tag:blogger.com,1999:blog-4256367009985298221.post567559288087372694..comments2024-03-23T13:16:37.006-07:00Comments on Hawaiian libertarian: How Banks Create Money...Out of Thin AirKeoni Galthttp://www.blogger.com/profile/00842553742723239151noreply@blogger.comBlogger21125tag:blogger.com,1999:blog-4256367009985298221.post-39892901403949875242011-06-22T04:15:20.774-07:002011-06-22T04:15:20.774-07:00Americans would rather watch Dancing with the Star...Americans would rather watch Dancing with the Stars than to pick up a book about finance or economics.Captain No Marriagehttps://www.blogger.com/profile/13131818013569986308noreply@blogger.comtag:blogger.com,1999:blog-4256367009985298221.post-52145430937666058432011-06-18T03:16:02.702-07:002011-06-18T03:16:02.702-07:00Look, the thing you're missing (wilfully it se...Look, the thing you're missing (wilfully it seems) is that banks must hold equity against loans made (technically, equity is held against risk weighted assets, with different types of loans subject to more or less equity holding requirements).<br /><br />Equity in this sense is not customer deposits, its actual shareholder equity (or instruments with similar obligations on the holders).<br /><br />This is what stops banks creating infinite money; their P&L is constrained by the amount of equity they hold. Further, investors look for return on equity, so its a careful balancing act for banks - each new loan is marginally more expensive to make due to the increased equity held, and at some point RoE decreases from increased lending.<br /><br />I'm also not aware of any banks running advances to deposits ratios higher than 100% (i.e. more loans made than retail deposits held). If you have examples, then sure, I'd agree that those banks are engaging in extremely risky behaviour (they are basically assuming that they have access to liquidity to bridge any short term funding requirements, which is very dangerous; its why the UK's Northern Rock Building Society collapsed for example).<br /><br />But no Retail Banker could seriously argue that running such ratios was a sound business decision.Gunnnoreply@blogger.comtag:blogger.com,1999:blog-4256367009985298221.post-11752600022496527492011-06-17T21:03:54.504-07:002011-06-17T21:03:54.504-07:00Read the book by G. Edward Griffin called The Crea...Read the book by G. Edward Griffin called The Creature From Jekyll Island.(Ironic name) It's about how the Fed was formed. Very interesting. Last month Glenn Beck had him on his show. Now Glenn Beck does not or will shortly loose his show. I just started the book. Very good read. Lots of research. Best place to buy it is through Midas Resources. They throw in a walking Liberty $1.00 silver coin. One book per family BTW.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-4256367009985298221.post-18286481441580010252011-06-16T12:44:19.369-07:002011-06-16T12:44:19.369-07:00So in summary: So, this bank only got a $100 depos...So in summary: So, this bank only got a $100 deposit. Throughout history 10% reserves are adequate to fill peoples' needs to withdraw their money. But, how banks work is, they've given out $900 in money created out of thin air. They only have $10 in actual reserves in their vaults, but should have at least $90 ($900 times 10%). They'll eventually have $90 plus interest...eventually. This is why banks always fail in hard times. This is why they will fail again. This is called Fractional Reserve Banking. This is the method all banks use today.<br /><br />ShaneAnonymousnoreply@blogger.comtag:blogger.com,1999:blog-4256367009985298221.post-33261159383294453042011-06-16T12:41:19.171-07:002011-06-16T12:41:19.171-07:00Sorry, my numbers got cut off. Here they are again...Sorry, my numbers got cut off. Here they are again:<br /><br />$90.00<br />$81.00<br />$72.90<br />$65.61<br />$59.05<br />$53.14<br />$47.83<br />$43.05<br />$38.74<br />$34.87<br />$31.38<br />$28.24<br />$25.42<br />$22.88<br />$20.59<br />$18.53<br />$16.68<br />$15.01<br />$13.51<br />$12.16<br />$10.94<br />$9.85<br />$8.86<br />$7.98<br />$7.18<br />$6.46<br />$5.81<br />$5.23<br />$4.71<br />$4.24<br />$3.82<br />$3.43<br />$3.09<br />$2.78<br />$2.50<br />$2.25<br />$2.03<br />$1.82<br />$1.64<br />$1.48<br />$1.33<br />$1.20<br />$1.08<br />$0.97<br />$0.87<br />$0.79<br />$0.71<br />$0.64<br />$0.57<br />$0.52<br />$0.46<br />$0.42<br />$0.38<br />$0.34<br />$0.30<br />$0.27<br />$0.25<br />$0.22<br />$0.20<br />$0.18<br />$0.16<br />$0.15<br />$0.13<br />$0.12<br />$0.11<br />$0.10<br />$0.09<br />$0.08<br />$0.07<br />$0.06<br />$0.06<br />$0.05<br />$0.05<br />$0.04<br />$0.04<br />$0.03<br />$0.03<br />$0.03<br />$0.02<br />$0.02<br />$0.02<br />$0.02<br />$0.02<br />$0.01<br />$0.01<br />$0.01<br />$0.01<br />$0.01<br />$0.01<br />$0.01<br />$0.01<br />$0.01<br />$0.01<br />$0.00 = $899.96<br /><br />ShaneAnonymousnoreply@blogger.comtag:blogger.com,1999:blog-4256367009985298221.post-85915589548147516162011-06-16T12:39:49.114-07:002011-06-16T12:39:49.114-07:00I've done some math on fractional reserve bank...I've done some math on fractional reserve banking. Although my numbers below don't exactly match $1000, you can see the process. Basically, the bank technically could only have $10 in their vault, but be accountable for $899 in case people defaulted(and until principle and interest is received). The following numbers represent the amounts they can loan with that original amount, then the smaller amounts after 10% hold:<br /><br />$0.27<br />$0.25<br />$0.22<br />$0.20<br />$0.18<br />$0.16<br />$0.15<br />$0.13<br />$0.12<br />$0.11<br />$0.10<br />$0.09<br />$0.08<br />$0.07<br />$0.06<br />$0.06<br />$0.05<br />$0.05<br />$0.04<br />$0.04<br />$0.03<br />$0.03<br />$0.03<br />$0.02<br />$0.02<br />$0.02<br />$0.02<br />$0.02<br />$0.01<br />$0.01<br />$0.01<br />$0.01<br />$0.01<br />$0.01<br />$0.01<br />$0.01<br />$0.01<br />$0.01<br />$0.00<br />Tatal loaned with $10 in the vault = $899.96<br /><br />ShaneAnonymousnoreply@blogger.comtag:blogger.com,1999:blog-4256367009985298221.post-45237160554467672852011-06-16T08:38:43.495-07:002011-06-16T08:38:43.495-07:00The easy answer is there is something north of 70 ...The easy answer is there is something north of 70 TRILLION in credit market debt and only a few trillion on deposit.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-4256367009985298221.post-904141788762764842011-06-15T12:48:58.312-07:002011-06-15T12:48:58.312-07:00I have been studying this a bit lately. This is a ...I have been studying this a bit lately. This is a great youtube video that works though all the particulars:<br /><br />http://www.youtube.com/watch?v=7auQEXTWomA&feature=relatedAtlasnoreply@blogger.comtag:blogger.com,1999:blog-4256367009985298221.post-88532930196522538282011-06-15T12:43:48.719-07:002011-06-15T12:43:48.719-07:00The best material I have ever read on this subject...The best material I have ever read on this subject is by Murray Rothbard. I strongly recommend "The Mystery of Banking" which I think is available on PDF as a free download. Google it.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-4256367009985298221.post-83256101030204377532011-06-15T12:09:58.362-07:002011-06-15T12:09:58.362-07:00So if bank lends me money, the bank created money ...So if bank lends me money, the bank created money from my borrowing.<br /><br />Let's guess I give the money back to the bank immediately without spending it. The bank will have it immediately. So why should my presence mandatory for creating money?<br /><br />Ok this is not my field so I am not expert of this stuff. Any link book or video to recommend to study this matter more?Travellernoreply@blogger.comtag:blogger.com,1999:blog-4256367009985298221.post-3972143115054739052011-06-15T10:56:21.409-07:002011-06-15T10:56:21.409-07:00How do people not see this? This is why you (and ...How do people not see this? This is why you (and Vox and Athol, etc.)need to keep up the good fight There are noobs (like me!) who have just taken the red pill and need massive amounts of information in a short time to prepare.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-4256367009985298221.post-74443658360504888212011-06-15T10:14:20.929-07:002011-06-15T10:14:20.929-07:00"Most of a bank’s loans are made to its own c..."Most of a bank’s loans are made to its own customers and are deposited in their checking accounts."<br /><br />Why would anyone borrow money at >5% and put in into a checking account making <1% much less "most" of the people borrowing money. That makes no sense.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-4256367009985298221.post-22441375191695305102011-06-15T09:35:51.363-07:002011-06-15T09:35:51.363-07:00I think his main point is that "the masses&qu...I think his main point is that "the masses" don't get to enjoy this wealth magnification of leveraging , fractional banking, alchemy only the bankers do.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-4256367009985298221.post-80359666781243333152011-06-15T06:57:01.935-07:002011-06-15T06:57:01.935-07:00The fractional banking alchemy works on a math pri...The fractional banking alchemy works on a math principle called "limit of a geometric sequence sum": The sum of money in the system is equal to 1/Reserve Ratio * Deposits.<br /><br />For 5% on 2,000, that's 40,000<br />For 10% on 100, that's 1,000.<br /><br />Just as money is created, it is destroyed. This is a form of leverage that magnifies wealth. Deleveraging, its opposite, utterly implodes it. Ashes to ashes, dust to dust.Corbanhttps://www.blogger.com/profile/01876190727321777961noreply@blogger.comtag:blogger.com,1999:blog-4256367009985298221.post-5389973963813393722011-06-14T23:13:15.900-07:002011-06-14T23:13:15.900-07:00This is somewhat un-related, but I recently saw Th...This is somewhat un-related, but I recently saw The Zeitgeist Movement; interesting take on the banking industrySharkhttp://solvemygirlproblems.comnoreply@blogger.comtag:blogger.com,1999:blog-4256367009985298221.post-29979006763253588362011-06-14T21:26:40.751-07:002011-06-14T21:26:40.751-07:00You are correct. The banks can create $1000 out o...You are correct. The banks can create $1000 out of a deposit of $100.<br /><br />The misunderstanding occurs because most people understand that the bank lends out $90 of a $100 deposit with a reserve ratio of 10%.<br /><br />What most do not understand is that that is not how it actually works. The bank accepts your $100 deposit, and <i>treats that $100 as the 10% to be kept on reserve.</i> <br /><br />Since the bank has $100 in reserves, it uses it to create the other $900 (i.e., 90%)...Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-4256367009985298221.post-17518481861445355602011-06-14T21:26:19.514-07:002011-06-14T21:26:19.514-07:00Long, long ago, a fellow worker told me if the res...Long, long ago, a fellow worker told me if the reserve rate was 10% and I deposited $100, the bank could loan out the $900, keeping the $100 as the 10% reserve. I told him he was not only a liar but a damned fool. When I checked it out, I had to eat massive amounts of crow.<br /><br />Anonymous age 69Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-4256367009985298221.post-51229644278824747212011-06-14T20:23:54.479-07:002011-06-14T20:23:54.479-07:00This is the kind of thing you study in the first y...This is the kind of thing you study in the first year economics class at any university. Yes, a high-functioning society needs a managed monetary system. It doesn't matter whether it's paper, gold, or credit (savings of others to pay for their spending later). This whole "OMG it's all a scam!!!" destroys your credibility. Yes, of course it's a scam. A scam we are all choosing to go along with, to make life better, facilitate exchanges, obtain thing we can't pay for outright in furs and vodka. That's where the whole civilized society thing comes in.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-4256367009985298221.post-88579370038714810992011-06-14T20:21:19.903-07:002011-06-14T20:21:19.903-07:00Yes, withdrawals are the key - at least for honest...Yes, withdrawals are the key - at least for honest confusion. Willful stupidity's another matter entirely; there's no cure for that but letting the banksters enslave them and their kids.<br /><br />When you say that 'on a $100 deposit, a bank lends $90 and keeps $10 in reserve', you need to stress that the money creation aspect of this is that <i>the depositor can write a check for the full $100, not the $10 the bank actually has,</i> and <i>someone else </i>simultaneously <i>has $90</i>. (And so on and so forth down the line of borrowers/depositors.) There would be no money creation if the depositor couldn't write a check for more than $10 until the $90 loan was repaid. That's the answer to Lynch's question of where the missing $900 comes from.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-4256367009985298221.post-40185687396418666272011-06-14T20:14:43.168-07:002011-06-14T20:14:43.168-07:00I remember reading over 10 years ago The Case Agai...I remember reading over 10 years ago The Case Against the Fed and What Has the Government Done to Our Money. I had to read them both at 2x to get it.<br /><br />But yes, this kind of ignorance is astounding. Oh well, most of us will be living in filth, stench, and pestilence soon enough. I've talked to people from Latin American countries that have been through currency problems; not fun.sth_txsnoreply@blogger.comtag:blogger.com,1999:blog-4256367009985298221.post-79370772806805232902011-06-14T19:34:12.157-07:002011-06-14T19:34:12.157-07:00I think the part that's hanging people up is t...I think the part that's hanging people up is the fact the federal reserve loans money to bank anytime they need it to cover withdraws. There used to be limits on how much capital they needed to reserve to cover deposits but I believe those where removed in 2003 or 2004 and the fed simply lends money whenever they ask.Grimhttps://www.blogger.com/profile/08216378792974323131noreply@blogger.com