Posted on 03/29/2008 6:48:20 PM PDT by ovrtaxt
I wonder if young Alan ever boinked Ayn Rand. She was a sexual freelancer. Same as libertarianism is the religion of freelancers
I think nascent skeptic has a better handle on it that I.
The banks can create "money" by writing paper loans. But it is the entrepreneur who creates wealth!
nascent skeptic, thanks for that explanation!
Your post #19,
"$10,000 in cash money in the vault allows them to back $100,000 in loans"
$10,000 in vault cash would be enough to back $90,000 in loans, but you seem to think they create that $90,000 by waving a magic wand. Some secret that only banks can do. A guarantee of huge profits. Create money for free and loan it out for interest.
Your post #51,
"Remember that the borrower almost never gets his loan in cash, it’s almost always in the form of a check, or as a deposit in his account"
It sounds like your scheme works as long as the borrower doesn't ask for cash. Or as long as they don't deposit their check in another bank.
My post #61,
"Just putting money in the vault does not allow them to loan out more than their deposits"
Unless you think the bank gets to "create" money.
Your post #97,
"You can get that much cash the next day, this gives the bank enough time to get cash money from the local Fed, or you can get a check or transfer on the spot"
You can't get cash from the Fed, you have no reserves at the Fed. Your reserves are all vault cash. I wouldn't recommend your first loan involve a wire transfer, when your wire bounces for lack of funds, you'd be out of business pretty quickly.
In post 106 I showed from readily available documents that WFC has loaned out 110% of their deposits
Excellent link. Thanks again. But I asked you how they "created" the extra, like your claim in post #51. If you really looked at the WFC link, you'd see the answer.
And as long as the checks are accepted as "real money" they ARE "real money"
You bet.
Real money the bank itself created by printing a slip of paper with "Pay to the order of", a name, an amount in numbers and words, and an authorized signature.
Absolutely. Until they check is deposited and the Fed doesn't have enough money in your account to cover it. Then that real money becomes fraud and your created money sends you to jail. But nice try.
I wouldn't be surprised.
Do you know what the Fed Funds rate is? Do you know why it's such a big deal?
The Fed Funds rate is the overnight interest rate on money that banks lend to one another. Why do banks lend each other money? Why would a bank ever need to borrow money?
Why borrow when they can just "create" money to loan?
If you figure that out there might be hope for you yet.
Ayn was an intriguing personality, and she’s been an influence in my thinking, but I never thought of her as sexy. yuck. I saw bits and pieces of that movie they made about her- it was too weird to watch all the way through.
Of course, Alan Greenspan isn’t exactly a porn star either. lol
Sorry dennis...why are you wondering that? I’ve only read about or am limited to having read some of her stuff....therefore, I’m not getting the connection. Thanks.
Why would they ever need to borrow money if they only loan out less than they have? They’d always have a wad o’ bills being jealously guarded by the dragon in the vault...
They can’t create more money than their reserve requirements allow. Not legally anyway, and there is a whole boat load of eyes watching their books.
With a system as you describe they should either have
$38,219,500,000.00 in cash reserves or only
$13,281,000,000.00 in loans.
The different types of money are typically classified as M’s. The number of M’s usually range from M0 (most narrow) to M3 (broadest) but which M’s are actually used depends on the system. The typical layout for each of the M’s is as follows:
* M0: Physical currency. A measure of the money supply which combines any liquid or cash assets held within a central bank and the amount of physical currency circulating in the economy. M0 (M-zero) is the most liquid measure of the money supply. It only includes cash or assets that could quickly be converted into currency. This measure is known as narrow money because it is the smallest measure of the money supply.[7]
* M1: M0 + demand deposits, which are checking accounts. This is used as a measurement for economists trying to quantify the amount of money in circulation. The M1 is a very liquid measure of the money supply, as it contains cash and assets that can quickly be converted to currency.[8]
* M2: M1 + all time-related deposits, savings deposits, and non-institutional money-market funds. M2 is a broader classification of money than M1. Economists use M2 when looking to quantify the amount of money in circulation and trying to explain different economic monetary conditions.[9] M2 is key economic indicator used to forecast inflation.[10]
* M3: M2 + all large time deposits, institutional money-market funds, short-term repurchase agreements, along with other larger liquid assets. The broadest measure of money; it is used by economists to estimate the entire supply of money within an economy.[11]
http://en.wikipedia.org/wiki/Money_supply
What you appear to be describing is something known in banking history as “the Real Bills Doctrine”.
The knock on the Real Bills Doctrine is that it may be inherently pro-cyclical and pro-inflationary, much like the housing bubble behaved. More activity begets more credit, which begets more activity and then more credit, ad infinitum until the credit bubble collapses. Real bills discounting provides no brake on monetary expansion.
http://en.wikipedia.org/wiki/Real_bills_doctrine
They can only loan out more if they borrow.
They can’t create more money than their reserve requirements allow.
Create how? They borrow money. How boring. Even I can borrow money and lend it to someone else. When you said they create money, because "Would Mr. Bankerman rather collect interest on $9,000, or $100,000?" you neglected to mention the interest they would pay on their borrowings. Personally, I'd rather pay low interest to depositors than higher interest to another bank or a bondholder.
Your way sounds better, I'd rather create money for free. The profit margins are better. LOL!
Not legally anyway, and there is a whole boat load of eyes watching their books.
Yeah, those eyes would notice if you wrote a bad check to a car dealership, just because the checks are accepted as "real money" they ARE "real money".
That 1963 United States Note is nothing other than the Lincoln Greenback series in its last incarnation.
In 1963 you still had Silver Certificates and US Notes as well as Federal Reserve Notes. Silver Certificates were retired when American coinage was debased during Johnson’s administration.
US Notes were an anachronism that functioned exactly like Federal Reserve Notes so they were no longer put into circulation after the 1963 series. A loss for numismatists and history buffs, and a source of new lunacy for conspiracy fanatics who somehow think JFK was killed over the not so mysterious US Note issue.
The reserve requirements on certain deposits are as low as 0%.
“Because of your question, I checked to see who was in office in 1953; interestingly, at that time, George F. Humphrey was Secretary of the Treasury as opposed to Dillon and Ivy Baker Priest was as opposed to Granahan. Strange.”
The 1953 C bills were printed during JFK’s administration, so Dillon and Granahan’s signatures were on them. 1953 B bills were also printed during JFK, but with Dillon and Smith’s signatures.
Ivy Baker Priest was on the 1953 bills and the 1953 A bills, with Humphrey and Anderson respectively.
The signatures tell you when the bill was printed. The year designation tells you when the particular design of the bill was created.
http://www.uspapermoney.info/general/chron_s.html
Fractional-reserve banking
The different forms of money in government money supply statisitics arise from the practice of fractional-reserve banking. Whenever a bank gives out a loan in a fractional-reserve banking system, a new type of money is created. This new type of money is what makes up the non-M0 components in the M1-M3 statistics. In short, there are two types of money in a fractional-reserve banking system:
1. central bank money (physical currency)
2. commercial bank money (money created through loans) - sometimes referred to as checkbook money
In the money supply statistics, central bank money is M0 while the commercial bank money is divided up into the M1-M3 components. Generally, the types of commercial bank money that tend to be valued at lower amounts are classified in the narrow category of M1 while the types of commercial bank money that tend to exist in larger amounts are categorized in M2 and M3, with M3 having the largest.
Thanks for the history. Things like this are fascinating.
Thanks for the information. I had always thought the year was when a bill was printed, not designed. Thanks for the link, too. Looks interesting for future reading.
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