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The debt hoax ...

wow- to think that I used to understand this...

either...

a) A bank has deposits of £1m. So it can lend out £900,000, and keep the £100,000 as the %10 deposit

or

b) A bank has deposits of £1m. That £1m counts as the 10%, so it can lend out 10 x this amount - £10m

(yes, it's a british bank. And it is investing in cluster bombs now)

which is it - a or b? I always thought it was b, as Anders has been explaining, but many more here think it is a. I suppose I could ask my banker brother, but seeing as he's a Bilderburger, he might be a little biased
 
twinstead said:
But they have to have the rest of the money, even if it's other people's money. They can't loan money they do not possess.
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Ah! Now I think I found what the difference is. There is a difference between money issued by the central bank and money in circulation in society. It's only money that banks borrow from the central bank that can be directly expanded out of nothing so to speak:

"First, the central bank introduces new money into the economy (termed 'expansionary monetary policy') by purchasing financial assets or lending money to financial institutions. Second, the new money introduced by the central bank is multiplied by commercial banks through fractional reserve banking; this expands the amount of broad money (i.e. cash plus demand deposits) in the economy so that it is a multiple (known as the money multiplier) of the amount originally created by the central bank." -- http://en.wikipedia.org/wiki/Money_creation
 
Halcyon Dayz said:
I'm not.


You owe it to me, and the hundred of millions of others like me who have a bit of money in a savings account or a pensionfund.

And I really do want my money back.



Thank you.

We're all dumber now.
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Same here.

ETA: not in debt that is. as to being dumber I think someone said that they feel less human the more they interact with humans.
 
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Liszt said:
wow- to think that I used to understand this...

either...

a) A bank has deposits of £1m. So it can lend out £900,000, and keep the £100,000 as the %10 deposit

or

b) A bank has deposits of £1m. That £1m counts as the 10%, so it can lend out 10 x this amount - £10m

(yes, it's a british bank. And it is investing in cluster bombs now)

which is it - a or b? I always thought it was b, as Anders has been explaining, but many more here think it is a. I suppose I could ask my banker brother, but seeing as he's a Bilderburger, he might be a little biased
Click to expand...

I think I was wrong. It's a that is the correct alternative. Because otherwise money could be expanded again and again. My mistake was the difference between money issued by the central bank and money in circulation in society. Only money from the central bank can directly be expanded 10 times.
 
Anders Lindman said:
Wrong. The bank can create 10 times the amount of the reserves directly.

"Most people do not realize that the basic Fractional Reserve System operating on (for instance) a 1 to 10 ratio of "reserves" to loans (the basic underlying system we use now) gives the managing or owning institution -- whether the Fed or Congress -- a system that has enormous leverage, both up-side and down-side built into it. For every dollar of capital invested by the owners of the system - those owners can make loans adding up to ten times the amount of the invested capital. In other words -- if a Federal Bank opens its doors with one million dollars of invested capital -- it has the right to lend out $10 million at whatever interest is currently in vogue." -- http://www.primeronmoney.com/fractionalreservebankingdefended.html
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You keep missing the fact that someone had to deposit the $10 to begin with, then the bank loans out $9 of it.
 
Anders Lindman said:
No, then there could be no run on the bank. That would be 100% reserve banking, not fractional reserve banking.
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But customers can only walk in and demand that 10% "real" money, as the other 90% was created "out of thin air" and was nobody's actual money in the first place. So the customers' run on your bank is limited to amounts you do possess. Whether you have enough banknotes for them to stuff under mattresses is another matter.

The other 90% you have given out as loans might or might not be repaid, but it never belonged to the bank in the first place.

If, however, all 100% of the money were real - but you had lent out 90% of it - then a run on the bank would be a real headache as customers eventually getting their money back depends on the solidity of the 90% you've dished out in loans.
 
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tsig said:
You keep missing the fact that someone had to deposit the $10 to begin with, then the bank loans out $9 of it.
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Yes, I made the mistake to say that all money can be expanded ten times. That would make it possible to expand the money again and again which would lead to hyperinflation of the money. It's only the money banks get from the central bank that can be directly expanded 10 times like that. See post #63.
 
Anders Lindman said:
But the deposits are a part of the reserve! Let's say that a bank only has one deposit of $10 and that is the bank's total reserve. Then they can create credits of $90 to other customers out of nothing.
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Rephrasing and repeating yourself isn't making you any less wrong. This is not how it works. If the bank only has one deposit of $10, then it may only lend $9.
 
Sceptic-PK said:
Rephrasing and repeating yourself isn't making you any less wrong. This is not how it works. If the bank only has one deposit of $10, then it may only lend $9.
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Yes, I made a mistake and mixed up money the bank gets from the central bank with ordinary money in circulation. See post #63. Only money from the Fed can be expanded directly 10 times. So if the $10 is from the Fed THEN the bank can expand it to $100 and lend it out. :)
 
Liszt said:
wow- to think that I used to understand this...

either...

a) A bank has deposits of £1m. So it can lend out £900,000, and keep the £100,000 as the %10 deposit

or

b) A bank has deposits of £1m. That £1m counts as the 10%, so it can lend out 10 x this amount - £10m

(yes, it's a british bank. And it is investing in cluster bombs now)

which is it - a or b? I always thought it was b, as Anders has been explaining, but many more here think it is a. I suppose I could ask my banker brother, but seeing as he's a Bilderburger, he might be a little biased
Click to expand...



The problem is, he isn't making any distinction between "deposit" and "reserve". If you deposit $10, the bank is required to hold on to a reserve of $1, and can loan out $9.

Of course, that $9 will likely be spent (you usually don't take out a loan just to hide it in you mattress), and that $9 will then be deposited in the bank (assuming there's only one bank in town, but it averages out). The bank can then lend out 90% of that $9, or $8.10. They then have $19 worth of deposits, $1.90 held in reserve, and $17.10 in loans outstanding, which counts as an asset on their books.

So, that original $10 now counts as $19. The CT types would insist that this means the bank has "created" $9 "out of nothing", but this completely ignores what the people borrowing the money actually do with it - which is usually create new real wealth. I borrowed that $9 to buy something, like tools or materials, and I used those materials to make something - a new house, a new car, a meal at a restaurant, or some such thing. That end product can now (hopefully!) be sold for more than the $9 I spent, which allows me to pay off the loan, and make a profit as well.

That is, I am the one who created that extra $9 - not out of "nothing", but out of the application of my skills and work.

And it's that part of the banking equation that the CT types never seem to get.
 
Basically all money is created as debt, which means that the total debt cannot ever be repaid since there is never enough money to pay both the debt and the interest.
 
Anders Lindman said:
Yes, I made a mistake and mixed up money the bank gets from the central bank with ordinary money in circulation. See post #63. Only money from the Fed can be expanded directly 10 times. So if the $10 is from the Fed THEN the bank can expand it to $100 and lend it out. :)
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I'm sure you can point me to a document that shows that to be true.:)
 
twinstead said:
You still haven't shown me where banks create money out of thin air. Between the fact they need to keep 10% in reserve, and the other 90% is deposited by others, and they interest they pay on those deposits, and the interest they earn investing that money, where is the money from thin air coming from?
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Well, how much money do you have? You'd count the bills in your wallet and spare change, but you'd probably also count the money in your bank account. This, however, has been lent out to other people, who probably put some in their account. And this in turn has been lent out, and so forth and so on.

So you have a whole bunch of people thinking that the money is theirs, but there is very little real money (10%) involved.
 
epepke said:
Well, how much money do you have? You'd count the bills in your wallet and spare change, but you'd probably also count the money in your bank account. This, however, has been lent out to other people, who probably put some in their account. And this in turn has been lent out, and so forth and so on.

So you have a whole bunch of people thinking that the money is theirs, but there is very little real money (10%) involved.
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But the money IS mine. I can go to the bank and withdraw it at any time. How can it not be real money? The money came from somewhere; my wallet.
 
twinstead said:
But the money IS mine. I can go to the bank and withdraw it at any time. How can it not be real money? The money came from somewhere; my wallet.
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They imagine that the physical bills and/or coins are the only "real" money there is. If it doesn't have a physical, tangible embodiment, it's beyond their conception that it can be considered to be "real money", despite my ability to walk into almost any store in country, ask them to accept the computer bits from my bank in exchange for the physical goods in the store, and walk out with my purchases.

So, yes, it's superficially true that if everyone with money on deposit in a bank wanted to get actual, physical cash in hand in amounts equal to their deposits, the banks would be physically unable to do that, since there's only 10% of the amount available as physical money. But that is essentially meaningless, since even without the physical money, I can still buy and sell things. The era when you needed cash in hand to buy anything is long past, but these guys just can't let it go.
 
Horatius said:
... even without the physical money, I can still buy and sell things.
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Is runs on banks impossible these days? :eek: Because most money is electronic! To get actual cash is time-consuming. So in practice maybe runs on banks cannot happen.

ETA: How the heck are transactions between banks done? If I move money from one bank to another bank electronically, then where is the control structure to make sure that the money is actual money? Maybe a run on a bank could happen very quickly electronically if many people started to move their money out from a bank via the Internet for example. Of course, the bank could then shut down its website before too many people had made their withdrawals.
 
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Anders Lindman said:
Is runs on banks impossible these days? :eek: Because most money is electronic! To get actual cash is time-consuming. So in practice maybe runs on banks cannot happen.

ETA: How the heck are transactions between banks done? If I move money from one bank to another bank electronically, then where is the control structure to make sure that the money is actual money? Maybe a run on a bank could happen very quickly electronically if many people started to move their money out from a bank via the Internet for example. Of course, the bank could then shut down its website before too many people had made their withdrawals.
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I suppose that if a run on the banks happened, and the banks had to somehow shut down their websites, it would mean some sort of economic collapse would be in progress. I guess then we'd have more to worry about than esoteric discussions about the nature of banking and whether money is "real" or not ;)
 
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