How the banks create money

[psionl0]

It really is the basic lies that tell the most truth, don't you think psionl0?

Agreed.

Mind you, I was initially impressed when I first read Thomas Anderson several years ago. Sceptic-PK must have dug up those ancient quotes from around about that time. The difference however is that I did further research on the matter. I discovered that Thomas Anderson's argument was mainly one of semantics and his advice didn't work. Most of his writings were lifted directly from Mary Croft's writings anyway.

Anybody who isn't a child can see what Sceptic-PK is trying to do. He can't win his argument on the facts alone so he is attempting malign me instead. He really is a nasty piece of work.

Sceptic-PK, GO BACK TO YOUR NAUGHTY CORNER!!

 

[Sceptic-PK]

Mind you, I was initially impressed when I first read Thomas Anderson several years ago. Sceptic-PK must have dug up those ancient quotes from around about that time. The difference however is that I did further research on the matter. I discovered that Thomas Anderson's argument was mainly one of semantics and his advice didn't work. Most of his writings were lifted directly from Mary Croft's writings anyway.

Anybody who isn’t a child (or a moron) would never have fallen for that complete and utter nonsense in the first place. It says a lot about your world view and the kind of things you’re willing to believe without any evidence. It is great you decided to do further research about the topic, perhaps you could do the same re banking? Go and interview a banking executive and ask him why he pays interest to his depositors if he doesn’t really lend their money to third parties. Or something.

Anybody who isn't a child can see what Sceptic-PK is trying to do. He can't win his argument on the facts alone so he is attempting malign me instead. He really is a nasty piece of work.

Well let’s be honest here, we’ve been going on for months about banks lending/not lending their reserves, what else is there to say? We’ve gone round and round and round. I have no need to “win the argument” because it cannot be won. I’m surprised you don’t feel the same way. We’re at an impasse. So, mocking a fully grown man who believed in fairy tales seemed like the right thing to do, given the large collection of thinly-veiled insults sent in my direction over the last few months.

Good luck on your next conspiracy theory! I’m sure it’s not too far away. At your age your world view is set in stone.

 

[psionl0]

I have no need to “win the argument” because it cannot be won.

 

[Sceptic-PK]

It’s no different to arguing with a FMOTL that what he believes is nonsense (I’m sure you know what that feels like!)- the argument cannot be won. They’ll believe whatever they want, because they have a strong emotional or intellectual reason to do so. Even though your maths proves that banks lend excess reserves, you still refuse to accept it. How can one win an argument against such blatant dishonesty? Lulz.

 

[psionl0]

Sceptic-PK, from what I understand, you can not even do basic algebra. I hate to have to bring that up, but it seems to me, if you can not even do algebra, what position are you in to evaluate the thinking of people who can?

When you can't do critical thinking, all you can do is guess whether a POV sounds like mainstream thinking or not. Once you have made that random decision, you try to "win the argument" at all costs.

 

[Sceptic-PK]

When we sign documents with the government (company) we become surety for the STRAWMAN and have to pay its taxes, duties etc.

 

[psionl0]

Yet another failed attempt to win the argument. Imagine how many posts Sceptic-PK would make if he actually "needed" to win the argument.

 

[psionl0]

I'm probably not being very clear about my real question. There's nothing mysterious about fractional reserve banking. The mechanics get covered in standard college economics courses taken by every economics major, usually in their sophomore or junior year. The thing I don't understand is what it is that people find confusing or mysterious. I'm not asking which piece one party here thinks that another party here gets wrong. I'm asking for insight as to why people find this hard to understand (which many people clearly do). Is the problem not being used to thinking in economic models? Is it that people have views as to whether fractional reserve banking is good or bad, and this somehow leads to them arguing over the mechanics? Some other source of confusion?

FRB and the caveats that go with it is not a difficult subject for someone of average intelligence to learn.

The problem is that FRB is not taught in schools nor explained in the mainstream media. So while many have a vague idea that banks need deposits in order to make loans, most will find it a shock to discover that money actually gets created this way.

Some who can not comprehend this principle will try to argue that it is just the "same money being accessed by different people" (true if banks lend money directly from their vault and every withdrawal is a "cash" withdrawal) or that bank account balances are "not money" (which ignores the role of cheques and electronic banking).

You are not one of these people.

 

[tensordyne]

Yes / No / Do not know... that is the question.

Absolute nonsense. I even explained it as a two-step process either here or in Webb’s other stupid thread. Nobody has denied that the process of creating the loan engenders a credit to the borrower’s account that comes “out of thin air”. The point that the nutters are missing is that this is irrelevant. What matters is where the money comes from when the loan is accessed by the borrower. It doesn’t come from “thin air” it comes from the reserves of the bank (which come from customer deposits).

Let's assume for the moment that you explained the two part process of making the loan and then having the amount transferred correctly. Let's start backward on the claims in this post for the part quoted above.

1. Reserves do not just come from deposits, they also come from the bank's capital. So that statement is in error. Matching to each loan is at least an equal amount of debt in the form of the loan promissory note.

2. What does "comes from" mean to you? When the loan amount is accessed as you put it, transferred as I would put it, both the money in the deposit account and in reserves goes down. Two things go down, which means "comes from" does not have its usual easy meaning. If you say it comes from reserves, than why are you singling out reserves as being so special? Why not deposits, why not both? Why not neither? It is just as arbitrary in the end.

Really, if you agree that both reserves and deposits go down in the sending bank and up in receiving bank in equal amount after a transfer occurs, then at least on that issue, I am in agreement with you.

3. I do not see how the fact that loans coming out "thin air" is made any less relevant by total reserves remaining constant (barring actions by the central bank). Both at least are relevant to banking, so define for me how one being true makes the other one irrelevant, even though it is also true.

4. Many people have no idea how FRB works, or that it even exists. I have seen videos with Tea Party type people trying to explain FRB and doing it wrong. I have also seen many videos of people you would probably not call 'nutters', because they are just average everyday people, that have not even heard of Fractional Reserve Banking. Really, your or my own, or anyone else's political feelings makes zero difference as to how the mechanics of FRB works, which is the main thing we have been discussing and the main topic of the the thread.

5. In my post titled "Example for Startz, just to clear things up." I did not use a bunch of equations. I used just a balance sheet and some numbers. I would like a yes, no, or don't know, as to whether you agree with the description of the transactions occurring in that post. By all means break things up to multiple yes/no or don't knows if you want.

If yes on something, then me you and psionl0 are all in agreement as to the mechanics of how FRB works for that item. If no, I will present an argument to show why I think this is the wrong conclusion. If don't know, then you do not know how FRB works as per that aspect.

This is completely and utterly wrong (of course). Though you might need a licence to act as a bank (what don’t you need a licence for these days?) the actual process of double-entry book keeping is not a magical ability of banks and anyone can create deposits out of thin air if they want to. This of course doesn’t fly with tensordyne’s conspiracy beliefs so he’ll never understand this.

So, now one needs a license to do these kinds of actions. There is then something banks do that you can not (well, at least not without a license). That thing is run a legal business that works as per FRB. If your statement were correct, one would have pawn shops and pay-day loan operations acting like commercial banks and credit unions. They do not, ergo, there is something different about how FRB handles money. The difference is in the loan process. The mathematics is pretty clear on this point.

I never made mention of magic, although at times I suspect that Tippit would like us all to live in the Harry Potter universe with Gringott's Bank as the preferred form of banking. Double entry bookkeeping happens for more than just banks. Fractional reserves, that does not happen in anything other then FRB institutions. That is why there is the FR in FRB.



All the best to you all!

 

[psionl0]

5. In my post titled "Example for Startz, just to clear things up." I did not use a bunch of equations. I used just a balance sheet and some numbers. I would like a yes, no, or don't know, as to whether you agree with the description of the transactions occurring in that post. By all means break things up to multiple yes/no or don't knows if you want.

!!LOL!! Sceptic-PK isn't going to comment on anything in your post because he doesn't understand a word (or number) of it! Why do you think he's switched to ad-hominems?

 

[tensordyne]

... what is this ... place ...

When we sign documents with the government (company) we become surety for the STRAWMAN and have to pay its taxes, duties etc.

I always found the laughing dog to be a bit annoying myself. The above is true. Perhaps should add in about the all caps-lock name they send in the mail. Interesting stuff the FMOTL information. The only problem is that judges, institutions and so on act the way FMOTL describe things, but they have never thought through how they act or why.



Oh well. All the best to you all!

 

[tensordyne]

!!LOL!! Sceptic-PK isn't going to comment on anything in your post because he doesn't understand a word (or number) of it! Why do you think he's switched to ad-hominems?

Yes, I know. Putting down actual statements that can be interpreted in an objective manner does not seem to be Sceptic-PK's strong suit. Thought I should at least give him a try at it.

 

[Sceptic-PK]

Reserves do not just come from deposits, they also come from the bank's capital. So that statement is in error. Matching to each loan is at least an equal amount of debt in the form of the loan promissory note.

Of course they don’t just come from deposits, during this entire discussion we’ve ignored the role of bank investment re money “creation”, why are we suddenly talking about that now? For the purposes of discussion we have always been talking about customer deposits. Your attempt to score a point here is amusing.

What does "comes from" mean to you? When the loan amount is accessed as you put it, transferred as I would put it, both the money in the deposit account and in reserves goes down. Two things go down, which means "comes from" does not have its usual easy meaning. If you say it comes from reserves, than why are you singling out reserves as being so special? Why not deposits, why not both? Why not neither? It is just as arbitrary in the end.

Because deposits are worthless without reserves.

I do not see how the fact that loans coming out "thin air" is made any less relevant by total reserves remaining constant (barring actions by the central bank). Both at least are relevant to banking, so define for me how one being true makes the other one irrelevant, even though it is also true.

Because they don’t really come out of thin air. They are funded by the amounts the bank has on deposit (and their own capital if you want, but that’s not particularly relevant. A bank has better things to use its capital for than lending to me to buy a house.)

So, now one needs a license to do these kinds of actions.

I didn’t say that they did (I have no idea) but that they might, because you need a licence to do almost anything these days.

There is then something banks do that you can not (well, at least not without a license). That thing is run a legal business that works as per FRB. If your statement were correct, one would have pawn shops and pay-day loan operations acting like commercial banks and credit unions. They do not, ergo, there is something different about how FRB handles money. The difference is in the loan process. The mathematics is pretty clear on this point.

This is needless pedantry. I could also state that a fisherman isn’t doing anything special that I cannot do, and you could turn around and say “but you’d need a licence!”. So what? Getting a licence (even assuming one is needed) does not imbue the licensee with a magical ability to invent money out of thin air. While there may be a licence required to act as a bank, there is no licence required to practice FRB. I could get 10 people to give me money on the proviso that I be allowed to lend it to other people and they would receive a cut of the arrangement(s), and expand deposits in just the way that banks do.

 

[tensordyne]

Show me the beef!

Yes, I know. Putting down actual statements that can be interpreted in an objective manner does not seem to be Sceptic-PK's strong suit. Thought I should at least give him a try at it.

Maybe psionl0 you should put up a series of balance sheets for him to look at with minimal description for him to comment wrongly about. Just statements like: "Bank A transfers money to Bank B" followed by a balance sheet. Here are the numbers, tell me if they make sense. I mean, if he can not read a balance sheet, he really is retarded then.

I mean, he did claim "I even explained it as a two-step process either here or in Webb’s other stupid thread." Reading a T balance sheet should be a piece of cake then right Sceptic-PK... or is that asking for your brain to do too much work?

What say you Sceptic-PK? Up for the challenge? No single-line non-starter statements, just cold hard numbers. If you really do understand some part of FRB you should be able to interpret whether the balance statements make sense or not, for at least a couple of them. I know I can.

Or are you too (chicken)? Too much of a yellow-belly and want to run away?

Your call.

 

[psionl0]

I always found the laughing dog to be a bit annoying myself.

I do too nowadays but "You told a fib" didn't seem to highlight the magnitude of the WHOPPER that Sceptic-PK told.

I don't mind if he reminds people that I once quoted Thomas Anderson. It highlights the difference between a critical thinker and himself. No knowledge is sacrosanct. All information must be tested before it is accepted or rejected and even then, you need to be willing to change your views in the light of new information.

The highlighted quote is "basically" true but the truth is more involved than that. We could discuss these quotes in a separate thread if you are interested but frankly, having browsed a number of "truther" sites over the last couple of years, I now find a lot of the unsubstantiated theories in the CT forums uninspiring. (Yes, I know that a demolitions expert couldn't have done a more perfect demolition job on the twin towers than the aeroplanes did but that is not a high enough standard of proof of a conspiracy).

 

[tensordyne]

Show me the beef Sceptic-PK. Interpret a balance sheet. The rest of the arguments are just empty words. Balance sheet or chicken. Your choice.

 

[tensordyne]

Show me the beef!

 

[Sceptic-PK]

I already gave a simple example (over and over and over) previously.

A bank has $10,000 deposits; this is $10,000 in reserves.
The bank loans $9,000 to you by crediting your account.
The bank now has $19,000 deposits, $10,000 reserves, and a $9,000 loan asset.
You then go and buy $9,000 of widgets.
The bank now has $10,000 deposit liabilities, $1,000 reserves and a $9,000 loan asset.

The money that is used to fund your loan comes from the bank's excess reserves. That they credit a borrower's account with deposits "out of nothing" is irrelevant. Deposits are worthless without reserves. If, in the above example, the borrower withdraws the $9,000 and then the customers attempt to withdraw their $10,000, the bank doesn't have the money because they lent it to the borrower.

I always found the laughing dog to be a bit annoying myself. The above is true. Perhaps should add in about the all caps-lock name they send in the mail. Interesting stuff the FMOTL information. The only problem is that judges, institutions and so on act the way FMOTL describe things, but they have never thought through how they act or why.

Well sure, the FMOTL is "interesting" because it is interesting to study individuals that believe such complete nonsense.

 

[psionl0]

I already gave a simple example (over and over and over) previously.

What did I tell you tensordyne?

Sceptic-PK doesn't dare address your balance sheet (buk! buk!) He would rather repeat his "expositions" ad nauseum.

 

[Sceptic-PK]

Yeah, it's not as if I could just copy the examples straight out of MMM to prove my "worth" or anything haha. But, if psi is really that desperate for it, I'll see if I can be bothered over the weekend. But tonight is footy night. Fremantle versus...Oh wait no, hang on. No finals for Freo.