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Thread: Fed economist: 'No evidence that QE works' as central bank starts unwinding program

  1. #61

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    Quote Originally Posted by Madison320 View Post
    I don't think the fractional reserve thing means one bank can lend 10x. If a bank has $100 in reserves it can loan that out to someone for 10% for example. The lender might take the $100 and deposit it in another bank but that doesn't do anything for the original bank. So that bank could get 10% but there's risk that they might not get paid back. So I have know idea what the actual return is.
    A bank is only required to keep 10% in reserves. So if they have $100 in excess reserves, they can loan $1000 out. Either the bank or whoever they loan it to, could then spend that $1000 on treasuries.

    @Zippyjuan am I missing something? If I'm correct on the above, then what possible reason would the banks have for keeping money in reserves, other than a handshake agreement with the Fed to keep it there?

    Maybe there's some quid pro quo going on. Maybe the banks got bailed out with the agreement they would keep their money at low rates in reserve?
    That's what I'm thinking. I think they also know what would happen if they decided to take the money out all at once.
    Last edited by TheTexan; 09-22-2017 at 11:33 AM.
    It's all about taking action and not being lazy. So you do the work, whether it's fitness or whatever. It's about getting up, motivating yourself and just doing it.
    - Kim Kardashian

    Donald Trump / Rand Paul (Vice Pres) 2016!!!!



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  3. #62

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    Quote Originally Posted by TheTexan View Post
    A bank is only required to keep 10% in reserves. So if they have $100 in excess reserves, they can loan $900 out. Either the bank or whoever they loan it to, could then spend that $900 on treasuries.

    So, 9x instead of 10x.
    @Zippyjuan am I missing something? If I'm correct on the above, then what possible reason would the banks have for keeping money in reserves, other than a handshake agreement with the Fed to keep it there?



    That's what I'm thinking. I think they also know what would happen if they decided to take the money out all at once.
    If they have $100 in reserves with a 10% reserve requirement I'm pretty sure they can only loan out $90 not $900.

  4. #63

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    Quote Originally Posted by Madison320 View Post
    If they have $100 in reserves with a 10% reserve requirement I'm pretty sure they can only loan out $90 not $900.
    Actually it would be $1000

    https://www.minneapolisfed.org/resea...xcess-reserves

    Since each dollar of bank deposit requires approximately only 10 cents of required reserves at the Fed, then each dollar of excess reserves can be converted by banks into 10 dollars of deposits. That is, for every dollar in excess reserves, a bank can lend 10 dollars to businesses or households and still meet its required reserve ratio.
    It's all about taking action and not being lazy. So you do the work, whether it's fitness or whatever. It's about getting up, motivating yourself and just doing it.
    - Kim Kardashian

    Donald Trump / Rand Paul (Vice Pres) 2016!!!!

  5. #64

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    Quote Originally Posted by TheTexan View Post
    Actually it would be $3000 - Everything you ever wanted to know about bank leverage rules - https://www.cnbc.com/id/100880857
    The essential English leadership secret does not depend on particular intelligence. Rather, it depends on a remarkably stupid thick-headedness. The English follow the principle that when one lies, one should lie big, and stick to it. They keep up their lies, even at the risk of looking ridiculous.

  6. #65

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    Quote Originally Posted by Zippyjuan View Post
    Presidents really don't have any power over the economy (beyond psychological).

    So you'd be in favor of eliminating the labor and treasury departments? What about the president's economic advisors? Dept of Ag? All federal regs related to the economy?
    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 Zippyjuan View Post
    I do think that ID should be required for certain things like carrying a concealed weapon...




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

  7. #66

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    Quote Originally Posted by TheTexan View Post
    Excess reserves is money the banks were allowed to loan out based on the deposits they took in but didn't. If they start making loans from their excess reserves, they are reducing their excess reserves. If they have $100 in excess reserves and make an additional $100 in loans, they have reduced their excess reserves to zero. They can't loan out 10 times their excess reserves.

    What is being talked about is multiplying deposits by making a loan. If they have $100 in excess reserves and loan out that money, the borrower may not need that money right away so the put it in the bank until they do. That just created a $100 deposit. Now since the bank has $100 in deposits, they can loan out 90% of that (on a ten percent reserve requirement) or $90. If that person didn't need the money right away, that borrower may put it in the bank too which adds $90 in deposits. That deposit makes another $81 available to be loaned out. If this happens an infinite amount of times, it can in theory lead to $1000 in deposits. But the catch is that each borrower must put the money in the bank.

    As soon as one person takes their money out and uses it, the deposit is removed and the bank now has too much money out for the amount of deposits they have. They either need to either attract in a new deposit, call in loans, or borrow money (from the Fed or another bank which may have excess reserves themselves) to bet back to meeting their reserve requirement. So while the deposits in theory multiplied the amount of money available, that extra money only exists on the bank ledger. Once that money moves out into the economy by being spent, it has to be replaces by taking money OUT of the economy from another place to replace the deposit leaving the real net change zero.

    One example focusing on who has the money and how much. Bank has $100 excess reserves. Person A borrows it. Bank has zero excess reserves, I have $100. I deposit the money. The bank has zero reserves but $100 in deposits. I have zero. The bank loans person B $90 from my deposit. The bank has $10 left, I have zero, and the new borrower has $90: total money is $100. Person B deposits $90. Bank is back to $100. I have zero, person B has zero. Bank loans out $81 from that $90 deposit to person C. Bank has $11, I have zero, B has zero, and C has $91. Still just $100 in the system.

    Now B finds the item he wanted to buy with his loan and takes out his deposit. $90. That is a problem- the bank only has $11. It also means that they are out of balance in their reserve requirements- they have too many loans out relative for the amount of deposits they have. So they have to borrow another $90 from somebody to get back in balance. They reduce the money from another part of the economy by $90 to replace the $90 lent out. B is able to spend $90 more than he could have without the loan but somebody else is spending $90 less.

    Why are banks keeping excess reserves? I can't say for certain. The Fed has certainly heavily encouraged them to keep higher reserves- (thanks for the correction on the rate the Fed currently pays on them- I forgot that was increased). Another may simply be demand. Haven't checked numbers for a while but at one point companies themselves were sitting on $2 trillion in cash.
    Last edited by Zippyjuan; 09-22-2017 at 01:02 PM.
    "The only thing we have to fear is.... fear itself!" Franklin Delano Roosevelt.
    "Be afwaid. Be berry afwaid" Donald Trump.

    The optimists built this country and made it great- not the fearful. Fear can only destroy.

    I am Zippy and I approve of this post. But you don't have to.

  8. #67

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    Quote Originally Posted by Zippyjuan View Post
    Excess reserves is money the banks were allowed to loan out based on the deposits they took in but didn't. If they start making loans from their excess reserves, they are reducing their excess reserves. If they have $100 in excess reserves and make an additional $100 in loans, they have reduced their excess reserves to zero. They can't loan out 10 times their excess reserves.
    I am 100% certain you're wrong on this.
    It's all about taking action and not being lazy. So you do the work, whether it's fitness or whatever. It's about getting up, motivating yourself and just doing it.
    - Kim Kardashian

    Donald Trump / Rand Paul (Vice Pres) 2016!!!!

  9. #68

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    Quote Originally Posted by TheTexan View Post
    I am 100% certain you're wrong on this.
    If they loan out 100% of excess reserves, they have no more excess reserves. At that point, lending is based on total deposits.

    If they can loan out 10 times excess reserves, what has happened to loans since excess reserves soared in 2008? Shouldn't they be soaring? Wouldn't loans be greater than deposits? (More loans means more revenues for the bank).

    Note that banks still have loans below 100% of deposits. (also helps explain why reserves are still so high)



    https://www.forbes.com/sites/greatsp.../#3dcd67f37be3

    Q2 2015 U.S. Banking Review: Loan-To-Deposit Ratio

    The Federal Reserve’s decision to keep interest rates around record lows since the economic downturn has played a crucial role in ensuring strong growth in loans for U.S. banks over recent years. But the move also led to a drying up of lucrative investment options for investors – in turn helping deposits grow at a faster rate than loans. This has resulted in a marked decline in loan-to-deposit ratios across the industry since 2011. To put things in perspective, data compiled by the Federal Reserve indicates that the loan-to-deposit ratio for the U.S. commercial banking industry has fallen from a peak level in excess of 100% in late 2008 to 77% now.
    The loan-to-deposit ratio, as its name suggests, is the ratio of a bank’s total outstanding loans for a period to its total deposit balance over the same period. So a loan-to-deposit ratio of 1 (100%) indicates that a bank lends a dollar to customers for every dollar that it brings in as deposits. But this also means that the bank doesn’t have cash on hand for contingencies. A combination of prudence and regulatory requirements suggests that for a traditional bank the loan-to-deposit ratio should be around 80-90%.
    Longer term chart:





    Except in rare cases, loans (red line) do not exceed deposits (blue line). If they can loan out multiples of deposits, why don't they?
    Last edited by Zippyjuan; 09-22-2017 at 03:36 PM.
    "The only thing we have to fear is.... fear itself!" Franklin Delano Roosevelt.
    "Be afwaid. Be berry afwaid" Donald Trump.

    The optimists built this country and made it great- not the fearful. Fear can only destroy.

    I am Zippy and I approve of this post. But you don't have to.

  10. #69

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    Quote Originally Posted by Zippyjuan View Post
    If they loan out 100% of excess reserves, they have no more excess reserves. At that point, lending is based on total deposits.

    If they can loan out 10 times excess reserves, what has happened to loans since excess reserves soared in 2008? Shouldn't they be soaring? Wouldn't loans be greater than deposits? (More loans means more revenues for the bank).

    Note that banks still have loans below 100% of deposits. (also helps explain why reserves are still so high)



    https://www.forbes.com/sites/greatsp.../#3dcd67f37be3


    Longer term chart:



    Except in rare cases, loans (red line) do not exceed deposits (blue line). If they can loan out multiples of deposits, why don't they?
    I think you're forgetting what a reserve is.

    The maximum amount of deposit liabilities that a bank can create is a function of how much reserves they have:

    Required reserves = Deposit liabilities * reserve requirement

    Or:

    Maximum deposit liabilities = Reserves / reserve requirement
    It's all about taking action and not being lazy. So you do the work, whether it's fitness or whatever. It's about getting up, motivating yourself and just doing it.
    - Kim Kardashian

    Donald Trump / Rand Paul (Vice Pres) 2016!!!!

  11. #70

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    Quote Originally Posted by TheTexan View Post
    I think you're forgetting what a reserve is.

    The maximum amount of deposit liabilities that a bank can create is a function of how much reserves they have:

    Required reserves = Deposit liabilities * reserve requirement

    Or:

    Maximum deposit liabilities = Reserves / reserve requirement
    Exactly. Banks are required to keep a fraction of deposits as reserves (hence, "Fractional reserve banking"). That means loans are not allowed to exceed deposits.

    Excess reserves are reserves kept in excess of their required amounts- money which could be lent out but hasn't yet. Excess reserves can be loaned out but required reserves cannot. And no more than 100% of excess reserves can be lent (they can't loan out ten times that) since loaning out 100% of excess reserves leaves zero excess reserves.
    Last edited by Zippyjuan; 09-22-2017 at 04:28 PM.
    "The only thing we have to fear is.... fear itself!" Franklin Delano Roosevelt.
    "Be afwaid. Be berry afwaid" Donald Trump.

    The optimists built this country and made it great- not the fearful. Fear can only destroy.

    I am Zippy and I approve of this post. But you don't have to.

  12. #71

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    Quote Originally Posted by Zippyjuan View Post
    Exactly. Banks are required to keep a fraction of deposits as reserves (hence, "Fractional reserve banking"). That means loans are not allowed to exceed deposits.

    Excess reserves are reserves kept in excess of their required amounts- money which could be lent out but hasn't yet. Excess reserves can be loaned out but required reserves cannot. And no more than 100% of excess reserves can be lent (they can't loan out ten times that) since loaning out 100% of excess reserves leaves zero excess reserves.
    That's really not the way that it works.

    Let's say I'm a new bank. I have $100 to my name, and I put that $100 in my brand new Federal Reserve deposits account.

    My balance sheet then looks like this:

    Deposit liabilities: 0
    Excess reserves: $100

    If you said, hey Texan, can you loan me $1000? I would say: sure.

    My balance sheet then looks like this:

    Deposit liabilities: $1000
    Assets: $1000
    Reserves: $100
    Excess reserves: $0

    I have met my reserve requirements, and have loaned out 10x my excess reserves.

    This is possible, because loans create deposits.

    It's all about taking action and not being lazy. So you do the work, whether it's fitness or whatever. It's about getting up, motivating yourself and just doing it.
    - Kim Kardashian

    Donald Trump / Rand Paul (Vice Pres) 2016!!!!

  13. #72

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    Quote Originally Posted by TheTexan View Post
    That's really not the way that it works.

    Let's say I'm a new bank. I have $100 to my name, and I put that $100 in my brand new Federal Reserve deposits account.

    My balance sheet then looks like this:

    Deposit liabilities: 0
    Excess reserves: $100

    If you said, hey Texan, can you loan me $1000? I would say: sure.

    My balance sheet then looks like this:

    Deposit liabilities: $1000
    Assets: $1000
    Reserves: $100
    Excess reserves: $0

    I have met my reserve requirements, and have loaned out 10x my excess reserves.

    This is possible, because loans create deposits.
    If your deposits are zero you can loan out zero. If your excess reserves are $100 and you loan out $100, your excess reserves are zero. If you have $100 in your account, you can loan $90 out (assuming a 10% reserve requirement- your required reserves in this case would be $10).


    (I did run though an example of loans creating deposits earlier).
    Last edited by Zippyjuan; 09-22-2017 at 06:16 PM.
    "The only thing we have to fear is.... fear itself!" Franklin Delano Roosevelt.
    "Be afwaid. Be berry afwaid" Donald Trump.

    The optimists built this country and made it great- not the fearful. Fear can only destroy.

    I am Zippy and I approve of this post. But you don't have to.

  14. #73

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    Quote Originally Posted by Zippyjuan View Post
    If your deposits are zero you can loan out zero. If your excess reserves are $100 and you loan out $100, your excess reserves are zero. If you have $100 in your account, you can loan $90 out (assuming a 10% reserve requirement).

    (I did run though an example of loans creating deposits earlier).
    Again - that's really not the way it works.

    Because of double-entry accounting, the moment that loan is created, the deposit for it also exists.

    http://www.investopedia.com/articles...make-loans.asp

    The below is a good link also, it's for BoE but it's basically the same with the Federal Reserve:

    Go to page 14 specifically: Money creation in the modern economy

    http://www.bankofengland.co.uk/publi...014/qb14q1.pdf
    It's all about taking action and not being lazy. So you do the work, whether it's fitness or whatever. It's about getting up, motivating yourself and just doing it.
    - Kim Kardashian

    Donald Trump / Rand Paul (Vice Pres) 2016!!!!

  15. #74

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    Quote Originally Posted by TheTexan View Post
    Again - that's really not the way it works.

    Because of double-entry accounting, the moment that loan is created, the deposit for it also exists.

    http://www.investopedia.com/articles...make-loans.asp

    The below is a good link also, it's for BoE but it's basically the same with the Federal Reserve:

    Go to page 14 specifically: Money creation in the modern economy

    http://www.bankofengland.co.uk/publi...014/qb14q1.pdf
    Excess reserves are currently $2.2 trillion (Down from a peak of $2.7 trillion). Shouldn't there be $22 trillion in loans? They currently total $9.3 trillion. https://fred.stlouisfed.org/series/TOTLL

    In May, 2008, excess reserves were only $1.8 billion (not even trillion). How could they loan out $6.9 trillion? That is nearly 4,000 times excess reserves! Loans are based on reserves, not excess reserves which are determined by the amount of deposits they have. Excess reserves are funds they can loan out but have not done so.

    If they can loan out ten times, how can you explain this chart? Shouldn't loans be significantly higher than deposits rather than less than deposits?

    Last edited by Zippyjuan; 09-22-2017 at 06:16 PM.
    "The only thing we have to fear is.... fear itself!" Franklin Delano Roosevelt.
    "Be afwaid. Be berry afwaid" Donald Trump.

    The optimists built this country and made it great- not the fearful. Fear can only destroy.

    I am Zippy and I approve of this post. But you don't have to.

  16. #75

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    Zip, that is one creepy avy, man. You shoulda stuck with Newman from back in the day.

  17. #76

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    Quote Originally Posted by Zippyjuan View Post
    If your deposits are zero you can loan out zero. If your excess reserves are $100 and you loan out $100, your excess reserves are zero. If you have $100 in your account, you can loan $90 out (assuming a 10% reserve requirement- your required reserves in this case would be $10).


    I know very little about this subject. I did however; read The Texan's Investopedia link (http://www.investopedia.com/articles...make-loans.asp). I could determine in 5 minutes that you appear to be totally wrong. The Investopedia article reads:

    The magnitude of this fraction is specified by the reserve requirement, the reciprocal of which indicates the multiple of reserves that banks are able to lend out. If the reserve requirement is 10% (i.e. 0.1) then the multiplier is 10, meaning banks are able to lend out 10 times more than their reserves.


    Furthermore, that article says a bank doesn't even have to have the reserve, meaning that it can acquire it later:

    The reality is that banks first extend loans and then look for the required reserves later.


    The X factor in lending, according to the Investopedia article, seems to be judgment on the amount of risk a bank takes when making loans.




    So, it comes down to who am I going to believe: Someone like The Texan and his authoritative source? Or, someone like you, a poster on this site with a dubious agenda, horrible reputation, and total untrustworthiness?
    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 Zippyjuan View Post
    I do think that ID should be required for certain things like carrying a concealed weapon...




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

  18. #77

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    Quote Originally Posted by NorthCarolinaLiberty View Post
    I know very little about this subject. I did however; read The Texan's Investopedia link (http://www.investopedia.com/articles...make-loans.asp). I could determine in 5 minutes that you appear to be totally wrong. The Investopedia article reads:

    The magnitude of this fraction is specified by the reserve requirement, the reciprocal of which indicates the multiple of reserves that banks are able to lend out. If the reserve requirement is 10% (i.e. 0.1) then the multiplier is 10, meaning banks are able to lend out 10 times more than their reserves.


    Furthermore, that article says a bank doesn't even have to have the reserve, meaning that it can acquire it later:

    The reality is that banks first extend loans and then look for the required reserves later.


    The X factor in lending, according to the Investopedia article, seems to be judgment on the amount of risk a bank takes when making loans.




    So, it comes down to who am I going to believe: Someone like The Texan and his authoritative source? Or, someone like you, a poster on this site with a dubious agenda, horrible reputation, and total untrustworthiness?
    The magnitude of this fraction is specified by the reserve requirement, the reciprocal of which indicates the multiple of reserves that banks are able to lend out. If the reserve requirement is 10% (i.e. 0.1) then the multiplier is 10, meaning banks are able to lend out 10 times more than their reserves.
    If they have $100 in deposits, their required reserve (if it is 10%) is indeed $10. How much in loans can they generate from that deposit? $90. So nine times, not quite ten times, their reserves. It is close to ten times- that would be $100 instead of $90.

    The reality is that banks first extend loans and then look for the required reserves later.
    And where does it say it gets those reserves the bank needs? Depositors.

    Attracting new customers is one way, if not the cheapest way, to secure those reserves. Indeed, the current targeted fed funds rate—the rate at which banks borrow from each other—is between 0.25% and 0.50%, well above the 0.01% to 0.02% interest rate the Bank of America pays on a standard checking deposit. The banks don’t need your money; it’s just cheaper for them to borrow from you than it is to borrow from other banks.
    The other potential source is to borrow money from the Fed. Do they do that? How much money do banks have on loan from the Fed?

    Currently they have $220 million borrowed from the Fed (usually overnight to meet reserve requirements for that day). https://fred.stlouisfed.org/series/BORROW Out of $9.3 trillion in loans, they borrowed $220 million. (0.0002%) The rest from deposits.
    Last edited by Zippyjuan; 09-22-2017 at 06:35 PM.
    "The only thing we have to fear is.... fear itself!" Franklin Delano Roosevelt.
    "Be afwaid. Be berry afwaid" Donald Trump.

    The optimists built this country and made it great- not the fearful. Fear can only destroy.

    I am Zippy and I approve of this post. But you don't have to.

  19. #78

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    Quote Originally Posted by Zippyjuan View Post
    Excess reserves are currently $2.2 trillion (Down from a peak of $2.7 trillion). Shouldn't there be $22 trillion in loans?
    Not necessarily. If the banks don't want to lend they don't have to. The question is - why don't they want to?

    They currently total $9.3 trillion. https://fred.stlouisfed.org/series/TOTLL

    In May, 2008, excess reserves were only $1.8 billion (not even trillion). How could they loan out $6.9 trillion?
    Like you said - Loans are issued based on reserves, not excess reserves.

    Loans are based on reserves, not excess reserves.
    This is true.

    Excess reserves are funds they can loan out but have not done so.
    This is true - they could loan those funds out. But they don't. It's easier to just originate an entirely new loan, that is backed by those reserves.

    We can go back and forth on this all day long. I know you subscribe to the "banks lend out deposits" way of thinking, this is the traditional "money gets multiplied as it goes from bank to bank" school of thought. But all of the evidence I can find, tells me that the opposite is what actually happens - that loans create deposits. Because it's just easier accounting.

    The Bank of England has publicly said it, that's exactly what happens. As far as I can tell, the Fed system operates the exact same way.
    It's all about taking action and not being lazy. So you do the work, whether it's fitness or whatever. It's about getting up, motivating yourself and just doing it.
    - Kim Kardashian

    Donald Trump / Rand Paul (Vice Pres) 2016!!!!

  20. #79

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    Quote Originally Posted by Zippyjuan View Post
    That means loans are not allowed to exceed deposits.
    Not according to The Texan's Investopedia article. It reads:

    The truth, however, is that the reserve requirement does not act as a binding constraint on banks’ ability to lend and consequently their ability to create money.



    It seems to me that you are giving the de jure explanation, while The Texan is giving the de facto explanation. It's textbook versus real world. It's a credible source versus you.
    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 Zippyjuan View Post
    I do think that ID should be required for certain things like carrying a concealed weapon...




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

  21. #80

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    Quote Originally Posted by Zippyjuan View Post
    Excess reserves are currently $2.2 trillion (Down from a peak of $2.7 trillion). Shouldn't there be $22 trillion in loans?
    Why should there be? Based on what?
    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 Zippyjuan View Post
    I do think that ID should be required for certain things like carrying a concealed weapon...




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

  22. #81

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    Quote Originally Posted by TheTexan View Post
    Not necessarily. If the banks don't want to lend they don't have to. The question is - why don't they want to?



    Like you said - Loans are issued based on reserves, not excess reserves.



    This is true.



    This is true - they could loan those funds out. But they don't. It's easier to just originate an entirely new loan, that is backed by those reserves.

    We can go back and forth on this all day long. I know you subscribe to the "banks lend out deposits" way of thinking, this is the traditional "money gets multiplied as it goes from bank to bank" school of thought. But all of the evidence I can find, tells me that the opposite is what actually happens - that loans create deposits. Because it's just easier accounting.

    The Bank of England has publicly said it, that's exactly what happens. As far as I can tell, the Fed system operates the exact same way.
    Fair enough. Thanks for the debate!
    "The only thing we have to fear is.... fear itself!" Franklin Delano Roosevelt.
    "Be afwaid. Be berry afwaid" Donald Trump.

    The optimists built this country and made it great- not the fearful. Fear can only destroy.

    I am Zippy and I approve of this post. But you don't have to.

  23. #82

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    Quote Originally Posted by Zippyjuan View Post
    Fair enough. Thanks for the debate!

    From what I can tell, prior to 2008 the monetary system worked exactly like you've been describing. But not anymore.

    This is a relatively old paper (2013) but it appears fairly comprehensive in its detail:

    https://www.kreditopferhilfe.net/doc...Me_8_14_13.pdf


    Where Deposits Come From

    This goes against the grain of the usual way of describing bank lending, which suggests that banks "collect" deposits
    and then "lend them out." That is not the way it happens at all. In a closed economy (or the world as a whole),
    fundamentally, (8) deposits come from only two places: new bank lending and government deficits (9). Banks create
    deposits when they create loans, as explained above. Governments also create deposits when they run budget deficits
    because they are putting more money into the public's bank accounts than they are taking out. This net flow creates
    new deposits in the banking system, which has its counterpart on the bank's balance sheet as an increase in reserves:
    And on the central bank's balance sheet,
    as we saw before.
    Banks don't lend out of deposits; nor do they lend out of reserves. They lend by creating deposits. And deposits are
    also created by government deficits.
    (previously when I said a bank could loan out reserves if they wanted to, isn't exactly true. Technically reserves can only be loaned to a Federal reserve member bank)
    It's all about taking action and not being lazy. So you do the work, whether it's fitness or whatever. It's about getting up, motivating yourself and just doing it.
    - Kim Kardashian

    Donald Trump / Rand Paul (Vice Pres) 2016!!!!

  24. #83

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    Quote Originally Posted by Natural Citizen View Post
    Zip, that is one creepy avy, man. You shoulda stuck with Newman from back in the day.

    That Alfred Newman avatar seemed to be popular in 2008. It was one of the funny images in a 2008 top secret NSA document released by Snowden (see below). The NSA also used Montgomery Burns and Snidely Whiplash in that document. Now, I don't think the NSA is hiring retail; however, they are very incompetent, so who knows? Either way, I think Zip and the NSA are more comical as to be on par with Homer Simpson. LOL





    https://snowdenarchive.cjfe.org/gree...78.dir/doc.pdf

    https://snowdenarchive.cjfe.org/gree...78eda3004f28c9
    Last edited by NorthCarolinaLiberty; 09-29-2017 at 05:54 PM.
    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 Zippyjuan View Post
    I do think that ID should be required for certain things like carrying a concealed weapon...




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

  25. #84

    Default

    Quote Originally Posted by Zippyjuan View Post
    Why are banks keeping excess reserves? I can't say for certain. The Fed has certainly heavily encouraged them to keep higher reserves- (thanks for the correction on the rate the Fed currently pays on them- I forgot that was increased). Another may simply be demand. Haven't checked numbers for a while but at one point companies themselves were sitting on $2 trillion in cash.
    https://www.forbes.com/sites/steveha.../#4ca1fe782cf5

    High bank capital ratios have damaged the American economy on both a cyclical and a structural basis. The solution? Every bank shareholder has a strong interest in ensuring that managements do not take on too much risk relative to the capital entrusted to them. It must be emphasized that the stable macroeconomic performance of the Great Moderation (in the 20 or so years prior to 2007) occurred while banks operated with much lower capital-asset ratios than now. The solution is to scale back untimely and excessive bank capital requirements and restore market discipline on banks and other financial businesses. Let banks spend more time managing risks and less time managing regulators and politicians
    https://www.forbes.com/sites/steveha.../#66e3ed9c4953

    The United States has employed a loose state money/tight bank money monetary policy mix. Yes, for all the talk of quantitative easing and the Fed’s loose monetary policy, the inconvenient truth is that the overall money supply in the U.S., broadly measured, is still, on balance, somewhat tight to neutral — thanks in large part to ill-timed bank capital hikes.

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