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Thread: Doug Casey explains how banking is supposed to work vs. how it actually works today

  1. #1

    Doug Casey explains how banking is supposed to work vs. how it actually works today

    Doug Casey explains how banking is supposed to work vs. how it actually works today.

    http://www.internationalman.com/arti...d-for-collapse
    "Paper money has the effect to ruin commerce,oppress the honest, and open the door to every species of fraud and injustice"

    ~GEORGE WASHINGTON



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  3. #2
    Chester Copperpot
    Member

    Um, i like doug casey but this article doesnt tell us anything we dont already know

  4. #3
    "The thought of how far the human race [might] have advanced without government simply staggers the imagination." -Attributed to Doug Casey, 1979

  5. #4
    Oh, this "fractional banking is fraud" nonsense again!

    Yes, it would be fraud IF the contract between the bank & the demand-depositor doesn't disclose that the money will be lent but in case of full disclosure & voluntary agreement between both parties, it's a perfectly legitimate thing. In fact, fractional banking will always exist, especially in a less regulated or unregulated market because markets naturally tend towards optimum use of resources & therefore, markets will try to put to use as much of the idle money as it can.

    The fact that the bank doesn't charge fees or even pays interest on the money deposited should make it obvious to any person with even an iota of sense that the bank is lending it out. If one doesn't want their money to be lent out then for such people, there's this thing called "safe deposit box"!
    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

  6. #5
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    doug casey ludwigs: In addition, gold backed most national currencies at a fixed rate of convertibility.



    (sorry doug, this simply isn't true...people were told/believed this^^..but it was a stinking lie...see steve zarlenga...turn off the stinking glenn beck and alex jones, etc. gold mythologists galore)

    PAUL OR NOTHING...PLEASE UNDERSTAND THOSE NUMBERS ('EVIDENCES OF DEBT') THE BANKSTERS CREATE HAVE BEEN MADE 'LEGAL TENDER'...INDISTINGUISHABLE FROM ANY OTHER 'DOLLARS'...REALITY!!...sheesh..

  7. #6
    Quote Originally Posted by Paul Or Nothing II View Post
    Oh, this "fractional banking is fraud" nonsense again!

    Yes, it would be fraud IF the contract between the bank & the demand-depositor doesn't disclose that the money will be lent but in case of full disclosure & voluntary agreement between both parties, it's a perfectly legitimate thing. In fact, fractional banking will always exist, especially in a less regulated or unregulated market because markets naturally tend towards optimum use of resources & therefore, markets will try to put to use as much of the idle money as it can.

    The fact that the bank doesn't charge fees or even pays interest on the money deposited should make it obvious to any person with even an iota of sense that the bank is lending it out. If one doesn't want their money to be lent out then for such people, there's this thing called "safe deposit box"!
    I think the important, infrequently mentioned, piece of information is whether the money is in a checking account or a savings account. If it's in a savings account the bank can loan it out, if it's in a checking account they have to hold it.

  8. #7
    Quote Originally Posted by H. E. Panqui View Post
    (sorry doug, this simply isn't true...people were told/believed this^^..but it was a stinking lie...see steve zarlenga...turn off the stinking glenn beck and alex jones, etc. gold mythologists galore)
    The national currencies were "supposed to be" backed by gold, & although I don't know a great deal about Casey, I doubt he is oblivious to the fact that governments have always had a habit of reneging on their promises. If anything, that's precisely why socialist monetarists like Zarlenga shouldn't try to deceive people by pretending that we can let the governments create money at will & they won't misuse that power.

    Quote Originally Posted by H. E. Panqui View Post
    PAUL OR NOTHING...PLEASE UNDERSTAND THOSE NUMBERS ('EVIDENCES OF DEBT') THE BANKSTERS CREATE HAVE BEEN MADE 'LEGAL TENDER'...INDISTINGUISHABLE FROM ANY OTHER 'DOLLARS'...REALITY!!...sheesh..
    http://www.treasury.gov/resource-cen...al-tender.aspx
    "the Coinage Act of 1965, specifically Section 31 U.S.C. 5103, entitled "Legal tender," which states: "United States coins and currency (including Federal reserve notes and circulating notes of Federal reserve banks and national banks) are legal tender for all debts, public charges, taxes, and dues."

    Notes & coins approved by the government are "legal tender".

    I've already substantiated in the other thread that Monetary Base is "money", & since fractional banking doesn't increase Monetary Base, it can't be said to be "creating money".

    Fractional banking leads to creation of assets, which can be converted to money but even stocks, bonds & a whole range of assets can be converted to money but that does NOT mean that these assets are money by themselves.
    Demand deposits are NOT money, they are essentially assets that can be converted to money on demand IF the bank has money (otherwise, it may have to freeze withdrawals or as is usually the case, borrow from someone else).
    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

  9. #8
    Quote Originally Posted by Madison320 View Post
    I think the important, infrequently mentioned, piece of information is whether the money is in a checking account or a savings account. If it's in a savings account the bank can loan it out, if it's in a checking account they have to hold it.
    Irrespective of what they are called, I think the terms of the contract & its voluntary nature is more important in establishing legitimacy rather than arbitrary claims of "fraud" that are common amongst many followers of the Austrian School.
    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



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  11. #9
    Quote Originally Posted by Madison320 View Post
    I think the important, infrequently mentioned, piece of information is whether the money is in a checking account or a savings account. If it's in a savings account the bank can loan it out, if it's in a checking account they have to hold it.
    About ten percent of all money is in a demand account (checking account) and about 90% are in "time deposits" so a ten percent reserve requirement (as we have today) should cover that.

    Quote Originally Posted by Paul Or Nothing II View Post
    I've already substantiated in the other thread that Monetary Base is "money", & since fractional banking doesn't increase Monetary Base, it can't be said to be "creating money".
    The "Monetary base" is cash (which obviously banks can't produce) plus bank reserves (which they do control) so banks can increase the monetary base by loaning out less money and keeping more in reserves (which actually reduces the supply of money circulating). They can lower the monetary base by lending that money out (which increases the supply of money circulating while deceasing the Base). Monetary Base is not a very good measure of the money supply.

    During the economic crisis, the monetary base grew rapidly as banks increased reserves- now about $2.5 trillion worth. Before the crisis, the "Monetary Base" was mostly all cash since banks didn't have any significant amounts of reserves.
    Last edited by Zippyjuan; 04-20-2015 at 11:29 AM.

  12. #10
    Quote Originally Posted by Zippyjuan View Post

    The "Monetary base" is cash (which obviously banks can't produce) plus bank reserves (which they do control)
    Bank can't produce cash nor can they produce reserves, so they can't influence Monetary Base - case closed!

    Quote Originally Posted by Zippyjuan View Post
    so banks can increase the monetary base by loaning out less money and keeping more in reserves (which actually reduces the supply of money circulating).
    You just acknowledged that MB = cash + reserves.....
    So money moving from one side (cash) to the other side (reserves) or vice versa does NOT increase/decrease the TOTAL!
    This is basic math!
    Ok, so it's like having two buckets holding 10 liters of water in TOTAL. Now, one bucket may have 1 liter & the other has 9 liters, or one bucket may have 4 liters & the other has 6 liters, & so on BUT no matter how you divide the water between the two buckets, the TOTAL never changes UNTIL more water is added to the whole thing (aka Fed creating & adding more money into the system, if this new money isn't lent then it stands as reserves for the time being, if it's lent & held by public then it stands as cash for the time being).
    So NO, banks can't increase/decrease MB!

    http://www.newyorkfed.org/aboutthefe...int/fed01.html
    To meet the demands of their customers, banks get cash from Federal Reserve Banks. Most medium- and large-sized banks maintain reserve accounts at one of the 12 regional Federal Reserve Banks, and they pay for the cash they get from the Fed by having those accounts debited
    Because banks pay the Fed for cash by having their reserve accounts debited, the level of reserves in the nation's banking system drops when the public's demand for cash rises; similarly, the level rises again when the public's demand for cash subsides and banks ship cash back to the Fed
    The thing you seem to have overlooked is that cash can be converted to reserves & reserves can be converted to cash. When banks ask for cash, their reserves are subtracted by the same amount while when banks send back excess cash, their reserves are increased by the same amount.
    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

  13. #11
    Cash is metal coins and paper money produced at the mint under the US Treasury.

    Reserves are the amounts of money banks have not lent out. If I deposit $100 in the bank and they loan out none of it, they now have $100 more in reserves. If they loan out $90 of it (with a ten percent reserve requirement), they have $10 in reserves. Changing what they lend changes their reserves and changes the Monetary Base.

    Let's look at a Monetary Base chart. Note how slowly and steadily it was increasing. Then the 2009 recession hits and the Fed starts QE. Suddenly bank reserves shot up and so did the Monetary Base. As banks start to loan out more of that money again, the monetary base will decline. It does not mean the money supply shot up suddenly in 2009.



    That spike was caused by higher bank reserves:




    M2 is the most commonly used measure of money supply- not the monetary base. Did it spike along with the monetary base? No, it did not.

    Last edited by Zippyjuan; 04-20-2015 at 01:34 PM.

  14. #12
    Quote Originally Posted by Zippyjuan View Post
    If I deposit $100 in the bank and they loan out none of it, they now have $100 more in reserves. If they loan out $90 of it (with a ten percent reserve requirement), they have $10 in reserves.
    Before depositing:
    Cash $100 + Reserves $0 = MB $100

    After depositing:
    Cash $0 (banks typically hold a little cash for daily transactions but for simplicity's sake, we'll presume all the cash is sent back to Fed-banks) + Reserves $100 = MB $100

    After the loan:
    Cash $90 + Reserves $10 = MB $100

    So, nope, fluctuation in reserves by don't change MB by itself because only Fed can change MB by creating/destroying money.

    You are confused about cause & effect. The increase in MB (caused by Fed adding more money through MBS & what not) led to the higher reserves (because the banks didn't lend all the new money they received from Fed).

    And, posting M2 is pointless because the discussion is about MB & its constituents (reserves + cash).

    Quote Originally Posted by Zippyjuan View Post
    Then the 2009 recession hits and the Fed starts QE. Suddenly bank reserves shot up and so did the Monetary Base.
    The bold part is important. Reserves & MB shot up because Fed started adding more money to the system. So everything I've said holds up. I've already cited a link to NY Fed saying exactly what I've said & if you don't agree then take it up with NY Fed.
    Last edited by Paul Or Nothing II; 04-20-2015 at 02:56 PM. Reason: Missed a word "didn't"
    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

  15. #13
    You are assuming all deposits are cash- the aren't. Only about ten percent of the money supply is actually cash.

    M2 is a money supply measure. Monetary Base is not used as a money supply measure. A lot of people make that mistake.

    You are confused about cause & effect. The increase in MB (caused by Fed adding more money through MBS & what not) led to the higher reserves (because the banks lend all the new money they received from Fed.
    Reserves grew because banks DID NOT loan out all the money the received from the Fed. If they had loaned out all the money they got from the Fed, their excess reserves would be zero and the monetary base would only be all the cash money in the banking system.

    DEFINITION of 'Bank Reserve'

    Bank reserves are the deposits which are not lent out to the bank's clients. A small fraction of the total deposits is held internally by the bank or deposited with the central bank. Minimum reserve requirements are established by central banks in order to ensure that the financial institutions will be able to provide clients with cash upon request.
    http://www.investopedia.com/terms/b/bank-reserve.asp

    The bold part is important. Reserves & MB shot up because Fed started adding more money to the system.
    You are right that the money came from the Fed and that reserves and MB shot up. You are wrong that the banks lent it all out. If it was lent out, it would no longer be part of their reserves so reserves would be lower- not higher.

    Deposits = Loans plus Reserves- the two things the money can be used for. If loans are down, reserves are up. If loans are up (and deposits remain the same) then reserves are down.
    Last edited by Zippyjuan; 04-20-2015 at 02:22 PM.

  16. #14
    Quote Originally Posted by Zippyjuan View Post
    You are wrong....

    No.
    Quote Originally Posted by TheCount View Post
    ...I believe that when the government is capable of doing a thing, it will.
    Quote Originally Posted by Influenza View Post
    which one of yall fuckers wrote the "ron paul" racist news letters
    Quote Originally Posted by Dforkus View Post
    Zippy's posts are a great contribution.




    Disrupt, Deny, Deflate. Read the RPF trolls' playbook here (post #3): http://www.ronpaulforums.com/showthr...eptive-members

  17. #15
    Quote Originally Posted by Zippyjuan View Post
    Reserves grew because banks DID NOT loan out all the money the received from the Fed.
    Firstly, my bad. Bad typing, I missed "didn't" there but I'd already posted the correct thing in the earlier post as well so.....

    Quote Originally Posted by Paul Or Nothing II View Post
    Ok, so it's like having two buckets holding 10 liters of water in TOTAL. Now, one bucket may have 1 liter & the other has 9 liters, or one bucket may have 4 liters & the other has 6 liters, & so on BUT no matter how you divide the water between the two buckets, the TOTAL never changes UNTIL more water is added to the whole thing (aka Fed creating & adding more money into the system, if this new money isn't lent then it stands as reserves for the time being, if it's lent & held by public then it stands as cash for the time being).
    So NO, banks can't increase/decrease MB!
    Quote Originally Posted by Zippyjuan View Post
    You are assuming all deposits are cash- the aren't.
    Re-read the example. $100 are cash BEFORE depositing!

    Quote Originally Posted by Paul Or Nothing II View Post
    Before depositing:
    Cash $100 + Reserves $0 = MB $100

    After depositing:
    Cash $0 (banks typically hold a little cash for daily transactions but for simplicity's sake, we'll presume all the cash is sent back to Fed-banks) + Reserves $100 = MB $100

    After the loan:
    Cash $90 + Reserves $10 = MB $100

    So, nope, fluctuation in reserves by don't change MB by itself because only Fed can change MB by creating/destroying money.
    Quote Originally Posted by Zippyjuan View Post
    Only about ten percent of the money supply is actually cash.
    That's irrelevant because the point is that cash & reserves can be converted back & forth without affecting MB.
    So if we take 10% cash & then the cash + reserves stand at $10 + $90 (MB $100) & when somebody cashes out $5, then reserves fall by $5 & cash increases by $5 ($15 + $85 = MB $100). Again, fluctuation of banks' reserves has no impact on MB; only Fed creating/destroying money can affect MB.

    Quote Originally Posted by Zippyjuan View Post
    You are right that the money came from the Fed and that reserves and MB shot up
    Then that proves my point that MB can only be increased/decreased by Fed, not by fluctuation in bank reserves.

    Again, I've already cited NY Fed on this, & they say exactly what I've said so you have neither a logical nor a factual leg to stand on in this argument.
    Last edited by Paul Or Nothing II; 04-20-2015 at 03:50 PM.
    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

  18. #16
    Then that proves my point that MB can only be increased/decreased by Fed, not by fluctuation in bank reserves.
    The Fed does not tell banks how much to keep in excess reserves. They do set a minimum- the "reserve requirement". Anything over that is "excess reserves". And that counts towards the Monetary Base. (And it is also true that the Fed is encouraging them keeping excess reserves by offering them one quarter of one percent interest on them).

    If a bank chooses to keep more in reserve, the MB goes up. If they later loan out those excess reserves, the MB goes down.

    In the economic crisis, the Fed was not creating reserves by lending money to the banks. It was selling securities to dealers who put the money in banks in the form of deposits. The banks were required to keep their usual ten percent in reserve but they kept a much larger percentage (for a couple of reasons- one was to protect their liquidity and one was because demand for loans dried up- nobody even wanted to borrow money). That led to higher excess reserves and increased MB.

    http://www.frbsf.org/economic-resear...ney-inflation/

    A critical explanation is that banks would rather hold reserves safely at the Fed instead of lending them out in a struggling economy loaded with risk. The opportunity cost of holding reserves is low, while the risks in lending or investing in other assets seem high. Thus, at near-zero rates, demand for reserves can be extremely elastic. The same logic holds for households and businesses. Given the weak economy and heightened uncertainty, they are hoarding cash instead of spending it. In a nutshell, the money multiplier has broken down (see a discussion in Williams 2011a).

    The numbers tell the story. Despite a 200% increase in the monetary base, measures of the money supply have grown only moderately. For example, M2 has increased only 28% over the past four years. Figure 3 shows that the money multiplier—as measured by the ratio of M2 to the monetary base—plummeted in late 2008 and has not recovered since.
    http://thismatter.com/money/banking/...multiplier.htm

    The central bank controls the monetary base and usually controls the reserve requirement. Although banks decide how much excess reserves they will hold, the central bank can influence that decision by the amount of interest that it pays on the reserves.
    and since excess reserves are part of the Monetary Base, banks activities can cause changes in the Monetary Base.



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  20. #17
    You know, truth has literally hit you in the face but you're oblivious to it.

    The text that YOU YOURSELF have quoted says in no uncertain terms that the central bank controls the Monetary Base. IF banks could control Monetary Base then they would have clearly mentioned it in as specific terms as they have mentioned that the central bank controls the Monetary Base.

    Quote Originally Posted by Zippyjuan View Post

    http://thismatter.com/money/banking/...multiplier.htm

    The central bank controls the monetary base
    I don't see any reason for prolonging this discussion any further. You just need to read, & more importantly, make sense of the information available. Good luck.
    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

  21. #18
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    paul or nothing kudlows: Yes, it would be fraud IF the contract between the bank & the demand-depositor doesn't disclose that the money will be lent but in case of full disclosure & voluntary agreement between both parties, it's a perfectly legitimate thing.



    (GOOD GRIEF!!!...how many times must you be told that 'THE DEMAND-DEPOSITOR' AND THE PERSON(s) TO WHOM 'THE MONEY' WAS/IS 'LENT' CAN NOW 'BID IN THE MARKETPLACE,' PAY THEIR TAXES, etc., WITH 'THE SAME MONEY'..the banksters having merely created new 'money'/digits credited to any 'borrower(s)' accounts of their choosing..while not reducing the particular 'demand-depositor' account by the amount of 'the loan'...IN OTHER WORDS, THEY HAVE CREATED/COUNTERFEITED 'NEW MONEY'...GET REAL!...
    Last edited by H. E. Panqui; 04-23-2015 at 07:27 AM.

  22. #19
    Quote Originally Posted by H. E. Panqui View Post

    (GOOD GRIEF!!!...how many times must you be told that 'THE DEMAND-DEPOSITOR' AND THE PERSON(s) TO WHOM 'THE MONEY' WAS/IS 'LENT' CAN NOW 'BID IN THE MARKETPLACE,' PAY THEIR TAXES, etc., WITH 'THE SAME MONEY'..the banksters having merely created new 'money'/digits credited to any 'borrower(s)' accounts of their choosing..while not reducing the particular 'demand-depositor' account by the amount of 'the loan'...IN OTHER WORDS, THEY HAVE CREATED/COUNTERFEITED 'NEW MONEY'...GET REAL!...
    I've already explained this in the other thread, banks hold accounts with Fed which tracks their reserves/money so when a person deposits $100 & the bank lends out $90 & let's say the borrower buys something, & the seller has an account with a different bank then $90 will be moved from the first bank's reserves to the other bank's reserves on the Fed's books. So now, if the depositor tries to spend his $100 then he can't because the bank has only $10, rest of the $90 have been moved to the other bank's reserves/money. Now, the bank may have to take a loan at interest from Fed, & THIS is the point where the new money is created BY FED, not by the bank itself. If the Fed had no power to create money then the bank wouldn't be able to honor the transaction, it might have to issue a temporary freeze on withdrawals if the contract covers it. So fractional banking does NOT create money, central-banking does!
    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

  23. #20
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    Paul or Nothing asserts: Now, the bank may have to take a loan at interest from Fed, & THIS is the point where the new money is created BY FED, not by the bank itself. If the Fed had no power to create money then the bank wouldn't be able to honor the transaction, it might have to issue a temporary freeze on withdrawals if the contract covers it. So fractional banking does NOT create money, central-banking does!



    (..good grief!.....cut with the $moke, please...get real!!...firstly, 'fractional reserve banking' and 'central banking' are concepts/labels..and, OF COURSE, concepts and labels don't 'create money'...only real living people 'create money'...
    ..see 'fallacy of reification'...and they do so, essentially, by 'creating deposits'..(legalized counterfeiting..'fractional reserve lending,' etc....facilitated by a CARTEL OF BANKS/BANKSTERS)

    ...also your very narrow definition of 'money' is a weak reed...i like jerry voorhis' definition:.."Money is anything which people generally use to discharge debt contracts or price contracts--that is, to pay debts or buy goods."

    (...a little tip for republicrats: more jerry voorhis reality, less ludwig theory!..)

    'And it seems to me perfectly in the cards that there will be within the next generation or so a pharmacological method of making people love their servitude, and producing … a kind of painless concentration camp for entire societies, so that people will in fact have their liberties taken away from them but will rather enjoy it, because they will be distracted from any desire to rebel by propaganda, brainwashing, or brainwashing enhanced by pharmacological methods.'
    Aldous Huxley, 1959

  24. #21
    Quote Originally Posted by H. E. Panqui View Post
    more jerry voorhis reality, less ludwig theory!..)
    ]
    I don't know why you think some character from Friday The 13th movies is more credible that Ludwig von Mises but may be that explains why you'd prefer government-issued unbacked fictional money over a market-based gold-standard.

    Nonetheless, the point remains that if banks could create money then they would never have to turn to central-banks as the "lender of last resort". The fact is that banks have to borrow from Fed because banks can't create money, & it's the Fed that creates new money at that point, & lends it out to the banks!
    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

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    Nonetheless, the point remains that if banks could create money then they would never have to turn to central-banks as the "lender of last resort". The fact is that banks have to borrow from Fed because banks can't create money, & it's the Fed that creates new money at that point, & lends it out to the banks!





    (good grief!!..still kicking...stubborn republicrattery..."THE BANKS" 'BORROW FROM THE FED' BECAUSE THEY HAVE CREATED/COUNTERFEITED 'TOO MUCH' MONEY...NOT BECAUSE THEY "CAN'T CREATE MONEY"....btw, an honest understanding of the federal reserve would lead you to the reality that there are thousands of 'commercial banks of issue'...and they are part and parcel of the [incomplete] 'fed' concept under which you appear to labor...

    http://beyondmoney.net/2013/04/22/do...ut-of-nothing/

    Mr. King would have us believe that banks simply take in money from savers and lend it out to borrowers. That is clearly wrong. Even the Federal Reserve, in its own publications, says that,The actual process of money creation takes place primarily in banks.(1) As noted earlier, checkable liabilities of banks are money. These liabilities are customers’ accounts. They increase when customers deposit currency and checks and when the proceeds of loans made by the banks are credited to borrowers’ accounts.

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    “I am afraid the ordinary citizen will not like to be told that the banks can and do create money. And they who control the credit of the nation direct the policy of Governments and hold in the hollow of their hand the destiny of the people.” Reginald McKenna, as Chairman of the Midland Bank, addressing stockholders in 1924.

    “If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks…will deprive the people of all property until their children wake-up homeless on the continent their fathers conquered…. The issuing power should be taken from the banks and restored to the people, to whom it properly belongs.” – Thomas Jefferson in the debate over the Re-charter of the Bank Bill (1809)

    “The study of money, above all other fields in economics, is one in which complexity is used to disguise truth or to evade truth, not to reveal it. The process by which banks create money is so simple the mind is repelled. With something so important, a deeper mystery seems only decent.” John Kenneth Galbraith (1908- ), former professor of economics at Harvard, writing in ‘Money: Whence it came, where it went’ (1975).

  27. #24
    Quote Originally Posted by H. E. Panqui View Post
    "THE BANKS" 'BORROW FROM THE FED' BECAUSE THEY HAVE CREATED/COUNTERFEITED 'TOO MUCH' MONEY...NOT BECAUSE THEY "CAN'T CREATE MONEY"
    Again, if banks could create money, they wouldn't need to borrow from the Fed.

    Anybody that can create money, doesn't need to borrow it. If you can't accept such an obvious fact then I see little reason in continuing this discussion.
    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



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  29. #25
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    Paul or Nothing, here's some reading for you:

    http://en.wikipedia.org/wiki/Fractional-reserve_banking

    In most legal systems, a bank deposit is not a bailment. In other words, the funds deposited are no longer the property of the customer. The funds become the property of the bank, and the customer in turn receives an asset called a deposit account (a checking or savings account). That deposit account is a liability on the balance sheet of the bank. Each bank is legally authorized to issue credit up to a specified multiple of its reserves, so reserves available to satisfy payment of deposit liabilities are less than the total amount which the bank is obligated to pay in satisfaction of demand deposits.
    Fractional-reserve banking ordinarily functions smoothly. Relatively few depositors demand payment at any given time, and banks maintain a buffer of reserves to cover depositors' cash withdrawals and other demands for funds. However, during a bank run or a generalized financial crisis, demands for withdrawal can exceed the bank's funding buffer, and the bank will be forced to raise additional reserves to avoid defaulting on its obligations. A bank can raise funds from additional borrowings (e.g., by borrowing in the interbank lending market or from the central bank), by selling assets, or by calling in short-term loans.

    http://www.bankofengland.co.uk/publi...4/qb14q102.pdf

    "...Commercial banks create money, in the form of bank deposits, by making new loans. When a bank makes a loan, for example to someone taking out a mortgage to buy a house, it does not typically do so by giving them thousands of pounds worth of banknotes. Instead, it credits their bank account with a bank deposit of the size of the mortgage. At that moment, new money is created. For this reason, some economists have referred to bank deposits as ‘fountain pen money’, created at the stroke of bankers’ pens when they approve loans.(1)..."

    ...i hope this helps you out...btw, perhaps sometime you could provide some evidence to bolster your (incorrect) assertion that 'banks don't create money'..


  30. #26
    Let us suppose it is true that banks can create money from thin air and none of that money comes from deposits. A bank wanting to maximize their revenues will want to loan out as much money as possible- more loans= more profits. Deposits cost them money- if they pay interest on that deposit or just to handle the paperwork associated with taking and maintaining those deposits. Loans make them money- they get profit off fees and interest collected on them. That means they want to minimize deposits and maximize loans. What do loans look like in comparison to deposits? Are loans higher than deposits? Let's see. Chart below.

    So why don't loans exceed deposits? Because loans come from deposited money (not created money) and loans are not allowed to exceed deposits (that pesky reserve requirement) by law.


    Source: St. Louis Federal Reserve, Federal Reserve Board of Governors, as of 11/18/2013.

    http://www.marketminder.com/a/fisher...dd33e8731.aspx
    Last edited by Zippyjuan; 05-04-2015 at 12:10 PM.

  31. #27
    Quote Originally Posted by Zippyjuan View Post
    ...loans are not allowed to exceed deposits (that pesky reserve requirement) by law.

    There is de jure "law" and de facto "law." The de jure is textbook, what you cite here. The de facto is what happens in the real world because of loopholes, ambiguity, lack of judicial ruling, etc.

    Making your claim based on the "requirement by law" does not make it so. You'll need something else.
    Quote Originally Posted by TheCount View Post
    ...I believe that when the government is capable of doing a thing, it will.
    Quote Originally Posted by Influenza View Post
    which one of yall fuckers wrote the "ron paul" racist news letters
    Quote Originally Posted by Dforkus View Post
    Zippy's posts are a great contribution.




    Disrupt, Deny, Deflate. Read the RPF trolls' playbook here (post #3): http://www.ronpaulforums.com/showthr...eptive-members

  32. #28
    Quote Originally Posted by H. E. Panqui View Post
    Paul or Nothing, here's some reading for you:

    http://en.wikipedia.org/wiki/Fractional-reserve_banking

    In most legal systems, a bank deposit is not a bailment. In other words, the funds deposited are no longer the property of the customer. The funds become the property of the bank, and the customer in turn receives an asset called a deposit account (a checking or savings account).
    Thanks for pointing out that there's nothing illegal about FRB as it stands.

    Quote Originally Posted by H. E. Panqui View Post
    Fractional-reserve banking ordinarily functions smoothly. Relatively few depositors demand payment at any given time, and banks maintain a buffer of reserves to cover depositors' cash withdrawals and other demands for funds.
    The thing to note is that FRB works fine as long as relatively few depositors demand payments. I've already explained the problem that the banks run into if all of the depositors try to redeem their deposits :
    Quote Originally Posted by Paul Or Nothing II View Post
    I've already explained this in the other thread, banks hold accounts with Fed which tracks their reserves/money so when a person deposits $100 & the bank lends out $90 & let's say the borrower buys something, & the seller has an account with a different bank then $90 will be moved from the first bank's reserves to the other bank's reserves on the Fed's books. So now, if the depositor tries to spend his $100 then he can't because the bank has only $10, rest of the $90 have been moved to the other bank's reserves/money. Now, the bank may have to take a loan at interest from Fed, & THIS is the point where the new money is created BY FED, not by the bank itself.


    Quote Originally Posted by H. E. Panqui View Post
    However, during a bank run or a generalized financial crisis, demands for withdrawal can exceed the bank's funding buffer, and the bank will be forced to raise additional reserves to avoid defaulting on its obligations. A bank can raise funds from additional borrowings (e.g., by borrowing in the interbank lending market or from the central bank), by selling assets, or by calling in short-term loans.
    Notice the fact that the bank needs "reserves" to pay off its depositors, & while the bank may be able to borrow existing reserves from other banks but if unavailable, only central-bank can create NEW reserves & lend them to the bank to meet its obligations to the depositors.

    I refer you to the same wiki article you've posted above :
    http://en.wikipedia.org/wiki/Fractional-reserve_banking
    When a deposit of central bank money is made at a commercial bank, the central bank money is removed from circulation and added to the commercial banks' reserves
    When a loan is made by the commercial bank (which keeps only a fraction of the central bank money as reserves), using the central bank money from the commercial bank's reserves, the m1 money supply expands by the size of the loan.[2] This process is called "deposit multiplication".
    So banks have to have "reserves" ("money") to make loans or to allow its demand-depositers to make payments. So "reserves" (which can only be created by central banks) are the real "money", not loans or demand deposits.




    Quote Originally Posted by H. E. Panqui View Post
    http://www.bankofengland.co.uk/publi...4/qb14q102.pdf

    "...Commercial banks create money, in the form of bank deposits, by making new loans. When a bank makes a loan, for example to someone taking out a mortgage to buy a house, it does not typically do so by giving them thousands of pounds worth of banknotes. Instead, it credits their bank account with a bank deposit of the size of the mortgage. At that moment, new money is created. For this reason, some economists have referred to bank deposits as ‘fountain pen money’, created at the stroke of bankers’ pens when they approve loans.(1)..."

    ...i hope this helps you out...btw, perhaps sometime you could provide some evidence to bolster your (incorrect) assertion that 'banks don't create money'..
    Mainstream economics considers deposits as "money" even though they are just book liabilities, it's a stupid concept but remember it applies to ALL deposits. Just scroll down to page 23 on your Bank of England link & you'll find that they believe that even Certificates of Deposit & Time Deposits ALSO "create money". So if you think FRB "creates money" & its bad then by that same definition, even time deposits & CDs "create money", so do you propose banning ALL lending activity in the economy? (That would be disastrous for the growth of the economy & capitalism in general but then you seem like a socialist so I guess you don't really care.......)
    Last edited by Paul Or Nothing II; 05-10-2015 at 11:36 AM.
    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



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