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#61
06-21-2006, 10:25 AM
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Re: \"He who makes the money - makes the rules\"
[ QUOTE ]
Do you just not understand how fractional reserve banking works at all, or what? [/ QUOTE ] I don't understand how the fractional reserve system works - perhaps you can educate me or point me to somewhere that can. As I understand it presently. A bank is permitted to lend ten times the amount of money it has on deposit. So say ACME Bank has $1billion in reserves - it is alowed to lend out $10billion to customers, all it does to acheive this is alter some bits held in a computer system somewhere to increase the balance of the person taking out the loan. Most of the money lent by this system never really materialises - it's not like you take $500000 in cash out of your bank account when you buy your house - in fact these days almost all transactions are conducted with credit or debit cards and very little cash is used any more [I've always wondered why "debit card" is an anagram of "bad credit" but I digress] So ACME bank has lent out it's money and is now owed $10billion - plus interest! - fast forward a few years and ACME bank now has reserves of $10billion - and so on and so forth. All the time it's not really doing all that much apart from lending out money that doesn't exists - trapping it's customers (who mostly borrow money to buy stuff they don't really want or need who have been conditioned to buy that stuff by brainwashing - sorry advertising) in debt - all the time slowly but surely getting a few people richer while most people get poorer. I don't see this as anything other than a monumental fraud. One that not only keeps the masses in check but is also used to keep the poorest nations in stupifyingly large amounts of debt so that they have to spend lots of money on (unbeknownst to them) outdated military technology to keep their borders "secure" while at the same time not allowing them to spend money on things that would greatly improve the life of their citizens by say helping to provide medical care or maybe even clean water or electricity or enough uncontaminated food to eat. The whole world is enslaved to the world banks - all the time collectively growing poorer and poorer while the few capitalist scum that run the banks wallow in ever more wealth that they couldn't physically spend anyway. All of this happens because of fractional reserve banking, it's how the Rothschilds for example get to be very rich and the rest of world scratches about for crumbs. It's not as tho these bankers are even providing a useful service - they are selling money that doesn't exist - if I try selling something that doesn't exist I get locked up for fraud. Whats the difference?? Hence the title of my OP - is my understanding of fractional resevre banking about right or am I way off base somewhere? 
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#62
06-21-2006, 10:35 AM
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Re: \"He who makes the money - makes the rules\"
[ QUOTE ]
So say ACME Bank has $1billion in reserves - it is alowed to lend out $10billion to customers, all it does to acheive this is alter some bits held in a computer system somewhere to increase the balance of the person taking out the loan. [/ QUOTE ] You're missing a key detail here. Once ACME lends out its intial one billion dollars, (actually, $900 million, because it's required to have 10% reserves on hand, in your example), it can't lend out any more. What happens is that the people it lent its money to (or other people) deposit new money at ACME, which they then lend out 90% of. The net result is that the banking system as a whole lends out 10 times as much money as there was to start with, but ACME must have more in deposits and capital than it loans out. The additional loans don't come from nowhere.
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#63
06-21-2006, 11:04 AM
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Re: \"He who makes the money - makes the rules\"
I don't want to get too involved in this thread but this is such a gross misconception that I simple don't have the discipline or whatever to ignore it:
matrix128 writes in part: [ QUOTE ] So ACME bank has lent out it's money and is now owed $10billion - plus interest! - fast forward a few years and ACME bank now has reserves of $10billion - and so on and so forth. All the time it's not really doing all that much apart from lending out money that doesn't exists [/ QUOTE ] Absolutely, totally wrong. The money does exist. Financial instituions implement what's called the carry trade i.e. they borrow short-lend long and make money on the "spread" between interest rates more or less. The degree to which they borrow short term funds and lend long per their "reserves" is the "leverage" they employ. There are many, many ways that financial institutions hedge their risk due to "leverage" as well. Generally speaking investors that are seeking various levels of risk to acheive desired returns are plentiful to accept risk at all levels in fixed income securities. I'm using financial instutions because there are a lot more than banks lending money. You have many misconceptions and a lack of knowledge about the Fed and banking in general.
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#64
06-21-2006, 11:22 AM
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Problem solved :)
here you go [img]/images/graemlins/smile.gif[/img]
The U.S. Mint unveiled the nation's first 24-karat gold coin Tuesday, hoping to capture a sizable share of the global market for pure gold coins. Gold gold gold!
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#65
06-21-2006, 11:55 AM
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Re: \"He who makes the money - makes the rules\"
[ QUOTE ]
who mostly borrow money to buy stuff they don't really want or need who have been conditioned to buy that stuff by brainwashing - sorry advertising [/ QUOTE ] Awfully arrogant of you to think you know what other people want or need.
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#66
06-21-2006, 01:42 PM
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Re: \"He who makes the money - makes the rules\"
[ QUOTE ]
I'm still not sure whether I agree with your assertions about monetary expansion and the investment value of property. [/ QUOTE ] Look, this is really, really simple. When you create more money, the value of everyone else's money goes down. This is because the market reacts to the increase in the money supply, and raises its prices. Money is constantly changing hands through trade. Eventually, everyone will get the new money that was produced. Those who get the money before the prices have increased get richer, and those who get the money after the prices have increased get poorer. Real estate allows one to get closer to the newly created money. It's simple. [ QUOTE ] I'm not sure it's that mysterious. Weird transactional forms aren't going to change the underlying economics of the situation, which is that there isn't much money to lend, so it will be costly. Without loans, very few will be able to afford their own home, and those who can will have to save extensively to do so. It seems like landlordism would be even more prevalent than it is now. [/ QUOTE ] Again, social norms have a lot to do with this. To most young people, you're not "supposed" to own a home in your early twenties. That means you have to "settle down" and live in the same place for thirty years. I've tried talking to all of my friends about the benefits of owning rather than renting (since if you do it in the right place, you are effectively being paid to live), but they don't care. Consequently, the demand for rent increases, and landlords can use stupid kids to pay their mortgages. If more people wanted to own homes young, the market would accomodate them with an increase of small, sensible condominiums in which they could build equity, and the market prices for rent would be lower. It is unreasonable to think that one cannot afford something as simple as a studio apartment to start out with. (laugh all you want, but many of us spent years renting in a studio apartment, with a roommate, at exorbitant cost) It would just take a small loan at most. With equity built, savings can take place toward bigger homes. Effectively, such a strategy is akin to purchasing a home one room at a time. Is this as convenient as buying a large home right out with a FRM? Certainly not. But fiat-driven FRMs are very damaging to those who cannot afford to buy homes in a market of rapidly increasing, investment-driven prices. They are good for the rich, but very, very bad for the poor who suffer the burden of the inflation. They are the ones who pay for the convenient, low interest rates.
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#67
06-21-2006, 02:04 PM
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Re: \"He who makes the money - makes the rules\"
[ QUOTE ]
Look, this is really, really simple. When you create more money, the value of everyone else's money goes down. This is because the market reacts to the increase in the money supply, and raises its prices. Money is constantly changing hands through trade. Eventually, everyone will get the new money that was produced. Those who get the money before the prices have increased get richer, and those who get the money after the prices have increased get poorer. Real estate allows one to get closer to the newly created money. It's simple. [/ QUOTE ] Frankly, I think this is a little too simple. I suspect that the determinant of the price level, particularly for investment-type goods like real estate, is based as much on expectations of the near-future money supply as on experience of the present money supply. Inflation is quite predictable. If people didn't take into account the possible future impact of inflation, they would be stupid. I don't think you get that kind of stupidity in the economy, particularly from the actors that set prices. [ QUOTE ] It is unreasonable to think that one cannot afford something as simple as a studio apartment to start out with. [/ QUOTE ] I know I sure as hell couldn't afford to own a place, however small, in DC.
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#68
06-21-2006, 02:19 PM
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Re: \"He who makes the money - makes the rules\"
[ QUOTE ]
Frankly, I think this is a little too simple. [/ QUOTE ] No, your answer is too complicated. You do realize that whenever new money is created, it necessarily devalues the other money already in the economy, right? [ QUOTE ] I know I sure as hell couldn't afford to own a place, however small, in DC. [/ QUOTE ] You also can't afford to own a place, however small, on a fiat-based FRM, in Beverly Hills. You also can't afford a Porsche. Other cities, such are Raleigh or Denver, have much lower property values and are much easier to own in. People seem to think that it's wrong that they can't afford to make ends meet working multiple jobs when they live in Manhattan, but they don't realize that living in Manhattan is a luxury that, frankly, they just can't afford.
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#69
06-21-2006, 02:30 PM
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Re: \"He who makes the money - makes the rules\"
[ QUOTE ]
You do realize that whenever new money is created, it necessarily devalues the other money already in the economy, right? [/ QUOTE ] Yes. The key is when does it happen? For example, say the Mint announced that in one month's time, helicopters would dump bale after bale of hundred dollar bills over every major city in America, with the goal of doubling the money supply. Do you believe prices tomorrow would rise or stay the same? [ QUOTE ] You also can't afford to own a place, however small, on a fiat-based FRM, in Beverly Hills. You also can't afford a Porsche. Other cities, such are Raleigh or Denver, have much lower property values and are much easier to own in. People seem to think that it's wrong that they can't afford to make ends meet working multiple jobs when they live in Manhattan, but they don't realize that living in Manhattan is a luxury that, frankly, they just can't afford. [/ QUOTE ] Well, thanks to the twin miracles of financing and fiat currency, I can afford to live in DC and get an education. Thank goodness.
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#70
06-21-2006, 02:31 PM
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Re: \"He who makes the money - makes the rules\"
[ QUOTE ]
[ QUOTE ] So say ACME Bank has $1billion in reserves - it is alowed to lend out $10billion to customers, all it does to acheive this is alter some bits held in a computer system somewhere to increase the balance of the person taking out the loan. [/ QUOTE ] You're missing a key detail here. Once ACME lends out its intial one billion dollars, (actually, $900 million, because it's required to have 10% reserves on hand, in your example), it can't lend out any more. What happens is that the people it lent its money to (or other people) deposit new money at ACME, which they then lend out 90% of. The net result is that the banking system as a whole lends out 10 times as much money as there was to start with, but ACME must have more in deposits and capital than it loans out. The additional loans don't come from nowhere. [/ QUOTE ] But they must come from nowhere if that money is lent using "fractional reserve banking" by definition. so ACME bank has loaned out $100million each to customers a,b,c,d,e,f,g,h and i - at the same time ACME bank gets deposits from new customers j,k,l,m,n,o,p,q and r - now it has reserves of $1billion again and can then lend out more money again, up to 10 times the total all this time collecting interest and repayments from the first 9 customers. I still don't see how the money physically exists - it's all digits in a computer. If everyone who has money at a bank turns up on mass closes their accounts and withdraws their money as cash - before too long the bank will be forced to close it's doors and would go out of business. i) what IS money in any case? ii) there isn't enough paper currency in circulation to cover the amount of money that banks supposedly have. Fractional reserve banking is a monumental con. Why can't it work so that ACME bank has $1billion in capital and is then permitted to only lend out $1billion.
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