How banks create money out of thin air part 1 of 2

[CosmosPrivateer]

The only way this can be fixed is that all debt public and private must be removed.

The banks and government screwed use out of our labor anyway.

Then we can just start over.

[20Proff]

I am more than happy to pay any financial obligation you believe I may owe you once you provide me with

Validation of the debt. Can you please provide me with actual accounting as to where you substantiated a loss and had a risk in the investment. Or, even just an invoice signed by the branch manager

Verification of your claim against me (a sworn affidavit, or again, just a signed invoice

A copy of the contract binding both parties

I'll pay anything once you provide me with these 3 things. END

[rxlm89]

Basically, there's no incentive for our gov't to pay off its debt. It would break the entire system.

[TheMEK3]

Seems like a never ending cycle to me

[BRINK00]

Great video - this is why there is no such thing as too big to fail - the banks/lenders must fail and wipe out their pseudo profits. There is no such thing as a free lunch. The only way to re-balance the system is to have the banks go into bankruptcy - write off the "bad" debt and clear the system of this created money (not wealth). What we have right now is the banks fighting this action - and the government being the lackey in trying to delay this default - you only delay - not prevent.

[Jaybar262]

This setup assumes that borrower #2 does nothing with his $90 dollars that's left over after allowing for borrower #1 to break even on the loan. What if borrower #2 takes their $90 and then makes a product that they sell to someone who isn't buying on borrowed money and makes a 50% profit. Thus they pay back their loan and pocket $25, cycle ends. Of course it could go the other way and they make no money theoretically allowing the cycle to continue if people are purchasing with debt.

[gogolando]

Ok, but if the borrower doesn't pay and the bank finds that its collateral falls short of the principle owed what happens? Nothing? I dont think so. And what about the goverment? Doesn't it creat money that stays in the sytem when it sells T-bonds. Government, sells them to banks, spend the money and then the Fed buys the T-bonds from the banks by printing.

[TheByronDaleChannel]

@gogolando The banks simply take all the pledge collateral (real wealth) when they only loan a promise to pay (banks do not loan any tangable assett).

The government creates no money at all and the money that is created by the banking system when the government goes into debt gets extinguished the moment someone uses it to make a principle payment on that debt.

You have to remember that the government has to borrow before it can spend (when talking about T-bonds).

[tadaa11]

@TheByronDaleChannel You nailed it on the head. Its funny that I came across this. You know how they get out of this scenario. Government spending adds money into the system for the interest. The fed Issuing bank credit is a dumb system. Or the business just borrows more money until everyone is over leveraged and the system becomes insolvent. Like today

[TheByronDaleChannel]

@tadaa11 Except the government has to borrow at interest as well. It's not really an issue of businesses getting overleveraged, it's simply a monetary system that is purely based on interest bearing indebtiness.

[tadaa11]

@TheByronDaleChannel I was thinking of just creating and spending into the economy. Its an interesting concept, we need to try something different for sure.

[TheByronDaleChannel]

@gogolando If you would like to discuss this more in depth please visit our website at wealthmoney dot o r g and visit our forums. We are in the process of upgrading the website at the moment as well.

[hamobu]

@usurynation Banks don't make money (other than the central bank of course). Interest is the price of money, so banks 'buy' money from savers and they 'sell' it to lenders for a bit more. The difference in interest rates covers banks costs, defaulted loans and profit. Banks get profit for basically taking our money and giving it to someone who has a need for it. This enables businesses to get started and economy to grow.

[hamobu]

This is nonsense. Banks don't make up money and loan it to people. Instead they need 100 in savings deposits to be able to lend 100 dollars. Banks charge more to loans then they give to savings, but they have default risk from people who get loans. If there were no banks, than people would put money under the mattress and nobody would be able to open a business. Banks have a so called a multiplier effect, but that comes from banks making money circulate faster.

[BRINK00]

@hamobu

Please do further research on FRB - Fraction Reserve Banking - this will show you that the banks don't need $100 in deposit to loan $100. The very definition of FRB does mean that the banks "make up money". Your theory that if there were no banks then their would be no business is a bit misplaced. I'd agree that there would be no business if there was no savings. The only true way to grow an economy is through investment of savings (deferred consumption) into higher return assets.

[hamobu]

@BRINK00

I was talking about fractional reserve banking. Banks need say $100 deposit to loan out $80 and keep $20 in banks own bank account with federal reserve. $80 loan becomes another deposit and then 64 is loaned out while $16 is left with Fed, and so on. Eventually $100 becomes $500 in loans and this is the multiplier effect.

And how could regular people invest in other people's car loans and home mortgages without banks as an intermediary?

[prayfortruejustice]

Owners v. Workers

P+I > P = slavery

Time for interest free sovereign money -- this is Freedom's Vision.

Join the swarm today. The American Party PAC.  w w w SwarmUSA com

[zefvor]

price level = production cost + profit

inflation = either wages or profits go up, and profits somewhat have limited leeway thanks to competition

[zefvor]

inflation most probably comes just from rising wages, made possible by rising debt levels

conversely, deflation occurs only if wages fall, otherwise its just growing "output gap" and unemployment

[BRINK00]

@zefvor

True Inflation is not price inflation - it's Monetary Inflation = inflation of the money supply. The "inflation" of wages and prices (after all, wages are just a price of labor) of goods, are in fact a direct result of this Monetary (re true) Inflation. The true fight would be about the level of money supply the economy needs to sustain and grow with the growth of the country (ie population). Of course this would lead to a non-market decision - leading us to our current problem.

[22santini]

If only the complexity of economics could truly be explained in the simplified terms of some guys borrowing $100 from a "greedy" banker!!!!!!

This is theoretical "hogwash"!

[Sunamc]

How familiar is Byron with Post Keynesian school? This video appears to be a reproduction of endogenous theory of money creation, and the circuitist models of the PK school.

[buzzz121]

Now I get it. The Bankers are Evil!

With this type of Ponzi Scheme in place how is it the banks are in trouble?

[TheByronDaleChannel]

Watch Byron's speech from the Kansas City CNC and that may help to answer that question.

-Tommy

[tchujdenetza]

@buzzz121 Do you really believe that banks are in trouble my friend? With the bailouts they are getting trillions of dollars free of charge that they are never going to return. This is even better than this Ponzi Scheme! If I was a banker I would have claimed I'm in trouble all the time. And the corrupt media that are owned by the banks would repeat the same like a parrot.

[Lexi8888]

Thank you

[johnnytm]

good explaination