Debunking fractional reserve conspiracies

<SNIP>

Banks don't take money from their vault when making loans, they do bookkeeping entries. Your attempts to say that these are one and the same thing have failed miserably every time you tried to sneak it past us.

If you think you can deny the realities of banking by derailing an ancient thread then <SNIP>

<SNIP>ed, breach of rule 0, rule 12. Please keep it civil/polite and address the argument vs attack the arguer.
Replying to this modbox in thread will be off topic  Posted By: Locknar
 
Last edited by a moderator:
psionl0 said:
<SNIP>

Banks don't take money from their vault when making loans, they do bookkeeping entries. Your attempts to say that these are one and the same thing have failed miserably every time you tried to sneak it past us.

If you think you can deny the realities of banking by derailing an ancient thread then <SNIP>
Edited by Locknar: 
Moderated content removed.
Click to expand...

Another wonderful example of psionl0’s reading comprehension fail. Banks don’t take money from their vault when making loans, but when those loans are utilised, cretin! The making of the loan (the book keeping entry) is completely irrelevant to the actual outcome of the process and the examples used above or the mattress one.

Seriously, at your age you should have a much better grounding in reality and your greater life experience should be an asset. Yet here you are making the same mistakes over and over like a child. Your (supposedly) temporary attraction to FMOTL is a perfect example of a sad old man with little grasp of reality.
 
Last edited by a moderator:
No, but there’s this amazing ability called reasoning that most grown adults develop eventually. You should check it out!
 
Chicken-PK, is this where you have been hiding? I will say it once, I will say it twice, I will even say it thrice if need be...

:degrin: SHOW US THE BEEF! :degrin:

Show us how what ever it is you are trying to prove about FRB is true, using balance sheets, mathematics, something other then repetitive 'exposition' of your viewpoint. As it is, you all word and no gun. I of course do not expect anything like a legit reply for this most reasonable request.

Later Chicken-PK. When you can figure out how to make anything other then poultry arguments, I will be happy to engage in actual debate.
 
Last edited:
Alex Libman said:
In a free society, a bank that fails to convince others that its paper currency is trustworthy will not be in the currency business for long. No matter how a particular store lists its prices, paying with a different currency would be as simple as paying with a different credit card, and online shopping and portable electronics can make currency conversion entirely transparent.

In our society, the government has a total monopoly (as only a government can have) on the issuance of legal tender. Try to offer an alternative (ex. Liberty Dollar), and thugs with guns will come for you soon enough!
Click to expand...

You think the idea of a country's money supply being controlled by private interests is a good idea? Even the founding fathers, and other presidents like Andrew Jackson, hated the idea of privately owned currencies. The money supply should be controlled by the government, but with some serious restrictions (unlike today).

If you want to look at fiat currencies that saved empires, look at Greenbacks and Tally sticks.
 
MarkyX said:
Didn't realize this was a necro thread till now.

But sadly, his thoughts are shared by many nuts.
Click to expand...

Of course, to many who think the current banking system is well designed and regulated that may have a few hickups every so often, ideas such as tally sticks, Greenbacks and Sovereign credit, is a crazy idea.

As far as the necro-ness of the thread is concerned, I myself have no problem with anyone reviving a thread, but did Sceptic-PK start it to make some kind of point, or is there some new information that has not been considered so far about various aspects related to this thread? Just curious what the deal is.

Another point I would like to make, a critique of a system is not the same as a conspiracy theory. Even assuming for instance that a bunch of fat cats went to Jekyll Island Resort to 'conspire' about creating a banker friendly banking system, it is not so much conspiracy as collusion perhaps. Conspiracy implies illegal activity (not including any claims about the illegality of how the bill was eventually passed).

Collusion versus conspiracy, group think versus aggressive self-interested group behaviour, etc.

Just some thoughts.
 
Last edited:
tensordyne said:
Chicken-PK, is this where you have been hiding? I will say it once, I will say it twice, I will even say it thrice if need be...

:degrin: SHOW US THE BEEF! :degrin:

Show us how what ever it is you are trying to prove about FRB is true, using balance sheets, mathematics, something other then repetitive 'exposition' of your viewpoint. As it is, you all word and no gun. I of course do not expect anything like a legit reply for this most reasonable request.

Later Chicken-PK. When you can figure out how to make anything other then poultry arguments, I will be happy to engage in actual debate.
Click to expand...

Sceptic-PK said:
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 deposit liabilities, $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.
Click to expand...

Honestly, if you can’t work out what a balance sheet would look like in the above example, there’s nothing that I or anyone else can do for you. The $9,000 of “excess reserves” was used to fund the loan so you could buy your widgets. This wasn’t money magicked into existence, it came from the loans to the bank made by the bank’s depositors.
 
Sceptic-PK said:
Honestly, if you can’t work out what a balance sheet would look like in the above example, there’s nothing that I or anyone else can do for you. The $9,000 of “excess reserves” was used to fund the loan so you could buy your widgets. This wasn’t money magicked into existence, it came from the loans to the bank made by the bank’s depositors.
Click to expand...

It would take two balance sheets no?
 
By that I mean one balance sheet for before, and one for after a transfer occurs. One could also have before and after balance sheets for the bank that the money is transferred to.'

ETA: or would it be 5. One each for how each bank starts off. One for how the bank changes once a loan is made, and two other ones for how each bank is effected once the transfer occurs. 2 + 1 + 2 = 5. OK, yeah, that sounds right...
 
Last edited:
tensordyne said:
It would take two balance sheets no?
Click to expand...
If the bookkeeping entries are irrelevant then obviously balance sheets have no relevance in real life either.

The only thing that counts is that money moves from bank vaults - eventually. This whole fictional world of accounting exists only in the minds of ................everybody else!
 
I cannot believe this discussion is still continuing. I explained how the transactions work months ago.

ngc6205 said:
Umm, no. It appears to me that you are confusing some terms. Reserves, cash, and outstanding loans are all assets. Assets are increased in the books through a DEBIT and decreased through a CREDIT. OTOH, depositor's accounts are LIABILITIES for the bank. Liabilities are increased by a CREDIT and are decreased by a DEBIT. Also, cash and some other current assets ARE reserves. The only important distinction is what is required and what is excess.

Let's start at the beginning with a very simple bank and an initial deposit of $10,000. We'll assume the bank keeps a "required reserves" account, though it is not required. We'll also assume the bank's desired reserve is 10%. Person A walks into the bank and makes a $10,000 deposit. Cash is debited or increased by $9,000. Required Reserves are debited or increased by $1,000. Person A's checking account is credited $10,000. The books balance because there is $10,000 in debits and $10,000 in credits. Total reserves are $10,000 ($9,000 excess and $1,000 required).

Person B comes into the bank and applies for a $9,000 loan. At the time of the loan, a demand account is created for Person B. The Loans Outstanding Account-Person B is debited or increased by $9,000. Person B's demand account is credited $9,000. Required Reserves are debited or increased $900 and Cash is credited or decreased $900. This last part of the transaction with the "Required Reserves" account is not necessary since cash is normally considered a reserve. I use it for illustrative purposes. Also, the loan transaction is complete at this point. Withdrawal of the funds is NOT required in order for their to be a loan though it does often occur at the same time.
Click to expand...

I break here because at that moment in time, no funds have left the bank's vault.

ngc6205 said:
At this point, the bank has assets of $19,000. Cash account of $8,100 plus Required Reserves (which is also cash) of $1,900 plus a loan outstanding of $9,000. The bank also has liabilities of $19,000 with the two depositor's checking/demand accounts of $10,000 and $9,000. Total reserves are still $10,000. Cash of $8,100 plus Required Reserves of $1,900.

Now, you might think the bank still has $8,100 in excess reserves and could continue to make loans. However, banks will typically not do this because they know that existing loans might be withdrawn at anytime. Therefore, banks will typically not continue to loan out money if their excess reserves match or drop below the amount of loans that have not been withdrawn.

At the end of the loan transaction, the borrower will often either request the loan funds as a withdrawal or the loan documents will specify who will be paid the loan funds for something the borrower has purchased. This initiates a second transaction.
Click to expand...

It is in this second transaction where cash LEAVES a bank's vault or a bank check will be issued against the cash in the vault which essentially gives the same result. The amount of time between the creation of the loan and the withdrawal may be as little as a few seconds or as much as several days or longer.

ngc6205 said:
In our example, because there is a separate Required Reserve account, it requires crediting both Cash and Required Reserves. The transaction will be a debit or decrease to Person B's demand account of $9,000. There will be a corresponding credit or decrease to Cash of $8,100 and there will be a credit or decrease to Required Reserves of $900. It is only at this point that total reserves have changed after the initial deposit. Remember, total reserves were $10,000 after the deposit and total reserves were still $10,000 after the initial loan transaction. Now, after the loan proceeds have been withdrawn, total reserves are $1,000.

At this point, the bank has $10,000 in assets. ($9,000 loan outstanding-Person B and $1,000 Required Reserve or cash.) $10,000 in liabilities in the form of Person A's checking account.

Now, let's assume Person B's loan proceeds went to Person C and Person C deposits the $9,000 in the same bank. Cash is debited $8,100 and Required Reserves is debited $900. Person C's checking account is credited $9,000. The bank now has $19,000 in assets and $19,000 in liabilities. Assets are: $8,100 in cash or excess reserves. $1,900 in Required Reserves, and $9,000 in loan outstanding. Liabilities are: $19,000 in depositor's accounts. At this point, the bank could loan the $8,100 since the $9,000 loan has already been distributed.

That is a simple banking example. Again, the required reserves account is NOT necessary. You might see a similar account on the books of some banks and you might not. Sometimes, a bank will have a reserves account in the Stockholder's Equity section of the balance sheet. This is because that particular bank has decided to utilize some profit or paid-in capital from previous years to meet their reserve requirements. If that is the case, the accounting is a little bit different from the simple example provided above.
Click to expand...

This isn't that hard. A little rudimentary accounting knowledge should be all it should take. There is only one balance sheet.
 
ngc6205 said:
I cannot believe this discussion is still continuing. I explained how the transactions work months ago.


I break here because at that moment in time, no funds have left the bank's vault.


It is in this second transaction where cash LEAVES a bank's vault or a bank check will be issued against the cash in the vault which essentially gives the same result. The amount of time between the creation of the loan and the withdrawal may be as little as a few seconds or as much as several days or longer.


This isn't that hard. A little rudimentary accounting knowledge should be all it should take. There is only one balance sheet.
Click to expand...
It is pretty much the consensus of nearly everybody on this forum that banking works exactly how you have described it.
 
1, 2, 5, 10988978973198723192873981273

ngc6205 said:
This isn't that hard. A little rudimentary accounting knowledge should be all it should take. There is only one balance sheet.
Click to expand...

Hate to complain, the quoted stuff was too long to read for my tastes. I understand now why everyone here writes such cursory responses.

As for the one balance sheet, I myself said 5 because I wanted to capture the states of both banks at all times. Technically, since there are two banks, unless one is looking at the balance sheet of the banking system as a whole, it should be two balance sheets, both changing over time.

Yes, everyone seems to agree about the specifics. This is good, because now we can all get down to consequences if desired.

...
 
You must log in or register to reply here.

Back
Top Bottom