Posted on 09/02/2011 7:50:17 PM PDT by Tolerance Sucks Rocks
Watch “The Money Masters” DVD.
The Secret of Oz - Winner, Best Docu of 2010 v.1.09.11
http://www.youtube.com/watch?v=swkq2E8mswI
BOOKMARK
ping
Thanks for the facts. Great posted article.
The Money Masters - Full
http://www.youtube.com/watch?v=JXt1cayx0hs&feature=related
"Usually, one might think that means that for every dollar of capital, it can lend out 90 cents and 10 cents must be kept in reserve, and there is no increase in the money supply. This is the Jimmy Stewart version of banking. But according to Hammond’s analysis, “banks don’t really loan currency that way.” Instead, keeping with the 10 percent capital requirement example, for every dollar kept in reserve, the bank or financial institution can create $9 to lend — out of thin air — with the dollar itself held in reserve. If true, all common conceptions of prudential financial standards are thrown out the window. Then, the banks are practically speaking nine times larger than they would be under a conventional understanding of what a bank is. That is not a fractional system at all."
My understanding is that the banks do keep 10% in reserve and loan out 90% and that in itself creates new money. How? Because a large part of that 90% they loan out is deposited on demand, in other words the depositor can legally withdraw it while the bank cannot withdraw the loan it gave on demand. And that depositor will have money that at some point came from another 90% on deposit someplace else on demand and loaned out, and on and on. This is still worth reading. Explains how these bubbles and form.
It would probably be better if someone who knew what he was talking about wrote about these points. Too much of this article is meaningless, jargon-laden gibberish. Note that this has nothing to do with whether some of these points are true or false; it’s that they are neither right nor wrong because they make no sense.
And the article doesn’t even get to the full extent of this debacle: all of the “real” money is also debt, loaned out from the Federal Reserve!
...Not to cool on Federal regulation, but, in the case of Hedge funds and quick buy-sell stock marketeers, those turds need to be squeezed...
Which is why libs believe we can spend our way out of debt.
Of course they gloss over the fact in order to get more money back in to pay off our debt, overall debt has to go up even more.
Guess when the music stops, the one holding the most debt is the biggest loser.
The fractional reserve a bank has to hold varies depending on the size of the bank. Smaller banks may have to hold a higher percentage, bigger banks may be able to hold less as a percentage of deposits.
Thanks, and that makes perfect sense, Obviously when the contraction comes it doesnt help.
before long we're gonna be talkin about real money...billionaires will be worthless street bums...
too big to fail is becoming too big to survive with this political math...
I didn’t say it would help at all. If you didn’t get I think the whole scheme sucks, I guess I was too subtle.
What is the status of your reserve requirement after a capricious government sucks 5 or 10 Billion dollars out of your assets for following their orders?
Actually, it’s simpler than that.
The 90% the banks are allowed to mark as an asset that they can borrow against.
Foreign Policy Journal’s Jeremy Hammond is good and well worth reading.
Romano’s commentary, however, is a bit oversimplified. Romano’s thesis is absolutely correct: “The issue boils down to capital requirements”, but then he goes on to confuse reserves with capital.
Bank reserves are quite different from bank capital. Bank reserves are mostly currency in bank vaults plus deposits at the Federal Reserve Bank. These can be measured entirely objectively. Bank capital is trickier to quantify. On the bank’s balance sheet, bank capital is simply the sum of assets (bank loans net of loss reserves, securities, and other bank assets) minus liabilities (deposits, bonds, and other bank liabilities). The tricky part is in evaluating the appropriate value of those loans net of loss reserves and securities: should these values be based on historic cost and loss statistics or market value?
The extent to which the banks can create money is limited by both reserve requirements and capital requirements, which are entirely different constraints. At present, banks have abundant reserves: never in the history of banking have excess reserves been nearly as high as they’ve been in the past two years. Capital requirements, however, pose operating constraint on money growth. The fact is bank assets are not worth nearly as much in the market as the balance sheets indicate. In fact, many banks are technically insolvent: if they were liquidated, they would not be able to pay their depositors and other creditors. Absent capital, banks cannot lend money and their abundant reserves at the Fed remain sterile.
Bank reserves account for most of the stunning growth of M0, the monetary base, since the 2008 financial crisis. Seeing this truly unprecedented spike in M0, both monetarists and Austrian economists anticipated a spike in inflation rates which has not yet materialized. The reason rates have thusfar been modest is twofold: 1) the world economy is in a profound recession and 2) M0 growth is not the same as money supply growth. The banks cannot do their money multiplier magic with M0 until they have adequate capital. That’s one of the reasons that the Fed has purchased rotten securities from the banks and held down interest rates. By exchanging a security worth $20 for $100 in their Federal Reserve account and by borrowing at 0.05% and lending at 18%, the banks should be able to restore capital adequacy in short order. Taxpayers and savers get to pay the freight. Once bank capital is restored, Katy bar the door because the money aggregates are going to explode even with a historically conservative 10% capital ratio. Savers will see their purchasing power erode every month.
“How to enslave an entire country without firing a shot”- 101
level course in the school of ugly reality
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