Should and will the Fed be abolished?

[Toddsterpatriot]

[I am not confusing money with wealth, it is fractional reserve banking that does so. That is the whole point. Loans should be made with money backed by wealth. Fractional reserve banking has loans made with money backed by nothing.

So loans made under a gold standard would be okay, because that money is "backed by wealth"?

 

[Brutus]

[I am not confusing money with wealth, it is fractional reserve banking that does so. That is the whole point. Loans should be made with money backed by wealth. Fractional reserve banking has loans made with money backed by nothing.

So loans made under a gold standard would be okay, because that money is "backed by wealth"?

actually gold and paper are equally useful and valuable depending on whether the central bank controls the supply of money as well as nature controls the supply of gold. The issue is not whether we have gold or money or both, but whether the centrals bank's mandate is to keep prices at 0% inflation or not.

 

[percysunshine]

Invest in copper.

People are willing to electricute themselves trying to steal it.

 

[ShackledNation]

Either way, no matter what caused problems in Spain, can you explain to me how fractional reserve banking would make the situation in Spain more stable? Considering you just threw out Spain as an example with absolutely no analysis or reasoning behind your claim, for all I know you haven't a clue about it at all.

Fractional reserve or the gold standard can do anything and have any effect depending on how they are managed so the question is silly.
With the experience we have gained to date we now all there is to know about monetary policy:

No. Your answer is a silly fallacy. Answer the question. How would fractional reserve banking have helped the Spanish inflation crisis?

 

[Brutus]

Either way, no matter what caused problems in Spain, can you explain to me how fractional reserve banking would make the situation in Spain more stable? Considering you just threw out Spain as an example with absolutely no analysis or reasoning behind your claim, for all I know you haven't a clue about it at all.

Fractional reserve or the gold standard can do anything and have any effect depending on how they are managed so the question is silly.
With the experience we have gained to date we now all there is to know about monetary policy:

No. Your answer is a silly fallacy. Answer the question. How would fractional reserve banking have helped the Spanish inflation crisis?

as I said reserve banking is just a tool. The effect depends 100% on how it is used. It can be used to create 1000% inflation or deflation.

 

[ShackledNation]

[I am not confusing money with wealth, it is fractional reserve banking that does so. That is the whole point. Loans should be made with money backed by wealth. Fractional reserve banking has loans made with money backed by nothing.

So loans made under a gold standard would be okay, because that money is "backed by wealth"?

What kind of loans? Loans are fine so long as they are not made through fractional reserve banking. If you have banks making more loans that gold reserves exist, then you have fractional reserve banking, so no those loans would not be ok. And again, gold is not wealth either (although it can have other uses besides functioning as a currency). What can be exchanged for gold is wealth. All of the services you provide to the economy are wealth. In exchange for providing that wealth, you get money. That is what it means to make a loan financed by wealth. There is a clear difference between depositing money received from providing wealth and depositing money received out of thin air by bank manipulations or the printing press.

 

[Brutus]

There is a clear difference between depositing money received from providing wealth and depositing money received out of thin air by bank manipulations or the printing press.

oh please, paper is as good as gold as long as the supply is limited. The entire world is committed to paper so give it up please. And do somehthing purposive like support a meaningful paper standard that the liberals can't abuse.

 

[Toddsterpatriot]

[I am not confusing money with wealth, it is fractional reserve banking that does so. That is the whole point. Loans should be made with money backed by wealth. Fractional reserve banking has loans made with money backed by nothing.

So loans made under a gold standard would be okay, because that money is "backed by wealth"?

What kind of loans? Loans are fine so long as they are not made through fractional reserve banking. If you have banks making more loans that gold reserves exist, then you have fractional reserve banking, so no those loans would not be ok. And again, gold is not wealth either (although it can have other uses besides functioning as a currency). What can be exchanged for gold is wealth. All of the services you provide to the economy are wealth. In exchange for providing that wealth, you get money. That is what it means to make a loan financed by wealth. There is a clear difference between depositing money received from providing wealth and depositing money received out of thin air by bank manipulations or the printing press.

Your claims are confusing. How can money be backed by services?
And even if money is backed by services, which you claim is good,
if that money was used to make fractional reserve loans, suddenly
that money would be bad?
Doesn't sound very logical.

 

[Jessica Blume]

End the fractional reserve system.

How would that work? Banks have to hold your entire deposit in reserve? How would anyone get a loan?

Have Congress once again print money interest free and pay off our national debt with the new United States notes and retract Federal Reserve notes.

Congress doesn't pay interest on the money that's printed now, how is your suggestion an improvement? There is currently less than $1 trillion in outstanding FRNs. Hardly enough to pay off the national debt. And if you exchange the new interest free money for the old interest free FRNs, the government wouldn't get any benefit or have any extra to pay off the debt.

First, yes, banks would have to hold your entire deposit, but this would stop the inflation of the money supply. If people stopped getting loans they could not afford, and stopped inflating the money supply, and stopped living on the idea of credit, we wouldn't need loans. At one time, you could buy a home in this country from your government interest free. It wasn't until banks sold the idea of people buying more home than they could afford that created artificial housing bubbles, as that created more demand artificially.

Second, if you paid off the national debt, there would be no money left, because money is debt, and there would still be interest due, which we won't have, of course. So, continuing the madness and growing the debt makes things worse. It is time to cut off the leaching.

End the fed.

 

[Toddsterpatriot]

End the fractional reserve system.

How would that work? Banks have to hold your entire deposit in reserve? How would anyone get a loan?

Have Congress once again print money interest free and pay off our national debt with the new United States notes and retract Federal Reserve notes.

Congress doesn't pay interest on the money that's printed now, how is your suggestion an improvement? There is currently less than $1 trillion in outstanding FRNs. Hardly enough to pay off the national debt. And if you exchange the new interest free money for the old interest free FRNs, the government wouldn't get any benefit or have any extra to pay off the debt.

First, yes, banks would have to hold your entire deposit, but this would stop the inflation of the money supply. If people stopped getting loans they could not afford, and stopped inflating the money supply, and stopped living on the idea of credit, we wouldn't need loans. At one time, you could buy a home in this country from your government interest free. It wasn't until banks sold the idea of people buying more home than they could afford that created artificial housing bubbles, as that created more demand artificially.

Second, if you paid off the national debt, there would be no money left, because money is debt, and there would still be interest due, which we won't have, of course. So, continuing the madness and growing the debt makes things worse. It is time to cut off the leaching.

End the fed.

Yes, crushing the economy and massive deflation would stop the inflation of the money supply.
Right, who needs a loan to buy a house anyway? LOL!
Please provide a link about those interest free homes.
I'm assuming you're posting from the US, not Russia or Cuba.
You are mistaken about the national debt and money supply.

 

[Jessica Blume]

Those videos are funny. And full of errors.
Congress doesn't pay interest on printed money.

That's right. The taxpayers do.

I don't pay interest on the printed money in my wallet.
Who do you pay? How much? Do you mail them a check?

You DO pay interest on the printed money in your wallet by way of income tax.
You/We pay it to the IRS. How much depends on how much you are willing to admit you make. Yes, you mail them a check when you do your income taxes each year.

What did you think your income taxes went for anyway? Wars? Schools? Clean air? Cell phones?

 

[Toddsterpatriot]

That's right. The taxpayers do.

I don't pay interest on the printed money in my wallet.
Who do you pay? How much? Do you mail them a check?

You DO pay interest on the printed money in your wallet by way of income tax.
You/We pay it to the IRS. How much depends on how much you are willing to admit you make. Yes, you mail them a check when you do your income taxes each year.

What did you think your income taxes went for anyway? Wars? Schools? Clean air? Cell phones?

You are mistaken, my income tax is not higher if I have $10,000 cash in my wallet than it would be if I had $12 in my wallet.
The IRS does not charge me interest on the cash in my wallet.
My income taxes currently go to (mostly) wasteful government spending.

 

[expat_panama]

...a steady 2.6% annual inflation which means every day a dollar looses three thousandths of a penny.

That is like saying it is better to die slowly than right away. Rising prices caused by the expansion of the money supply is never a good thing because it devalues savings, making people poorer...

Taking a hundred years to die is better than dying in one year, and we accept the fact that eventual death is mandatory. Other facts we have to accept:

deflation is worse than inflation,

wildly unstable prices from year to year is worse than gradual inflation,

the money supply must expand with a growing economy.​

...42% is nearly half. That is a huge amount. If you had 1,000 in a savings account, it would be reduced to about $578 (in terms of how much it could buy). Even if you had a great interest rate, you still lost a great deal of money you would have obtained with no devaluation...

Setting aside nonexistent nonsensical 'would-haves', real life savings account rates were higher than 2.6% and account buying power increased.

... the issue of stability has to do with the creation of money. Fractional Reserve banking creates money, but so can corrupt governments with control over the money supply...

Now the post reads as if you object to all money creation. Maybe we can just agree that fractional reserve banking is just another way people create money, little different than making gold coins or printing currency.

 

[ShackledNation]

There is a clear difference between depositing money received from providing wealth and depositing money received out of thin air by bank manipulations or the printing press.

oh please, paper is as good as gold as long as the supply is limited. The entire world is committed to paper so give it up please. And do somehthing purposive like support a meaningful paper standard that the liberals can't abuse.

What you quoted had nothing to do with paper vs. gold. And our supply is not limited. It is indefinite.

 

[ShackledNation]

So loans made under a gold standard would be okay, because that money is "backed by wealth"?

What kind of loans? Loans are fine so long as they are not made through fractional reserve banking. If you have banks making more loans that gold reserves exist, then you have fractional reserve banking, so no those loans would not be ok. And again, gold is not wealth either (although it can have other uses besides functioning as a currency). What can be exchanged for gold is wealth. All of the services you provide to the economy are wealth. In exchange for providing that wealth, you get money. That is what it means to make a loan financed by wealth. There is a clear difference between depositing money received from providing wealth and depositing money received out of thin air by bank manipulations or the printing press.

Your claims are confusing. How can money be backed by services?
And even if money is backed by services, which you claim is good,
if that money was used to make fractional reserve loans, suddenly
that money would be bad?
Doesn't sound very logical.

They are confusing because are current banking system has been engraved in our heads as normal and successful. It is not. Here is a list of bank failures since the year 2000. The major banks never fail because they are safeguarded by government (hence bailouts). They are part of the corporatist system.

It all comes down to understanding the purpose of money. Before money, people had to barter. If you had a cow and wanted a pig, you would have to not only find someone who was willing to sell a pig but someone who wanted a cow. Maybe someone would only be willing to sell a pig for two cows. Or maybe all you had was one cow, but you wanted to items each worth half a cow. You couldn't cut up the cow because it would lose all value (unless people wanted it as meat). People would have to find out a commodity that everyone would be willing to exchange their goods and services for. In much of the world, this commodity was gold.

Rather than barter like before, people began to exchange their goods and services simply for gold, and then use that gold to purchase other goods and services they needed. Gold served as a medium of exchange. When you purchased something with gold, you were essentially still bartering. Say you had a cow and wanted a pig. You sold the cow for 10 gold pieces, and bought the pig for 5. Essentially, you bought the pig for half a cow. Because of money, you could divide the wealth of your cow. Today with paper money the same principles apply. If you work for $10 and hour, then each $10 you get represents that hour of work. If you buy something for $10, you are basically exchanging 1 hour of work for whatever item. Many people think like this when deciding whether or not they want something: "I worked 10 hours to get this money. Is it really worth spending?" When money is simply created by the banks, we can get less for each hour we work. That is the result of inflation.

Paper money would never come into existence unless it was originally backed by a market created currency (like gold) or decreed by government (hence the name fiat currency). Would you ever barter for pieces of paper in exchange for your cow? Not unless that paper was a receipt to gold or the actual currency. Today we use paper because government decrees we use paper. It was once exchangeable for gold and silver. Now it is not, and can be created with no restraint.

When you deposit $100 in the bank, you probably worked for that money. Maybe it represented a day's work. Loaning that money out is perfectly fine. But if it is loaned out, you cannot have access to it. If you put $100 in the bank, and they loan out $90, the only way you can ever withdraw more than $10 is if you use the 10% reserves of other banking customers. But the insanity does not stop their. In order to finance the spending of both the debtor and the depositor, banks simply create more money. This created money is loaned out. This is done by making loans financed by deposits of already loaned funds. If a bank loans out $90, and then the debtor deposits that $90, the bank would still have $90. The depositor transferred $90 to the bank. The bank then transferred the $90 to the debtor, who then transferred it back into the bank. But under fractional reserve banking, the bank says there is $180. In order to do this, it must pretend that it never actually loaned out the depositor's funds. On the bank records, the depositor accounts will remain unchanged with every loan made from them, representing just that practice. But the debtor accounts will increase.

When a normal loan is made, the provider of the funds for the loan would not be able to access the funds provided for the loan. Those funds would be in use by the debtor. Under our current system, when you deposit money in a demand deposit, it is not used to create loans but to create money. You always have access to your account. But if your account is used to make loans, how can this be? The solution is to fudge the numbers and create more money. This practice is bizarre at best and fraudulent at worst.

 

[Brutus]

There is a clear difference between depositing money received from providing wealth and depositing money received out of thin air by bank manipulations or the printing press.

oh please, paper is as good as gold as long as the supply is limited. The entire world is committed to paper so give it up please. And do somehthing purposive like support a meaningful paper standard that the liberals can't abuse.

What you quoted had nothing to do with paper vs. gold. And our supply is not limited. It is indefinite.

you mean the supply of paper money is infinite?? Yes, but only until there is a simple law that says paper must be, in effect, as limited as gold with the sole objective of keeping prices steady.

Once that happens all of our problems are solved. So then, what is it that you still don't understand?

 

[Toddsterpatriot]

Paper money would never come into existence unless it was originally backed by a market created currency (like gold) or decreed by government (hence the name fiat currency). Would you ever barter for pieces of paper in exchange for your cow? Not unless that paper was a receipt to gold or the actual currency. Today we use paper because government decrees we use paper. It was once exchangeable for gold and silver. Now it is not, and can be created with no restraint.

You are mistaken. Money creation by commercial banks is restrained first by the amount of their deposits and second by the reserve requirement.

When you deposit $100 in the bank, you probably worked for that money. Maybe it represented a day's work. Loaning that money out is perfectly fine. But if it is loaned out, you cannot have access to it. If you put $100 in the bank, and they loan out $90, the only way you can ever withdraw more than $10 is if you use the 10% reserves of other banking customers.

Yes! So why is that a problem? You already admitted bank runs are no longer an issue.

But the insanity does not stop their. In order to finance the spending of both the debtor and the depositor, banks simply create more money.

Bzzzzt! Wrong. If a bank gave money to both the depositor and borrower such that their reserve requirement at the end of the day was too low, they would simply borrow in the Fed Funds market. In your imaginary world, banks would never need to worry about reserve requirements or too many withdrawals, they would "simply create more money".

This created money is loaned out. This is done by making loans financed by deposits of already loaned funds. If a bank loans out $90, and then the debtor deposits that $90, the bank would still have $90. The depositor transferred $90 to the bank. The bank then transferred the $90 to the debtor, who then transferred it back into the bank. But under fractional reserve banking, the bank says there is $180. In order to do this, it must pretend that it never actually loaned out the depositor's funds. On the bank records, the depositor accounts will remain unchanged with every loan made from them, representing just that practice. But the debtor accounts will increase.

LOL! Make up your mind. Either they "simply create more money" or they need deposits in order to make loans.
And your last point is wrong, the depositor accounts do not remain unchanged.
Every loan in which the borrower keeps the money at the same bank means a new deposit.
$100, first deposit.
$90 borrowed but stays at the bank, $190 in deposits and $90 in loans.
Next loan, $81 borrowed but stays at the bank, $271 in deposits, $171 in loans.
At every point in the cycle, loans are less than deposits.

When a normal loan is made, the provider of the funds for the loan would not be able to access the funds provided for the loan. Those funds would be in use by the debtor. Under our current system, when you deposit money in a demand deposit, it is not used to create loans but to create money. You always have access to your account. But if your account is used to make loans, how can this be? The solution is to fudge the numbers and create more money. This practice is bizarre at best and fraudulent at worst.

The solution is modern banking. If you don't like it, please, don't deposit money into or borrow from a bank. Their is no fraud involved. If you don't realize that banks are in business to take deposits (and pay interest on them) and make loans from those deposits (and charge interest on those loans), you're probably too dumb to open a bank account.

 

[expat_panama]

...a market created currency (like gold) or decreed by government (hence the name fiat currency)...

All currency whether it's metal coins or paper notes is made directly by or by direction from governments. Exchanges of value without currency is bartering.

...Loaning that money out is perfectly fine. But if it is loaned out, you cannot have access to it...

Bonds are by their nature negotiable. Anyone who makes a secure loan gains possession of an asset that can be used for other purchases.

 

[JakeStarkey]

There are a lot of posts out there calling for this and I was wondering how much of the talk was simply show time and how much it was serious.

Nope and never will.

 

[ShackledNation]

oh please, paper is as good as gold as long as the supply is limited. The entire world is committed to paper so give it up please. And do somehthing purposive like support a meaningful paper standard that the liberals can't abuse.

What you quoted had nothing to do with paper vs. gold. And our supply is not limited. It is indefinite.

you mean the supply of paper money is infinite?? Yes, but only until there is a simple law that says paper must be, in effect, as limited as gold with the sole objective of keeping prices steady.

Once that happens all of our problems are solved. So then, what is it that you still don't understand?

If paper money must be as limited as gold, you get a gold standard. Which I would agree with.
As for the objective of money to keep prices steady: not really. The purpose of money is to provide a medium of exchange before anything else. Don't forget that money too has a price.