What Does Your Favorite Republicrat Think About Thi$?

[H. E. Panqui]

....hardly a stinking peep from any r or d creep...

http://cc.shu.edu.tw/~tsungwu/FRS.htm


"...For the credit of this or any nation is squarely based upon and derived from the production of wealth by the nation plus the power of the government to tax. A nation like the United States thus possesses an almost unlimited amount of credit. Otherwise it could not possibly have persuaded investors to buy $480 billion of government securities.

By whatever percentage it can be anticipated that production and hence potential tax revenues will increase as a result of deficit spending, by that same amount the credit of the nation and its government will be increased. This same percentage of the volume of money previously in circulation should appear on the books of the Treasury as a credit entry to be drawn upon just like tax revenues. To do that would be nothing more than rational and proper bookkeeping. It would also be morally right bookkeeping. And it would make some sense of Mr. Nixon's "full employment budget" idea.

But this is not what happens at all. Instead the sovereign government of the United States goes hat in hand to the private banking system and asks it to create the new money that the economy needs. The government gives-the word is used advisedly-it gives to the banking system, including the Federal Reserve banks, government bonds, the debt of all the people. Interest-bearing bonds, that is, bonds bearing as high an interest rate under today's regime as the banks decide to demand. Else they won't buy the bonds. The banks "buy" the bonds with newly created demand deposit entries on their books-nothing more. It is fountain-pen money and considerably more inflationary than would be the same amount of dollar bills created by the government. The deposits the banks create with which to own the people's debt are backed by nothing except the bonds themselves! In other words, they are backed by the credit of the American people.

What the government has "borrowed" from the banks, what the people must for years pay interest on, is nothing more nor less than the credit of the nation, which obviously the nation possessed in the first place or the bonds themselves would be no good!

At long last, a few years ago the Federal Reserve made tacit acknowledgment of these facts. As a direct result of logical and relentless agitation by members of Congress, led by Congressman Wright Patman as well as by other competent monetary experts, the Federal Reserve began to pay to the U.S. Treasury a considerable part of its earnings from interest on government securities. This was done without public notice and few people, even today, know that is being done. It was done, quite obviously, as acknowledgment that the Federal Reserve Banks were acting on the one hand as a national bank of issue, creating the nation's money, but on the other hand charging the nation interest on its own credit-which no true national bank of issue could conceivably, or with any show of justice, dare to do.

But this is only part of the story. And the less discouraging part, at that. For where the commercial banks are concerned, there is no such repayment of the people's money.

When the commercial banks create money, as they do when they acquire government bonds, they levy a tax on every person in the United States. This is so because every new dollar that is created makes every dollar previously in existence worth somewhat less than it was worth before. This is the very heart of inflation.

It is also taxation without representation with a vengeance. Until this system is changed, our debt will continue to skyrocket without limit and the fixing of debt limits by the Congress will continue to be an exercise in utter futility.

What ought to be done?

Banks should lend existing money. But, as the Constitution clearly requires, the money (or credit) of the nation should never be created by any private agency, but by an agency of the nation itself. It is the duty of Congress to provide for this by a carefully drawn statute.

The stock in Federal Reserve Banks should be purchased by the government from their present private bank owners. The Federal Reserve should then become our national bank of issue. It should create reserve Bank Credit as it does now. But that credit should be credited to the United States Treasury, not charged against it and the people as debt. As much such new credit should be created each year as is needed to keep our economy running at or near capacity-and no more than that. A stable price level could result. Then and only then can we expect to overcome recessions, to put our people to work, and do this without the danger of inflation and the ever-increasing debt which are inescapable under the present monetary system.

-Jerry Voorhis, The Strange Case of Richard Milhous Nixon, 1973

[Ronin Truth]

All of my favorite Republicrats are dead.

[Ralph Coffman]

"the money (or credit) of the nation should never be created by any private agency". - Explains EXACTLY the Heart of the entire Petro Dollar Ponzi Scheme!

[Zippyjuan]

At long last, a few years ago the Federal Reserve made tacit acknowledgment of these facts. As a direct result of logical and relentless agitation by members of Congress, led by Congressman Wright Patman as well as by other competent monetary experts, the Federal Reserve began to pay to the U.S. Treasury a considerable part of its earnings from interest on government securities. This was done without public notice and few people, even today, know that is being done. It was done, quite obviously, as acknowledgment that the Federal Reserve Banks were acting on the one hand as a national bank of issue, creating the nation's money, but on the other hand charging the nation interest on its own credit-which no true national bank of issue could conceivably, or with any show of justice, dare to do.

If the Fed is giving interest paid on US Treasuries it owns back to the US Treasury (which they do- along with most of their other profits), that means that they are NOT charging the country interest on their own credit but returning any interest paid to them.
http://www.forbes.com/sites/samantha...-u-s-treasury/

Fed Sending $98.7 Billion Of 2014 Profits To U.S. Treasury

The stock in Federal Reserve Banks should be purchased by the government from their present private bank owners. The Federal Reserve should then become our national bank of issue.

Federal Reserve shares are not the same as stock shares- they are membership fees and not ownership. If a bank wishes to join the Federal Reserve banking system, they must put up as collateral ten percent of their bank assets- if they are worth $100 billion, they must give the Fed $10 billion. In exchange, they are given "shares". But unlike stock shares, these shares do not change in value. They do not carry any rights like voting or control over the "company". They cannot be traded, bought or resold to anybody else other than back to the Fed. The only similarity to a corporate stock issue is that they do pay dividends- a six percent annual dividend. http://www.federalreserve.gov/faqs/about_14986.htm

Then and only then can we expect to overcome recessions, to put our people to work, and do this without the danger of inflation and the ever-increasing debt which are inescapable under the present monetary system.

No economic or monetary or governmental system has been able to overcome (avoid) recessions. They are always inescapable.

[Paul Or Nothing II]

I disagree with Zippy on like 90% of the issues but I largely agree with what he's said above.

Arguing that Fed is "private" is ridiculous because just how many "private" corporations do you think were created through an act of Congress? It was created by the government & therefore is a government department, no different than IRS or Treasury or whatever. Calling Fed "private" is an affront to private markets, calling Fed "private" only plays into the hands of liberals, who believe "private" things are bad. So, no, Fed isn't "private" at all, not in a real sense anyway.

The MYTH that "Fed charges interest to the government" has been repeatedly debunked on these forums for many a years. Fed hands over nearly all of its profits to the Treasury, & those profits include the interest that Fed supposedly "charged" government with, so that interest just goes right back to the Treasury anyway.

And, what "solution" does the author suggest? That we should turn Fed into a "national bank of issue" & then it should continue creating enough money out of thin air "to keep the economy running". Well, I got news for the author, the economy does NOT need a constant supply of new money! A REAL solution would be to allow a free market in money so that people are free to use gold, silver, bitcoins or whatever they want!

[H. E. Panqui]

Zippyjuan writes: If the Fed is giving interest paid on US Treasuries it owns back to the US Treasury (which they do- along with most of their other profits), that means that they are NOT charging the country interest on their own credit but returning any interest paid to them.


(you missed this: "..But this is only part of the story. And the less discouraging part, at that. For where the commercial banks are concerned, there is no such repayment of the people's money.

When the commercial banks create money, as they do when they acquire government bonds, they levy a tax on every person in the United States. This is so because every new dollar that is created makes every dollar previously in existence worth somewhat less than it was worth before. This is the very heart of inflation..."



Ronin Truth writes: All of my favorite Republicrats are dead.


(i'm with you there, brother!!...although i sense most of them were cretinous puppets too!)

[H. E. Panqui]

paul/nothing writes: The MYTH that "Fed charges interest to the government" has been repeatedly debunked on these forums for many a years.



(...aha..so you admit to beating strawmen to death!...casting red herrings...etc....i must admit this is maybe the most fun i've had engaging about monetary realism...(at least trying to bring reality, rather than ludwig, etc. theory, to the table..you know, for once..

"In purchasing offerings of Government bonds the banking system as a whole creates new money, or bank deposits. When the banks buy a billion dollars of Government bonds as they are offered-and you have to consider the banking system as a whole--as a unit--the banks credit the deposit account of the Treasury with a billion dollars. They debit their Government bond account a billion dollars, or they actually create, by a bookkeeping entry, a billion dollars." - MARRINER ECCLES, Chairman of the Board of Governors, Federal Reserve, 1935

...ah...the $ilence of the republicrat lamb$..or maybe clams...

[Madison320]

I disagree with Zippy on like 90% of the issues but I largely agree with what he's said above.

Arguing that Fed is "private" is ridiculous because just how many "private" corporations do you think were created through an act of Congress? It was created by the government & therefore is a government department, no different than IRS or Treasury or whatever. Calling Fed "private" is an affront to private markets, calling Fed "private" only plays into the hands of liberals, who believe "private" things are bad. So, no, Fed isn't "private" at all, not in a real sense anyway.

The MYTH that "Fed charges interest to the government" has been repeatedly debunked on these forums for many a years. Fed hands over nearly all of its profits to the Treasury, & those profits include the interest that Fed supposedly "charged" government with, so that interest just goes right back to the Treasury anyway.

And, what "solution" does the author suggest? That we should turn Fed into a "national bank of issue" & then it should continue creating enough money out of thin air "to keep the economy running". Well, I got news for the author, the economy does NOT need a constant supply of new money! A REAL solution would be to allow a free market in money so that people are free to use gold, silver, bitcoins or whatever they want!

Good post!

I totally agree. I hate it when I read comments on yahoo or anywhere else that mentions the Fed is private. As if that's somehow the problem. If the Fed was really private, acting as just another private bank, then it would be a good thing. But the Fed is not private in a meaningful, free market way. It's a government created monopoly. The government forces us to use the Federal Reserve Notes so we don't have a choice to use another currency if we feel the the dollar is being debased.

[Zippyjuan]

Good post!

I totally agree. I hate it when I read comments on yahoo or anywhere else that mentions the Fed is private. As if that's somehow the problem. If the Fed was really private, acting as just another private bank, then it would be a good thing. But the Fed is not private in a meaningful, free market way. It's a government created monopoly. The government forces us to use the Federal Reserve Notes so we don't have a choice to use another currency if we feel the the dollar is being debased.

Maybe we should put Morgan Stanley in charge of it.

[H. E. Panqui]

madison 320 asserts: "Good post! I totally agree. I hate it when I read comments on yahoo or anywhere else that mentions the Fed is private..."



...'private' is another stinking republicrat 'term of art'...more ellen, less ludwig, boys!..

http://www.globalresearch.ca/who-own...-reserve/10489

“Some people think that the Federal Reserve Banks are United States Government institutions. They are private monopolies which prey upon the people of these United States for the benefit of themselves and their foreign customers; foreign and domestic speculators and swindlers; and rich and predatory money lenders.”

– The Honorable Louis McFadden, Chairman of the House Banking and Currency Committee in the 1930s.....

.....Not Private and Not for Profit?The Fed’s website insists that it is not a private corporation, is not operated for profit, and is not funded by Congress. But is that true? The Federal Reserve was set up in 1913 as a “lender of last resort” to backstop bank runs, following a particularly bad bank panic in 1907. The Fed’s mandate was then and continues to be to keep the private banking system intact; and that means keeping intact the system’s most valuable asset, a monopoly on creating the national money supply. Except for coins, every dollar in circulation is now created privately as a debt to the Federal Reserve or the banking system it heads.4 The Fed’s website attempts to gloss over its role as chief defender and protector of this private banking club, but let’s take a closer look. The website states:* “The twelve regional Federal Reserve Banks, which were established by Congress as the operating arms of the nation’s central banking system, are organized much like private corporations – possibly leading to some confusion about “ownership.” For example, the Reserve Banks issue shares of stock to member banks. However, owning Reserve Bank stock is quite different from owning stock in a private company. The Reserve Banks are not operated for profit, and ownership of a certain amount of stock is, by law, a condition of membership in the System. The stock may not be sold, traded, or pledged as security for a loan; dividends are, by law, 6 percent per year.”* “[The Federal Reserve] is considered an independent central bank because its decisions do not have to be ratified by the President or anyone else in the executive or legislative branch of government, it does not receive funding appropriated by Congress, and the terms of the members of the Board of Governors span multiple presidential and congressional terms.”* “The Federal Reserve’s income is derived primarily from the interest on U.S. government securities that it has acquired through open market operations. . . . After paying its expenses, the Federal Reserve turns the rest of its earnings over to the U.S. Treasury.”5So let’s review:1. The Fed is privately owned.Its shareholders are private banks. In fact, 100% of its shareholders are private banks. None of its stock is owned by the government.2. The fact that the Fed does not get “appropriations” from Congress basically means that it gets its money from Congress without congressional approval, by engaging in “open market operations.”Here is how it works: When the government is short of funds, the Treasury issues bonds and delivers them to bond dealers, which auction them off. When the Fed wants to “expand the money supply” (create money), it steps in and buys bonds from these dealers with newly-issued dollars acquired by the Fed for the cost of writing them into an account on a computer screen. These maneuvers are called “open market operations” because the Fed buys the bonds on the “open market” from the bond dealers. The bonds then become the “reserves” that the banking establishment uses to back its loans. In another bit of sleight of hand known as “fractional reserve” lending, the same reserves are lent many times over, further expanding the money supply, generating interest for the banks with each loan. It was this money-creating process that prompted Wright Patman, Chairman of the House Banking and Currency Committee in the 1960s, to call the Federal Reserve “a total money-making machine.” He wrote:“When the Federal Reserve writes a check for a government bond it does exactly what any bank does, it creates money, it created money purely and simply by writing a check.”3. The Fed generates profits for its shareholders.The interest on bonds acquired with its newly-issued Federal Reserve Notes pays the Fed’s operating expenses plus a guaranteed 6% return to its banker shareholders. A mere 6% a year may not be considered a profit in the world of Wall Street high finance, but most businesses that manage to cover all their expenses and give their shareholders a guaranteed 6% return are considered “for profit” corporations.In addition to this guaranteed 6%, the banks will now be getting interest from the taxpayers on their “reserves.” The basic reserve requirement set by the Federal Reserve is 10%. The website of the Federal Reserve Bank of New York explains that as money is redeposited and relent throughout the banking system, this 10% held in “reserve” can be fanned into ten times that sum in loans; that is, $10,000 in reserves becomes $100,000 in loans. Federal Reserve Statistical Release H.8 puts the total “loans and leases in bank credit” as of September 24, 2008 at $7,049 billion. Ten percent of that is $700 billion. That means we the taxpayers will be paying interest to the banks on at least $700 billion annually – this so that the banks can retain the reserves to accumulate interest on ten times that sum in loans.The banks earn these returns from the taxpayers for the privilege of having the banks’ interests protected by an all-powerful independent private central bank, even when those interests may be opposed to the taxpayers’ — for example, when the banks use their special status as private money creators to fund speculative derivative schemes that threaten to collapse the U.S. economy. Among other special benefits, banks and other financial institutions (but not other corporations) can borrow at the low Fed funds rate of about 2%. They can then turn around and put this money into 30-year Treasury bonds at 4.5%, earning an immediate 2.5% from the taxpayers, just by virtue of their position as favored banks. A long list of banks (but not other corporations) is also now protected from the short selling that can crash the price of other stocks..."

[Zippyjuan]

Lots to look at. To keep it simple I will just take the last bit. Ignoring that the interest rate figures are way out of date- that really isn't relevant anyways.

Among other special benefits, banks and other financial institutions (but not other corporations) can borrow at the low Fed funds rate of about 2%. They can then turn around and put this money into 30-year Treasury bonds at 4.5%, earning an immediate 2.5% from the taxpayers, just by virtue of their position as favored banks. A long list of banks (but not other corporations) is also now protected from the short selling that can crash the price of other stocks..."

Since they can make this huge markup borrowing money from the Fed, they must have trillions borrowed to take advantage of this. They would be stupid not to take advantage of the free profits. How much is currently borrowed from the Fed Discount Window? As of April 2nd, total Discount Window borrowing outstanding is a massive $20 million. Yes, million with an "M", not billions with a "B". Borrowing is typically only used to meet short term needs (loans are overnight- not 30 years) when their loans are too high compared to their deposits to meet the reserve requirements.

Link: https://research.stlouisfed.org/fred2/series/DISCBORR

Discount Window Borrowings of Depository Institutions from the Federal Reserve

2015-03: 0.020 Billions of Dollars (+ see more)
Monthly, Not Seasonally Adjusted, DISCBORR, Updated: 2015-04-02 3:41 PM CDT

[Zippyjuan]

Notes pays the Fed’s operating expenses plus a guaranteed 6% return to its banker shareholders. A mere 6% a year may not be considered a profit in the world of Wall Street high finance, but most businesses that manage to cover all their expenses and give their shareholders a guaranteed 6% return are considered “for profit” corporations.

How that six percent works- it is not six percent of Fed profits or of an profits. When a bank wants to join the Federal Reserve system and have access to their services, they have to pay a membership fee. That fee is ten percent of their total assets. If they are worth $10 billion, they must cough up $1 billion. They get "shares" which cannot be traded or sold and don't have any rights. In exchange, they get a dividend on the value of those shares (in this case $1 billion) of six percent. Six percent of the money they gave to the Fed- not six percent of an profits. In our example, $60 million for their $1 billion. I doubt $60 million will cover all the costs of a $10 billion bank.

Any profits the Fed does take in (less expenses) is turned over to the US Treasury.

[Paul Or Nothing II]

(...aha..so you admit to beating strawmen to death!...

Do you even know what a straw man even means? The text you've posted clearly says that Fed charges interest to the government & I've rightly pointed out that it's untrue. Your text says that Fed is "private", which it clearly isn't as it was created by an act of Congress, & it's by the decree of government that it has the magical powers of creating money out of thin air & a complete monopoly over its issue, not to mention a complete control over the banking industry to prevent competition.

It was done, quite obviously, as acknowledgment that the Federal Reserve Banks were acting on the one hand as a national bank of issue, creating the nation's money, but on the other hand charging the nation interest on its own credit-which no true national bank of issue could conceivably, or with any show of justice, dare to do.

Another thing to notice is that the author of the text posted in the OP, Jerry Voorhis, was a socialist Democrat, who supported authoritarian New Deal policies of FDR & Wikipedia mentions him as having had one of the most liberal Congressional voting records!

Just out of curiosity, Panqui, as someone who thinks Mises was an idiot, & admires socialists like Zarlenga & Voorhis, what exactly do you hope to achieve? Do you really hope to convert people on this forum to socialism? Do you hope to "enlighten" them to support Congress-issued paper money instead of being "stupid goldbugs"? I'm really curious.

[Paul Or Nothing II]

Good post!

I totally agree. I hate it when I read comments on yahoo or anywhere else that mentions the Fed is private. As if that's somehow the problem. If the Fed was really private, acting as just another private bank, then it would be a good thing. But the Fed is not private in a meaningful, free market way. It's a government created monopoly. The government forces us to use the Federal Reserve Notes so we don't have a choice to use another currency if we feel the the dollar is being debased.

+1

Maybe we should put Morgan Stanley in charge of it.

Putting Morgan Stanley in-charge wouldn't change anything, the real problem as noted by Madison320 is that it's a government-backed monopoly.

[H. E. Panqui]

...zippy, methinks even you couldn't get jeffrey dahmer off...nor can you defend this gd monetary abomination going on under our noses...btw, how strong is your faith (and why) in the veracity of those number$ you assert?..

...let me drag you folks back to ground..do you deny that 'the (commercial) banksters' are 'allowed' to 'create deposits' (counterfeit) in order to acquire interest-bearing US Treasury Bonds?...


...in other words, whereas others and/or their brokers must bid for the bond$ using money they've acquired honestly...the banksters can get bonds for nothing..

[H. E. Panqui]

paul or nothing becks and joneses : Just out of curiosity, Panqui, as someone who thinks Mises was an idiot, & admires socialists like Zarlenga & Voorhis, what exactly do you hope to achieve? Do you really hope to convert people on this forum to socialism? Do you hope to "enlighten" them to support Congress-issued paper money instead of being "stupid goldbugs"? I'm really curious.



...please provide evidence i think mises was an idiot...btw, i favor about one tenth, or less, the government ?your guy, rand paul, favors..what ism does that make you/him?..

...btw, if you know of a better monetary historian than steve zarlenga, please name the name...

[Occam's Banana]

Just out of curiosity, Panqui, as someone who thinks Mises was an idiot, & admires socialists like Zarlenga & Voorhis, what exactly do you hope to achieve? Do you really hope to convert people on this forum to socialism? Do you hope to "enlighten" them to support Congress-issued paper money instead of being "stupid goldbugs"? I'm really curious.

It may be best policy not to take too (or at all) seriously the pronouncements issued by someone whose moniker is a play on "hanky panky."

(Of course, this is coming from someone who goes by the handle "Occam's Banana," so ...)

[Zippyjuan]

...zippy, methinks even you couldn't get jeffrey dahmer off...nor can you defend this gd monetary abomination going on under our noses...btw, how strong is your faith (and why) in the veracity of those number$ you assert?..

...let me drag you folks back to ground..do you deny that 'the (commercial) banksters' are 'allowed' to 'create deposits' (counterfeit) in order to acquire interest-bearing US Treasury Bonds?...


...in other words, whereas others and/or their brokers must bid for the bond$ using money they've acquired honestly...the banksters can get bonds for nothing..

Only the Federal Reserve can do that. Commercial banks cannot. And the Fed doesn't keep the interest they collect.

[H. E. Panqui]

...thank-you for your honestly and willingness to engage, zippy..an extreme rarity...i sense you won't pull the 'republicrat retreat':...sit back and snipe like a loud crow on a telephone line or pull the 'republicrat octopus retreat' where you retreat back into some deep, dark recess and emit gobs of inky verbiage..(a VERY common spectacle among republicrat monetary ignoramusses who engage on political bulletin boards...


zippy asserts: 'Only the Federal Reserve can do that. Commercial banks cannot. And the Fed doesn't keep the interest they collect.'



...help me..do you deny 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."

http://www.rpoth.at/docs/modern_money_mechanics_us.html

...or are you saying, 'yes commercial banks create our money but they can't purchase bonds with this money' or 'they can purchase bonds but don't get to keep the interest'... (hint/reminder: remember i'm referring to 'commercial banks' not 'the central bank/the fed')..


...i ask this because paul or nothing apparently denies even the somewhat common understanding of money creation/issuance among monetary realists...but paul or nothing seems to offer no/little evidence...lot's of 'opinions'...theorie$..confusion...delusion..

BTW, OCCAM'S BANANA...please let know me whose great, serious 'pronouncement$' are yours...i sense i would loooooooooove to engage them.....but i sense they will soon reveal themselves as crows and/or octopuses..

[Zippyjuan]

The banks can't create money. The Fed does when they buy Treasuries because they create the money to purchase them. If a bank buys Treasuries, they must use money they already have so they cannot create money that way.

What about deposits and lending? Can they create money that way?

A bank takes in a deposit- say $1000. Reserve requirements allow them to loan out 90% of that or $900. They aren't creating that money- they borrowed it from the depositor. The person who borrowed that money may not need it right away so they may stick it in the bank until they do- opening an account for $900. On paper, the bank now has $1900 in deposits but has money been created? Not really. Debt has been created. The depositor had $1000 which they lent to the bank. The bank had $1000 but owed the depositor $1000. When they loan out $900, they have $100. The depositor had zero. The borrower had $900. Still $1000 in money.

When the borrower deposited the $900 back into the bank the bank now had $100 plus $900. The initial depositor still has zero and now the borrower has zero dollars. He owes the bank $900 for the loan (ignoring interest) and the bank owes him $900 for the deposit.

We still have just $1000 in money. But debt grew. The first depositor is owed $1000. The bank is owed $900 from the borrower. The borrower is owed $900 for his re-deposit at the bank.

On paper the money has grown while in reality is has not.

[Paul Or Nothing II]

...please provide evidence i think mises was an idiot...btw, i favor about one tenth, or less, the government ?your guy, rand paul, favors..what ism does that make you/him?..

...btw, if you know of a better monetary historian than steve zarlenga, please name the name...

Clearly, you don't have a very high opinion of Ludwig von Mises, you think he was all about "theory" & out of touch with reality. Of course, now you could pretend that you were talking about some other Ludwig but that's not unexpected of you.

.(at least trying to bring reality, rather than ludwig, etc. theory, to the table..you know, for once..

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

more ellen, less ludwig, boys!..

Further, Rand Paul isn't "my guy" as I'm pretty much a voluntaryist. While I might believe that he's probably the best among the present crop of presidential candidates, him & I probably don't follow the same "ism".

Whom do you favor? Stephen Zarlenga? The socialist that wants the government to create money out of thin air to provide welfare?

http://en.wikipedia.org/wiki/America...tary_Institute

Zarlenga argues that this would mean money would be issued by government interest free and spent into circulation to promote the general welfare, and that substantial expenditures on infrastructure, including human infrastructure (education and health care) would become the predominant method of putting new money into circulation

[Paul Or Nothing II]

[/FONT][/COLOR][/B]http://www.rpoth.at/docs/modern_money_mechanics_us.html

...or are you saying, 'yes commercial banks create our money but they can't purchase bonds with this money' or 'they can purchase bonds but don't get to keep the interest'... (hint/reminder: remember i'm referring to 'commercial banks' not 'the central bank/the fed')..


...i ask this because paul or nothing apparently denies even the somewhat common understanding of money creation/issuance among monetary realists...but paul or nothing seems to offer no/little evidence...lot's of 'opinions'...theorie$..confusion...delusion..

Loans & deposits DON'T "create money". I've already explained the process several times in several threads as to when & who creates "money".

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!

Let's see whether the link YOU have posted above says the same thing or not.

http://www.rpoth.at/docs/modern_money_mechanics_us.html

The lending banks, however, do not expect to retain the deposits they create through their loan operations. Borrowers write checks that probably will be deposited in other banks. As these checks move through the collection process, the Federal Reserve Banks debit the reserve accounts of the paying banks (Stage 1 banks) and credit those of the receiving banks.

So, banks need reserves to make loans, & when checks are deposited in other banks, the Fed subtracts the reserves of the issuing bank & transfers those reserves to the bank receiving the check.

When a bank borrows from a Federal Reserve Bank, it borrows reserves.

When banks want to make more loans, they have to borrow more reserves from Fed.

A bank can always obtain reserve balances by sending currency to its Reserve Bank and can obtain currency by drawing on its reserve balance.

Reserves & cash are interchangeable.

the supply of reserves in the banking system is controlled by the Federal Reserve.

Only the Fed controls the total supply of reserves.

Summary : When people write checks, the Fed subtracts the equivalent amount of reserves from the bank & adds it to the reserves of the other bank receiving the check. Banks need reserves to make loans so reserves are "money" but only Fed can create reserves. Since cash & reserves are interchangeable, cash is also "money".

[Paul Or Nothing II]

It may be best policy not to take too (or at all) seriously the pronouncements issued by someone whose moniker is a play on "hanky panky."

(Of course, this is coming from someone who goes by the handle "Occam's Banana," so ...)

I agree & under the normal circumstances I wouldn't reply but the reason I have chosen to reply is because there are probably a good number of people here who genuinely support liberty but unfortunately, they have the same misconceptions about Fed, banking, FRB & nature of money, so I feel it's important to thwart the misinformation floating around, to thwart the simplistic belief that anybody & everybody that is against the Fed is necessarily a supporter of liberty. For example, Ron Paul opposes the Fed, so does Dennis Kucinich, Ron Paul wants a free market in money while Kucinich wants the Congress to create money out of thin air instead of the Fed, so it should be obvious that Kucinich isn't necessarily for more liberty even though he does oppose the Fed (not to mention he's a socialist). I think it's important to point this out because many genuine supporters of liberty, new & old, aren't always able to see this very clearly.

I've returned to the forums after a while & I see that the quality of the comments & commenters has gone down quite a bit since a couple of years back when there always used to be some great discussions going on in the economics & political philosophy forums (& you have been a great contributer over the years ) but now, we're left debating the hanky panky of the world Nonetheless, it's good to see you around.

[H. E. Panqui]

Zippy and Paul nothing: "The banks can't create money. The Fed does when they buy Treasuries because they create the money to purchase them. If a bank buys Treasuries, they must use money they already have so they cannot create money that way.


Loans & deposits DON'T "create money". I've already explained the process several times in several threads as to when & who creates "money"."



(we are at loggerheads, my poor monetary newbie$/brainwash spewists ...in fact, you two naive theorists use, trade for, slave for, etc., said 'commercial bank created money' a goodly portion of your republicrat lives....btw, what are your sources for your apparently incredibly ignorant assertions quoted above?!!..(sadly, many babbler$ today are republican tribe members whose knowledge of hi$tory derives from the ruse limbaaaah/glenn beck/alex jones/alan colmes oral tradition!!..COULD YOU PLEASE MERELY PASTE SOME EVIDENCE TO BOLSTER YOUR ASSERTION$!!!!

..here's some evidence that supports my assertion..((i sense no evidence forthcoming...except above-mentioned 0ral history..

http://www.positivemoney.org/how-mon...-create-money/

More than 97% of all the money in the economy exists as bank deposits – and banks create these deposits simply by making loans. Every time someone takes out a loan, new money is created. The Bank of England recently released a report explaining how this process works:

“Where does money come from? In the modern economy, most money takes the form of bank deposits. But how those bank deposits are created is often misunderstood. The principal way in which they are created is through commercial banks making loans: whenever a bank makes a loan, it creates a deposit in the borrower’s bank account, thereby creating new money. This description of how money is created differs from the story found in some economics textbooks.”(Bank of England)

[H. E. Panqui]

Zippy and Paul nothing: "The banks can't create money. The Fed does when they buy Treasuries because they create the money to purchase them. If a bank buys Treasuries, they must use money they already have so they cannot create money that way.


Loans & deposits DON'T "create money". I've already explained the process several times in several threads as to when & who creates "money"."




(here's some more evidence exposing your monetary naivete..AGAIN do YOU have ANY evidence (other than the republicrat 0ral tradition) to back your obviously ridiculous a$$ertion$??..

http://www.themoneymasters.com/faqs/

"...Here is the trick. Take, for example, a year like this year in which the government runs a $400 billion dollar deficit. The Treasury Department has to sell $400 billion in US Treasury bills, bonds and notes (government IOUs) to buyers at a rate of interest sufficient to attract their money (and beat the interest competition of other banks’ CDs and other governments’ bills, bonds and notes). To avoid a credit squeeze, the Federal Reserve System Open Market Committee in Washington directs the NY Federal Reserve Bank to purchase roughly 10% of that total (or $40 billion in our example) in existing US bills, bonds, and notes from the current holders. To pay for them it creates the $40 billion out of nothing, merely with keystrokes on a computer. Through more keystrokes, this new $40 billion is deposited into the banks of the various bill, bond, and note sellers, thereby increasing the reserves of those banks by $40 billion.
Pursuant to the Federal Reserve Act of 1913 those banks must keep only 10% of those new deposits on “reserve.” (Because these banks do not have to keep 100% on reserve, this banking system is called a “fractional reserve” system.). So of the $40 billion deposited, the banks must keep 10% on reserve ($4 billion) and may loan out $36 billion (90%), for business loans, mortgages, credit card loans, to purchase government bonds – for whatever borrowers want. Those loans (and payments) are in turn deposited in banks (very few folks put their money in mattresses). So of the $36 billion loaned out and then re-deposited, the banks receiving the new deposits can then loan out 90% or $32.4 billion, retaining 10% or $3.6 billion as reserves.
Banks repeat this redeposit-reloan process, reduced 10% each time, until the 10% reserves retained have reduced the funds available for loan to zero. This cunning process allows the banks to create out of nothing nine times the original $40 billion in new deposits received from the Federal Reserve (the “Fed”), or $360 billion dollars. This total is concealed from the public by the only partial expansion of the loan total at each repetitive step.
We can easily see that even by the second re-loan step mentioned above, the banks have loaned out $68.4 billion based on the original $40 billion deposited. The end result of the process is that the banks receiving the deposits and re-deposits collectively have loaned out $360 billion dollars, which they created out of nothing, and have retained $40 billion in reserve. The Fed created the first $40 billion, the banks $360 billion, equaling $400 billion dollars. Thus the credit markets are stabilized even though the US government has borrowed $400 billion.
But notice, the Fed only created the initial 10% ($40 billion). Privately owned banks created 90% ($360 billion) out of nothing, and loaned it out at interest. At even 6% that is $21.6 billion dollars per year in interest. Some of this profit goes to the private stockholders of the banks. However, the banks conceal much of this vast profit from the public as undistributed or retained earnings. Five banks hold over 50% of all deposits in the United States. This means that in a year with a $400 billion deficit (such as FY 2007-2008), those five banks will receive over 50% of approximately 6% interest on the newly created $360 billion: over $10 billion per year, from now on, for creating money out of nothing. This is profoundly unjust, and dangerous to any government, especially in a country that prides itself on being a democracy.
Note that the Fed, not the United States Treasury, created the initial $40 billion in our example. The 12 Federal Reserve banks are private corporations the stock of which is owned by private banks in their districts, not by the United States Government. The United States Treasury pays the Fed interest on the US bills, bonds, and notes the Fed buys with the money it creates out of nothing. The Fed routinely holds about 10% of the United States National Debt (US Treasury bills bonds, notes), which it has accumulated to provide the base for the rest, as explained above.
6% interest on the nearly trillion dollars in bonds it now owns provides the Fed with roughly $50 billion in revenue. With this money the Fed (1) pays some money to its private banks stockholders, (2) uses some to create giant unaudited slush funds to manipulate currency and stock markets (ostensibly to help avoid economic crises such as the one we are currently in), and (3) then takes out whatever it wishes – without any Congressional oversight or external audit – for expenses, salaries, perks, jets, lavish parties, etc.. The rest it returns to the US Treasury. In this manner the Federal Reserve operates independently of our elected Congress and external oversight...


(lol!..ah...the silence of the clams..i eagerly await the octopuses and crows...

[H. E. Panqui]

Paul or nothing becks: I've returned to the forums after a while & I see that the quality of the comments & commenters has gone down quite a bit since a couple of years back when there always used to be some great discussions going on in the economics & political philosophy forums (& you have been a great contributer over the years ) but now, we're left debating the hanky panky of the world Nonetheless, it's good to see you around.



(instead of all the phony bluster, why don't you merely paste the addresses of these 'great discussions' ..

...i sense discussions featuring a lot of republicrat monetary ignoramuses working their blow-holes about the illion dollar economy absent an honest clue as to the hideous origin and nature of even one stinking dollar..more reality, less republicrat theory and republican radio 0ral tradition, boys!..

[Zippyjuan]

Zippy and Paul nothing: "The banks can't create money. The Fed does when they buy Treasuries because they create the money to purchase them. If a bank buys Treasuries, they must use money they already have so they cannot create money that way.


Loans & deposits DON'T "create money". I've already explained the process several times in several threads as to when & who creates "money"."



(we are at loggerheads, my poor monetary newbie$/brainwash spewists ...in fact, you two naive theorists use, trade for, slave for, etc., said 'commercial bank created money' a goodly portion of your republicrat lives....btw, what are your sources for your apparently incredibly ignorant assertions quoted above?!!..(sadly, many babbler$ today are republican tribe members whose knowledge of hi$tory derives from the ruse limbaaaah/glenn beck/alex jones/alan colmes oral tradition!!..COULD YOU PLEASE MERELY PASTE SOME EVIDENCE TO BOLSTER YOUR ASSERTION$!!!!

..here's some evidence that supports my assertion..((i sense no evidence forthcoming...except above-mentioned 0ral history..

http://www.positivemoney.org/how-mon...-create-money/

More than 97% of all the money in the economy exists as bank deposits – and banks create these deposits simply by making loans. Every time someone takes out a loan, new money is created. The Bank of England recently released a report explaining how this process works:[/B]

“Where does money come from? In the modern economy, most money takes the form of bank deposits. But how those bank deposits are created is often misunderstood. The principal way in which they are created is through commercial banks making loans[/B]: whenever a bank makes a loan, it creates a deposit in the borrower’s bank account, thereby creating new money. This description of how money is created differs from the story found in some economics textbooks.”(Bank of England)

Money as bank deposits is not really money but debt- I showed how those deposits are created. The accounts represent debt owed- not money. Money which impacts prices and wages and inflation is money being used- spent buying goods and services. That does not dispute what I said earlier.

[H. E. Panqui]

zippyjuan writes: Money as bank deposits is not really money but debt- I showed how those deposits are created. The accounts represent debt owed- not money.


(...i acknowledge that what we use as money is 'numerical evidence of debt' in my fantastic thread, "Exposing Republicrat Monetary Ignorance for Dummies" .. http://www.ronpaulforums.com/showthr.../page2....post #46....

...in fact, these 'evidences of debt' represent more than 90% of 'legal tender'..i.e. what you call 'money,' 'dollars,' etc....the same 'stuff' for which you work, pay your bills, taxes...the same stuff rand will be seeking in his next money bomb...etc. ad nauseam..

..arguing that the stuff you use as money on a regular basis isn't really 'money' is disingenuous...quarrelsome...

....or it could be that you really don't understand how 'commercial banks' operate..like most everyone else on this site and throughout society...

...btw, put yourself in my shoes...continually hearing gd fool republicrat monetary ignoramuses (not you, you appear to be an honest seeker) working their holes about the illion dollar economy absent an honest clue as to the origin and nature of even one dollar!!

http://thenextturn.com/primer-widely...ion-mechanism/

How Money Actually Gets Created in the Real World

In a word, it gets created by commercial banks out of thin air.
Contrary to the theoretical ‘money multiplier’ process through which the money gets created, commercial banks create new money when they make loans and are not as constrained in their money creation as the multiplier model suggests.
Again, per “A Better Monetary System For Iceland”

A commercial bank creates new bank deposits when it advances loans. These bank deposits are liabilities (IOUs) of the bank, which represent a promise to deliver cash on demand to the deposit owner, or to make an electronic payment to a third party on the owner’s request. Deposits can therefore be used to make payments in the economy through debit cards and electronic fund transfers.
A bank does not need to acquire money from a saver before it can make a loan to a borrower. Through some simple double entry accounting, when a bank lends money, it increases both the quantity of money in the economy, as well as the quantity of debt. The Bank of England explains this process in the following way:
“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.”
“Money creation in practice differs from some popular misconceptions – banks do not act simply as intermediaries, lending out deposits that savers place with them, and nor do they ‘multiply up’ Central Bank money to create new loans and deposits.”
…
“In the modern economy, most money takes the form of bank deposits. But how those bank deposits are created is often misunderstood: the principal way is through commercial banks making loans. Whenever a bank makes a loan, it simultaneously creates a matching deposit in the borrower’s bank account, thereby creating new money.
The reality of how money is created today differs from the description found in some economics textbooks:

• Rather than banks receiving deposits when households save and then lending them out, bank lending creates deposits.
• In normal times, the Central Bank does not fix the amount of money in circulation, nor is Central Bank money ‘multiplied up’ into more loans and deposits.”

“In fact, when households choose to save more money in bank accounts, those deposits come simply at the expense of deposits that would have otherwise gone to companies in payment for goods and services. Saving does not by itself increase the deposits or ‘funds available’ for banks to lend. Indeed, viewing banks simply as intermediaries ignores the fact that, in reality in the modern economy, commercial banks are the creators of deposit money.

[Zippyjuan]

Where did the bank get the money to loan out? They didn't create it- the borrowed it- from depositors. If they have no deposits , they cannot make any loans. Loans cannot and do not exceed deposits. They are allowed to make loans up to the amount allowed by their reserve requirements. If they have $10 billion in deposits and a ten percent reserve requirement, they are allowed to make loans for up to $9 billion. They cannot "create money" to make loans over that amount.

Yes, they do create an account to park the money in but the money they put in that account was borrowed from another (depositor's) account.

I know you have seen this chart before:


http://www.marketminder.com/a/fisher...dd33e8731.aspx

Indeed, viewing banks simply as intermediaries ignores the fact that, in reality in the modern economy, commercial banks are the creators of deposit money.

Deposit money only exists on paper- it is debt, not real money. I deposited money in an account. The bank borrowed that money from me and put it into the account (they created the account- with my money). They borrowed up to 90% of that money in my account and loaned it to a borrow. They opened a new account to deposit that money they borrowed from me and lent to that other person. The accounts grew- the money did not.

[H. E. Panqui]

Deposit money only exists on paper- it is debt, not real money.

...

(so what?!...most 'money' is nothing more than some numbers in some bank ledger/account...YOU USE 'IT' ALL THE TIME (OR SOMEONE ELSE USES 'IT' IN YOUR BEHALF) OR YOU ARE QUICKLY IN JAIL/DEAD/BOTH...

...good grief, you really should get some monetary realism...WHERE ARE YOUR LINKS??? i have provided you MANY links bolstering my claim most money is created/issued by commercial banks...

...btw, come out hiders/lurkers...i know you're out there..let's get it on!!