominated. Primarily Treasury securities.

It's the money the US government borrowed. By the way, you want to reduce how much reserve currency China holds? Just balance the budget, and start running a surplus, and China's dollar reserves will dwindle.

Now if you doubt that, all you have to do is look up how much US Dollar reserve currency the central bank of China has, and see they list roughly $2 Trillion in US dollar reserves.

Well we know from the fed, that there is only $1.4 Trillion in hard currency. So what the World Bank reports that China has, is a greater amount of US dollars, than what actually exists on the planet.

Moreover, if China had even half that much hard cash in Reserve, then finding a dollar in the US, should be like finding a Unicorn. We should be experiencing so much deflation from the reduced supply of dollars, that a new car should only be $100 by now.

All the money, even the USD reserves, all of it comes back to the US. All of it does.

At no point of my discussion I refered to the bills or hard currency.
My previous table was to exemplify that
a) In order to sustain a trade deficit you need to use credit ( isn't it the same for a household?)
b) That the money you spend doesn't necesarily mean it will translate into investments in the short run.
c) That even if it comes back, it doesn't mean the country with the trade deficit will be better off.

I will say this though : In the absence of debt ( this of course is possible if you had a surplus for several years), a long term trade deficit is not harmfull . This, of course, is not the case for the US right now.
 
You seem to assume I supported the bailout. I don't.

why not???? you're a libturd and libturds support bailouts of failing human beings all the time despite no prospect of ever being paid back and huge moral hazard. The bank/money market/ insurance bailouts prevented a huge depression, were paid back, and required a huge huge loss by many owners, so were an obviousl great deal that libturds ought to support.
I don't really support any kind of bailout Ed. You're preaching to the wrong guy.
 
No they can't spend it anywhere. Reserve currency doesn't change anything. If I'm in China, and I have US dollars, I can't spend it anywhere. Maybe I can buy oil with it. Ok, but the person who sold me the oil from Saudi Arabia.... what can he do with US dollars? Nothing. Well maybe he can buy something from Norway or whatever. Ok, what can Norway do with US dollars? Nothing.

Have you been to these places? I have. You can't buy jack with US dollars. You have to convert to Euros. Or whatever the local legal tender is. You can't go to the UK and whip out your US dollars and buy stuff. You must buy with the local currency.

The fact that the US Dollar is the reserve currency changes it.
Countries tend to accumulate excess reserves. That money isn't comming back until those countries get rid of their excess reserves.
Second if A has a permanent trade deficit with countries B and C.
Countries B and C can swap their trade balances while A maintains its trade deficit.

Trade balance a b c Balance
a 0 -6 -3 -9
b 6 0 4 10
c 3 -4 0 -1
0
Trade balance a b c Balance
a 0 -6 -3 -9
b 6 0 -4 2
c 3 4 0 7
( sory about the format , this was pasted from excel )

No, that money does come back. You don't seem to understand how reserve currency works.

Reserve currency, doesn't mean they have a big huge vault somewhere where scrooge McDuck swims through piles of $100 dollar bills.

Not how it works. Most of the reserve currency is in assets that are dollar dominated. Primarily Treasury securities.

It's the money the US government borrowed. By the way, you want to reduce how much reserve currency China holds? Just balance the budget, and start running a surplus, and China's dollar reserves will dwindle.

Now if you doubt that, all you have to do is look up how much US Dollar reserve currency the central bank of China has, and see they list roughly $2 Trillion in US dollar reserves.

Well we know from the fed, that there is only $1.4 Trillion in hard currency. So what the World Bank reports that China has, is a greater amount of US dollars, than what actually exists on the planet.

Moreover, if China had even half that much hard cash in Reserve, then finding a dollar in the US, should be like finding a Unicorn. We should be experiencing so much deflation from the reduced supply of dollars, that a new car should only be $100 by now.

All the money, even the USD reserves, all of it comes back to the US. All of it does.

At no point of my discussion I refered to the bills or hard currency.
My previous table was to exemplify that
a) In order to sustain a trade deficit you need to use credit ( isn't it the same for a household?)
b) That the money you spend doesn't necesarily mean it will translate into investments in the short run.
c) That even if it comes back, it doesn't mean the country with the trade deficit will be better off.

I will say this though : In the absence of debt ( this of course is possible if you had a surplus for several years), a long term trade deficit is not harmfull . This, of course, is not the case for the US right now.

Which again, the policy I support is cutting the government budget, not spending more because of a recession. Which in turn would mean that we wouldn't be running a deficit.

A: for a household, that's true. For a country, no it's not. Again, all the money comes back one way or another.

For a household, if I buy something, and don't work to get that money back, then it never comes back. If I buy a TV, and then don't work, yeah I'm going to run a deficit.

For a country, if we give someone over there US dollars, the primary use of US dollars is in our economy. The exceptions are world commodities, and that benefits us. It's cheaper for us to buy oil, that is sold in US dollars, than other country to buy oil in US dollars, because they have to pay conversion rates.

But even then, if the dollar is used to pay someone in Saudi Arabia for oil, what do the Saudis use that money for? To buy US made goods, whether it is arms, food, or services. When Halliburton shows up to drill an oil well with US labor, they get paid in dollars. Where did those dollars come from? From international trade. Halliburton has over 50,000 employees, most of which are highly paid, US citizens.

It all comes back. At some point it all comes back. Again, if it didn't, then based on the amount of known hard currency, and the amount of international money reserves, there shouldn't be a single green back left in the entire United States. It MUST be coming back, or everyone everywhere is lying.

Now, I would agree with you that the money coming back doesn't automatically mean you are better off.

True. If the money comes back because the US government is blowing money on green-energy grants to failed projects...... Then no, of course not. Again, this is why I am in favor of cutting the budget, and reducing, even eliminated the deficit.

If the money comes back in government welfare, to pay people to not work. Then no, of course not. Again, this is why I'm against government borrowing anything.

On the other hand, if it comes back in the form of GM being paid to build services in China, or paid by Apple selling Iphones, or paid by Chinese businessmen investing in property, or companies in the US, or the list goes on...... then that is a good thing.

It has nothing to do with the trade deficit. Again, every single time we have had an economic boom in our country, it has been during a time of increasing trade deficits. You can look at the numbers yourself.

And every single time we have had a recession or economic crash, it was during a time of falling trade deficits.

Yes, how the money comes back is very important. Government debt = bad. Investment, purchases and growth = good. But the trade deficit is completely irrelevant.

We can easily have a trade surplus, and have a great depression.

Remember the last time we had a trade surplus? 1975. What happened in 1974? A recession. GDP fell from $5.46T to $5.36T. The next time it got close, was 1981, when it got within $10B of being balanced. What happened in 1981? Recession. GDP fell from $6.59T to $6.49T.

In fact the last time the trade deficit fell under $100 Billion? 1991. What happened then? A recession.

When has pushing down the trade deficit ever been during a good time? Never, not in modern economic history.

You have to go all the way back to the 1950s and 1960s. Well crap... Europe was rebuilding. Of course we had a trade surplus. They were buying everything from us, and we were not buying from this, because they didn't have jack.
 
No , it is not: paying with cash is not the same as paying with credit. Paying with credit actually creates money. The accounting transaction are completely different for both operations:
When paying with cash the assets of one bank decrease and the assets of the other bank increase.
Bank A( -reserves , + liabilities ( deposit))
Bank B( +reserves, - liabilities ( deposit)
When paying with a credit card the assets and and liabilities of one bank remain constant
Assets : (+ Loans , - Reserves), Liabilities ( + deposits , - liabilities ( deposits) )
while the assets of the other bank increase ( + Reserves , - liabilities( deposits) ) .

The operation at bank B is in effect identical to a customer making a deposit. This is the way in which banks create money endogenously.
This operation is not restricted by their reserves, since reserve requirements are checked at the end of the reporting period. At which point the bank will get the reserves from the Fed or borrowing from other bank ( which in turn has already created money endogenously).

Thus banks have by far ,greater power to create money than the Fed.

paying with cash is not the same as paying with credit. Paying with credit actually creates money


Loans increase the money supply. How is that like creating money out of thin air?

At which point the bank will get the reserves from the Fed or borrowing from other bank

Banks that create money out of thin air have no need to get reserves.
Banks that need to borrow in order to loan (the opposite of thin air), do need reserves.

As far as your confused attempt at explaining credit cards, my bank card will reduce my banks reserve balance
and the bank of the store I used it at will see their reserve balance increase. No thin air involved.

Indeed, at this point bank A would have to borrow from the Fed or from bank B, but only 10% of the loan.

But, that would only happen if the customer of Bank A was a household, as there is no reserve requirement for corporate deposits in the US, or to be more precise: for non personal time deposits.

Indeed, at this point bank A would have to borrow from the Fed or from bank B, but only 10% of the loan


Wrong. Loans are fully funded.

as there is no reserve requirement for corporate deposits in the US,

Link?

Fully funded? By my previous example: if $100 were deposited in bank A and a loan was made its balance shee would be:

Liabilities ( deposits ) -100
Assets ( reserves) 0
Assets ( loans ) 100

And bank B:
Assets (reserves ) 100
Liabilities ( deposits ) -100

Bank B can now loan $100 to anyone , even if customer A decided to withdraw all of his funds the next day. In that case the only requirement for bank A would be to borrow $10 from the FED or bank B.


Link:
FRB: Reserve Requirements
Also the first 15 millions are exempt of any reserve requirements.

Fully funded?


Yes. That means that banks can't create money out of thin air to lend.
It means banks have to borrow in order to lend.

Bank B can now loan $100 to anyone , even if customer A decided to withdraw all of his funds the next day. In that case the only requirement for bank A would be to borrow $10 from the FED or bank B.

Nope.
If a customer deposits $100 and withdraws it the next day, the bank would need to borrow $100 to lend $100.

No , that's not how fractional reserve systems work.
The bank must only have enough money to maintain its fractional reserve at the central bank.
Else there would be no money multiplier.
 
paying with cash is not the same as paying with credit. Paying with credit actually creates money

Loans increase the money supply. How is that like creating money out of thin air?

At which point the bank will get the reserves from the Fed or borrowing from other bank

Banks that create money out of thin air have no need to get reserves.
Banks that need to borrow in order to loan (the opposite of thin air), do need reserves.

As far as your confused attempt at explaining credit cards, my bank card will reduce my banks reserve balance
and the bank of the store I used it at will see their reserve balance increase. No thin air involved.

Indeed, at this point bank A would have to borrow from the Fed or from bank B, but only 10% of the loan.

But, that would only happen if the customer of Bank A was a household, as there is no reserve requirement for corporate deposits in the US, or to be more precise: for non personal time deposits.

Indeed, at this point bank A would have to borrow from the Fed or from bank B, but only 10% of the loan


Wrong. Loans are fully funded.

as there is no reserve requirement for corporate deposits in the US,

Link?

Fully funded? By my previous example: if $100 were deposited in bank A and a loan was made its balance shee would be:

Liabilities ( deposits ) -100
Assets ( reserves) 0
Assets ( loans ) 100

And bank B:
Assets (reserves ) 100
Liabilities ( deposits ) -100

Bank B can now loan $100 to anyone , even if customer A decided to withdraw all of his funds the next day. In that case the only requirement for bank A would be to borrow $10 from the FED or bank B.


Link:
FRB: Reserve Requirements
Also the first 15 millions are exempt of any reserve requirements.

Fully funded?


Yes. That means that banks can't create money out of thin air to lend.
It means banks have to borrow in order to lend.

Bank B can now loan $100 to anyone , even if customer A decided to withdraw all of his funds the next day. In that case the only requirement for bank A would be to borrow $10 from the FED or bank B.

Nope.
If a customer deposits $100 and withdraws it the next day, the bank would need to borrow $100 to lend $100.

No , that's not how fractional reserve systems work.
The bank must only have enough money to maintain its fractional reserve at the central bank.
Else there would be no money multiplier.

No , that's not how fractional reserve systems work.

Every loan is fully funded, do you know what that means?

The bank must only have enough money to maintain its fractional reserve at the central bank.


Those reserves clear checks. Do you understand that?
 
Indeed, at this point bank A would have to borrow from the Fed or from bank B, but only 10% of the loan.

But, that would only happen if the customer of Bank A was a household, as there is no reserve requirement for corporate deposits in the US, or to be more precise: for non personal time deposits.

Indeed, at this point bank A would have to borrow from the Fed or from bank B, but only 10% of the loan


Wrong. Loans are fully funded.

as there is no reserve requirement for corporate deposits in the US,

Link?

Fully funded? By my previous example: if $100 were deposited in bank A and a loan was made its balance shee would be:

Liabilities ( deposits ) -100
Assets ( reserves) 0
Assets ( loans ) 100

And bank B:
Assets (reserves ) 100
Liabilities ( deposits ) -100

Bank B can now loan $100 to anyone , even if customer A decided to withdraw all of his funds the next day. In that case the only requirement for bank A would be to borrow $10 from the FED or bank B.


Link:
FRB: Reserve Requirements
Also the first 15 millions are exempt of any reserve requirements.

Fully funded?


Yes. That means that banks can't create money out of thin air to lend.
It means banks have to borrow in order to lend.

Bank B can now loan $100 to anyone , even if customer A decided to withdraw all of his funds the next day. In that case the only requirement for bank A would be to borrow $10 from the FED or bank B.

Nope.
If a customer deposits $100 and withdraws it the next day, the bank would need to borrow $100 to lend $100.

No , that's not how fractional reserve systems work.
The bank must only have enough money to maintain its fractional reserve at the central bank.
Else there would be no money multiplier.

No , that's not how fractional reserve systems work.

Every loan is fully funded, do you know what that means?

The bank must only have enough money to maintain its fractional reserve at the central bank.


Those reserves clear checks. Do you understand that?

Todd,
I owe you an apology for the part regarding the fractional reserve. My bad: confusing the fractional reserve with capital requirements.

On the other hand you are not entirely correct when you say: Every loan is fully funded...

The correct statement would be : Every loan must eventually be fully funded.
As far as I know in the USA that moment is 30 days after the banks report the reserves to the central banks ( I read that somewhere , but I can't find the link ). It is certanly not on a daily basis.

That still means that deposits and credits are only loosely related and by no means represent a ceiling, they are just a reference value. Money creation depends on how optimistic is the bank about getting paid, and of course, since every single bank creates money when extending credit, there should be no shortage of banks that can provide the capital required to fund the loan.

How Banks Create Money - Positive Money
 
Indeed, at this point bank A would have to borrow from the Fed or from bank B, but only 10% of the loan

Wrong. Loans are fully funded.

as there is no reserve requirement for corporate deposits in the US,

Link?

Fully funded? By my previous example: if $100 were deposited in bank A and a loan was made its balance shee would be:

Liabilities ( deposits ) -100
Assets ( reserves) 0
Assets ( loans ) 100

And bank B:
Assets (reserves ) 100
Liabilities ( deposits ) -100

Bank B can now loan $100 to anyone , even if customer A decided to withdraw all of his funds the next day. In that case the only requirement for bank A would be to borrow $10 from the FED or bank B.


Link:
FRB: Reserve Requirements
Also the first 15 millions are exempt of any reserve requirements.

Fully funded?


Yes. That means that banks can't create money out of thin air to lend.
It means banks have to borrow in order to lend.

Bank B can now loan $100 to anyone , even if customer A decided to withdraw all of his funds the next day. In that case the only requirement for bank A would be to borrow $10 from the FED or bank B.

Nope.
If a customer deposits $100 and withdraws it the next day, the bank would need to borrow $100 to lend $100.

No , that's not how fractional reserve systems work.
The bank must only have enough money to maintain its fractional reserve at the central bank.
Else there would be no money multiplier.

No , that's not how fractional reserve systems work.

Every loan is fully funded, do you know what that means?

The bank must only have enough money to maintain its fractional reserve at the central bank.


Those reserves clear checks. Do you understand that?

Todd,
I owe you an apology for the part regarding the fractional reserve. My bad: confusing the fractional reserve with capital requirements.

On the other hand you are not entirely correct when you say: Every loan is fully funded...

The correct statement would be : Every loan must eventually be fully funded.
As far as I know in the USA that moment is 30 days after the banks report the reserves to the central banks ( I read that somewhere , but I can't find the link ). It is certanly not on a daily basis.

That still means that deposits and credits are only loosely related and by no means represent a ceiling, they are just a reference value. Money creation depends on how optimistic is the bank about getting paid, and of course, since every single bank creates money when extending credit, there should be no shortage of banks that can provide the capital required to fund the loan.

How Banks Create Money - Positive Money


As far as I know in the USA that moment is 30 days after the banks report the reserves to the central banks

Report the reserves? Can you translate that?

That still means that deposits and credits are only loosely related and by no means represent a ceiling, they are just a reference value.

Gibberish.

and of course, since every single bank creates money when extending credit, there should be no shortage of banks that can provide the capital required to fund the loan.

And more gibberish.
 
I will say this though : In the absence of debt ( this of course is possible if you had a surplus for several years), a long term trade deficit is not harmfull . This, of course, is not the case for the US right now.

and right now the economy is being harmed???? Where??? How???
 

Forum List

Back
Top