The Federal Reserve is setting America up for economic disaster

The Hill ^ | September 18, 2017 | Armstrong Williams

[Garth Tater]

"Instead we hurl towards disaster when a solution is available."

There is no solution without getting rid of the debt based currency. Each dollar we use was created by a debt that comes with an attached interest that must be paid back with the original debt. Paying back this interest on top of the original debt would necessarily shrink the money supply if the debt wasn't constantly being rolled over as it matured and rolled over into ever increasing amounts to cover the interest. The attached interest makes it an exponential function that will by mathematical necessity eventually approach a vertical asymptote, ie. run away hyper-inflation.

“It is well enough that people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning.”
                               - Henry Ford

[Garth Tater]

"You are mistaken. Every loan is fully funded. "

One of us is wrong Todd, and it's not me.

[central_va]

The fledgling United states was in serious debt after the revolution and gaining independence. The tariff raised enough revenue to pay that debt off in a decade and made America self sufficient in almost every industry.

More tariffs and less income taxes.

[Garth Tater]

Of course, and your ideas are exactly what we need after we get rid of the debt-based currency. Until that happens we are just bailing water in a sinking boat. We need to patch the holes first, then we can bail our way out of this mess.

End the Federal Reserve. It's not Federal and as it's never been subjected to a full, independent audit it may not even have any unencumbered assets in reserve.

[2001convSVT]

Like another author once wrote if something can’t go on forever it won’t. The endless printing of dollars is eventually going to render dollars worthless, and when that happens the economy collapses. The real question is when does the day of reckoning occur? The US dollar is the worlds reserve currency, so that acts to protect its value and add support time while people trade dollars for a substitute, until a tipping point is reach where paper dollars are untradeable. The date and cause of the tipping point is anyone’s guess.

[central_va]

Just repealing the 16th amendment would fix a lot of issues.

[Garth Tater]

That is the way to do it, but how are we going to do it? The public is ignorant of how their currency is created and the inevitable default that is in store and that govt granted right to print money out of thin air is damn near priceless - it will not be given up without a fight.

[Toddsterpatriot]

One of us is wrong Todd, and it's not me.

Post proof that banks can lend money for your mortgage out of thin air.

And then explain how any banks that could do that could ever fail.

[Garth Tater]

Todd, you already said that each loan was fully funded, and yet with the slightest bit of research you would find out that the banks operate on fractional reserves. This reserve fraction is set by the Federal Reserve and member banks must keep that fraction of their outstanding loans in reserve. At 10% each bank has 90% of their outstanding loans backed by nothing. If you could be so wrong in such a simple thing in your first post why should I believe anything else you have to say?

We've had this discussion before Todd and you were extremely rude. And now you have shown yourself to be basically ignorant of how our monetary system works. Don't trust me Todd, read what Henry Ford had to say on the matter, or does he have to post proof of what he knew too?

[Garth Tater]

Here Todd, just because it was so easy and you are a Freeper I went out and found your "proof" for you. Mind your manners this time and maybe we can have a conversation as you do seem interested in this subject.

Fed Chairman Ben Bernanke admitted the central bank created $1.3 trillion out of thin air to buy mortgage backed securities. This shocking admission came from the Joint Economic Committee hearing on Capital Hill last week.

[Toddsterpatriot]

Todd, you already said that each loan was fully funded

Only because they are.

banks operate on fractional reserves.

Yes.

Fractional-reserve banking is the practice whereby a bank accepts deposits, makes loans or investments, but is only required to hold reserves equal to a fraction of its deposit liabilities.[1] Reserves are held as currency in the bank, or as balances in the bank's accounts at the central bank. Fractional-reserve banking is the current form of banking practiced in most countries worldwide.[2]

Fractional-reserve banking

banks must keep that fraction of their outstanding loans in reserve.

No. They reserve a portion of deposits, not a portion of their loans.

[Garth Tater]

"No. They reserve a portion of deposits, not a portion of their loans."

Todd, when subject to a 10% reserve policy banks must keep in reserve assets worth 10% of their outstanding loans. So, how were these loans "fully funded" if with one million dollars of assets the bank can make ten million dollars of loans?

[Toddsterpatriot]

Here Todd, just because it was so easy and you are a Freeper I went out and found your "proof" for you.

Thanks. You're very helpful.

Fed Chairman Ben Bernanke admitted the central bank created $1.3 trillion out of thin air

Central banks can create money out of thin air. It's the reason they are created.

Now if you look at my claim in post #28....

Post proof that banks can lend money for your mortgage out of thin air.

You didn't get your loan from Ben Bernanke, did you?

When you take a loan out on your house you are actually being given cash that was created out of thin air.

Is that what you meant here?

[Toddsterpatriot]

Todd, when subject to a 10% reserve policy banks must keep in reserve assets worth 10% of their outstanding loans.

If they loan more than the deposits they hold, how do they have any reserve, let alone 10%?

So, how were these loans "fully funded" if with one million dollars of assets the bank can make ten million dollars of loans?

Because they can't.

One million in deposits would only allow $900,000 in loans.

[Pagey]

That’s a number most humans cannot fathom, but it’s completely true.

[Garth Tater]

When the banks loan out ten million dollars in mortgages and are required to hold only one million dollars of their assets in reserve - where do you think that other nine million dollars comes from?

If the mortgages were "fully funded" then the bank would already have given out ten million dollars of their own money to those borrowers and in that case why would any money have to be held in reserve? To cover what? They have already covered any possible mortgage defaults and are themselves in no danger of going bankrupt. Only the loans where 90% of the loan's value is created out thin are subject to the reserve requirement. Do you really not know this?

You really should read The Creature From Jekyll Island and then follow up with your own research in cases where you disagree with the author.

[Garth Tater]

"If they loan more than the deposits they hold, how do they have any reserve, let alone 10%? "

Ding Ding Ding! That's it right there. They create 90% of the loans value out of thin air!!! Do you get it now?

[Garth Tater]

Here Todd, a little research for into the money multiplier effect brought about by home mortgages.

What is the 'Multiplier Effect'

The multiplier effect is the expansion of a country's money supply that results from banks being able to lend. The size of the multiplier effect depends on the percentage of deposits that banks are required to hold as reserves. In other words, it is the money used to create more money and is calculated by dividing total bank deposits by the reserve requirement.

Please make note of the phrase "it is the money used to create more money." This is the money that is created "out of thin air."

[Toddsterpatriot]

When the banks loan out ten million dollars in mortgages and are required to hold only one million dollars of their assets in reserve - where do you think that other nine million dollars comes from?

For your example to make sense, the bank would need over $11 million in deposits in order to loan $10 million and hold reserves of their deposits of 10%.

Only the loans where 90% of the loan's value is created out thin are subject to the reserve requirement.

Commercial Banks don't create money out of thin air.

Only central banks can do that.

You really should read The Creature From Jekyll Island

I started it.

The silly errors early in the book showed it was a waste of time to continue.

[Toddsterpatriot]

They create 90% of the loans value out of thin air!!! Do you get it now?

Yes, I got your confusion much earlier in the thread.