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

[Andylusion]

The debt is owed by USA.INC and it's subsidiaries. USA.INC was taken into recievership by the IMF in 1950 to provide the 19 essential "gubermint" services and it is a for profit venture....unfortunately, they hide the profits and give us the bill on the corporate credit card to us to pay off.....great business model when you have a country full of dullards.

Yes, the 1% know how to siphon the Treasury and leave us with the debt. Ask Dick Cheney about that. And BTW, where's all the gold that used to be in Fort Knox? Maybe we should ask Cheney about that too...? Why are Congressional committees who ask for access to audit Fort Knox being denied access by ??? persons...?

That was OUR gold and OUR representatives must be allowed access to audit it.

What are you smoking? 37% of taxes are paid by the top 1%. The top 25% pay 85% of all taxes. If it wasn't for them, we wouldn't have a government at all.

It's not OUR gold, it's their gold you stole from them. Our representatives are doing exactly what we tell them to.

That's over 100% , your quote has a total percentage of 122%

The 1% is included in the 25%. The top 25% of all wage earners in the country, pay 85% of all taxes.

You don't add the 37% of taxes paid by the top 1%, with the 85% paid by the top 25%. The 1%, is part of the top 25%.

Then why be redundant?

It isn't.

 

[Andylusion]

Because, in reality, bank loans create deposits. The majority of all money originated from banks.

Because, in reality, bank loans create deposits.

And in reality, so what?
The deposits created by the loans don't reduce the need for other deposits by a single dollar.

That's why I keep coming back to it.
Someone says a bank needs deposits to make a loan, you dishonestly say, no, the loan itself creates the deposit.

The majority of all money originated from banks.

It would be more accurate to look at the original deposit account, not the loan account.

I deposit five $20 FRNs into a new bank.
You come to borrow $80.

The money supply doesn't grow because your "deposit account" has $80 in it for 5 minutes.
It grows because when you're holding the four $20s in your hand, my savings account still has $100 in it.

The deposits created by the loans don't reduce the need for other deposits by a single dollar.

Where did I say it did? Look, the majority of all money originated from loans, which created deposits. So overall, the loans create the deposits. I heard it was 97% somewhere, endogenous money.

Someone says a bank needs deposits to make a loan, you dishonestly say, no, the loan itself creates the deposit.

I never said banks don't need deposits. They still need reserves and have to manage their balance sheet.

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.

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.

 

[Rustic]

A thought provoking read.
Isn't it Time to Stop Calling it “The National Debt”? - Evonomics

What those scare-mongers don’t tell you, and generally don’t even understand: it actually makes almost no sense to call that figure “the national debt.” And no, you’re not on the hook to pay it back.

Imagine this: you’re the queen or king of a sovereign country. You decide to mint and issue a bunch of tin coins that your people will find useful. You use those coins to buy stuff from people in the private sector, and pay them to do work. Voilà, the people have money.
Is your government now in “debt” as a result of that “deficit spending”? Does it have to “pay” something to somebody at some point in the future? Do you have to redeem those coins for wheat or pigs or anything else? Obviously not. There’s just a bunch of money out there that people can use. You’ve made no promise that your treasury will ever redeem those coins for anything. They just circulate.

Those government-issued assets, held by the private sector, are only “liabilities” to the government in the most pettifogging accounting sense. If you “owed” some money that you would never, ever have to pay, would you put that on your balance sheet as a liability? Would it be anything beyond a pro formaentry designed to satisfy some obsessive impulse for accounting closure? A debt that will never be paid off is a very questionable “liability.”

That’s essentially the situation with the U.S. national “debt.” The U.S. issues money by deficit spending. It puts more money into private accounts than it takes out via taxes. The private sector has more balance-sheet assets (but no more liabilities, so it has more “net worth,” the balancing item on the righthand side of its balance sheet). The treasury has made no promises to redeem that new money for…anything (except maybe…different government-issued assets). It’s just out there.

Now it’s true that the U.S. et al operate under an arguably archaic and purely self-imposed rule: their treasuries are required to issue bonds equal to that deficit spending. This is a straightforward asset swap: the private sector gives checking-account deposits (back) to the government, and the government gives bonds in return. Private sector assets and net worth are unaffected by that accounting swap; it just changes the private-sector portfolio mix — more bonds, less “cash.” (Treasury “forces” the private sector to make that collective portfolio-adjusting swap through the simple expedient of selling bonds at an attractive price — a point or two below similar deals in the private sector.)

The same kind of asset swap happens when the Fed “prints money” for quantitative easing. The private sector gives bonds (back) to the government, and the Fed gives “reserves” in return — deposits in banks’ Fed accounts. Sure, the Fed creates those reserves ab nihilo, but they’re not a money injection into the private sector, like deficit spending. They’re just swapped for bonds. That accounting event doesn’t increase private-sector assets or net worth. It just changes the private-sector portfolio mix (more reserves, less bonds).

In any case, the private sector is holding government-issued assets. Whether they consist of bonds, “cash,” or reserves, is it realistic to call that money originally spent into private accounts a “debt” for the government? Is it in any real sense a government “liability” if it will never be redeemed for anything? Would a better term be “government-issued assets,” or similar?

Look at the U.S. and the U.K. as examples. The stock of government-issued assets from those sovereigns has been steadily (though fitfully) increasing for more than two centuries and three centuries, respectively. (And in the handful of cases where the stock was reduced significantly, the result was major economic depressions.) That centuries-long growth pattern could conceivably change at some point, but…why would governments stop issuing financial instruments all of a sudden — exchangeable instruments that their economies need to operate fluidly, and grow — while their economies continue to expand?

The government has committed itself to issuing bonds for archaic reasons, so it needs to roll over its “debt.” Old bonds mature, the government pays them off and issues new ones to replace them. Unendingly, for decades and centuries. But the stock of government-issued assets just keeps growing — as it should and must in a growing economy.

Those government-issued assets are a necessary lubricant for the operation of the private-sector economy. As the economy gets bigger, more of those assets are needed, as a kind of giant “pool” or buffer stock to avoid transactional lockups. (See: Paul Krugman’s babysitting co-op.) Realistically: will government stop issuing that necessary lubricant, or withdraw what it’s already issued, when the economic consequences of doing so are so dire?

It’s common parlance to say that the private sector is “holding government debt.” That’s understandable, since the private sector is holding bonds. But it’s a misnomer, and a pernicious, confusing one. The private sector is (obviously) holding assets on its balance sheet. The “debt,” such as it is, only exists as an offsetting accounting liability on the righthand side of the government balance sheet. (While “holding debt” is a handy verbal shorthand, if you think about it for a moment the usage makes no sense at all. How can you own something you owe? Debt can’t be an asset that you “hold.” It’s a liability.)

The private sector holds (owns) government-issued assets, not liabilities. And even the offsetting liabilities themselves are rather dodgy and iffy accounting entries. The government issues those assets as a public good. In the big picture over decades and centuries, that’s the end of it.

Another key understanding: Those different types of government-issued assets (bonds, “cash,” reserves, etc.) are straightforwardly fungible in the private market — at least at the margin, where it counts. The private sector couldn’t swap all its government bonds for currency or checking deposits at once (nor, realistically, would it). But if an individual bondholder needs cash for real-goods transactions or whatever else, the necessary asset-swap transaction happens with a mouse click. Likewise holders of checking-account deposits: if they want physical currency, their bank stands ready to make the swap; it’s called “withdrawing cash.” If the bank runs short on physical currency, the Federal Reserve provides it on demand in exchange for the bank’s reserves, its account deposits at the Fed. (With the Bureau of Engraving and Printing standing behind the Fed, presses ready to roll as the transactional economy expands.)

Now the private sector’s portfolio mix certainly has economic import (and even more so, changes in that portfolio mix). But that mix is secondary and subsequent to the total stock of various government-issued assets in play — be they bonds, checking deposits, whatever. Without a sufficient pool of those lubricatory assets, the financial economy binds up and freezes.

Which is why you, as queen or king, issued those tin coins in the first place. The economy needs them to operate smoothly. Sure, you got some one-time free labor out of the deal — “seignorage” and all that. But did you benefit? Maybe you used the labor to build roads. Both the roads and the coins are public goods. You just end up, still, as queen or king — of a more prosperous country. That one-time transaction happens — you issue coins and pay people to build roads or whatever (you “deficit spend”). But those coins (or bonds, or whatever) remain out there forever, for generations, doing the good work that needs doing in the economy. Money makes the world go round.

There’s really no reason to call those coins, or any other financial instrument the queen or king chooses to manufacture out of thin air and swap for those coins, “national debt.” Let’s switch to a term that actually describes the things that we ultimately tally up on the lefthand side of our private-sector balance sheets — something like “government-issued assets.”

There are deep political and economic implications to this kind of rethinking and renaming, but I’ll leave those implications to the ruminations of my gentle readers.

Call it socialisms debt...

 

[Dovahkiin]

Because, in reality, bank loans create deposits. The majority of all money originated from banks.

Because, in reality, bank loans create deposits.

And in reality, so what?
The deposits created by the loans don't reduce the need for other deposits by a single dollar.

That's why I keep coming back to it.
Someone says a bank needs deposits to make a loan, you dishonestly say, no, the loan itself creates the deposit.

The majority of all money originated from banks.

It would be more accurate to look at the original deposit account, not the loan account.

I deposit five $20 FRNs into a new bank.
You come to borrow $80.

The money supply doesn't grow because your "deposit account" has $80 in it for 5 minutes.
It grows because when you're holding the four $20s in your hand, my savings account still has $100 in it.

The deposits created by the loans don't reduce the need for other deposits by a single dollar.

Where did I say it did? Look, the majority of all money originated from loans, which created deposits. So overall, the loans create the deposits. I heard it was 97% somewhere, endogenous money.

Someone says a bank needs deposits to make a loan, you dishonestly say, no, the loan itself creates the deposit.

I never said banks don't need deposits. They still need reserves and have to manage their balance sheet.

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.

 

[Dovahkiin]

Because, in reality, bank loans create deposits.

And in reality, so what?
The deposits created by the loans don't reduce the need for other deposits by a single dollar.

That's why I keep coming back to it.
Someone says a bank needs deposits to make a loan, you dishonestly say, no, the loan itself creates the deposit.

The majority of all money originated from banks.

It would be more accurate to look at the original deposit account, not the loan account.

I deposit five $20 FRNs into a new bank.
You come to borrow $80.

The money supply doesn't grow because your "deposit account" has $80 in it for 5 minutes.
It grows because when you're holding the four $20s in your hand, my savings account still has $100 in it.

The deposits created by the loans don't reduce the need for other deposits by a single dollar.

Where did I say it did? Look, the majority of all money originated from loans, which created deposits. So overall, the loans create the deposits. I heard it was 97% somewhere, endogenous money.

Someone says a bank needs deposits to make a loan, you dishonestly say, no, the loan itself creates the deposit.

I never said banks don't need deposits. They still need reserves and have to manage their balance sheet.

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.

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.

Ask the bank of england.

 

[Toddsterpatriot]

Because, in reality, bank loans create deposits.

And in reality, so what?
The deposits created by the loans don't reduce the need for other deposits by a single dollar.

That's why I keep coming back to it.
Someone says a bank needs deposits to make a loan, you dishonestly say, no, the loan itself creates the deposit.

The majority of all money originated from banks.

It would be more accurate to look at the original deposit account, not the loan account.

I deposit five $20 FRNs into a new bank.
You come to borrow $80.

The money supply doesn't grow because your "deposit account" has $80 in it for 5 minutes.
It grows because when you're holding the four $20s in your hand, my savings account still has $100 in it.

The deposits created by the loans don't reduce the need for other deposits by a single dollar.

Where did I say it did? Look, the majority of all money originated from loans, which created deposits. So overall, the loans create the deposits. I heard it was 97% somewhere, endogenous money.

Someone says a bank needs deposits to make a loan, you dishonestly say, no, the loan itself creates the deposit.

I never said banks don't need deposits. They still need reserves and have to manage their balance sheet.

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.

 

[edthecynic]

What happens when the interest rate doubles? Please don't say it is impossible, remember, during the SNAFU, called the Carter administration, he drove interest rates up until they reached 18%.

And they broke 20% under the FUBAR called Reagan.

 

[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."

 

[Andylusion]

Where did I say it did? Look, the majority of all money originated from loans, which created deposits. So overall, the loans create the deposits. I heard it was 97% somewhere, endogenous money.
I never said banks don't need deposits. They still need reserves and have to manage their balance sheet.

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.

Ok! Finally...... something that actually makes sense. THANK YOU TOD. You actually make sense.

All those people saying that banks just magically make money.... Really..... So I walk into a bank. I get a loan. The bank teller GIVES ME CASH.... REAL RAW DOLLAR BILLS.... where does that money from from???

DEPOSITS. PERIOD.

Ugh..... these people. They know so much, that they know nothing.

 

[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.

 

[Norman]

All that text to say that the government has a printing press? (More technically the Federal reserve has one).

Wow...

And guess what happens if the government prints 20 trillion?

Oh... maybe better call it national debt after all.

 

[Norman]

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.

Ok! Finally...... something that actually makes sense. THANK YOU TOD. You actually make sense.

All those people saying that banks just magically make money.... Really..... So I walk into a bank. I get a loan. The bank teller GIVES ME CASH.... REAL RAW DOLLAR BILLS.... where does that money from from???

DEPOSITS. PERIOD.

Ugh..... these people. They know so much, that they know nothing.

I agree that the MMT (Modern Moronitary Theory) people are completely clueless, because they have studied accounting identities so long that they don't even know what the economy is anymore.

Just look at Devahin, fetisizing over that printing press every post. It's all he can think about!!

But the bank does create new credit money when it lends.



Also, the government doesn't have to spend one nickle for there to be monetary base, even in the current system. All that needs to happen is for the Federal reserve to buy anything on the market, or lend some cash to banks. Oops, there goes that theory.

 

[BuckToothMoron]

Because, in reality, bank loans create deposits.

And in reality, so what?
The deposits created by the loans don't reduce the need for other deposits by a single dollar.

That's why I keep coming back to it.
Someone says a bank needs deposits to make a loan, you dishonestly say, no, the loan itself creates the deposit.

The majority of all money originated from banks.

It would be more accurate to look at the original deposit account, not the loan account.

I deposit five $20 FRNs into a new bank.
You come to borrow $80.

The money supply doesn't grow because your "deposit account" has $80 in it for 5 minutes.
It grows because when you're holding the four $20s in your hand, my savings account still has $100 in it.

The deposits created by the loans don't reduce the need for other deposits by a single dollar.

Where did I say it did? Look, the majority of all money originated from loans, which created deposits. So overall, the loans create the deposits. I heard it was 97% somewhere, endogenous money.

Someone says a bank needs deposits to make a loan, you dishonestly say, no, the loan itself creates the deposit.

I never said banks don't need deposits. They still need reserves and have to manage their balance sheet.

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.

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.

 

[Andylusion]

Where did I say it did? Look, the majority of all money originated from loans, which created deposits. So overall, the loans create the deposits. I heard it was 97% somewhere, endogenous money.
I never said banks don't need deposits. They still need reserves and have to manage their balance sheet.

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.

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.

 

[Norman]

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.

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.

You said it yourself.

Buy low sell high.

The same would apply to gold. Just because you know some terrible investors, doesn't mean everybody is one. Also, you don't know much if you assume that having a pile of gold wouldn't be a benefit.

Why would your need a bag of gold, when one coin is enough to buy for the groceries? Anyway, gold is primarily an inflation hedge... but sure you can transact with it better than using stocks or bonds.

 

[BuckToothMoron]

Wow, you took that a lot

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.

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

 

[Andylusion]

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.

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.

You said it yourself.

Buy low sell high.

The same would apply to gold. Just because you know some terrible investors, doesn't mean everybody is one. Also, you don't know much if you assume that having a pile of gold wouldn't be a benefit.

Why would your need a bag of gold, when one coin is enough to buy for the groceries? Anyway, gold is primarily an inflation hedge... but sure you can transact with it better than using stocks or bonds.

But you can't. How exactly do you propose to transact with it better than stocks and bonds? I can pull my money out of my 1,000s of stocks, before midnight tonight. Can you do that with Gold?

And no, one coin isn't even close. Name one store, that takes gold coins as tender for groceries?

Yes it would. Right now gold is High, not low. Last time gold was low, was early to mid 1990s. It's been high for a decade plus. If you have been buying gold in the past 15 years, you have been buying high.

Gold will fall in value. I can almost guarantee it. Just look at the long term value. From the 1970s, the value of gold was falling. Not rising. And why would it? It's a shiny rock.

So unless you bought your gold in the 80s or 90s, you bought high. When the price falls, and it will, you will sell low. The chance of another spike in price unlikely. Global gold production has increased 25% in just the past 4 years. And guess who is leading the pack? China, which has tons of mineral wealth to produce.

You know the rules.... supply and demand. supply is jacking up big time. China is drastically increasing its output. Supply outpaces demand... what happens to value? It falls. That's your future if you are in gold.

 

[Dovahkiin]

Where did I say it did? Look, the majority of all money originated from loans, which created deposits. So overall, the loans create the deposits. I heard it was 97% somewhere, endogenous money.
I never said banks don't need deposits. They still need reserves and have to manage their balance sheet.

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.

 

[Andylusion]

Wow, you took that a lot

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.

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.

 

[BuckToothMoron]

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.

You said it yourself.

Buy low sell high.

The same would apply to gold. Just because you know some terrible investors, doesn't mean everybody is one. Also, you don't know much if you assume that having a pile of gold wouldn't be a benefit.

Why would your need a bag of gold, when one coin is enough to buy for the groceries? Anyway, gold is primarily an inflation hedge... but sure you can transact with it better than using stocks or bonds.

But you can't. How exactly do you propose to transact with it better than stocks and bonds? I can pull my money out of my 1,000s of stocks, before midnight tonight. Can you do that with Gold?

And no, one coin isn't even close. Name one store, that takes gold coins as tender for groceries?

Yes it would. Right now gold is High, not low. Last time gold was low, was early to mid 1990s. It's been high for a decade plus. If you have been buying gold in the past 15 years, you have been buying high.

Gold will fall in value. I can almost guarantee it. Just look at the long term value. From the 1970s, the value of gold was falling. Not rising. And why would it? It's a shiny rock.

So unless you bought your gold in the 80s or 90s, you bought high. When the price falls, and it will, you will sell low. The chance of another spike in price unlikely. Global gold production has increased 25% in just the past 4 years. And guess who is leading the pack? China, which has tons of mineral wealth to produce.

You know the rules.... supply and demand. supply is jacking up big time. China is drastically increasing its output. Supply outpaces demand... what happens to value? It falls. That's your future if you are in gold.

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.

I assume you mean gold will fall in value compared to stocks. I am of the opinion that the stock market is in trouble. It has had a nice run from 2008, but it was assisted with a lot of QE. And instead of companies expanding or growing, many used the new money to buy back their own stock, meaning they felt the best use of their money was their own stock, not hiring more employees or building a new plant, etc. That also propped their stock price. Interest rates have been ridiculously low for years, and not just in the US, Europe and Japan have joined in QE and low interest rate policies.

Looks like a set up for a bubble in stocks, and if so, people will run to gold, they always do. Every shrewd investor has a hedge against losses. But hey, it's your money, pile into stocks and promise not to sell them no matter what.