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Thread: Kucinich And Stephen Zarlenga Anti-Gold Drive

  1. #31
    Quote Originally Posted by dancjm View Post
    Fiat money is money which is not backed by a physical asset, but circulated and used on the basis of legal tender laws.
    Money is physical.

    Just look into your wallet and see it.

    Gold is not backed by anything other than itself, too.

    The definition of fiat being: A formal authorization or proposition; a decree.
    True, but it is still money.

    Debt money is "money" which is in fact not money at all, but debt.
    Correct, which is why it is a grave error to treat it as money, establish monetary policy as if it was money and to make cause/effect calculations of money as if it was money. You will get the wrong answers.

    In fact if I understand correctly, it is not just that a bank creates a debt from the borrower to the bank, but also that the bank creates a debt from the bank to the borrower.
    Correction.... bank to depositor

    So the bank promises to pay the borrower what the borrower promises to pay back to the bank. In effect there is no money, just a whole load of promises to pay (I promise to pay the bearer on demand the sum of XXX)
    Other than depositor/borrower misnaming... it is not money, but a whole lot of promises to pay that must -one day- be reconciled with money.

    As long as the borrower/depositors are matched, eventually everything works out.

    If depositors withdraw or borrowers renege, serious issues occur.

    So if I understand correctly, we have a fiat-debt money system.
    No, we just have fiat money and a fractional reserve system.

    It is important to understand that it is not the fiat nature of modern money that is (necessarily) a problem.

    It is the fractional reserve system that is the significant problem.

    It is a fraudulent system based on deception of the bank upon the depositor. As will all immoral operations, it tends to end badly.



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  3. #32
    Quote Originally Posted by Black Flag View Post
    It is important to understand that it is not the fiat nature of modern money that is (necessarily) a problem.

    It is the fractional reserve system that is the significant problem.

    It is a fraudulent system based on deception of the bank upon the depositor. As will all immoral operations, it tends to end badly.
    There is nothing fraudulent about a fractional reserve system as long as you are aware that the money you have deposited has been lent out. If you don't want it lent out then put it in a safe deposit box and pay storage cost instead of earning interest. This is a choice you have to make and it has nothing to do with fraud.



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  5. #33
    Quote Originally Posted by JBSay View Post
    There is nothing fraudulent about a fractional reserve system as long as you are aware that the money you have deposited has been lent out. If you don't want it lent out then put it in a safe deposit box and pay storage cost instead of earning interest. This is a choice you have to make and it has nothing to do with fraud.
    I would agree with this. The main problem is our current central banking system.

    In a free banking system, banks should still be required to be clear on how the system works.

  6. #34
    Quote Originally Posted by JBSay View Post
    There is nothing fraudulent about a fractional reserve system as long as you are aware that the money you have deposited has been lent out. If you don't want it lent out then put it in a safe deposit box and pay storage cost instead of earning interest. This is a choice you have to make and it has nothing to do with fraud.
    No, the fraud is the promise you can get your money upon demand, and that promise has been made 9 times over per dollar...so, 8 of "you" are going to lose one day.

  7. #35
    Quote Originally Posted by Black Flag View Post
    No, the fraud is the promise you can get your money upon demand, and that promise has been made 9 times over per dollar...so, 8 of "you" are going to lose one day.
    You have a promise you can get access to your money upon demand so long as the bank is solvent and in the case of the US the FDIC is solvent. Depositing money in a bank is akin to buying a rollover bond with instantaneous maturity. Upon maturity you can choose not to roll over your bond and receive payment of the principal. However if in the mean time your debtor becomes insolvent then like any bond holder you will likely suffer a loss.

    If you are not willing to take that risk you have an easy way out : don't buy the "bond". No one is deceiving you.

  8. #36
    Quote Originally Posted by cubical View Post
    What is so manipulated about it? Just because you don't think a price should be where it is, means nothing. The market is greater than you.
    Google "GATA" and start reading.
    Your "debt money" talk would make sense if you truly believe the fed will call in this debt money and eliminate it.
    ?? HUH? It can't do any such thing, as that would cause a deflationary collapse.
    Debt money has done and will cause inflation just as physical money.
    Yes, debt money is inherently inflationary as the creation of the money as debt does not create the money to pay the interest on the debt. More debt is automatically needed.

  9. #37
    Quote Originally Posted by JBSay View Post
    There is nothing fraudulent about a fractional reserve system as long as you are aware that the money you have deposited has been lent out.
    The fraud is precisely that money lent out has not been deposited by anyone but the bank itself, which creates the deposit by lending it. Money deposited by customers is used as reserves, not lent out.

  10. #38
    Quote Originally Posted by Roy L View Post
    The fraud is precisely that money lent out has not been deposited by anyone but the bank itself, which creates the deposit by lending it. Money deposited by customers is used as reserves, not lent out.
    If I deposit $100 the bank owes me $100. If the reserve requirement is 10% the bank can lend out $90 and keep $10 as reserve. Where is the fraud?

  11. #39
    Quote Originally Posted by JBSay View Post
    You have a promise you can get access to your money upon demand so long as the bank is solvent and in the case of the US the FDIC is solvent. Depositing money in a bank is akin to buying a rollover bond with instantaneous maturity. Upon maturity you can choose not to roll over your bond and receive payment of the principal. However if in the mean time your debtor becomes insolvent then like any bond holder you will likely suffer a loss.

    If you are not willing to take that risk you have an easy way out : don't buy the "bond". No one is deceiving you.
    It is not a bond, it is a deposit. It does not "roll over" anything, nor have a maturity.
    Your wishful analogy is dangerously flawed.

    The deposit is based on a promise to redeem upon demand, but the money has been loaned out.

    It cannot both be a loan and be ready to repay my deposit.

    The bank makes a lie - a lie that threatens the banking system.

  12. #40
    Let's loan $10 from my pocket to my friend Steve. Later in the day, Steve's friend John wants to borrow $5 from Steve to buy something and Steve gives it to him. Has fraud occured anywhere along the way? John owes Steve $5 and Steven owes me $10. Have we "created" $15? The actual money circulating is still $10. I don't have $10 and Steve doesn't either- he has $5 and John has $5.

    Now substitute "bank" for Steve.

    If I need to get my money back today, Steve (the bank) will have to get that money from somebody- either he can try to get John to pay him back or he can see if he can borrow (in the case of a bank try to attract more deposits) from somebody else.

    Banks know that not everybody is going to want to be paid back their deposits today so they try to keep enough around so that those who are likely to want their money back today can get it. In the mean time, they can wait for Steve and John to pay back what they borrowed.
    Last edited by Zippyjuan; 04-08-2012 at 04:47 PM.



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  14. #41
    Quote Originally Posted by JBSay View Post
    If I deposit $100 the bank owes me $100. If the reserve requirement is 10% the bank can lend out $90 and keep $10 as reserve. Where is the fraud?
    You're not paying attention. If you deposit $100, the bank uses ALL that money as reserves, and can thus lend out $1000 in brand new debt money that it creates, subject to its ability to cover checks written on those new deposits.

  15. #42
    Quote Originally Posted by Zippyjuan View Post
    Now substitute "bank" for Steve.
    Banks can legally do what Steve legally cannot: create deposits.

  16. #43
    Quote Originally Posted by Roy L View Post
    Banks can legally do what Steve legally cannot: create deposits.
    They can't do that either. A deposit is somebody putting money into the bank. Now if a bank took some of their money and put that into another bank, that would be a deposit. But then, they don't have that money- the other bank does. They can create the account the deposit goes into, but they can't create the deposit itself.

    http://www.investopedia.com/terms/b/...#axzz1rV6x3R3Z
    Definition of 'Bank Deposits'
    Money placed into a banking institution for safekeeping. Bank deposits are made to deposit accounts at a banking institution, such as savings accounts, checking accounts and money market accounts. The account holder has the right to withdraw any deposited funds, as set forth in the terms and conditions of the account. The "deposit" itself is a liability owed by the bank to the depositor (the person or entity that made the deposit), and refers to this liability rather than to the actual funds that are deposited.

    Investopedia explains 'Bank Deposits'
    When someone opens a bank account and makes a deposit of $500 cash, the account holder surrenders legal title to the $500 cash. This cash becomes an asset of the bank; the account becomes a liability. In the United States, the Federal Deposit Insurance Corporation (FDIC) provides deposit insurance that guarantees the deposits of member banks up to $250,000 per depositor, per bank. Member banks are required to place signs visible to the public stating that "deposits are backed by the full faith and credit of the United States Government."

    Read more: http://www.investopedia.com/terms/b/...#ixzz1rV747yyV
    Looks like Roy is on a vacation.
    Last edited by Zippyjuan; 04-08-2012 at 07:45 PM.

  17. #44
    Quote Originally Posted by Zippyjuan View Post
    Banks know that not everybody is going to want to be paid back their deposits today so they try to keep enough around so that those who are likely to want their money back today can get it. In the mean time, they can wait for Steve and John to pay back what they borrowed.
    It isn't that.

    If you promised to pay Steve and John on demand, and then you can't - you lied to them and committed a fraud - that is, an intentional deception made for personal gain as the "Bank" is earning interest on the loans and could only do so by lying to Steve and John

  18. #45
    Quote Originally Posted by Roy L View Post
    You're not paying attention. If you deposit $100, the bank uses ALL that money as reserves, and can thus lend out $1000 in brand new debt money that it creates, subject to its ability to cover checks written on those new deposits.
    No, it does not do that at all.

    It always loans out real money it receives via deposits.

    Deposit $100
    $10 to FED reserve
    $90 out in loan, which borrower buys something, the seller gets the cash, and deposits $90

    Deposit $90
    $9 to FED reserve
    $81 out in loan, which borrower buys something, the seller gets the cash, and deposits $81

    Deposit $81
    $8.10 to FED reserve... and so on.

    So do this over and over, and eventually $100 original money sits in the FED reserve.
    ~$900 is on the banks books as an obligation to the depositor.
    ~$900 is on the banks books earning interest as loans to borrowers.

  19. #46
    Black Flag is correct. I will add that if banks were doing what Roy L described then any amount of new money injected in the banking system no matter how small would infinitely increase the money supply rendering the money worthless as the series he described is not bounded.
    Last edited by JBSay; 04-09-2012 at 03:30 AM.

  20. #47
    LibForestPaul
    Member

    Quote Originally Posted by Black Flag View Post
    No, it does not do that at all.

    It always loans out real money it receives via deposits.
    .
    And that is why the m3 money supply never increase.

  21. #48
    The Fed does not track M3 any longer because they say it gives them no more useful information than M2 and is difficult to calculate though some sites like Shadowstats attampt to calculate their own version of M3 http://www.shadowstats.com/alternate...-supply-charts . It would not be true to say that M3 does not change.

    What is in M3 which is not in M2?

    all other CDs (large time deposits, institutional money market mutual fund balances), deposits of eurodollars and repurchase agreements.
    Large CDs being those over $100,000
    Eurodollar deposits are bank accounts in other countries which are denominated in US Dollars.

    The Money Supply measures are broken down into scales of liquidity and how easily money from them can enter the economy and be spent. M0 is cash plus accounts with the Fed that can be converted into cash. M1 is that plus money in demand accounts (like checking accounts). M2:
    M1 + most savings accounts, money market accounts, retail money market mutual funds, and small denomination time deposits (certificates of deposit of under $100,000).
    http://en.wikipedia.org/wiki/Money_supply
    Last edited by Zippyjuan; 04-12-2012 at 12:43 PM.



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  23. #49
    Quote Originally Posted by Black Flag View Post
    No, it does not do that at all.

    It always loans out real money it receives via deposits.
    Nope. But thanks for sharing your false opinion of how the monetary system works.
    Deposit $100
    $10 to FED reserve
    $90 out in loan, which borrower buys something, the seller gets the cash, and deposits $90

    Deposit $90
    $9 to FED reserve
    $81 out in loan, which borrower buys something, the seller gets the cash, and deposits $81

    Deposit $81
    $8.10 to FED reserve... and so on.

    So do this over and over, and eventually $100 original money sits in the FED reserve.
    ~$900 is on the banks books as an obligation to the depositor.
    ~$900 is on the banks books earning interest as loans to borrowers.
    Repeatedly posting this fictional account does not make it any more accurate.

  24. #50
    Quote Originally Posted by JBSay View Post
    Black Flag is correct.
    No, he is not.
    I will add that if banks were doing what Roy L described then any amount of new money injected in the banking system no matter how small would infinitely increase the money supply rendering the money worthless as the series he described is not bounded.
    False and absurd. It is limited by banks' ability to cover checks drawn on the deposits they create. That is why bundling and reselling mortgages enabled such a rapid increase in debt: banks were constantly getting back liquid demand deposit (debt) money in return for illiquid loans, enabling them to create even more debt money.

  25. #51
    Repeatedly posting this fictional account does not make it any more accurate.
    Other than the reserve portion going to the Federal Reserve (it can also be kept at the bank itself or at the Fed or some combination of both) this IS how it works.

    I deposit $100. I no longer have $100- the bank does. They give me a promise to pay later which is considered a liability for the bank. With a ten percent reserve requirement, the bank can loan out up to $90 of that. Somebody will owe them the $90 so that is counted as an asset and the $10 on reserve is an asset. Now they have $10 and the borrower has $90. If that person A does not need the money at that moment, he can deposit his $90 with the bank. He no longer has $90 but a promise from the bank that they will pay him back his $90 later. On this deposit, the bank can loan out $81 and has to keep $9. Now the bank has $11 and person B has $89. Everybody else has a promise to be paid back.

    Now if I want my $100 back, the bank has to get that money from someplace. They can't make it from nothing. They can get money from a new depositor or from another bank which may have more reserves on hand than required for the amount of loans outstanding or they can borrow from the Federal Reserve until they can attract or borrow more money from some place else.

    What has also happend is that the bank no longer has the $100 deposit they needed to be allowed to have that $90 loan out. They have to keep $10 on hand in reserves to keep that loan out so they also have to get another $10 for reserves.
    Last edited by Zippyjuan; 04-12-2012 at 01:15 PM.

  26. #52
    Quote Originally Posted by Zippyjuan View Post
    They can't do that either.
    They can and do.
    A deposit is somebody putting money into the bank.
    But that "somebody" can be the bank itself, and the money can be newly created.
    They can create the account the deposit goes into, but they can't create the deposit itself.
    Yes, they can. See, "Modern Money Mechanics," published by the US Federal Reserve Bank.
    Definition of 'Bank Deposits'
    Money placed into a banking institution for safekeeping. Bank deposits are made to deposit accounts at a banking institution, such as savings accounts, checking accounts and money market accounts. The account holder has the right to withdraw any deposited funds, as set forth in the terms and conditions of the account. The "deposit" itself is a liability owed by the bank to the depositor (the person or entity that made the deposit), and refers to this liability rather than to the actual funds that are deposited.
    That is objectively false. The money is owed to the deposit holder, not the depositor. You can deposit money into someone else's account, and the bank then owes them the money, not you. That is what banks do when they lend. If the bank is a merchant or investment bank, the money it deposits in the borrower's account is from its own cash account. But under our current monetary system, commercial banks (members of the US Federal Reserve System) usually just write a higher number in the borrower's account if they think they have enough cash and reserves to cover all the checks they expect to be written against their demand deposit liabilities.
    When someone opens a bank account and makes a deposit of $500 cash, the account holder surrenders legal title to the $500 cash. This cash becomes an asset of the bank; the account becomes a liability.
    And when someone takes out a loan, rather than the cash they deposit becoming the bank's asset, the loan itself does. The bank simply exercises a legal privilege of converting illiquid loan assets into liquid demand deposit (debt money) liabilities. If the bank holds the loan, its ability to create more money is limited by its ability to cover checks drawn against the newly created deposits. But if it can liquidate the loan (e.g., by bundling and reselling it), it can turn around and do the same thing again right away, as it then has the cash to cover more checks.

  27. #53
    And when someone takes out a loan, rather than the cash they deposit becoming the bank's asset, the loan itself does.
    Exactly what we said- a loan is an assset for the bank and a deposit a liability. If the loan gets sold that is the same as it being paid off as far as the bank is concerned- they got their money back for it and it is no longer an asset.

  28. #54
    Roy,

    You are a crackpot and do not understand fractional reserve banking whatsoever.

  29. #55
    usually just write a higher number in the borrower's account if they think they have enough cash and reserves to cover all the checks they expect to be written against their demand deposit liabilities.
    This is not true at all.

    They lend only based on the ability to fund the loan with money in their excess reserves or in their capital account.

    The loan functionally reduces their excess reserves or capital account - converts cash as an asset into a loan as an asset for the bank.

  30. #56
    And when someone takes out a loan, rather than the cash they deposit becoming the bank's asset, the loan itself does. The bank simply exercises a legal privilege of converting illiquid loan assets into liquid demand deposit (debt money) liabilities. If the bank holds the loan, its ability to create more money is limited by its ability to cover checks drawn against the newly created deposits. But if it can liquidate the loan (e.g., by bundling and reselling it), it can turn around and do the same thing again right away, as it then has the cash to cover more checks.
    This is where Roy confuses himself.

    He is correct - a loan turns liquid cash (an asset) into a less-liquid debt (also an asset) for the bank.

    He is incorrect to believe a bank has a legal privilege of doing this - anyone can do this, even Roy.

    The limits on Roy is that he can only do this to the amount of cash on hand, since he normally cannot accept deposits. The banking "privilege" exists here - the accepting of money for deposits - not in the lending. Anyone can lend if you have money.

    So, you can see where Roy goes off into lala land with his crackpot theory, because he does not properly understand where a bank "is a bank" - not in lending, but in the acceptance of deposits.

    He is also wrong in believing a bank is unrestrained in making loans as long as it can guess right on how many repayments of deposits it will face. Nothing is further from the truth. Banks have legal limits to the amount of loans that exist and there is no guessing here.

    He is correct that a bank to improve its liquidity will sell its portfolio of loans for cash in hand. But if banks create money out of thin air "debt money" as he says they can - why would this be necessary? He does not answer, because his crack pot theory cannot explain it.



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  32. #57
    Quote Originally Posted by Lafayette View Post
    Oh... i see. So for the sake of argument lets just forget for a second that the bankers and all the other special interests and complexes don't infest and control government. We just put the printing press into the hands of guys who bring us such wonderful things as the patriot act, NDDA, assassinations of US citizens, TSA, the war on drugs, endless foreign wars and 10s of trillions in debt and unfunded liabilities and things will be sooooooo much better....
    +1

    Zarlenga believes in central-planning & Kucinich as we know, is a socialist so they'd love government issuing money!
    So we'd take the power of issuing money from bankers to politicians & bureaucrats! Great, ain't it!
    NOOOOOOOOOOOO!
    History will repeat itself & government will overissue it because guess what, issuing monopolized money is a profitable business & people & their savings will get wiped out by inflation-tax

    The bottomline, be it bankers or government, they're all made up of people, not angels - SELF-INTERESTED people - so they'll use their power to benefit themselves, at the expense of ignorant people who believe in freeloading & that their "leaders" will make their lives so great!
    There is enormous inertia — a tyranny of the status quo — in private and especially governmental arrangements. Only a crisis — actual or perceived — produces real change. When that crisis occurs, the actions that are taken depend on the ideas that are lying around. That, I believe, is our basic function: to develop alternatives to existing policies, to keep them alive and available until the politically impossible becomes politically inevitable
    - Milton Friedman

  33. #58
    LibForestPaul
    Member

    Quote Originally Posted by Zippyjuan;4351524
    I deposit $100. I no longer have $100- the bank does. They give me a promise to pay later which is considered a liability for the bank. With a [I
    ten percent reserve requirement[/I], the bank can loan out up to $90 of that..
    Ohh, that's so cute, a reserve requirement...based on deposits no less...very quaint... I have a Nyan cat here for you, have a rainbow pop-tart, mmm mmmm good.

  34. #59
    Quote Originally Posted by Black Flag View Post
    This is not true at all.
    It is definitely true. See "Modern Money Mechanics" published by the US Federal Reserve.
    They lend only based on the ability to fund the loan with money in their excess reserves or in their capital account.
    As I said: contrary to your false claim, they do not transfer their own money into the borrower's account at the time the loan is made. They simply have to have enough reserves to cover all the checks drawn on that account -- and they can borrow reserves from the Fed.
    The loan functionally reduces their excess reserves or capital account
    It reduces reserves.
    - converts cash as an asset into a loan as an asset for the bank.
    Nope. Those are two totally different things. The latter is what a merchant or investment bank does: act as a financial intermediary or lender on its own account. The role of a commercial bank under the Fed or any equivalent debt money central banking system (such as the original debt money banking system, the BoE) is quite different: it creates demand deposit money by lending it into existence.

  35. #60
    Quote Originally Posted by Black Flag View Post
    He is incorrect to believe a bank has a legal privilege of doing this - anyone can do this, even Roy.
    But that is not what commercial banks do.
    The limits on Roy is that he can only do this to the amount of cash on hand, since he normally cannot accept deposits. The banking "privilege" exists here - the accepting of money for deposits - not in the lending. Anyone can lend if you have money.
    Anyone can lend, it is only commercial banks that can create deposits.
    He is also wrong in believing a bank is unrestrained in making loans as long as it can guess right on how many repayments of deposits it will face. Nothing is further from the truth. Banks have legal limits to the amount of loans that exist and there is no guessing here.
    There are legal limits on both capital adequacy and reserve ratios, but they are not the major limit on lending, as the explosion of subprime loans proved.
    He is correct that a bank to improve its liquidity will sell its portfolio of loans for cash in hand. But if banks create money out of thin air "debt money" as he says they can - why would this be necessary? He does not answer, because his crack pot theory cannot explain it.
    Wrong again. The answer is simple: they can't create debt money out of thin air. They need a debtor, a willing borrower who agrees to repay the money they create, plus interest. That is why when firms and households don't want to go into debt, as they currently do not, the government has to step in and borrow, or the economy will collapse in deflation.

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