i am still trying to figure out why the banks got bailed out for the bad mortgages yet still hold liens on people's homes. if they get bailed out, should not the people oweing them those same funds be forgiviven of these paid of debts thru use of our tax dollars to the banks ?
There are two different ways to create money: * manufacturing a new monetary unit, such as paper currency or metal coins (money creation) * loaning out a physical monetary unit multiple times through fractional-reserve lending (credit creation)
"The money supply of a country is usually held to consist of currency (banknotes and coins) and demand deposits or 'bank money' (the balance held in checking accounts and savings accounts). These demand deposits usually account for a much larger part of the money supply than currency.[8][9] Bank money is intangible and exists only in the form of various bank records. Despite being intangible, bank money still performs the basic functions of money.." wikip : 'money'
"John Kenneth Galbraith once famously said, The process by which money is created is so simple that the mind is repelled. Were about to discuss that very thing. Money creation is a bizarre thing to ponder. It is actually a very simple process, but its really difficult to accept.
Money is loaned into existence. Conversely, when loans are paid back, money disappears. "
The difference between Basketballs & Money is that AN IOU FOR A BASKETBALL IS NOT A BASKETBALL - BUT AN IOU FOR MONEY *IS* MONEY.
By creating IOUs (ie deposit accounts , that represent money of yours you imagine the bank 'has' - maybe in a cupboard somewhere ) banks are (literally ) creating money.
IOU = DEBT = MONEY
Money is not a physical object ( like a basketball). It's an obligation. A promise. And we all know promises can be mulitplied endlessly, whether or not they can ever be kept.
So... the bank is creating "imaginary" money? How is that different than creating no money at all? Like... if I say I have an imaginary pet dragon, how is that different from having no pet dragon at all?
First of all, I'm not saying that it's not physically possible for you, I, or a commercial bank to "print money". Yes, it's POSSIBLE to create money "out of thin air". However, for the three parties mentioned above, it's also illegal. When I say that commercial banks "can't" create money, I mean they are not allowed to do so by law.
Andy puts this in bank B. Bank B lend out ( say) 800 to Chris. Chris puts this in bank C. Bank C lend out ( say) 700 to Dave. Dave puts this in bank D. Bank D lend out say 600 to Eric.
Now we all withdraw our money & go out & spend it.
Secondly, you're being ridiculous. When you loan somebody something, they owe you that which they borrowed from you. A two-year-old knows this. When somebody borrows money from you, they don't (under normal circumstances) pay you back in goods and services. Rather, they pay you back in money (the medium of exchange [currency] that you lent them in the first place). You're insulting my intelligence in an attempt to justify the absurd notion that one magically retains what one loans.
Seriously? You don't know where the bank gets the money to cover withdrawals?
Do you find it at all ironic, that you are trying to talk about "fractional RESERVE banking", even though you apparently don't know what a bank's reserves are, nor their purpose?
It's not a mystery at all where the money to pay out deposits comes from.
There is no "extra" $2400. When someone deposits money into a bank, the bank keeps (stores) 10% (in it's vaults), and loans out the other 90%. When people make withdrawals, the money comes out of the banks reserves. It's not a mystery. The whole purpose of the reserves is to enable the bank to meet it's obligations to it's depositors. That is why banks have legal "reserve requirements".
Guess what: A five dollar bill can be used to buy a zillion times that amount. There are even less restrictions on spending money then there are on lending it.
Shawn : I suggest you try to remain calm. Apparently it is you who doesn't understand fractional reserve banking:
"Fractional-reserve banking creates money whenever a new loan is created." (wikipedia article on 'money creation' . )
"Whenever a bank gives out a loan in a fractional-reserve banking system, a new sum of money is created." ( wikipedia art. on 'fractional reserve banking' )
"I mean, in this imaginary bank there was ONLY my original 1000 deposited."
Don't be an idiot. Obviously, fractional reserve banking doesn't work if a bank only has one customer. You don't understand fractional reserve banking at all, do you?
Or - to make it even more obvious what's happening - let's say I put 1000 in my bank. They lend Bert 900 , who deposits it in the same bank . They can then lend Charlie say 800 . Charlie deposits this 800 in the same bank. They can then lend Dierdre say 700. She deposits it in the same bank.
So we now have CDs worth 1000 + 900 + 800 + 700 = 3400 sitting in the same bank.
good-with-girls, but not with banks. You are 100% correct with actural dollars. The banks do lend out 90% of actually cash, but they lend out 900% of actually so-called-money. Again, you guys are right about actullay cash, but we other guys are not talking about cash, we are talking about how the banking system actually works. They lend out 900% of what they acutally have in cash. They do it in numbers on a computer, or in an account. Just trust us, the banks are a corrupt system.
No they don't. They lend out the SAME money several DIFFERENT TIMES (over a period of time).
In other words, the same money changes hands several different times.
What's important to note, is that the money is never in two places at once. You will see this, if you trace the path the money takes as it is transfer from one person to another.
This has nothing to do with the quantity of money; it has everything to do with the velocity of money.
Time exists, and one's analysis must factor it in.
It is the Fed that creates money electronically by typing numbers into a computer. Commercial banks can't do that. You are mixing those two things up.
your video completely ignores the credit/debt based system we live in. The amount of credit (debt) in the system dwarfs the actual number of dollars floating around. Currently, debt is being defaulted on at a pace never seen--a deflationary spiral.
It would depend on how much money that 20% wanted to withdraw. We know that the bank only has 10% of what they owe everybody in total, but I don't know what percentage of people are owed what percentage of money. It might be that most of the money belongs to a few people. You know how they say that 85% of the nation's wealth is concentrated in the hands of 1% of the population?
Weather it is right or wrong, the banks lend out way more money then they have. I dont agree with them at all, as a matter of fact, I would rather see them do it the way you explain, but the truth is they dont. They like to lend checks, with numbers in your account, not actually money, just numbers. They do bank transfers, but again numbers in the computer. They hardly ever make Dollars transactions. they rather deal with numbers in an account. Thats how they get away with it. Thanks. Peace...
good-with-girls, but not with banks. You are 100% correct with actural dollars. The banks do lend out 90% of actually cash, but they lend out 900% of actually so-called-money. Again, you guys are right about actullay cash, but we other guys are not talking about cash, we are talking about how the banking system actually works with what they actually have.
if you gave the bank $100 that would essentially come from another bank anyway originally as all banks creat the money supply.
also the bank is aloud to borrow 9 times the deposit not 90% of the deposite. the banks inflate the money thats where inflation comes from. thick head this clip is a total failure and riddled with mistakes.
I'm become a bored with this particular conspiracy theory.
"Reserve requirements are the PORTION OF DEPOSITS that banks may not lend and have to keep either on hand or on deposit at a Federal Reserve Bank"
The money that commercial banks lend COMES FROM PEOPLE'S DEPOSITS. They are allowed by law to lend out %90 of each deposit; not 9 times the deposits. That is a silly conspiracy theory.
Inflation is explain by the fact that the Federal Reserve (the central bank) expands the money supply.
that is not a conspiracy theory read and study fractional reserve banking at teh loacal library or you will find it in economic text books at a local book store, magazines speak of it, anywhere you want to find it its there. politicians speak of it, economist admit it, the meida mentions it. wikipedia im sure would speak about it documentries discuss it what planet are you on with this conspiracy rubbish?
Please man study first accurately then post clips on accurate information.
Your knowledge of banking and money is extremely limited yet your trying to educate?
Attacking my sentence construction is not the problem the problem is your pitiful explanation of money and the fact that your trying to teach us things you know nothing about is extremely pathetic.
To understand you error, all you need to do is read the definition of "fractional reserve banking".
"Fractional-reserve banking is the banking practice in which banks KEEP ONLY A FRACTION OF THEIR DEPOSITS in reserve, and LEND OUT THE REMAINDER, while maintaining the simultaneous obligation to redeem all these deposits upon demand."
Do you know what a "fraction" is?
Do you know what a "remainder" is"?
Do you know what a "Deposit" is?
What part don't you understand. It's NOT complicated.
ok i beleive you have corrected me there. i apologise ok. Either way you look at it the money is created out of thin air and multipled over and over. the central bank creats the deposit out of nothing and issues it to the commercial banks. the banks then issue there fraction repeatedly over and over till there is no more to issue. depending on which ratio the country uses. america is using a 40 to 1 ratio the money is expanded accordingly. the fed is the instigator and FRB is a problem.
You're right about the Fed banks creating money. However, when the commercial banks lend out THE SAME money at DIFFERENT TIMES, they are not multiplying the QUANTITY of money. They are multiplying the VELOCITY.
Money changes hands many, many times. It doesn't just vanish into thin air once it is spent/loaned once.
However, every time someone spends/loans money, they aren't creating money; the money is simply changing hands. The same money can change hands several times.
If everybody lent half of what they owned to someone else, it wouldn't change that amount of stuff in the world. It would only changes the location of the stuff.
The same thing is true when money is lent. If you (or a bank) lends people money, it doesn't change the quantity of money. All that happens, is that money is transferred from one person to another.
It's true that the money must be paid back in the future, but that still has no effect on the quantity of money.
the next person spends that loan and passes that as a deposit.
the next person spends that loan and pases that off as a deposit
each time we get to spend our ever decreasing loan portion but we still get to spend it almost an equal size. each of us is thus expaning imaginary money through multiplication.
although the money is not expanding the ability to spend expands. the imaginary debt expands.
its not the money that expands its the debt that expands. you have to add the loans and deposits to get the quantity of money. ignore the money being transfered physical money means nothing. its a debt based money system that needs to keep expanding or else it cant find the extra money to pay off the interest on the loan that was never created.
The ability to spend and buy stuff is whats expanding. the phyiscal money in the community doesnt expand which seems to be what you are wrongfully paying attention too. we ant carrying more money but prices are being jacked up because the quantity of debt is increasing. do you understand this?
Look im adding a part 4 just to make sure you get it.
A federal reserve deposit of $100 at a 40:1 ratio can allow 30 to 40 people to borrow the shrinking loan money. $100 allows about $3500 in spending. roughly $3500 in debt is my calculated guess. and no new money created to consider interest repayments.
All from a $100 deposit by the FED. but the Fed works in trillions now and soon sextillions.
I think it's different because the loans are getting paid back periodically (at least in theory). So... if the bank ran out of new customers (to pay out old ones with), it's not as if the money (to pay everybody back) wouldn't be forthcoming. There might be a delay, but it's not like the whole thing would come crashing down.
Now... in real life, the banks are making bad loans, and so the money isn't coming back. That's why they needed the bailout.
Yes it is crazy....but that does not change the fact that the Fed is corrupt and along with GS and others are draining our money....I too have blocked you and not appreciate it that you have taken it upon yourself to send me an unsolicited message just because I sub to a member that you do not agree with..get a grip..get a life...
You can set your YouTube account to only receive messages from "friends". If you then want to solicited a message from somebody, you can add them as a friend.
I'm not familiar with the exact process, but I'm sure you can look it up or something. You might want to in case you have more than five subscribers someday. With popularity, comes "unsolicited messages".
I hope you appreciate this info. I'm sure it will help you find peace and quite on the internets.
Yes, 5 subs and I have never made a vid...hmmm I wonder how the averages would place that???/ Don't send me anything else, I do not like your tactics...
Useless video. You try to make a physical thing like a basketball represent a physical thing like federal reserve notes. Granted if physical money could ONLY be used in transactions then we'd have lots of issues with fractional reserve banking. We don't, however, use physical money. Just numbers in bank accounts. And even your explanation of that ignores the effect of multiple banks working inside the system, otherwise known as the "money multiplier". Look it up.
The "multiplier effect" demonstrates an increase in the velocity of money, NOT an increase in the quantity of money. That is what I'm trying to explain, and that is why people need to understand the difference between actual money (in circulation) and an "asset" in the sense of something written down on paper as a record of transaction. When a bank loans money, they no longer have the money. The asset is denominated in future money. Future money exists on paper. It's not an actual thing.
Okay, I guess you've made your point that banks don't create physical money. Today me and my family spent a total of about $250 shopping for food and clothing. How much physical money did I use? $0. I put it all on my Amex card. The bank in effect created the same thing that spent like money otherwise I could not have purchased the things I did. Who cares if the money is physical or not? The money (or the thing that represented money) was created out of nothing.
I'm still struggling with this since I'm still trying to understand your point in all of this. "When a bank loans money, they no longer have the money." True, but that money got deposited into another bank. That other bank saw an increase in "reserves" and then turned around and loaned out some of that money. Wash, rinse, repeat. Each time the loan was created, the thing that looked like money was spent into the economy. In effect wealth was created out of nothing...
...but the "good" that this debt creates is a possible return on investment. That's good if debt is used to create more wealth or a positive return on investment. Trouble is that 1) we've loaned out way to much and people can't possible get the return they need to pay the interest on the debt, or 2) the thing they bought with their debt has depreciated in value so much that they can't/won't pay back this debt. That's a problem for the FRB system. Has nothing to do with physical dollars.
With the credit card, you transferred ownership of debt (you transferred a title to future money that the bank owes you). When that money is redeemed (by the vendors) it comes from money deposited into the bank by the bank's customers. Nothing has been created; you simply transferred ownership of a debt (future money).
You could easily have gone to the bank yourself and withdrawn (or borrowed) the money and transferred it by hand. The credit card just saved to a physical trip to the bank.
"You're confusing velocity with quantity." What? Doesn't velocity then act like quantity? If it spends like money than isn't it money? Have you seen the Money as Debt presentations?
Read some of Warren Mosler's stuff. Google: Center of the Universe Mosler. Click on Mandatory readings and read the Soft Currency Economics. He too agrees with you that there is no such multiplier effect. But I don't think he would agree with your explanation. His point is that the bank ignores their reserves when lending and if they have people who demand their deposits back, the bank then borrows from the Fed. Good stuff on that Mosler site. Just not sure of the political ramifications.
I think maybe he would agree with me as a theoretical starting point, insofar as it relates to the concept of FRB. In practice, there are many additional things specific to our country's real world version of it.
And I'll agree with that part I suppose. But again the lack of the multiplier effect isn't so much your "physical" limitation, rather what Mosler presents in that a bank is never reserve bound since it can always go to the Fed and exchange IOU's with money on "T" accounts to bring up the reserves it needs.
I've heard some similar things. I vaguely know what you're talking about. I definitely need to explore the other side of this equation more (the commercial bank's relationship to the Fed).
Right now, I'm looking at fractional reserve banking in isolation (as something that could very well exist without a central bank). I'm trying to isolate it on a theoretical level, before I bring in additional factors (such as the real life relationship between the Fed and existing commercial banks).
"I'm looking at fractional reserve banking in isolation". I think you've taken the isolation level too far. If FRB does in fact exist then there truly is a multiplier. The concern being that new money that is created is based on debt. Velocity however isn't debt based. If I borrow $10K to buy a car, the dealer gets my $10K and pays his employees who then go out to eat that day, etc., etc. The velocity is the aggregate exchange of the money. The multiplier is creation of money or $10K as debt.
In order to tell what we're looking at, we have to acknowledge the existence of TIME, and look at a (any) specific moment in TIME. At the END of that process (for example): Bank D has $72. Jack has $0. Bank C has $9. Jan has $0. Bank B has $9. Jim has $0. Bank A has $10. Jan has $0. Total=$100
The numbers you gave, show the various different places the SAME money traveled to OVER TIME. That's VELOCITY. Quantity never changed.
So you see... the multiplier effect doesn't show the quantity of money. It's counting the SAME money numerous times. What it is showing is the velocity of money (how fast the money is circulating).
How did Jack, Jan, and Jim end up with 0$. Yes, they paid back the loan eventually, but it is entirely possible that $343 dollars was injected into the economy before any amount of money was paid back. That is the multiplier. And that is how our system of money creation is "debt" based.
Velocity isn't debt based. Jack could have taken his $72 and bought some food at a store. The store owner than used that money from Joe to buy flowers for his wife that day. Joe's money started out as debt.
But the store owner's money he used was not a debt since it came from Joe. THAT's the velocity. Not the original money which came from the multiplier.
Go back and record another video where Joe, Jim, Jan, and Jack do what I said before. Make the loan transactions occur before any payments are made. That's your multiplier.
Your video with Mr. Ramen and Ms. Power Bar: that's velocity.
Jack, Jan, and Jim ended up with $0 by giving (loaning) their money to the bank.
The bank doesn't warehouse their money. That's not what modern banks do. The bank loaned out their money (with the exception of 10% of it [the reserve requirement] which is held in the bank's vaults).
Exactly. So, Joe, Jim, Jack, and Jan all deposited a total of $343 into the bank, but that all got loaned out minus the 10% reserve. That's the multiplier.
Keep reading. Mosler says the federal reserve (or as I would say, the off balance sheet, special purpose entity of the US Treasury) can create money to offset any slowing of demand. This is just basic Keynes. Taken further, the federal government has an unlimited supply of money. Your taxes do not pay for revenue to the government. Start here: Google mosler tax for dummies.
I will be exploring the issue of whether or not an increase in the velocity of money has the same effect as an increase in the quantity of money (in future videos). It's a complex issue. The first thing we need to do is understand the difference.
Right. Their books are a statement of what I would call the total amount of "atemporal dollars" (dollars that exist independently of time). In other words, they have assets that are denominated in "future dollars" (i.e. money that somebody owes them), and they are adding that to the "present dollars" that they actually hold. What is important to understand, is that "atemporal dollars" don't exist in reality; they exist on paper. They are merely a device for record keeping.
What they are doing is illegal, by our means, but not illegal by law. Its their way to make money. Clearly check it out, do your homework, and you will see. I will not mislead you, I am simply trying to help you understand how they work. Why do you think they fail, and everyone did not get their money out.
The banks failed (recently) because they loaned our money to people who couldn't pay it back. They brokered bad loans. If the banks can't get paid back, then they can't pay us back. That's why the Fed had to step in, and bail out the banks (so the banks could pay us back, when we withdraw our money).
I don't think they actually solved the problem though. Depositors are still in danger of losing their money.
This is not at all how fractional reserve banking works. This does not account for leverage, interest, derivatives and such. This is alot of talking, with not much said.
If I look up, "How does fractional reserve banking work", how many of those explanations will involve "leverage, interest, derivatives and such"?
Obviously, it's always possible to delve into greater detail when discussing any given subject, but I don't think the things you've brought up (which allegedly debunk what I've said here), are typically included in most discussions of this issue, at least not in the initial explanations.
My reply was not to debunk your video. If you choose to believe that money is not multipied, so be it. I will believe what I see, and that is a major blackhole of profits being lost worldwide. This money existed in accounts. If fractional reserve banking did not use a multiplier, a complete and total collapse would have already happened. This is one main part of the myth that lets the scheme continue on. In your scenario, wouldnt every paper dollar have to exist for this to be true?
We like to seperate the obvious from eachother, as if one does not pertain to the other. You cannot seperate math from science, or philoshpy from the markets. Each thread of the web holds the next. Our ancestors understood this and so do the elite. Why did Bernanke say the fed had figured out alchemy without ever touching a piece of metal? They do turn trees into gold. Or computor digits into gold. Stop being a good little follower.
I'm not disagree with the idea that the Fed creates money. I accept that. I'm rejecting the idea that commercial banks create money (though a process known as "fractional reserve banking").
I guess you miss the point, if you lend your basket ball to your friend it doesn't mean there are two balls, yet this ball appears on your 'balance sheet' as an asset, while on your friend's 'bs' would reflect it as a liability. While there's just one ball, but for the purposes of an accounting there are two records by one on each balance sheet, so the direct analogy with physical appearance of the ball is a bit misleading in that case.
What I'm trying to illustrate is is the difference between a "money supply" in reality (which is quantity of money in circulation), and the "money supply" on paper, which is a mathematical construct measuring the velocity of money.
Most people think that when they are looking at a depiction of the velocity of money, they are looking at the quantity of money.
The issue here is the difference between quantity and velocity.
Commercial banks don't increase quantity; they increase velocity.
Ahh, ok, but velocity is velocity and it's still different from money supply itself, but anyway I guess I understand where you are getting, you just have chosen not the easiest way to demonstrate your thought, yet I gotta admit an interesting one :)
Shawn, this is a nice try, but the problem in this whole sorry mess occurs at 3:55. You make no distinction between DEMAND DEPOSITS and TIME DEPOSITS. Demand deposits are supposed to be held in a state of availability by the depositor at any time without prior notice, whereas a time deposit is to be deposited and inaccessible by the depositor for the term of the contract- such as a CD. The practice of loaning deposited funds to other bank customers should only be done with time deposits...
The bank should legitimately make a profit by the difference in the interest rate paid to the depositor and the rate charged to the borrower.
However, making loans on a demand deposit is where fraud is built into the fractional reserve banking system, and an important point that you've omitted. The bank is gambling that not everyone will demand their deposit at the same time. Not only is this a gamble, it's a gamble with money that's not theirs.
Creating money and increasing the money supply are one and the same. However, commercial banks, and Federal Reserve Banks, are not one and the same. The Fed can't create money, but commercial banks can't (at least according to me).
Why does the Fed increase the money supply? Probably for the following three reasons:
a) It gives politicians a way to buy votes and please the masses
weather you know it or not, you are admitting that the fed can create money out of thin air. YOu just dont believe it, or you just dont understand it yet.
When the reserve rate is 20% & $100 deposit, the maximum amount of total deposits that can be created is $500 and the maximum amount of commercial bank money that can be created is $400.
Trust me on this one Shawn. The bank can lend 900% of the $100 you deposit. That's $900 dollars, and that's the real law(look it up). You give the bank $100, and they lend Chuck $500 in a check(not cash), then lend Timmy $300 the same way. And when they start to pay back in cash, the bank make their money. They loaned money that they didn't have(money out of thin air). If everyone was to go to their bank and demand their money, the banks cannot deliver.
Even If just 20% of the people wanted their money, the banks cannot do it. So what that tell you? Somehow the money is not their, the numbers are their, but not the money. You may have an account with x-amount of number of dollars, but the dollars themselves are not their at all, only about 10% of your money is actually their, the rest is numbers in your account. It's way more to the story, but for now just trust me on this one, do your homework, and look it up. Please stop being deceived.
Dude... shut up. You don't even know what Fractional Reserve Banking is.
Fractional Reserve Banking is when someone deposits $100, the bank keeps %10 for it's reserves, and loans out the other %90. It doesn't mean that the bank puts $100 in reserves, and then loans out $900. READ THE DEFINITION.
What you are describing is not FRB, nor what any real banks do.
Look at the definition of FRB:
"Fractional-reserve banking is the banking practice in which banks keep only a fraction of their DEPOSITS (NOT LOANS) in reserve, and lend out the remainder, while maintaining the simultaneous obligation to redeem all these deposits upon demand. Fractional reserve banking necessarily occurs when banks LEND OUT ANY FRACTION OF THE FUNDS RECEIVED FROM DEPOSIT ACCOUNTS."
This video distorts how fractional reserve banking works. A bank receiving a deposit of $100, with a requirement to maintain 10% reserves, it isn't limited to making $90 in loans; instead, it can approve loans up to $900 (with the new wealth provided as lines of credit or balances on account, rather than currency) - hence, new money. I'm always interested in alternative viewpoints - but henceforth, condescending, profanity-laden invitations to watch your videos are not welcome.
When a bank estblishes a line a credit for somebody, and that person ends up spending (borrowing) the money, why do you think that money does NOT come from the deposits made by the bank's customers?
Why should I believe that there is some other source, when I already know that the bank loans out the money that people deposit?
You are mistaken. Watch the documentary "Money as Debt" and learn. Or read the wiki on "Money creation", which says: "Fractional-reserve banking creates money whenever a new loan is created."
Ok, how about an official source: dallasfed[.]org[/]educate[/]everyday[/]ev9[.]html
That's the Federal Reserve Bank of Dallas. In that article, to go "How Banks Create Money". First sentence: "Banks actually create money when they lend it. "
I recommend you take down your video to avoid embarrassing yourself.
Most likely, they don't understand the difference between the quantity of money, and the velocity of money.
BTW, there are different schools of economic thought. They can't all be right. It shouldn't surprise at all when lots of people are wrong about something. For example, the "broken window fallacy" never seems to go away, even though it's an obvious fallacy. It's a very pervasive and persistent fallacy.
Yes , thats the way they work, because they know that everyone will not want all their money at one time, so they can get away with it as long as everyone pays their loans on time. If everyone wanted their money at the same time(bank run), all the banks will close down, because they cannot deliver the money, and most of the banks will never open again. They will be bankrupt, for doing bad business
Shawn, you are right about 90% of $100 is not $900, but tell that to the bank, because(for a fact) that is how they do it. In the real sense you are 100% correct, but in the real world you are 10% correct. You are just unaware of what is really going on.
You either have no idea how moneitization works or your an just being a jerk and insulting folks that are trying to educate the masses. I think it is the latter.
wrong but nice try. FRN are the obligation of the US! They are just worthless securities. They only represent the total value of substance within the economy.
We are forced by law to employ FRN as legal tender. This means, that whatever debt the government incurs, manifests itself as a drop in the buying power of the dollars we hold.
WE are the ones paying the bills here. The government doesn't have any wealth of it's own. It only has what it steals from us.
You are correct about legal tender, but who forces you to use FRN's? Companies are required to take the notes as tender but who says you are forced to take them in exchage for time/work? Give to Cesar what is Ceasr's/give dead presidents to who has to obligation. What is the differance between lawful and legal?
Sorry but it seems you are still be pluged in. Contact me for the red pill. Peace
Nobody is forced to do anything. You can lay own in the gutter an die if you want.
However, anyone who attempt to issue and employ a currency that competes with the Federal Reserve will be shut down, shot, or imprisoned. If you don't believe me, look up "The Liberty Dollar".
Of course, if you really wanted to, you go go live in a cave, or a cabin in the woods, and not have to use FRN. The point is, the government actively prevents the use of alternatives.
You're not saying anything. You're asking me rhetorical questions, presumably, in an attempt to IMPLY something. However, I don't know what you're trying to imply, so why don't you just spit it out. I can't read your froggin' mind.
People expect to be given a fish and that is not my objective, I feel like people need to learn how to fish for themselevs i.e if you do not understand something reserch it and figure it out for yourself. Maybe if you would have just sent me a PM then we wouldn't be having this pointless exchage of words.
My goal here is not to bash anyone, but to help. If you read my 2nd comment you would see just that. Anyhow, Peace
Banks basically engage in "check-kiting" and charge interest on the same money over and over (simultaneously).
I had a friend who dealt drugs in high school who was doing the same thing with IOUs -- it "seemed" like everyone (about 6 people) owed him money, but one day everyone cornered him and it worked out he was the one in debt!
At some point, I'll make a video on that subject. It gets brought up a lot. I just haven't had the opportunity to address it yet. One thing at a time...
I know, but I actually meant the interest that the bank had to pay back out, not the interest they take in (since it's an additional financial draw on the bank).
What if I promised to loan a basketball at different times to 100 consecutively. And they promised to simultaneously loan it to someone else (without telling him WHEN he would get it).
That person may then begin work under the assumption that he will be able to have 100 basketballs in his possession at some point in time. Of course this never happens, causing his plans to fail.
MAKE MORE VIDEOS
theVAGINAntichrist 1 year ago
THIS IS SO LAME!!!
sheffieldvids 2 years ago
LOL, GREAT ANALOGY !
i am still trying to figure out why the banks got bailed out for the bad mortgages yet still hold liens on people's homes. if they get bailed out, should not the people oweing them those same funds be forgiviven of these paid of debts thru use of our tax dollars to the banks ?
923TARA 2 years ago
Comment removed
spanishaustralian 2 years ago
There are two different ways to create money: * manufacturing a new monetary unit, such as paper currency or metal coins (money creation) * loaning out a physical monetary unit multiple times through fractional-reserve lending (credit creation)
reference dot comm
chaingangcharlie 2 years ago
"The money supply of a country is usually held to consist of currency (banknotes and coins) and demand deposits or 'bank money' (the balance held in checking accounts and savings accounts). These demand deposits usually account for a much larger part of the money supply than currency.[8][9] Bank money is intangible and exists only in the form of various bank records. Despite being intangible, bank money still performs the basic functions of money.." wikip : 'money'
chaingangcharlie 2 years ago
"John Kenneth Galbraith once famously said, The process by which money is created is so simple that the mind is repelled. Were about to discuss that very thing. Money creation is a bizarre thing to ponder. It is actually a very simple process, but its really difficult to accept.
Money is loaned into existence. Conversely, when loans are paid back, money disappears. "
chrismartenson dott comm
chaingangcharlie 2 years ago
The difference between Basketballs & Money is that AN IOU FOR A BASKETBALL IS NOT A BASKETBALL - BUT AN IOU FOR MONEY *IS* MONEY.
By creating IOUs (ie deposit accounts , that represent money of yours you imagine the bank 'has' - maybe in a cupboard somewhere ) banks are (literally ) creating money.
IOU = DEBT = MONEY
Money is not a physical object ( like a basketball). It's an obligation. A promise. And we all know promises can be mulitplied endlessly, whether or not they can ever be kept.
chaingangcharlie 2 years ago
So... the bank is creating "imaginary" money? How is that different than creating no money at all? Like... if I say I have an imaginary pet dragon, how is that different from having no pet dragon at all?
D4Shawn 2 years ago
Shawn, I was trying to explain to you that an IOU is NOT 'imaginary' money.
It is REAL money.
Whereas an IOU for a basketball is not a basketball, an IOU for money IS money.
That's the difference.
Think about it.
Please.
chaingangcharlie 2 years ago
When someone writes you an IOU, what does the person owe you (if not money [if you already have the money])?
D4Shawn 2 years ago
They owe you goods & services to the value of the IOU.
They are in your debt.
Debt = Money.
You might say they owe you dollars ( for eg) but a 'dollar' is really just another IOU. (ie more debt).
A dollar is an accounting unit that keeps track of debt.
It has no more neccessary physical reality than ( for eg ) an ( abstract ) light year , or an abstract ounce .
Thus, unlike basketballs, they are freely creatable out of thin air.
chaingangcharlie 2 years ago
First of all, I'm not saying that it's not physically possible for you, I, or a commercial bank to "print money". Yes, it's POSSIBLE to create money "out of thin air". However, for the three parties mentioned above, it's also illegal. When I say that commercial banks "can't" create money, I mean they are not allowed to do so by law.
D4Shawn 2 years ago
OK let's run through an example.
I deposit 1000 in bank A
Bank A lends ( say) 900 of this out to Andy .
Andy puts this in bank B. Bank B lend out ( say) 800 to Chris. Chris puts this in bank C. Bank C lend out ( say) 700 to Dave. Dave puts this in bank D. Bank D lend out say 600 to Eric.
Now we all withdraw our money & go out & spend it.
We spend 1000 + 900 + 800 +700 + 600 = 4000.
We just spent 3000 that ( you say) doesn't exist.
chaingangcharlie 2 years ago
Secondly, you're being ridiculous. When you loan somebody something, they owe you that which they borrowed from you. A two-year-old knows this. When somebody borrows money from you, they don't (under normal circumstances) pay you back in goods and services. Rather, they pay you back in money (the medium of exchange [currency] that you lent them in the first place). You're insulting my intelligence in an attempt to justify the absurd notion that one magically retains what one loans.
D4Shawn 2 years ago
So my question would be, where did this 'extra' 3000 come from , if banks cannot create money ?
chaingangcharlie 2 years ago
Seriously? You don't know where the bank gets the money to cover withdrawals?
Do you find it at all ironic, that you are trying to talk about "fractional RESERVE banking", even though you apparently don't know what a bank's reserves are, nor their purpose?
It's not a mystery at all where the money to pay out deposits comes from.
D4Shawn 2 years ago
Where does the extra 2400 come from Shawn ?
chaingangcharlie 2 years ago
There is no "extra" $2400. When someone deposits money into a bank, the bank keeps (stores) 10% (in it's vaults), and loans out the other 90%. When people make withdrawals, the money comes out of the banks reserves. It's not a mystery. The whole purpose of the reserves is to enable the bank to meet it's obligations to it's depositors. That is why banks have legal "reserve requirements".
D4Shawn 2 years ago
What do you mean 'there is no 'extra' 2400 ???? WE ALL JUST WENT OUT & SPENT IT .
Real shopkeepers gave us real things for this money you say doesn't exist.
Are they mad ?
chaingangcharlie 2 years ago
Why is it so hard to understand what bank reserves are and what they are for?
Are you really that deluded by conspiracy theories that you can't understand that banks pay out withdrawals from their reserves?
It's not that frikkin' complicated.
D4Shawn 2 years ago
When you think it through, the awful truth will descend upon you.
A bank holding 100 in deposits can lend out 10 times that amount ( with a 10% reserve ratio).
They take in 100 & ON THAT BASIS they can legally lend out 1000. ( This is the mechanism by which that 2400 was created ).
You really should watch the Money is Debt series. It;s on Youtube somewhere. You will learn a lot.
And you'll probably need a drink when you finally get it.
chaingangcharlie 2 years ago
lol
Guess what: A five dollar bill can be used to buy a zillion times that amount. There are even less restrictions on spending money then there are on lending it.
D4Shawn 2 years ago
Shawn : I suggest you try to remain calm. Apparently it is you who doesn't understand fractional reserve banking:
"Fractional-reserve banking creates money whenever a new loan is created." (wikipedia article on 'money creation' . )
"Whenever a bank gives out a loan in a fractional-reserve banking system, a new sum of money is created." ( wikipedia art. on 'fractional reserve banking' )
chaingangcharlie 2 years ago 6
I mean, in this imaginary bank there was ONLY my original 1000 deposited. That's all.
And yet they end up with 3400 worth of deposits which we all go out & spend on crap stuff made in China.
So, again WHERE DOES THAT EXTRA 2400 - which we spent on real stuff remember - where does it COME FROM ?
Try to work it out before answering.
Thanks.
chaingangcharlie 2 years ago
"I mean, in this imaginary bank there was ONLY my original 1000 deposited."
Don't be an idiot. Obviously, fractional reserve banking doesn't work if a bank only has one customer. You don't understand fractional reserve banking at all, do you?
D4Shawn 2 years ago
Or - to make it even more obvious what's happening - let's say I put 1000 in my bank. They lend Bert 900 , who deposits it in the same bank . They can then lend Charlie say 800 . Charlie deposits this 800 in the same bank. They can then lend Dierdre say 700. She deposits it in the same bank.
So we now have CDs worth 1000 + 900 + 800 + 700 = 3400 sitting in the same bank.
Where does the extra 2400 come from Shawn ?
chaingangcharlie 2 years ago
How about a solution: Take ALL your fake paper money out of the bank and buy physical assets. Simple enough.
TadRapidly 2 years ago
good-with-girls, but not with banks. You are 100% correct with actural dollars. The banks do lend out 90% of actually cash, but they lend out 900% of actually so-called-money. Again, you guys are right about actullay cash, but we other guys are not talking about cash, we are talking about how the banking system actually works. They lend out 900% of what they acutally have in cash. They do it in numbers on a computer, or in an account. Just trust us, the banks are a corrupt system.
kbdory 2 years ago
No they don't. They lend out the SAME money several DIFFERENT TIMES (over a period of time).
In other words, the same money changes hands several different times.
What's important to note, is that the money is never in two places at once. You will see this, if you trace the path the money takes as it is transfer from one person to another.
This has nothing to do with the quantity of money; it has everything to do with the velocity of money.
Time exists, and one's analysis must factor it in.
D4Shawn 2 years ago
It is the Fed that creates money electronically by typing numbers into a computer. Commercial banks can't do that. You are mixing those two things up.
D4Shawn 2 years ago
your video completely ignores the credit/debt based system we live in. The amount of credit (debt) in the system dwarfs the actual number of dollars floating around. Currently, debt is being defaulted on at a pace never seen--a deflationary spiral.
jekyllisland7 2 years ago 2
Debt is future money. It's THE SAME money that exists now; it's just existing at a different point in time.
D4Shawn 2 years ago
what if 20 percent of the depositors want their mone? Leaman fell because only 3% of their depositors wanted their money.......
centervilletn 2 years ago
It would depend on how much money that 20% wanted to withdraw. We know that the bank only has 10% of what they owe everybody in total, but I don't know what percentage of people are owed what percentage of money. It might be that most of the money belongs to a few people. You know how they say that 85% of the nation's wealth is concentrated in the hands of 1% of the population?
D4Shawn 2 years ago
Weather it is right or wrong, the banks lend out way more money then they have. I dont agree with them at all, as a matter of fact, I would rather see them do it the way you explain, but the truth is they dont. They like to lend checks, with numbers in your account, not actually money, just numbers. They do bank transfers, but again numbers in the computer. They hardly ever make Dollars transactions. they rather deal with numbers in an account. Thats how they get away with it. Thanks. Peace...
kbdory 2 years ago
"the banks lend out way more money then they have."
That statement is a contradiction. It's like saying, "I eat more food than I have." It doesn't even make sense.
The fact is this:
Banks loan out %90 of each deposit. It's that simple.
It's really not anymore complicated than that.
goodwithgirls 2 years ago
good-with-girls, but not with banks. You are 100% correct with actural dollars. The banks do lend out 90% of actually cash, but they lend out 900% of actually so-called-money. Again, you guys are right about actullay cash, but we other guys are not talking about cash, we are talking about how the banking system actually works with what they actually have.
kbdory 2 years ago
Maybe you can do a Basketballs & Inflation/deflation vid?
DebtIsMoney 2 years ago
Yeah!
You forgot that the $100 you deposit at the bank was augmented 30-50 times by Leihman Bros. How can you explain that?
yaplonglong 2 years ago
he cant explain hes on a conspiracy trip.
spanishaustralian 2 years ago
WRONG WRONG WRONG
if you gave the bank $100 that would essentially come from another bank anyway originally as all banks creat the money supply.
also the bank is aloud to borrow 9 times the deposit not 90% of the deposite. the banks inflate the money thats where inflation comes from. thick head this clip is a total failure and riddled with mistakes.
MISTAKES MISTAKES MISTAKES
spanishaustralian 2 years ago
I'm become a bored with this particular conspiracy theory.
"Reserve requirements are the PORTION OF DEPOSITS that banks may not lend and have to keep either on hand or on deposit at a Federal Reserve Bank"
The money that commercial banks lend COMES FROM PEOPLE'S DEPOSITS. They are allowed by law to lend out %90 of each deposit; not 9 times the deposits. That is a silly conspiracy theory.
Inflation is explain by the fact that the Federal Reserve (the central bank) expands the money supply.
D4Shawn 2 years ago
that is not a conspiracy theory read and study fractional reserve banking at teh loacal library or you will find it in economic text books at a local book store, magazines speak of it, anywhere you want to find it its there. politicians speak of it, economist admit it, the meida mentions it. wikipedia im sure would speak about it documentries discuss it what planet are you on with this conspiracy rubbish?
spanishaustralian 2 years ago
this kid is so clueless.
spanishaustralian 2 years ago
Before you attempt to "take me to school", the least you could do is:
a) Learn what a run-on sentence is.
b) Learn what a period is, and where it belongs.
c) Learn to capitalize the beginning of each sentence.
D4Shawn 2 years ago
Dude please !!!!
Your attacks are pathetic.
Please man study first accurately then post clips on accurate information.
Your knowledge of banking and money is extremely limited yet your trying to educate?
Attacking my sentence construction is not the problem the problem is your pitiful explanation of money and the fact that your trying to teach us things you know nothing about is extremely pathetic.
spanishaustralian 2 years ago
This idiot writes
"I'm become a bored with this particular conspiracy theory"
And he claims to be an expert in sentence construction?
you make me laugh. hahahahaaaaaahahahahahahahahahahahahhahaahahahahahahhahaha!!!!!!!
IDIOT
spanishaustralian 2 years ago
To understand you error, all you need to do is read the definition of "fractional reserve banking".
"Fractional-reserve banking is the banking practice in which banks KEEP ONLY A FRACTION OF THEIR DEPOSITS in reserve, and LEND OUT THE REMAINDER, while maintaining the simultaneous obligation to redeem all these deposits upon demand."
Do you know what a "fraction" is?
Do you know what a "remainder" is"?
Do you know what a "Deposit" is?
What part don't you understand. It's NOT complicated.
D4Shawn 2 years ago
If I have $100, a FRACTION of that $100 would be $10.
Get it?
The REMAINDER would then be $90.
The REMAINDER of THE DEPOSIT is what is LOANED out.
It's not complicate. The math is really, really, really, really simple.
D4Shawn 2 years ago
ok i beleive you have corrected me there. i apologise ok. Either way you look at it the money is created out of thin air and multipled over and over. the central bank creats the deposit out of nothing and issues it to the commercial banks. the banks then issue there fraction repeatedly over and over till there is no more to issue. depending on which ratio the country uses. america is using a 40 to 1 ratio the money is expanded accordingly. the fed is the instigator and FRB is a problem.
spanishaustralian 2 years ago
You're right about the Fed banks creating money. However, when the commercial banks lend out THE SAME money at DIFFERENT TIMES, they are not multiplying the QUANTITY of money. They are multiplying the VELOCITY.
Money changes hands many, many times. It doesn't just vanish into thin air once it is spent/loaned once.
However, every time someone spends/loans money, they aren't creating money; the money is simply changing hands. The same money can change hands several times.
D4Shawn 2 years ago
If everybody lent half of what they owned to someone else, it wouldn't change that amount of stuff in the world. It would only changes the location of the stuff.
The same thing is true when money is lent. If you (or a bank) lends people money, it doesn't change the quantity of money. All that happens, is that money is transferred from one person to another.
It's true that the money must be paid back in the future, but that still has no effect on the quantity of money.
D4Shawn 2 years ago
part 1
Think of it like this.
i spend my loan and pass that off as a deposit.
the next person spends that loan and passes that as a deposit.
the next person spends that loan and pases that off as a deposit
each time we get to spend our ever decreasing loan portion but we still get to spend it almost an equal size. each of us is thus expaning imaginary money through multiplication.
although the money is not expanding the ability to spend expands. the imaginary debt expands.
spanishaustralian 2 years ago
Part 2
its not the money that expands its the debt that expands. you have to add the loans and deposits to get the quantity of money. ignore the money being transfered physical money means nothing. its a debt based money system that needs to keep expanding or else it cant find the extra money to pay off the interest on the loan that was never created.
spanishaustralian 2 years ago
Part 3
The ability to spend and buy stuff is whats expanding. the phyiscal money in the community doesnt expand which seems to be what you are wrongfully paying attention too. we ant carrying more money but prices are being jacked up because the quantity of debt is increasing. do you understand this?
spanishaustralian 2 years ago
Part 4
Look im adding a part 4 just to make sure you get it.
A federal reserve deposit of $100 at a 40:1 ratio can allow 30 to 40 people to borrow the shrinking loan money. $100 allows about $3500 in spending. roughly $3500 in debt is my calculated guess. and no new money created to consider interest repayments.
All from a $100 deposit by the FED. but the Fed works in trillions now and soon sextillions.
you explanation is wrong.
spanishaustralian 2 years ago
sounds like a ponzi scheme
galikazoid 2 years ago
I think it's different because the loans are getting paid back periodically (at least in theory). So... if the bank ran out of new customers (to pay out old ones with), it's not as if the money (to pay everybody back) wouldn't be forthcoming. There might be a delay, but it's not like the whole thing would come crashing down.
Now... in real life, the banks are making bad loans, and so the money isn't coming back. That's why they needed the bailout.
D4Shawn 2 years ago
Yes it is crazy....but that does not change the fact that the Fed is corrupt and along with GS and others are draining our money....I too have blocked you and not appreciate it that you have taken it upon yourself to send me an unsolicited message just because I sub to a member that you do not agree with..get a grip..get a life...
skybirdbird 2 years ago
You can set your YouTube account to only receive messages from "friends". If you then want to solicited a message from somebody, you can add them as a friend.
I'm not familiar with the exact process, but I'm sure you can look it up or something. You might want to in case you have more than five subscribers someday. With popularity, comes "unsolicited messages".
I hope you appreciate this info. I'm sure it will help you find peace and quite on the internets.
D4Shawn 2 years ago
Yes, 5 subs and I have never made a vid...hmmm I wonder how the averages would place that???/ Don't send me anything else, I do not like your tactics...
skybirdbird 2 years ago
If you think you can make better videos than me, then I certainly welcome you to try.
What kind of tactics do you like? Blocking and deleting?
Not one of my favorite ways to win an argument... but it works I guess (at least for wepollock).
D4Shawn 2 years ago
Useless video. You try to make a physical thing like a basketball represent a physical thing like federal reserve notes. Granted if physical money could ONLY be used in transactions then we'd have lots of issues with fractional reserve banking. We don't, however, use physical money. Just numbers in bank accounts. And even your explanation of that ignores the effect of multiple banks working inside the system, otherwise known as the "money multiplier". Look it up.
WheresTheInterest 2 years ago
The "multiplier effect" demonstrates an increase in the velocity of money, NOT an increase in the quantity of money. That is what I'm trying to explain, and that is why people need to understand the difference between actual money (in circulation) and an "asset" in the sense of something written down on paper as a record of transaction. When a bank loans money, they no longer have the money. The asset is denominated in future money. Future money exists on paper. It's not an actual thing.
D4Shawn 2 years ago
Okay, I guess you've made your point that banks don't create physical money. Today me and my family spent a total of about $250 shopping for food and clothing. How much physical money did I use? $0. I put it all on my Amex card. The bank in effect created the same thing that spent like money otherwise I could not have purchased the things I did. Who cares if the money is physical or not? The money (or the thing that represented money) was created out of nothing.
WheresTheInterest 2 years ago
I'm still struggling with this since I'm still trying to understand your point in all of this. "When a bank loans money, they no longer have the money." True, but that money got deposited into another bank. That other bank saw an increase in "reserves" and then turned around and loaned out some of that money. Wash, rinse, repeat. Each time the loan was created, the thing that looked like money was spent into the economy. In effect wealth was created out of nothing...
WheresTheInterest 2 years ago
...but the "good" that this debt creates is a possible return on investment. That's good if debt is used to create more wealth or a positive return on investment. Trouble is that 1) we've loaned out way to much and people can't possible get the return they need to pay the interest on the debt, or 2) the thing they bought with their debt has depreciated in value so much that they can't/won't pay back this debt. That's a problem for the FRB system. Has nothing to do with physical dollars.
WheresTheInterest 2 years ago
You're confusing velocity with quantity.
Money is being transferred; not created.
Watch this:
watch?v=HPExoxaHGF4
D4Shawn 2 years ago
With the credit card, you transferred ownership of debt (you transferred a title to future money that the bank owes you). When that money is redeemed (by the vendors) it comes from money deposited into the bank by the bank's customers. Nothing has been created; you simply transferred ownership of a debt (future money).
You could easily have gone to the bank yourself and withdrawn (or borrowed) the money and transferred it by hand. The credit card just saved to a physical trip to the bank.
D4Shawn 2 years ago
"You're confusing velocity with quantity." What? Doesn't velocity then act like quantity? If it spends like money than isn't it money? Have you seen the Money as Debt presentations?
WheresTheInterest 2 years ago
Read some of Warren Mosler's stuff. Google: Center of the Universe Mosler. Click on Mandatory readings and read the Soft Currency Economics. He too agrees with you that there is no such multiplier effect. But I don't think he would agree with your explanation. His point is that the bank ignores their reserves when lending and if they have people who demand their deposits back, the bank then borrows from the Fed. Good stuff on that Mosler site. Just not sure of the political ramifications.
WheresTheInterest 2 years ago
Yeah... it sounds like I might like that.
I think maybe he would agree with me as a theoretical starting point, insofar as it relates to the concept of FRB. In practice, there are many additional things specific to our country's real world version of it.
D4Shawn 2 years ago
At this point, I would say that there IS a "multiplier effect", but that it's velocity (not quantity) that is being multiplied.
D4Shawn 2 years ago
And I'll agree with that part I suppose. But again the lack of the multiplier effect isn't so much your "physical" limitation, rather what Mosler presents in that a bank is never reserve bound since it can always go to the Fed and exchange IOU's with money on "T" accounts to bring up the reserves it needs.
WheresTheInterest 2 years ago
I've heard some similar things. I vaguely know what you're talking about. I definitely need to explore the other side of this equation more (the commercial bank's relationship to the Fed).
Right now, I'm looking at fractional reserve banking in isolation (as something that could very well exist without a central bank). I'm trying to isolate it on a theoretical level, before I bring in additional factors (such as the real life relationship between the Fed and existing commercial banks).
D4Shawn 2 years ago
"I'm looking at fractional reserve banking in isolation". I think you've taken the isolation level too far. If FRB does in fact exist then there truly is a multiplier. The concern being that new money that is created is based on debt. Velocity however isn't debt based. If I borrow $10K to buy a car, the dealer gets my $10K and pays his employees who then go out to eat that day, etc., etc. The velocity is the aggregate exchange of the money. The multiplier is creation of money or $10K as debt.
WheresTheInterest 2 years ago
The 10K you borrowed wasn't "created". It was deposited in the bank by the bank's customers.
The money that banks lend out comes from people's deposits.
When someone deposits money into a bank, the bank loans out %90. That's where your loan came from. It didn't come from nothing.
D4Shawn 2 years ago
Joe deposits $100 into Bank A
Bank A loans $90 to Jim
Jim deposits $90 into Bank B
Bank B loans $81 to Jan
Jan deposits $81 into Bank C
Bank C loans $72 to Jack
Jack deposits $72 into Bank D
Originally there was $100 deposited into Bank A, but in total, there is $343 deposited into all four banks. That's the multiplier.
WheresTheInterest 2 years ago
D4Shawn 2 years ago
At any give TIME, there is only $100.
The numbers you gave, show the various different places the SAME money traveled to OVER TIME. That's VELOCITY. Quantity never changed.
So you see... the multiplier effect doesn't show the quantity of money. It's counting the SAME money numerous times. What it is showing is the velocity of money (how fast the money is circulating).
D4Shawn 2 years ago
How did Jack, Jan, and Jim end up with 0$. Yes, they paid back the loan eventually, but it is entirely possible that $343 dollars was injected into the economy before any amount of money was paid back. That is the multiplier. And that is how our system of money creation is "debt" based.
Velocity isn't debt based. Jack could have taken his $72 and bought some food at a store. The store owner than used that money from Joe to buy flowers for his wife that day. Joe's money started out as debt.
WheresTheInterest 2 years ago
But the store owner's money he used was not a debt since it came from Joe. THAT's the velocity. Not the original money which came from the multiplier.
Go back and record another video where Joe, Jim, Jan, and Jack do what I said before. Make the loan transactions occur before any payments are made. That's your multiplier.
Your video with Mr. Ramen and Ms. Power Bar: that's velocity.
WheresTheInterest 2 years ago
Jack, Jan, and Jim ended up with $0 by giving (loaning) their money to the bank.
The bank doesn't warehouse their money. That's not what modern banks do. The bank loaned out their money (with the exception of 10% of it [the reserve requirement] which is held in the bank's vaults).
goodwithgirls 2 years ago
Exactly. So, Joe, Jim, Jack, and Jan all deposited a total of $343 into the bank, but that all got loaned out minus the 10% reserve. That's the multiplier.
WheresTheInterest 2 years ago
This makes me skeptical:
"MOSLER'S LAW: There is no financial crisis so deep that a sufficiently large net increase in public spending cannot deal with it."
D4Shawn 2 years ago
Keep reading. Mosler says the federal reserve (or as I would say, the off balance sheet, special purpose entity of the US Treasury) can create money to offset any slowing of demand. This is just basic Keynes. Taken further, the federal government has an unlimited supply of money. Your taxes do not pay for revenue to the government. Start here: Google mosler tax for dummies.
WheresTheInterest 2 years ago
I will be exploring the issue of whether or not an increase in the velocity of money has the same effect as an increase in the quantity of money (in future videos). It's a complex issue. The first thing we need to do is understand the difference.
D4Shawn 2 years ago
The banks don't balance the books that way.
linux23dragon2008 2 years ago
Right. Their books are a statement of what I would call the total amount of "atemporal dollars" (dollars that exist independently of time). In other words, they have assets that are denominated in "future dollars" (i.e. money that somebody owes them), and they are adding that to the "present dollars" that they actually hold. What is important to understand, is that "atemporal dollars" don't exist in reality; they exist on paper. They are merely a device for record keeping.
D4Shawn 2 years ago
What they are doing is illegal, by our means, but not illegal by law. Its their way to make money. Clearly check it out, do your homework, and you will see. I will not mislead you, I am simply trying to help you understand how they work. Why do you think they fail, and everyone did not get their money out.
kbdory 2 years ago
The banks failed (recently) because they loaned our money to people who couldn't pay it back. They brokered bad loans. If the banks can't get paid back, then they can't pay us back. That's why the Fed had to step in, and bail out the banks (so the banks could pay us back, when we withdraw our money).
I don't think they actually solved the problem though. Depositors are still in danger of losing their money.
D4Shawn 2 years ago
This is not at all how fractional reserve banking works. This does not account for leverage, interest, derivatives and such. This is alot of talking, with not much said.
BendoverBernanke 2 years ago
Ah... the old "you didn't address every conceivable thing you could have possibly addressed all in one video" argument.
Which one of those things do you think contradicts what I've said in the video, and how does it conflict?
D4Shawn 2 years ago
Here's another quastion for you:
If I look up, "How does fractional reserve banking work", how many of those explanations will involve "leverage, interest, derivatives and such"?
Obviously, it's always possible to delve into greater detail when discussing any given subject, but I don't think the things you've brought up (which allegedly debunk what I've said here), are typically included in most discussions of this issue, at least not in the initial explanations.
D4Shawn 2 years ago
My reply was not to debunk your video. If you choose to believe that money is not multipied, so be it. I will believe what I see, and that is a major blackhole of profits being lost worldwide. This money existed in accounts. If fractional reserve banking did not use a multiplier, a complete and total collapse would have already happened. This is one main part of the myth that lets the scheme continue on. In your scenario, wouldnt every paper dollar have to exist for this to be true?
BendoverBernanke 2 years ago
Money is not multiplied in terms of QUANTITY. It is multiplied in terms of VELOCITY.
THAT is what I'm trying to demonstrate.
Loaning money isn't a scheme. There's absolutely nothing wrong with loaning money (and thus increasing the velocity of money).
The problem (IMO) is that the Fed system is a monopoly, and so the legal system creates an artificial demand for lending.
I'm not saying the Fed system isn't problematic in many ways; I'm just trying to correctly diagnose the problem.
D4Shawn 2 years ago
We like to seperate the obvious from eachother, as if one does not pertain to the other. You cannot seperate math from science, or philoshpy from the markets. Each thread of the web holds the next. Our ancestors understood this and so do the elite. Why did Bernanke say the fed had figured out alchemy without ever touching a piece of metal? They do turn trees into gold. Or computor digits into gold. Stop being a good little follower.
BendoverBernanke 2 years ago
Bernanke works for the Fed. What he was likely referring to, was the Fed's ability to expand the money supply electronically (i.e. "print money").
D4Shawn 2 years ago
Heres a simple way to explain.
Do you know how the Fed prints money?
And this is actual fact youll here it mentioned all the time.
Well the Fed buys US treasuries or Bonds, and thru fractional reserve money is created and put back into the system.
Hence all the tresury sales.
Read Murry Rothbard's The Mystery of Banking or watch this video watch?v=CRjCVGuFlIE
NicosMind 2 years ago
I'm not disagree with the idea that the Fed creates money. I accept that. I'm rejecting the idea that commercial banks create money (though a process known as "fractional reserve banking").
D4Shawn 2 years ago
I guess you miss the point, if you lend your basket ball to your friend it doesn't mean there are two balls, yet this ball appears on your 'balance sheet' as an asset, while on your friend's 'bs' would reflect it as a liability. While there's just one ball, but for the purposes of an accounting there are two records by one on each balance sheet, so the direct analogy with physical appearance of the ball is a bit misleading in that case.
gtele5hev 2 years ago
What I'm trying to illustrate is is the difference between a "money supply" in reality (which is quantity of money in circulation), and the "money supply" on paper, which is a mathematical construct measuring the velocity of money.
Most people think that when they are looking at a depiction of the velocity of money, they are looking at the quantity of money.
The issue here is the difference between quantity and velocity.
Commercial banks don't increase quantity; they increase velocity.
D4Shawn 2 years ago
Ahh, ok, but velocity is velocity and it's still different from money supply itself, but anyway I guess I understand where you are getting, you just have chosen not the easiest way to demonstrate your thought, yet I gotta admit an interesting one :)
gtele5hev 2 years ago
Thanks.
I do believe the distinction is very crucial. I am currently exploring that distinction in my videos.
D4Shawn 2 years ago
Shawn, this is a nice try, but the problem in this whole sorry mess occurs at 3:55. You make no distinction between DEMAND DEPOSITS and TIME DEPOSITS. Demand deposits are supposed to be held in a state of availability by the depositor at any time without prior notice, whereas a time deposit is to be deposited and inaccessible by the depositor for the term of the contract- such as a CD. The practice of loaning deposited funds to other bank customers should only be done with time deposits...
auroraoutdoor 2 years ago
... not demand deposits.
The bank should legitimately make a profit by the difference in the interest rate paid to the depositor and the rate charged to the borrower.
However, making loans on a demand deposit is where fraud is built into the fractional reserve banking system, and an important point that you've omitted. The bank is gambling that not everyone will demand their deposit at the same time. Not only is this a gamble, it's a gamble with money that's not theirs.
auroraoutdoor 2 years ago
But why? And why do they need to continually increase the money supply?
How is this different from creating money?
yomeyo99 2 years ago
Creating money and increasing the money supply are one and the same. However, commercial banks, and Federal Reserve Banks, are not one and the same. The Fed can't create money, but commercial banks can't (at least according to me).
Why does the Fed increase the money supply? Probably for the following three reasons:
a) It gives politicians a way to buy votes and please the masses
b) They believe it stimulates the economy
c) It's a form of theft that enriches the elite.
D4Shawn 2 years ago
weather you know it or not, you are admitting that the fed can create money out of thin air. YOu just dont believe it, or you just dont understand it yet.
kbdory 2 years ago 2
Sorry... I made a typo. I meant:
Federal Reserve Banks (the Fed) CAN create money, but commercial banks can't.
D4Shawn 2 years ago
When the reserve rate is 20% & $100 deposit, the maximum amount of total deposits that can be created is $500 and the maximum amount of commercial bank money that can be created is $400.
Powdermonkey99 2 years ago
"Reserve requirements are the portion of deposits that banks may not lend and have to keep either on hand or on deposit at a Federal Reserve Bank"
So... if the reserve rate is %20, and someone makes a $100 deposit, the bank can lend out %80.
It's really not complicated.
Do you understand what a "fraction" is (in mathematics)?
D4Shawn 2 years ago
So why is there inflation? Look what a dollar could have bought in 1920 with what it can buy today.
Wouldnt 1 basketball always be 1 basketball?
yomeyo99 2 years ago
Well... for one thing, Federal Reserve Banks increase the money supply. That's probably the main reason.
D4Shawn 2 years ago
Trust me on this one Shawn. The bank can lend 900% of the $100 you deposit. That's $900 dollars, and that's the real law(look it up). You give the bank $100, and they lend Chuck $500 in a check(not cash), then lend Timmy $300 the same way. And when they start to pay back in cash, the bank make their money. They loaned money that they didn't have(money out of thin air). If everyone was to go to their bank and demand their money, the banks cannot deliver.
kbdory 2 years ago
Even If just 20% of the people wanted their money, the banks cannot do it. So what that tell you? Somehow the money is not their, the numbers are their, but not the money. You may have an account with x-amount of number of dollars, but the dollars themselves are not their at all, only about 10% of your money is actually their, the rest is numbers in your account. It's way more to the story, but for now just trust me on this one, do your homework, and look it up. Please stop being deceived.
kbdory 2 years ago
The video was good, but misinformed. The system that you showed works that a way, but the banking system does not.
kbdory 2 years ago
Dude... shut up. You don't even know what Fractional Reserve Banking is.
Fractional Reserve Banking is when someone deposits $100, the bank keeps %10 for it's reserves, and loans out the other %90. It doesn't mean that the bank puts $100 in reserves, and then loans out $900. READ THE DEFINITION.
D4Shawn 2 years ago
"Even If just 20% of the people wanted their money, the banks cannot do it. So what that tell you?"
It tells me that the banks have loaned out %90 of everybody's deposit. I've explained this myself. This isn't a secret. I am not "deceived".
D4Shawn 2 years ago
What you are describing is not FRB, nor what any real banks do.
Look at the definition of FRB:
"Fractional-reserve banking is the banking practice in which banks keep only a fraction of their DEPOSITS (NOT LOANS) in reserve, and lend out the remainder, while maintaining the simultaneous obligation to redeem all these deposits upon demand. Fractional reserve banking necessarily occurs when banks LEND OUT ANY FRACTION OF THE FUNDS RECEIVED FROM DEPOSIT ACCOUNTS."
D4Shawn 2 years ago
This video distorts how fractional reserve banking works. A bank receiving a deposit of $100, with a requirement to maintain 10% reserves, it isn't limited to making $90 in loans; instead, it can approve loans up to $900 (with the new wealth provided as lines of credit or balances on account, rather than currency) - hence, new money. I'm always interested in alternative viewpoints - but henceforth, condescending, profanity-laden invitations to watch your videos are not welcome.
Tigerpaws9097826 2 years ago
I don't remember making use of any profanity (unless you take a rather broad definition of the term).
D4Shawn 2 years ago
At some point (soon), I'll have to make a video exploring the issue of credit lines.
Just out of curiosity though... what do you think a line of credit is?
If I didn't know what a line of credit was, how would you explain it to me?
SHAWNONOMICS 2 years ago
Here's another question for you:
When a bank estblishes a line a credit for somebody, and that person ends up spending (borrowing) the money, why do you think that money does NOT come from the deposits made by the bank's customers?
Why should I believe that there is some other source, when I already know that the bank loans out the money that people deposit?
SHAWNONOMICS 2 years ago
You are mistaken. Watch the documentary "Money as Debt" and learn. Or read the wiki on "Money creation", which says: "Fractional-reserve banking creates money whenever a new loan is created."
ECX0x100h 2 years ago
HOW am I mistaken? Where is the flaw in my thinking/arguement.
You should really back up your own claim (rather than referring me to someone else).
Maybe, if you impress me with your knowledge, I'll be a bit more interested in how you acquired it.
So far though, you've shown me nothing.
SHAWNONOMICS 2 years ago
Ok, how about an official source: dallasfed[.]org[/]educate[/]everyday[/]ev9[.]html
That's the Federal Reserve Bank of Dallas. In that article, to go "How Banks Create Money". First sentence: "Banks actually create money when they lend it. "
I recommend you take down your video to avoid embarrassing yourself.
ECX0x100h 2 years ago
I'm already familiar with the Fed's propaganda. Thanks though.
Contrary to your suggestion, I'm uploading an ADDITIONAL video right now. I think it explains the fallacy y'all are making use of fairly well.
D4Shawn 2 years ago
oh i see, so you're saying the Fed, princeton economics professors, economics PhDs, etc are all lying about banks creating money?
ECX0x100h 2 years ago
They are either lying, or mistaken.
Most likely, they don't understand the difference between the quantity of money, and the velocity of money.
BTW, there are different schools of economic thought. They can't all be right. It shouldn't surprise at all when lots of people are wrong about something. For example, the "broken window fallacy" never seems to go away, even though it's an obvious fallacy. It's a very pervasive and persistent fallacy.
SHAWNONOMICS 2 years ago
OK so how is the new loan created? If you can answer this contact me for the red pill. Peace
hiphopsocnroc 2 years ago
When someone deposites money into a bank, the bank is allowed (by law) to loan out %90 of it.
SHAWNONOMICS 2 years ago
OK so I deposit $100 in the bank..now the bank can lend out $900 dollars on my $100 dollar deposit
Powdermonkey99 2 years ago
Yes , thats the way they work, because they know that everyone will not want all their money at one time, so they can get away with it as long as everyone pays their loans on time. If everyone wanted their money at the same time(bank run), all the banks will close down, because they cannot deliver the money, and most of the banks will never open again. They will be bankrupt, for doing bad business
kbdory 2 years ago
Noooooooooooooo. %90 of $100 is NOT $900. Where did you guys learn your math?
D4Shawn 2 years ago
So you are saying that on my $100 deposit the bank can NOT lend out more than $90? - so is the statement below false?
By its nature, the practice of fractional reserve banking expands money supply
Powdermonkey99 2 years ago
Yes and yes!
D4Shawn 2 years ago
Shawn, you are right about 90% of $100 is not $900, but tell that to the bank, because(for a fact) that is how they do it. In the real sense you are 100% correct, but in the real world you are 10% correct. You are just unaware of what is really going on.
kbdory 2 years ago 2
I now know why Wepollock blocked you.
You either have no idea how moneitization works or your an just being a jerk and insulting folks that are trying to educate the masses. I think it is the latter.
Kittenkattan 2 years ago
So... you think I've made an error in my presentation/argument.
Great. Let's hear it!
I'm waiting with baited breath.
D4Shawn 2 years ago
I agree 100%
kbdory 2 years ago
OK, good explaination, but know tell me who's obligation is that FRN, YOURS OR THE UNITED STATES?
hiphopsocnroc 2 years ago
Well... any money the government has it gets from us, so...
D4Shawn 2 years ago
wrong but nice try. FRN are the obligation of the US! They are just worthless securities. They only represent the total value of substance within the economy.
hiphopsocnroc 2 years ago
Ok dude... check it out:
We are forced by law to employ FRN as legal tender. This means, that whatever debt the government incurs, manifests itself as a drop in the buying power of the dollars we hold.
WE are the ones paying the bills here. The government doesn't have any wealth of it's own. It only has what it steals from us.
D4Shawn 2 years ago
You are correct about legal tender, but who forces you to use FRN's? Companies are required to take the notes as tender but who says you are forced to take them in exchage for time/work? Give to Cesar what is Ceasr's/give dead presidents to who has to obligation. What is the differance between lawful and legal?
Sorry but it seems you are still be pluged in. Contact me for the red pill. Peace
hiphopsocnroc 2 years ago
Nobody is forced to do anything. You can lay own in the gutter an die if you want.
However, anyone who attempt to issue and employ a currency that competes with the Federal Reserve will be shut down, shot, or imprisoned. If you don't believe me, look up "The Liberty Dollar".
Of course, if you really wanted to, you go go live in a cave, or a cabin in the woods, and not have to use FRN. The point is, the government actively prevents the use of alternatives.
SHAWNONOMICS 2 years ago
Is that what I'm saying, to issue your own current-cy?
Yes the silver case is an example.
I beleive that you are not grasping the point, and are still pluged in. Peace
hiphopsocnroc 2 years ago
You're not saying anything. You're asking me rhetorical questions, presumably, in an attempt to IMPLY something. However, I don't know what you're trying to imply, so why don't you just spit it out. I can't read your froggin' mind.
D4Shawn 2 years ago
Questions not assumptions:
Do you know how to read between the lines?
Like I said, are YOU still pluged in?
I can not help you if you refuse, are un-willing or you're un-able to un-plug.
Peace.
hiphopsocnroc 2 years ago
Jesus dude...
If you don't know what you're saying, why the hell would I know what you were saying?
Obviously, if you knew what you were saying, you could just tell me, and I wouldn't have to read between the lines.
Likewise, it's also obvious that if you don't know what you're trying to say, there's no reason I should know what you're saying.
You should know better than me, and YOU DON'T KNOW. If you did, you would just tell me.
D4Shawn 2 years ago
P.S. Don't be a hypocrite. Don't expect me to do something you can't do.
D4Shawn 2 years ago
People expect to be given a fish and that is not my objective, I feel like people need to learn how to fish for themselevs i.e if you do not understand something reserch it and figure it out for yourself. Maybe if you would have just sent me a PM then we wouldn't be having this pointless exchage of words.
My goal here is not to bash anyone, but to help. If you read my 2nd comment you would see just that. Anyhow, Peace
hiphopsocnroc 2 years ago
Banks basically engage in "check-kiting" and charge interest on the same money over and over (simultaneously).
I had a friend who dealt drugs in high school who was doing the same thing with IOUs -- it "seemed" like everyone (about 6 people) owed him money, but one day everyone cornered him and it worked out he was the one in debt!
mindprism 2 years ago
At some point, I'll make a video on that subject. It gets brought up a lot. I just haven't had the opportunity to address it yet. One thing at a time...
D4Shawn 2 years ago
Gee, this is so silly and juvenile that it's no wonder the other guy banned you.
thamnosma 2 years ago
Good argument.
D4Shawn 2 years ago
This makes sense and all, but it doesn't seem to factor in interest or a bank's loss on a loan.
Jrien 2 years ago
Sorry, I meant to say on a loan that wasn't paid back.
Jrien 2 years ago
The interest is partly to cover the risk that the bank loses money on a loan.
sharperguy 2 years ago
I know, but I actually meant the interest that the bank had to pay back out, not the interest they take in (since it's an additional financial draw on the bank).
Jrien 2 years ago
That interest is the cut the banks customer gets from loaning their money to the bank as the bank also makes a profit on its loans.
sharperguy 2 years ago
What if I promised to loan a basketball at different times to 100 consecutively. And they promised to simultaneously loan it to someone else (without telling him WHEN he would get it).
That person may then begin work under the assumption that he will be able to have 100 basketballs in his possession at some point in time. Of course this never happens, causing his plans to fail.
sharperguy 2 years ago
Are you insinuating that banks practice fractional reserve banking without notifying their customers?
I mean... do you really think it's not stipulated in the contract?
D4Shawn 2 years ago