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It's not out of thin air. It's out of deposits in the bank.Yes. Why not? What law prevents it?
Can you create $9,000 out of thin air? Wouldn't you get arrested for counterfeiting if you did that?
Moving the economy away from a fractional banking system would collapse the economy because credit would implode and make last fall's financial collapse look like a picnic.
Whether or not the Federal Reserve system is the best system, central banks with an "elastic currency" (how very 1920s of you) generally are more adaptive and have less volatility in the economy.
well one, thats not my webite.. and two I have to dumb it down somewhat. In effect, the fed sells our own money to us. We go into debt to buy it, and then we get taxed to finance it.
We do not go into debt to create Federal Reserve notes. Federal reserve notes are exchanged for government debt, which is held as an asset on the balance sheet. Holding government debt is not the same thing as going into debt.
It's not out of thin air. It's out of deposits in the bank.Can you create $9,000 out of thin air? Wouldn't you get arrested for counterfeiting if you did that?
I think what he's getting at is the Fed creating it out of thin air, which they do.
They create an amount of brand new money on their balance sheet, and purchase assets with it which increases the reserve amounts of member banks, giving said banks the ability to lend more than what they currently hold in demand deposit.
Id be fine with letting the fed do what it does as long as we could have competing currencies in silver and/or gold.
Over time youll see that "elastic" is just another word for "volatile"
A gold/silver standard would mean that the money supply would be reliant on the profitability of mining firms and the political whims of third world countries. It makes little sense from an economic perspective to be reliant on an industry that was irrational for three decades and from a political perspective to be reliant on countries that are often basket cases.
And it would cause a massive deflation. There isn't a whole lot of gold/silver in the world. This was the issue in the 19thc, not enough capital.
A gold/silver standard would mean that the money supply would be reliant on the profitability of mining firms and the political whims of third world countries. It makes little sense from an economic perspective to be reliant on an industry that was irrational for three decades and from a political perspective to be reliant on countries that are often basket cases.
And it would cause a massive deflation. There isn't a whole lot of gold/silver in the world. This was the issue in the 19thc, not enough capital.
No, the issue was that the government wanted deeper pockets. The only problem is that they are making everyone's arms shorter in the process. Deflation means that everyone's money is more valuable. How is that a bad thing? Please educate me, Rabbi Hitler-Keynes. How do you define capital? I define it as something that generates value. How does printing paper that inflates the currency generate value?
The member banks are making loans not only from what is demand deposited, but from the reserves that the Fed is increasing via its asset purchases to meet the reserve minimum.It's not out of thin air. It's out of deposits in the bank.
I think what he's getting at is the Fed creating it out of thin air, which they do.
They create an amount of brand new money on their balance sheet, and purchase assets with it which increases the reserve amounts of member banks, giving said banks the ability to lend more than what they currently hold in demand deposit.
No, what he's talking about has little to do with the Fed, since it is the member banks making the loans.
I still want to know what's wrong with it.
Your description of the fractional reserve system baffles the mind. If I deposit $1000 in the bank what are they supposed to do with it? Stick it in the vault?I get the idea that you're a crank.
Look at P2 where it says any surplus goes to the Treasury. I guess that's the same with Fed Ex too, right?
Sure their "surplus" goes back to the treasury..But theres a few issues with that. One the real issue is seignorage and that the debt is created in the first place. Also we dont really know what the fed does because its books are not open to a government audit. They can transfer govt debt to member banks or other places and then no money is remitted back to the treasury. Basically around the $23 or so billion the fed collects they remit back approx $19 or $20 billion. But we really dont know whats going on behind the scenes.. And theres no reason for this debt to be created in the first place.
Another problem comes from the fractional reserve banking system which uses these created federal reserve notes as reserves to make out loans and such. These banks in turn will create more checkbook money on top of the paper federal reserve notes so that we get a very unstable and very inflationary environment that all the while makes it impossible for all debts to get paid off.
The system is always taking somebody's house, car, business, property etc. Thats how it works.
Our currency is debt and we continually have to go into debt to buy more of it.
And it would cause a massive deflation. There isn't a whole lot of gold/silver in the world. This was the issue in the 19thc, not enough capital.
No, the issue was that the government wanted deeper pockets. The only problem is that they are making everyone's arms shorter in the process. Deflation means that everyone's money is more valuable. How is that a bad thing? Please educate me, Rabbi Hitler-Keynes. How do you define capital? I define it as something that generates value. How does printing paper that inflates the currency generate value?
Are you still posting here? Do you have no shame whatsoever, having been unmasked as an ignoramus and noob in these matters?
Deflation means that prices go down. There has never been a country that experienced deflation as a positive thing.
And educating you is impossible. You are uneducable.
Your description of the fractional reserve system baffles the mind. If I deposit $1000 in the bank what are they supposed to do with it? Stick it in the vault?Sure their "surplus" goes back to the treasury..But theres a few issues with that. One the real issue is seignorage and that the debt is created in the first place. Also we dont really know what the fed does because its books are not open to a government audit. They can transfer govt debt to member banks or other places and then no money is remitted back to the treasury. Basically around the $23 or so billion the fed collects they remit back approx $19 or $20 billion. But we really dont know whats going on behind the scenes.. And theres no reason for this debt to be created in the first place.
Another problem comes from the fractional reserve banking system which uses these created federal reserve notes as reserves to make out loans and such. These banks in turn will create more checkbook money on top of the paper federal reserve notes so that we get a very unstable and very inflationary environment that all the while makes it impossible for all debts to get paid off.
The system is always taking somebody's house, car, business, property etc. Thats how it works.
Our currency is debt and we continually have to go into debt to buy more of it.
Yes, unless I tell them that they can do whatever they want with it. And if I were to do that, I would probably expect to be paid for my troubles. Otherwise, why not just put my money in my vault at home?
Your description of the fractional reserve system baffles the mind. If I deposit $1000 in the bank what are they supposed to do with it? Stick it in the vault?
Yes, unless I tell them that they can do whatever they want with it. And if I were to do that, I would probably expect to be paid for my troubles. Otherwise, why not just put my money in my vault at home?
Geez are you stupid. So let me ask, assuming you actually had money (I mean more than $3.26 in recyclable cans) do you put it in the bank? Like, where it will collect interest and be secure from theft and loss?
As for prices going down, it's a great thing if you're a buyer. And since you've probably never been a seller of anything except hemoglobin you wouldn't understand that when prices go down, that includes asset prices like houses and stock portfolios. How is having less money a good thing?
Your description of the fractional reserve system baffles the mind. If I deposit $1000 in the bank what are they supposed to do with it? Stick it in the vault?
Yes, unless I tell them that they can do whatever they want with it. And if I were to do that, I would probably expect to be paid for my troubles. Otherwise, why not just put my money in my vault at home?
Geez are you stupid. So let me ask, assuming you actually had money (I mean more than $3.26 in recyclable cans) do you put it in the bank? Like, where it will collect interest and be secure from theft and loss?
As for prices going down, it's a great thing if you're a buyer. And since you've probably never been a seller of anything except hemoglobin you wouldn't understand that when prices go down, that includes asset prices like houses and stock portfolios. How is having less money a good thing?
A $1,000 deposit into the banking system becomes upwards of $9,000 and you dont see a problem with that?It's not out of thin air. It's out of deposits in the bank.
I think what he's getting at is the Fed creating it out of thin air, which they do.
They create an amount of brand new money on their balance sheet, and purchase assets with it which increases the reserve amounts of member banks, giving said banks the ability to lend more than what they currently hold in demand deposit.
No, what he's talking about has little to do with the Fed, since it is the member banks making the loans.
I still want to know what's wrong with it.
Deflation is a wonderful thing. When a sound money system is in play deflation is the norm, to the betterment of the people.And it would cause a massive deflation. There isn't a whole lot of gold/silver in the world. This was the issue in the 19thc, not enough capital.
No, the issue was that the government wanted deeper pockets. The only problem is that they are making everyone's arms shorter in the process. Deflation means that everyone's money is more valuable. How is that a bad thing? Please educate me, Rabbi Hitler-Keynes. How do you define capital? I define it as something that generates value. How does printing paper that inflates the currency generate value?
Are you still posting here? Do you have no shame whatsoever, having been unmasked as an ignoramus and noob in these matters?
Deflation means that prices go down. There has never been a country that experienced deflation as a positive thing.
And educating you is impossible. You are uneducable.
No, why not explain what the problem is.A $1,000 deposit into the banking system becomes upwards of $9,000 and you dont see a problem with that?I think what he's getting at is the Fed creating it out of thin air, which they do.
They create an amount of brand new money on their balance sheet, and purchase assets with it which increases the reserve amounts of member banks, giving said banks the ability to lend more than what they currently hold in demand deposit.
No, what he's talking about has little to do with the Fed, since it is the member banks making the loans.
I still want to know what's wrong with it.
As government debt grows and proportionally the risk of taking on government debt grows, it is less of an asset. If the Fed is a government agency, isn't this a conflict of interests? I mean if you could print money, wouldn't you loan it to yourself?
I most certainly don't.
The Fed has the legal ability to counterfeit. This practice is the source of our economic troubles.
As government debt grows and proportionally the risk of taking on government debt grows, it is less of an asset. If the Fed is a government agency, isn't this a conflict of interests? I mean if you could print money, wouldn't you loan it to yourself?
It is not a conflict of interest. It is the Fed's mandate.
The Fed's assets are primarily short-term government securities, or at least they were until the crisis hit. The Fed holds these assets and submits almost all of its profits back to the government, which was $40 billion in 2008 if I recall correctly.
Would I loan money to people who would sell me debt in exchange for bills of exchange that are not interest bearing? You bet I would. That's is how the Fed makes its profits. However, the Fed has a legal mandate to control inflation (and maintain employment). If the Fed prints too much money, it will create inflation. Thus, its legal mandate is a restriction on how much money it can print.
