Top 10 Ridiculous Examples of Corporate Greed

[CultureCitizen]

banks create money out of thin air

That's hilarious. And wrong.

No , it is not: paying with cash is not the same as paying with credit. Paying with credit actually creates money. The accounting transaction are completely different for both operations:
When paying with cash the assets of one bank decrease and the assets of the other bank increase.
Bank A( -reserves , + liabilities ( deposit))
Bank B( +reserves, - liabilities ( deposit)
When paying with a credit card the assets and and liabilities of one bank remain constant
Assets : (+ Loans , - Reserves), Liabilities ( + deposits , - liabilities ( deposits) )
while the assets of the other bank increase ( + Reserves , - liabilities( deposits) ) .

The operation at bank B is in effect identical to a customer making a deposit. This is the way in which banks create money endogenously.
This operation is not restricted by their reserves, since reserve requirements are checked at the end of the reporting period. At which point the bank will get the reserves from the Fed or borrowing from other bank ( which in turn has already created money endogenously).

Thus banks have by far ,greater power to create money than the Fed.

 

[Toddsterpatriot]

banks create money out of thin air

That's hilarious. And wrong.

No , it is not: paying with cash is not the same as paying with credit. Paying with credit actually creates money. The accounting transaction are completely different for both operations:
When paying with cash the assets of one bank decrease and the assets of the other bank increase.
Bank A( -reserves , + liabilities ( deposit))
Bank B( +reserves, - liabilities ( deposit)
When paying with a credit card the assets and and liabilities of one bank remain constant
Assets : (+ Loans , - Reserves), Liabilities ( + deposits , - liabilities ( deposits) )
while the assets of the other bank increase ( + Reserves , - liabilities( deposits) ) .

The operation at bank B is in effect identical to a customer making a deposit. This is the way in which banks create money endogenously.
This operation is not restricted by their reserves, since reserve requirements are checked at the end of the reporting period. At which point the bank will get the reserves from the Fed or borrowing from other bank ( which in turn has already created money endogenously).

Thus banks have by far ,greater power to create money than the Fed.

paying with cash is not the same as paying with credit. Paying with credit actually creates money

Loans increase the money supply. How is that like creating money out of thin air?

At which point the bank will get the reserves from the Fed or borrowing from other bank

Banks that create money out of thin air have no need to get reserves.
Banks that need to borrow in order to loan (the opposite of thin air), do need reserves.

As far as your confused attempt at explaining credit cards, my bank card will reduce my banks reserve balance
and the bank of the store I used it at will see their reserve balance increase. No thin air involved.

 

[EdwardBaiamonte]

Not quite Ed, he did stress the importance of monetary policy..

of course he did you idiot!!!! , but helicopter money only as a thought experiment to teach about monetary policy. Now do you understand?

 

[EdwardBaiamonte]

, all of this would not produce growth by itself,.

all?????? there was no "all" in your lunacy just a helicopter drop, something Friedman said would produce inflation and thus slow growth through price distortion.
You have learned many times that growth comes from the supply of new inventions or new efficiencies so why not propose something real to spur growth?

 

[EdwardBaiamonte]

. Stimulus was a good thing.

yes govt stimulus works better than private sector stimulus because lazy monopolist soviet govt bureaucrats in central govt know best how to efficiently spend other people's money!

 

[CultureCitizen]

, all of this would not produce growth by itself,.

all?????? there was no "all" in your lunacy just a helicopter drop, something Friedman said would produce inflation and thus slow growth through price distortion.
You have learned many times that growth comes from the supply of new inventions or new efficiencies so why not propose something real to spur growth?

Milton argued that the '29 crisis was largely due to a monetary contraction. Arguably helicopter money was a solution in such cases. Inflation? Indeed, but the US was already in a deflationary cycle.

 

[CultureCitizen]

banks create money out of thin air

That's hilarious. And wrong.

No , it is not: paying with cash is not the same as paying with credit. Paying with credit actually creates money. The accounting transaction are completely different for both operations:
When paying with cash the assets of one bank decrease and the assets of the other bank increase.
Bank A( -reserves , + liabilities ( deposit))
Bank B( +reserves, - liabilities ( deposit)
When paying with a credit card the assets and and liabilities of one bank remain constant
Assets : (+ Loans , - Reserves), Liabilities ( + deposits , - liabilities ( deposits) )
while the assets of the other bank increase ( + Reserves , - liabilities( deposits) ) .

The operation at bank B is in effect identical to a customer making a deposit. This is the way in which banks create money endogenously.
This operation is not restricted by their reserves, since reserve requirements are checked at the end of the reporting period. At which point the bank will get the reserves from the Fed or borrowing from other bank ( which in turn has already created money endogenously).

Thus banks have by far ,greater power to create money than the Fed.

paying with cash is not the same as paying with credit. Paying with credit actually creates money

Loans increase the money supply. How is that like creating money out of thin air?

At which point the bank will get the reserves from the Fed or borrowing from other bank

Banks that create money out of thin air have no need to get reserves.
Banks that need to borrow in order to loan (the opposite of thin air), do need reserves.

As far as your confused attempt at explaining credit cards, my bank card will reduce my banks reserve balance
and the bank of the store I used it at will see their reserve balance increase. No thin air involved.

Indeed, at this point bank A would have to borrow from the Fed or from bank B, but only 10% of the loan.

But, that would only happen if the customer of Bank A was a household, as there is no reserve requirement for corporate deposits in the US, or to be more precise: for non personal time deposits.

 

[Toddsterpatriot]

banks create money out of thin air

That's hilarious. And wrong.

No , it is not: paying with cash is not the same as paying with credit. Paying with credit actually creates money. The accounting transaction are completely different for both operations:
When paying with cash the assets of one bank decrease and the assets of the other bank increase.
Bank A( -reserves , + liabilities ( deposit))
Bank B( +reserves, - liabilities ( deposit)
When paying with a credit card the assets and and liabilities of one bank remain constant
Assets : (+ Loans , - Reserves), Liabilities ( + deposits , - liabilities ( deposits) )
while the assets of the other bank increase ( + Reserves , - liabilities( deposits) ) .

The operation at bank B is in effect identical to a customer making a deposit. This is the way in which banks create money endogenously.
This operation is not restricted by their reserves, since reserve requirements are checked at the end of the reporting period. At which point the bank will get the reserves from the Fed or borrowing from other bank ( which in turn has already created money endogenously).

Thus banks have by far ,greater power to create money than the Fed.

paying with cash is not the same as paying with credit. Paying with credit actually creates money

Loans increase the money supply. How is that like creating money out of thin air?

At which point the bank will get the reserves from the Fed or borrowing from other bank

Banks that create money out of thin air have no need to get reserves.
Banks that need to borrow in order to loan (the opposite of thin air), do need reserves.

As far as your confused attempt at explaining credit cards, my bank card will reduce my banks reserve balance
and the bank of the store I used it at will see their reserve balance increase. No thin air involved.

Indeed, at this point bank A would have to borrow from the Fed or from bank B, but only 10% of the loan.

But, that would only happen if the customer of Bank A was a household, as there is no reserve requirement for corporate deposits in the US, or to be more precise: for non personal time deposits.

Indeed, at this point bank A would have to borrow from the Fed or from bank B, but only 10% of the loan

Wrong. Loans are fully funded.

as there is no reserve requirement for corporate deposits in the US,

Link?

 

[Toddsterpatriot]

banks create money out of thin air

That's hilarious. And wrong.

No , it is not: paying with cash is not the same as paying with credit. Paying with credit actually creates money. The accounting transaction are completely different for both operations:
When paying with cash the assets of one bank decrease and the assets of the other bank increase.
Bank A( -reserves , + liabilities ( deposit))
Bank B( +reserves, - liabilities ( deposit)
When paying with a credit card the assets and and liabilities of one bank remain constant
Assets : (+ Loans , - Reserves), Liabilities ( + deposits , - liabilities ( deposits) )
while the assets of the other bank increase ( + Reserves , - liabilities( deposits) ) .

The operation at bank B is in effect identical to a customer making a deposit. This is the way in which banks create money endogenously.
This operation is not restricted by their reserves, since reserve requirements are checked at the end of the reporting period. At which point the bank will get the reserves from the Fed or borrowing from other bank ( which in turn has already created money endogenously).

Thus banks have by far ,greater power to create money than the Fed.

paying with cash is not the same as paying with credit. Paying with credit actually creates money

Loans increase the money supply. How is that like creating money out of thin air?

At which point the bank will get the reserves from the Fed or borrowing from other bank

Banks that create money out of thin air have no need to get reserves.
Banks that need to borrow in order to loan (the opposite of thin air), do need reserves.

As far as your confused attempt at explaining credit cards, my bank card will reduce my banks reserve balance
and the bank of the store I used it at will see their reserve balance increase. No thin air involved.

Indeed, at this point bank A would have to borrow from the Fed or from bank B, but only 10% of the loan.

But, that would only happen if the customer of Bank A was a household, as there is no reserve requirement for corporate deposits in the US, or to be more precise: for non personal time deposits.

or to be more precise: for non personal time deposits.

No reserve requirement on ANY time deposit.
Why is a corporation going to hold a time deposit?

 

[EdwardBaiamonte]

Milton argued that the '29 crisis was largely due to a monetary contraction. Arguably helicopter money was a solution in such cases..

dear, Milton did not argue that helicopter money should have been the solution to the '29 crisis. What is wrong with you???

 

[EdwardBaiamonte]

Inflation? Indeed, but the US was already in a deflationary cycle.

so what? when you give out money through the banks people have to pay it back and so it results in sustainable growth and long term economic activity but with helicopter money distributed to everyone in tiny amounts you get a little churning of the economy and nothing else that would cause real growth. When will you have a Republican suggestion to encourage the supply of new inventions??

 

[CultureCitizen]

banks create money out of thin air

That's hilarious. And wrong.

No , it is not: paying with cash is not the same as paying with credit. Paying with credit actually creates money. The accounting transaction are completely different for both operations:
When paying with cash the assets of one bank decrease and the assets of the other bank increase.
Bank A( -reserves , + liabilities ( deposit))
Bank B( +reserves, - liabilities ( deposit)
When paying with a credit card the assets and and liabilities of one bank remain constant
Assets : (+ Loans , - Reserves), Liabilities ( + deposits , - liabilities ( deposits) )
while the assets of the other bank increase ( + Reserves , - liabilities( deposits) ) .

The operation at bank B is in effect identical to a customer making a deposit. This is the way in which banks create money endogenously.
This operation is not restricted by their reserves, since reserve requirements are checked at the end of the reporting period. At which point the bank will get the reserves from the Fed or borrowing from other bank ( which in turn has already created money endogenously).

Thus banks have by far ,greater power to create money than the Fed.

paying with cash is not the same as paying with credit. Paying with credit actually creates money

Loans increase the money supply. How is that like creating money out of thin air?

At which point the bank will get the reserves from the Fed or borrowing from other bank

Banks that create money out of thin air have no need to get reserves.
Banks that need to borrow in order to loan (the opposite of thin air), do need reserves.

As far as your confused attempt at explaining credit cards, my bank card will reduce my banks reserve balance
and the bank of the store I used it at will see their reserve balance increase. No thin air involved.

Indeed, at this point bank A would have to borrow from the Fed or from bank B, but only 10% of the loan.

But, that would only happen if the customer of Bank A was a household, as there is no reserve requirement for corporate deposits in the US, or to be more precise: for non personal time deposits.

Indeed, at this point bank A would have to borrow from the Fed or from bank B, but only 10% of the loan

Wrong. Loans are fully funded.

as there is no reserve requirement for corporate deposits in the US,

Link?

Fully funded? By my previous example: if $100 were deposited in bank A and a loan was made its balance shee would be:

Liabilities ( deposits ) -100
Assets ( reserves) 0
Assets ( loans ) 100

And bank B:
Assets (reserves ) 100
Liabilities ( deposits ) -100

Bank B can now loan $100 to anyone , even if customer A decided to withdraw all of his funds the next day. In that case the only requirement for bank A would be to borrow $10 from the FED or bank B.


Link:
FRB: Reserve Requirements
Also the first 15 millions are exempt of any reserve requirements.

 

[Toddsterpatriot]

banks create money out of thin air

That's hilarious. And wrong.

No , it is not: paying with cash is not the same as paying with credit. Paying with credit actually creates money. The accounting transaction are completely different for both operations:
When paying with cash the assets of one bank decrease and the assets of the other bank increase.
Bank A( -reserves , + liabilities ( deposit))
Bank B( +reserves, - liabilities ( deposit)
When paying with a credit card the assets and and liabilities of one bank remain constant
Assets : (+ Loans , - Reserves), Liabilities ( + deposits , - liabilities ( deposits) )
while the assets of the other bank increase ( + Reserves , - liabilities( deposits) ) .

The operation at bank B is in effect identical to a customer making a deposit. This is the way in which banks create money endogenously.
This operation is not restricted by their reserves, since reserve requirements are checked at the end of the reporting period. At which point the bank will get the reserves from the Fed or borrowing from other bank ( which in turn has already created money endogenously).

Thus banks have by far ,greater power to create money than the Fed.

paying with cash is not the same as paying with credit. Paying with credit actually creates money

Loans increase the money supply. How is that like creating money out of thin air?

At which point the bank will get the reserves from the Fed or borrowing from other bank

Banks that create money out of thin air have no need to get reserves.
Banks that need to borrow in order to loan (the opposite of thin air), do need reserves.

As far as your confused attempt at explaining credit cards, my bank card will reduce my banks reserve balance
and the bank of the store I used it at will see their reserve balance increase. No thin air involved.

Indeed, at this point bank A would have to borrow from the Fed or from bank B, but only 10% of the loan.

But, that would only happen if the customer of Bank A was a household, as there is no reserve requirement for corporate deposits in the US, or to be more precise: for non personal time deposits.

Indeed, at this point bank A would have to borrow from the Fed or from bank B, but only 10% of the loan

Wrong. Loans are fully funded.

as there is no reserve requirement for corporate deposits in the US,

Link?

Fully funded? By my previous example: if $100 were deposited in bank A and a loan was made its balance shee would be:

Liabilities ( deposits ) -100
Assets ( reserves) 0
Assets ( loans ) 100

And bank B:
Assets (reserves ) 100
Liabilities ( deposits ) -100

Bank B can now loan $100 to anyone , even if customer A decided to withdraw all of his funds the next day. In that case the only requirement for bank A would be to borrow $10 from the FED or bank B.


Link:
FRB: Reserve Requirements
Also the first 15 millions are exempt of any reserve requirements.

Fully funded?

Yes. That means that banks can't create money out of thin air to lend.
It means banks have to borrow in order to lend.

Bank B can now loan $100 to anyone , even if customer A decided to withdraw all of his funds the next day. In that case the only requirement for bank A would be to borrow $10 from the FED or bank B.

Nope.
If a customer deposits $100 and withdraws it the next day, the bank would need to borrow $100 to lend $100.

 

[Andylusion]

banks create money out of thin air

That's hilarious. And wrong.

No , it is not: paying with cash is not the same as paying with credit. Paying with credit actually creates money. The accounting transaction are completely different for both operations:
When paying with cash the assets of one bank decrease and the assets of the other bank increase.
Bank A( -reserves , + liabilities ( deposit))
Bank B( +reserves, - liabilities ( deposit)
When paying with a credit card the assets and and liabilities of one bank remain constant
Assets : (+ Loans , - Reserves), Liabilities ( + deposits , - liabilities ( deposits) )
while the assets of the other bank increase ( + Reserves , - liabilities( deposits) ) .

The operation at bank B is in effect identical to a customer making a deposit. This is the way in which banks create money endogenously.
This operation is not restricted by their reserves, since reserve requirements are checked at the end of the reporting period. At which point the bank will get the reserves from the Fed or borrowing from other bank ( which in turn has already created money endogenously).

Thus banks have by far ,greater power to create money than the Fed.

I'm sorry, but you are simply wrong. Yes, deposits can be put back into circulation, increasing the total money supply, because money can be in the system twice.

However, there is a limit to this. Money can only be loaned out at a percentage, and all loans eventually are paid back. So the re-loaning of money is limited.

Further, banks do many things with the money, not all of which are loans. Such as paying staff, upkeep on buildings, expanding operations, and purchasing of assets.

So the ability of each individual bank, is extremely limited.

Increasing the money in circulation through loaning, does not create money out of thin air.

Only the Department of Treasury, can actually increase total amount of hard currency in the system. If a bank could actually make money out of thin air, then it would be impossible for any bank to fail. The moment my reserves got low, I'd just print out more.

 

[CultureCitizen]

banks create money out of thin air

That's hilarious. And wrong.

No , it is not: paying with cash is not the same as paying with credit. Paying with credit actually creates money. The accounting transaction are completely different for both operations:
When paying with cash the assets of one bank decrease and the assets of the other bank increase.
Bank A( -reserves , + liabilities ( deposit))
Bank B( +reserves, - liabilities ( deposit)
When paying with a credit card the assets and and liabilities of one bank remain constant
Assets : (+ Loans , - Reserves), Liabilities ( + deposits , - liabilities ( deposits) )
while the assets of the other bank increase ( + Reserves , - liabilities( deposits) ) .

The operation at bank B is in effect identical to a customer making a deposit. This is the way in which banks create money endogenously.
This operation is not restricted by their reserves, since reserve requirements are checked at the end of the reporting period. At which point the bank will get the reserves from the Fed or borrowing from other bank ( which in turn has already created money endogenously).

Thus banks have by far ,greater power to create money than the Fed.

I'm sorry, but you are simply wrong. Yes, deposits can be put back into circulation, increasing the total money supply, because money can be in the system twice.

However, there is a limit to this. Money can only be loaned out at a percentage, and all loans eventually are paid back. So the re-loaning of money is limited.

Further, banks do many things with the money, not all of which are loans. Such as paying staff, upkeep on buildings, expanding operations, and purchasing of assets.

So the ability of each individual bank, is extremely limited.

Increasing the money in circulation through loaning, does not create money out of thin air.

Only the Department of Treasury, can actually increase total amount of hard currency in the system. If a bank could actually make money out of thin air, then it would be impossible for any bank to fail. The moment my reserves got low, I'd just print out more.

No , it is not: paying with cash is not the same as paying with credit. Paying with credit actually creates money. The accounting transaction are completely different for both operations:
When paying with cash the assets of one bank decrease and the assets of the other bank increase.
Bank A( -reserves , + liabilities ( deposit))
Bank B( +reserves, - liabilities ( deposit)
When paying with a credit card the assets and and liabilities of one bank remain constant
Assets : (+ Loans , - Reserves), Liabilities ( + deposits , - liabilities ( deposits) )
while the assets of the other bank increase ( + Reserves , - liabilities( deposits) ) .

The operation at bank B is in effect identical to a customer making a deposit. This is the way in which banks create money endogenously.
This operation is not restricted by their reserves, since reserve requirements are checked at the end of the reporting period. At which point the bank will get the reserves from the Fed or borrowing from other bank ( which in turn has already created money endogenously).

Thus banks have by far ,greater power to create money than the Fed.

paying with cash is not the same as paying with credit. Paying with credit actually creates money

Loans increase the money supply. How is that like creating money out of thin air?

At which point the bank will get the reserves from the Fed or borrowing from other bank

Banks that create money out of thin air have no need to get reserves.
Banks that need to borrow in order to loan (the opposite of thin air), do need reserves.

As far as your confused attempt at explaining credit cards, my bank card will reduce my banks reserve balance
and the bank of the store I used it at will see their reserve balance increase. No thin air involved.

Indeed, at this point bank A would have to borrow from the Fed or from bank B, but only 10% of the loan.

But, that would only happen if the customer of Bank A was a household, as there is no reserve requirement for corporate deposits in the US, or to be more precise: for non personal time deposits.

Indeed, at this point bank A would have to borrow from the Fed or from bank B, but only 10% of the loan

Wrong. Loans are fully funded.

as there is no reserve requirement for corporate deposits in the US,

Link?

Fully funded? By my previous example: if $100 were deposited in bank A and a loan was made its balance shee would be:

Liabilities ( deposits ) -100
Assets ( reserves) 0
Assets ( loans ) 100

And bank B:
Assets (reserves ) 100
Liabilities ( deposits ) -100

Bank B can now loan $100 to anyone , even if customer A decided to withdraw all of his funds the next day. In that case the only requirement for bank A would be to borrow $10 from the FED or bank B.


Link:
FRB: Reserve Requirements
Also the first 15 millions are exempt of any reserve requirements.

Fully funded?

Yes. That means that banks can't create money out of thin air to lend.
It means banks have to borrow in order to lend.

Bank B can now loan $100 to anyone , even if customer A decided to withdraw all of his funds the next day. In that case the only requirement for bank A would be to borrow $10 from the FED or bank B.

Nope.
If a customer deposits $100 and withdraws it the next day, the bank would need to borrow $100 to lend $100.

Even so, if we consider the multiplier effect those $100 will be turned into $1,000.
The bank can now borrow from any of the banks that have the remaining $900 in deposits and that will still leave $800 in deposits . That will happen even if the FED doesn't put a dime into the system ( or if you prefer to see it the other way : even if the Fed just allocates the reserves for the day and is repaid

Again, banks have more to do in the process of creating money than the Fed.

Credit and debt are necesary to make an economy grow, but too much debt ( specially private debt will make the economy tank ).

 

[Toddsterpatriot]

paying with cash is not the same as paying with credit. Paying with credit actually creates money

Loans increase the money supply. How is that like creating money out of thin air?

At which point the bank will get the reserves from the Fed or borrowing from other bank

Banks that create money out of thin air have no need to get reserves.
Banks that need to borrow in order to loan (the opposite of thin air), do need reserves.

As far as your confused attempt at explaining credit cards, my bank card will reduce my banks reserve balance
and the bank of the store I used it at will see their reserve balance increase. No thin air involved.

Indeed, at this point bank A would have to borrow from the Fed or from bank B, but only 10% of the loan.

But, that would only happen if the customer of Bank A was a household, as there is no reserve requirement for corporate deposits in the US, or to be more precise: for non personal time deposits.

Indeed, at this point bank A would have to borrow from the Fed or from bank B, but only 10% of the loan

Wrong. Loans are fully funded.

as there is no reserve requirement for corporate deposits in the US,

Link?

Fully funded? By my previous example: if $100 were deposited in bank A and a loan was made its balance shee would be:

Liabilities ( deposits ) -100
Assets ( reserves) 0
Assets ( loans ) 100

And bank B:
Assets (reserves ) 100
Liabilities ( deposits ) -100

Bank B can now loan $100 to anyone , even if customer A decided to withdraw all of his funds the next day. In that case the only requirement for bank A would be to borrow $10 from the FED or bank B.


Link:
FRB: Reserve Requirements
Also the first 15 millions are exempt of any reserve requirements.

Fully funded?

Yes. That means that banks can't create money out of thin air to lend.
It means banks have to borrow in order to lend.

Bank B can now loan $100 to anyone , even if customer A decided to withdraw all of his funds the next day. In that case the only requirement for bank A would be to borrow $10 from the FED or bank B.

Nope.
If a customer deposits $100 and withdraws it the next day, the bank would need to borrow $100 to lend $100.

Even so, if we consider the multiplier effect those $100 will be turned into $1,000.
The bank can now borrow from any of the banks that have the remaining $900 in deposits and that will still leave $800 in deposits . That will happen even if the FED doesn't put a dime into the system ( or if you prefer to see it the other way : even if the Fed just allocates the reserves for the day and is repaid

Again, banks have more to do in the process of creating money than the Fed.

Credit and debt are necesary to make an economy grow, but too much debt ( specially private debt will make the economy tank ).

Even so, if we consider the multiplier effect those $100 will be turned into $1,000.

Yes, even though your earlier claims were wrong, lending does increase the money supply.

The bank can now borrow from any of the banks that have the remaining $900 in deposits

In your example, there was a $100 deposit, so there aren't $900 in remaining deposits for the bank to borrow.

 

[Andylusion]

banks create money out of thin air

That's hilarious. And wrong.

No , it is not: paying with cash is not the same as paying with credit. Paying with credit actually creates money. The accounting transaction are completely different for both operations:
When paying with cash the assets of one bank decrease and the assets of the other bank increase.
Bank A( -reserves , + liabilities ( deposit))
Bank B( +reserves, - liabilities ( deposit)
When paying with a credit card the assets and and liabilities of one bank remain constant
Assets : (+ Loans , - Reserves), Liabilities ( + deposits , - liabilities ( deposits) )
while the assets of the other bank increase ( + Reserves , - liabilities( deposits) ) .

The operation at bank B is in effect identical to a customer making a deposit. This is the way in which banks create money endogenously.
This operation is not restricted by their reserves, since reserve requirements are checked at the end of the reporting period. At which point the bank will get the reserves from the Fed or borrowing from other bank ( which in turn has already created money endogenously).

Thus banks have by far ,greater power to create money than the Fed.

I'm sorry, but you are simply wrong. Yes, deposits can be put back into circulation, increasing the total money supply, because money can be in the system twice.

However, there is a limit to this. Money can only be loaned out at a percentage, and all loans eventually are paid back. So the re-loaning of money is limited.

Further, banks do many things with the money, not all of which are loans. Such as paying staff, upkeep on buildings, expanding operations, and purchasing of assets.

So the ability of each individual bank, is extremely limited.

Increasing the money in circulation through loaning, does not create money out of thin air.

Only the Department of Treasury, can actually increase total amount of hard currency in the system. If a bank could actually make money out of thin air, then it would be impossible for any bank to fail. The moment my reserves got low, I'd just print out more.

paying with cash is not the same as paying with credit. Paying with credit actually creates money

Loans increase the money supply. How is that like creating money out of thin air?

At which point the bank will get the reserves from the Fed or borrowing from other bank

Banks that create money out of thin air have no need to get reserves.
Banks that need to borrow in order to loan (the opposite of thin air), do need reserves.

As far as your confused attempt at explaining credit cards, my bank card will reduce my banks reserve balance
and the bank of the store I used it at will see their reserve balance increase. No thin air involved.

Indeed, at this point bank A would have to borrow from the Fed or from bank B, but only 10% of the loan.

But, that would only happen if the customer of Bank A was a household, as there is no reserve requirement for corporate deposits in the US, or to be more precise: for non personal time deposits.

Indeed, at this point bank A would have to borrow from the Fed or from bank B, but only 10% of the loan

Wrong. Loans are fully funded.

as there is no reserve requirement for corporate deposits in the US,

Link?

Fully funded? By my previous example: if $100 were deposited in bank A and a loan was made its balance shee would be:

Liabilities ( deposits ) -100
Assets ( reserves) 0
Assets ( loans ) 100

And bank B:
Assets (reserves ) 100
Liabilities ( deposits ) -100

Bank B can now loan $100 to anyone , even if customer A decided to withdraw all of his funds the next day. In that case the only requirement for bank A would be to borrow $10 from the FED or bank B.


Link:
FRB: Reserve Requirements
Also the first 15 millions are exempt of any reserve requirements.

Fully funded?

Yes. That means that banks can't create money out of thin air to lend.
It means banks have to borrow in order to lend.

Bank B can now loan $100 to anyone , even if customer A decided to withdraw all of his funds the next day. In that case the only requirement for bank A would be to borrow $10 from the FED or bank B.

Nope.
If a customer deposits $100 and withdraws it the next day, the bank would need to borrow $100 to lend $100.

Even so, if we consider the multiplier effect those $100 will be turned into $1,000.
The bank can now borrow from any of the banks that have the remaining $900 in deposits and that will still leave $800 in deposits . That will happen even if the FED doesn't put a dime into the system ( or if you prefer to see it the other way : even if the Fed just allocates the reserves for the day and is repaid

Again, banks have more to do in the process of creating money than the Fed.

Credit and debt are necessary to make an economy grow, but too much debt ( specially private debt will make the economy tank ).

No, that isn't true. The economy grow before we had credit and debt. I reject any stupidity that claims the economy can't grow without it. Apple Computer doesn't borrow money. They operate on a cash on hand basis, and always have. Many companies have grown dramatically without credit or debt.

It is entirely possible to grow as a nation, without the use of debt. Yes, our economy has tons of debt, encouraged by horrible tax incentives. Just because that is how it currently is, doesn't mean it must be that way.

Again, the flaw in your theory is that the debt has to be paid back. You can't just continue the lend and re-lend, and re-lend, over and over infinitely. The money has to be paid back. Banks know this. Their ability to borrow and lend out, is always limited.

 

[CultureCitizen]

banks create money out of thin air

That's hilarious. And wrong.

No , it is not: paying with cash is not the same as paying with credit. Paying with credit actually creates money. The accounting transaction are completely different for both operations:
When paying with cash the assets of one bank decrease and the assets of the other bank increase.
Bank A( -reserves , + liabilities ( deposit))
Bank B( +reserves, - liabilities ( deposit)
When paying with a credit card the assets and and liabilities of one bank remain constant
Assets : (+ Loans , - Reserves), Liabilities ( + deposits , - liabilities ( deposits) )
while the assets of the other bank increase ( + Reserves , - liabilities( deposits) ) .

The operation at bank B is in effect identical to a customer making a deposit. This is the way in which banks create money endogenously.
This operation is not restricted by their reserves, since reserve requirements are checked at the end of the reporting period. At which point the bank will get the reserves from the Fed or borrowing from other bank ( which in turn has already created money endogenously).

Thus banks have by far ,greater power to create money than the Fed.

I'm sorry, but you are simply wrong. Yes, deposits can be put back into circulation, increasing the total money supply, because money can be in the system twice.

However, there is a limit to this. Money can only be loaned out at a percentage, and all loans eventually are paid back. So the re-loaning of money is limited.

Further, banks do many things with the money, not all of which are loans. Such as paying staff, upkeep on buildings, expanding operations, and purchasing of assets.

So the ability of each individual bank, is extremely limited.

Increasing the money in circulation through loaning, does not create money out of thin air.

Only the Department of Treasury, can actually increase total amount of hard currency in the system. If a bank could actually make money out of thin air, then it would be impossible for any bank to fail. The moment my reserves got low, I'd just print out more.

Indeed, at this point bank A would have to borrow from the Fed or from bank B, but only 10% of the loan.

But, that would only happen if the customer of Bank A was a household, as there is no reserve requirement for corporate deposits in the US, or to be more precise: for non personal time deposits.

Indeed, at this point bank A would have to borrow from the Fed or from bank B, but only 10% of the loan

Wrong. Loans are fully funded.

as there is no reserve requirement for corporate deposits in the US,

Link?

Fully funded? By my previous example: if $100 were deposited in bank A and a loan was made its balance shee would be:

Liabilities ( deposits ) -100
Assets ( reserves) 0
Assets ( loans ) 100

And bank B:
Assets (reserves ) 100
Liabilities ( deposits ) -100

Bank B can now loan $100 to anyone , even if customer A decided to withdraw all of his funds the next day. In that case the only requirement for bank A would be to borrow $10 from the FED or bank B.


Link:
FRB: Reserve Requirements
Also the first 15 millions are exempt of any reserve requirements.

Fully funded?

Yes. That means that banks can't create money out of thin air to lend.
It means banks have to borrow in order to lend.

Bank B can now loan $100 to anyone , even if customer A decided to withdraw all of his funds the next day. In that case the only requirement for bank A would be to borrow $10 from the FED or bank B.

Nope.
If a customer deposits $100 and withdraws it the next day, the bank would need to borrow $100 to lend $100.

Even so, if we consider the multiplier effect those $100 will be turned into $1,000.
The bank can now borrow from any of the banks that have the remaining $900 in deposits and that will still leave $800 in deposits . That will happen even if the FED doesn't put a dime into the system ( or if you prefer to see it the other way : even if the Fed just allocates the reserves for the day and is repaid

Again, banks have more to do in the process of creating money than the Fed.

Credit and debt are necessary to make an economy grow, but too much debt ( specially private debt will make the economy tank ).

No, that isn't true. The economy grow before we had credit and debt. I reject any stupidity that claims the economy can't grow without it. Apple Computer doesn't borrow money. They operate on a cash on hand basis, and always have. Many companies have grown dramatically without credit or debt.

It is entirely possible to grow as a nation, without the use of debt. Yes, our economy has tons of debt, encouraged by horrible tax incentives. Just because that is how it currently is, doesn't mean it must be that way.

Again, the flaw in your theory is that the debt has to be paid back. You can't just continue the lend and re-lend, and re-lend, over and over infinitely. The money has to be paid back. Banks know this. Their ability to borrow and lend out, is always limited.

Society has used credit for millenia. It is really hard to grow without credit. I don't know of any corporation who hasn't relied on credit at one period of its life and that includes Apple.

There is a healthy balance of debt to gdp ratio (about 80%) . Right now the US has exceeded that point. Japan crossed it many years while China's debt is also skyrocketing.

No , no flaw in my way of thinking: If debt grows too much the financial sector gets a bigger share of the gdp and for many households and companies the debt becomes unpayable. The result of this is permanent stagnation ( Japan has been stagnated for more than two decades).

And no , banks don't really know when debt has grown too much, else the 07 crisis wouldn't have happened and japan's private debt would not have grown so much.

Under the current system there is not much limit to how much money the banks can create: with a 10% reserve requirement the ratio is at least 10 to 1 ( the reserve requirement has a lot of exceptions) . That is why the Austrian economists are against it. I am not against it. I just think banks can allocate capital into the wrong sector just as easily as the government does.

 

[CultureCitizen]

Indeed, at this point bank A would have to borrow from the Fed or from bank B, but only 10% of the loan.

But, that would only happen if the customer of Bank A was a household, as there is no reserve requirement for corporate deposits in the US, or to be more precise: for non personal time deposits.

Indeed, at this point bank A would have to borrow from the Fed or from bank B, but only 10% of the loan

Wrong. Loans are fully funded.

as there is no reserve requirement for corporate deposits in the US,

Link?

Fully funded? By my previous example: if $100 were deposited in bank A and a loan was made its balance shee would be:

Liabilities ( deposits ) -100
Assets ( reserves) 0
Assets ( loans ) 100

And bank B:
Assets (reserves ) 100
Liabilities ( deposits ) -100

Bank B can now loan $100 to anyone , even if customer A decided to withdraw all of his funds the next day. In that case the only requirement for bank A would be to borrow $10 from the FED or bank B.


Link:
FRB: Reserve Requirements
Also the first 15 millions are exempt of any reserve requirements.

Fully funded?

Yes. That means that banks can't create money out of thin air to lend.
It means banks have to borrow in order to lend.

Bank B can now loan $100 to anyone , even if customer A decided to withdraw all of his funds the next day. In that case the only requirement for bank A would be to borrow $10 from the FED or bank B.

Nope.
If a customer deposits $100 and withdraws it the next day, the bank would need to borrow $100 to lend $100.

Even so, if we consider the multiplier effect those $100 will be turned into $1,000.
The bank can now borrow from any of the banks that have the remaining $900 in deposits and that will still leave $800 in deposits . That will happen even if the FED doesn't put a dime into the system ( or if you prefer to see it the other way : even if the Fed just allocates the reserves for the day and is repaid

Again, banks have more to do in the process of creating money than the Fed.

Credit and debt are necesary to make an economy grow, but too much debt ( specially private debt will make the economy tank ).

Even so, if we consider the multiplier effect those $100 will be turned into $1,000.

Yes, even though your earlier claims were wrong, lending does increase the money supply.

The bank can now borrow from any of the banks that have the remaining $900 in deposits

In your example, there was a $100 deposit, so there aren't $900 in remaining deposits for the bank to borrow.

I would just have to replicate the example until it reaches $900.... I don't really think I have to walk you through the money multiplier, do I ?

 

[Toddsterpatriot]

Indeed, at this point bank A would have to borrow from the Fed or from bank B, but only 10% of the loan

Wrong. Loans are fully funded.

as there is no reserve requirement for corporate deposits in the US,

Link?

Fully funded? By my previous example: if $100 were deposited in bank A and a loan was made its balance shee would be:

Liabilities ( deposits ) -100
Assets ( reserves) 0
Assets ( loans ) 100

And bank B:
Assets (reserves ) 100
Liabilities ( deposits ) -100

Bank B can now loan $100 to anyone , even if customer A decided to withdraw all of his funds the next day. In that case the only requirement for bank A would be to borrow $10 from the FED or bank B.


Link:
FRB: Reserve Requirements
Also the first 15 millions are exempt of any reserve requirements.

Fully funded?

Yes. That means that banks can't create money out of thin air to lend.
It means banks have to borrow in order to lend.

Bank B can now loan $100 to anyone , even if customer A decided to withdraw all of his funds the next day. In that case the only requirement for bank A would be to borrow $10 from the FED or bank B.

Nope.
If a customer deposits $100 and withdraws it the next day, the bank would need to borrow $100 to lend $100.

Even so, if we consider the multiplier effect those $100 will be turned into $1,000.
The bank can now borrow from any of the banks that have the remaining $900 in deposits and that will still leave $800 in deposits . That will happen even if the FED doesn't put a dime into the system ( or if you prefer to see it the other way : even if the Fed just allocates the reserves for the day and is repaid

Again, banks have more to do in the process of creating money than the Fed.

Credit and debt are necesary to make an economy grow, but too much debt ( specially private debt will make the economy tank ).

Even so, if we consider the multiplier effect those $100 will be turned into $1,000.

Yes, even though your earlier claims were wrong, lending does increase the money supply.

The bank can now borrow from any of the banks that have the remaining $900 in deposits

In your example, there was a $100 deposit, so there aren't $900 in remaining deposits for the bank to borrow.

I would just have to replicate the example until it reaches $900.... I don't really think I have to walk you through the money multiplier, do I ?

No, you don't have to repeat your confused misunderstanding of the money multiplier.

Here's a hint, after you go thru all the steps and deposits reach $1000, there is no loanable money left.