by MrBill » Sat 24 Feb 2007, 11:46:16
$this->bbcode_second_pass_quote('MonteQuest', '')$this->bbcode_second_pass_quote('CrudeAwakening', ' ')Yes, they are creating that $10,000 out of thin air, but they do have to worry. That deposit they are creating is a bank liability, not an asset. It can't be used to discharge the bank's debt to the other bank. It can be used to settle the account between the buyer and seller of the car by simple transfer between banks, but the flip side of this transfer is that reserves (bank assets) are also transferred between banks. You seem to be ignoring this part of the transaction.
What is in bold is a contradiction. And I dont think I am ignoring anything. The transfer of assets between the banks is electronic accounting. You seem to be hung up on the actual
cash needed to facilitate physical transactions.
There is never the cash in the bank vault to cover all demands. It only becomes a problem if there is a bank run.
Look if you do not know what the difference between an asset and a liability then you should just leave it alone. You are obviously not trained in this area and not willing to learn from those that do know what they are talking about. It has nothing to do with transfering cash. Doh!
The organized state is a wonderful invention whereby everyone can live at someone else's expense.
by MonteQuest » Sat 24 Feb 2007, 11:55:45
$this->bbcode_second_pass_quote('MrBill', 'L')ook if you do not know what the difference between an asset and a liability then you should just leave it alone.
Sure, I know the difference. You seem to continue to try and confuse the issue as any good plant does. Banks do not have to borrow the money they lend. They can create money based upon FED reserve requirements.
That is why it is called Fractional Reserve banking.
You only need a
fraction of the actual money in reserve to create more.
Last edited by
MonteQuest on Sat 24 Feb 2007, 12:31:08, edited 1 time in total.
A Saudi saying, "My father rode a camel. I drive a car. My son flies a jet-plane. His son will ride a camel."
-
MonteQuest
- Expert
-
- Posts: 16593
- Joined: Mon 06 Sep 2004, 03:00:00
- Location: Westboro, MO
-
by MonteQuest » Sat 24 Feb 2007, 11:57:15
$this->bbcode_second_pass_quote('MrBill', 'Y')ou are obviously not trained in this area and not willing to learn from those that do know what they are talking about.
And like the video says, many front-line banking people don't understand it. I think you are one.
So, we are even.
A Saudi saying, "My father rode a camel. I drive a car. My son flies a jet-plane. His son will ride a camel."
-
MonteQuest
- Expert
-
- Posts: 16593
- Joined: Mon 06 Sep 2004, 03:00:00
- Location: Westboro, MO
-
by MonteQuest » Sat 24 Feb 2007, 11:59:27
$this->bbcode_second_pass_quote('MrBill', ' ')I have to wonder what insights you can give us about resource depletion economics when you do not even understand how the economy today works? Not even a basic understanding of accounting or finance?
You may critique my many threads at your leisure.
You seem to be saying that all the information out there about Fractional Reserve Banking, from the FED's own handbook, to this video and the numerous links you can google, are all bullshit; a myth, urban legend.
That banks must
borrow all money they lend but keep 10% in reserves.
Nonsense.
Last edited by
MonteQuest on Sat 24 Feb 2007, 12:50:49, edited 1 time in total.
A Saudi saying, "My father rode a camel. I drive a car. My son flies a jet-plane. His son will ride a camel."
-
MonteQuest
- Expert
-
- Posts: 16593
- Joined: Mon 06 Sep 2004, 03:00:00
- Location: Westboro, MO
-
by joewp » Sat 24 Feb 2007, 12:46:13
$this->bbcode_second_pass_quote('MrBill', '
')New money is created when the commercial bank borrows from the central bank based on the initial primary deposit. It is so simple. So it must be you?
So then, Mr. Bill... How come the Federal Reserve disagrees with you and says that commercial banks create new money too?
Once again I'll post it:
$this->bbcode_second_pass_quote('
The New York Federal Reserve Bank', '
')
Reserve Requirements and Money CreationReserve requirements affect the potential of the banking system to create transaction deposits. If the reserve requirement is 10%, for example, a bank that receives a $100 deposit may lend out $90 of that deposit. If the borrower then writes a check to someone who deposits the $90, the bank receiving that deposit can lend out $81. As the process continues, the banking system can expand the initial deposit of $100 into a maximum of $1,000 of money ($100+$90+81+$72.90+...=$1,000). In contrast, with a 20% reserve requirement, the banking system would be able to expand the initial $100 deposit into a maximum of $500 ($100+$80+$64+$51.20+...=$500). Thus, higher reserve requirements should result in reduced money creation and, in turn, in reduced economic activity.
Is there something there that you don't understand? I know it's hard to accept that money comes from banks and not the government that you thought it came from, but that's the way it works. If you ask me, it's a pretty sucky situation, giving bankers the right to create money and not giving it to me and you. But it just goes to show that you have to be in it to win it. (the System, that is).
Joe P.
joeparente.com"Only when the last tree is cut; only when the last river is polluted; only when the last fish is caught; only then will they realize that you cannot eat money." - Cree Indian Proverb
by MonteQuest » Sat 24 Feb 2007, 14:27:25
$this->bbcode_second_pass_quote('mmasters', '')$this->bbcode_second_pass_quote('MonteQuest', 'Y')ou are issuing so much disinformation that I wonder if you are not a plant to keep people confused about this. Or that your job is dependent upon ignoring the truth.
I have wondered and suggested that myself too. Everytime I have an argument that reaches critical mass with the guy my points are evaded. Everytime I offer some resource of information such as a link or a dvd, I get a no response, an I'll check it out, or a "my browser isn't working right" comment and nothing changes.
Yes, forget my arguments pe se, I am citing the existing FED policy that supports my arguments. If someone wants to dispute the FED, go ahead, but Mr Bill seems to ignore the Federal Reserve facts and offers his own explanation in contradiction to it..even when constantly reminded.
A Saudi saying, "My father rode a camel. I drive a car. My son flies a jet-plane. His son will ride a camel."
by CrudeAwakening » Sat 24 Feb 2007, 16:29:37
$this->bbcode_second_pass_quote('MonteQuest', '')$this->bbcode_second_pass_quote('CrudeAwakening', ' ')Yes, they are creating that $10,000 out of thin air, but they do have to worry. That deposit they are creating is a bank liability, not an asset. It can't be used to discharge the bank's debt to the other bank. It can be used to settle the account between the buyer and seller of the car by simple transfer between banks, but the flip side of this transfer is that reserves (bank assets) are also transferred between banks. You seem to be ignoring this part of the transaction.
What is in bold is a contradiction. And I dont think I am ignoring anything. The transfer of assets between the banks is electronic accounting. You seem to be hung up on the actual
cash needed to facilitate physical transactions.
There is never the cash in the bank vault to cover all demands. It only becomes a problem if there is a bank run.
It's not a contradicition when you consider both the asset transfer and liability transfer sides of the transaction. I can only refer you to the "Modern Money Mechanics" article, Deposit Expansion, Step 6, where it demonstrates the transfer of reserve assets. Like I said, when depositor funds are transferred from one bank to another, there is a change in both the asset side of the bank balance sheet (reserve balances with the FED), and the liability side (customer deposits). The bank can no more use its created deposits to settle its obligations to another bank than I can use my mortgage to buy another house. Bank deposits are bank liabilities. Another way of putting this in kind of an imprecise way, is that commercial bank deposits are money with which bank customers can settle accounts with each other, while central bank deposits (i.e., bank reserves, liabilities of the central bank) are money with which commercial banks clear accounts with one another.
by MonteQuest » Sat 24 Feb 2007, 16:53:04
$this->bbcode_second_pass_quote('CrudeAwakening', ' ')The bank can no more use its created deposits to settle its obligations to another bank than I can use my mortgage to buy another house.
Then no new money is created if both the bank and the borrower must pull from the same pool of money. The money already in circulation.
Same goes for repaying interest.
P/P+I Where P = all the money currently in circulation.
$this->bbcode_second_pass_quote('', 'C')urrency held in bank vaults may be counted as legal reserves as well as deposits (reserve balances) at the Federal Reserve Banks. Both are equally acceptable in satisfaction of reserve requirements. A bank can always obtain reserve balances by sending currency to its Reserve Bank and can obtain currency by drawing on its reserve balance.
Because either can be used to support a much larger volume of deposit liabilities of banks, currency in circulation and reserve balances together are often referred to as "high-powered money" or the "monetary base." Reserve balances and vault cash in banks, however, are not counted as part of the money stock held by the public.
A Saudi saying, "My father rode a camel. I drive a car. My son flies a jet-plane. His son will ride a camel."
by CrudeAwakening » Sat 24 Feb 2007, 17:30:03
$this->bbcode_second_pass_quote('MonteQuest', '')$this->bbcode_second_pass_quote('CrudeAwakening', ' ')The bank can no more use its created deposits to settle its obligations to another bank than I can use my mortgage to buy another house.
Then no new money is created if both the bank and the borrower must pull from the same pool of money. The money already in circulation.
Same goes for repaying interest.
P/P+I Where P = all the money currently in circulation.
I don't think what I wrote was inconsistent with the creation of money? Banks use reserves to settle accounts with each other, while customers use bank deposits to settle accounts with each other. Bank deposits are, of course, only fractionally backed by these reserves. Money is created at the point the loan is made. The fact that reserves equivalent to the amount of the loan may subsequently be transferred between banks, when the loan is spent, doesn't alter that fact.
by MrBill » Sat 24 Feb 2007, 19:22:20
$this->bbcode_second_pass_quote('MonteQuest', '')$this->bbcode_second_pass_quote('MrBill', 'Y')ou are obviously not trained in this area and not willing to learn from those that do know what they are talking about.
And like the video says, many front-line banking people don't understand it. I think you are one.
So, we are even.
Yes, indeed. We are even. I understand what I am talking about, but I am in not popular and in the minority. You are a popular poster with a large following. I do not plan to write a book or make a video. At least nothing heavier than a fictional novel! You win, I lose.
$this->bbcode_second_pass_quote('', 'A')n open letter of sorts. Venting my frustration....
$this->bbcode_second_pass_quote('', 'J')ust sort of out of curiosity...
Your arguments seem sound and you seem pretty confident in them. But why are you in such a minority in your viewpoint? I mean, running a yahoo search of the dollar's fate yields about a 30 to 1 slant against your argument. Not that I disagree with you. But given your expertise in finances and energy, why do you think your viewpoint is in such a frightening minority?
The majority of socialists think they can tax & spend their way to prosperity, while a very small minority that understand how wealth creation works get richer. Not the majority who are ultimately poorer because wealth transfers from the rich to the poor just makes everyone poorer because it slows down wealth creation. Think about it.
I have always argued that the USA has serious fiscal problems including a huge trade deficit, which can be explained, but also debts, deficits and unfunded future liabilities that are inexcusable. There is no reason that a wealthy nation like the USA should be running debts and deficits funded by foreign nations and unborn generations. It is simply wrong and all Americans will eventually be much poorer for bad decisions taken today.
However, I take exception to peak oil dot com posters who do not understand how things actually work in reality and therefore embrace explanations that are wrong. And then they get defensive when you try to set them right. As if you are the cause of the problem and not the debts and deficits that are causing the problem in the first place.
Actually, I am getting quite tired of it. I want people 'to get it', but if not, it really does not affect me personally. I would sooner be right in the minority than wrong in the majority.
Think about this. Most journalists studied English not Finance. Many writers lean to the Left. They have a hard time understanding that economic growth pays for social programs and not the government. Give me a strong economy and I can pay for the less fortunate. Destroy the competitive environment and you take away the wealth that pays for those income transfers to the less fortunate.
The Soviet communists seized the means of production, just like Chavez today in Venezuela, but they do not know how to run it or make it grow. Now, ironically, the Chinese are getting wealthy not because they are turning to failed Marxist-Leninist planned economy policies, but because they have embraced market economy policies.
However, we live in such a decadent age of plenty that we can actually afford many dissenters sniping at the wealth creators from the sidelines. It does not make it pleasant. To be always under attack for earning the money that pays for the programs supported by those who are attacking you in the first place. Companies like mine pay 75% of all the taxes in Cyprus. That means every Cypriots' tax bill is lower due to my company's profits. No profits, no taxes. No social services or pensions. Who is evil and who is naive?
I appreciate your email. This is something I have been thinking about this weekend in response to many of the high priests at peak oil who see the world through their scripture instead of how the world really works. I went to great lengths to explain in detail how money creation and credit expansion works in practice. Many simply did not even bother to read my answers. Then they go right back to believing that banks can create money out of thin air. It is very difficult and sometimes I wonder, why bother, the more stupid people in the world the easier it is for me? But I try.
If you really want to understand more about everything to do with economics, finance and political decisions with economic consequences then I would urge you to read The Economist. Not everything they say is 'right', but it is a good place to start to balance out what you read elsewhere. I learned more from reading The Economist than I did at university for sure!
Take care and have a nice weekend. Cheers.
The organized state is a wonderful invention whereby everyone can live at someone else's expense.
by MrBill » Sat 24 Feb 2007, 19:41:39
$this->bbcode_second_pass_quote('mmasters', '')$this->bbcode_second_pass_quote('MonteQuest', 'Y')ou are issuing so much disinformation that I wonder if you are not a plant to keep people confused about this. Or that your job is dependent upon ignoring the truth.
I have wondered and suggested that myself too. Everytime I have an argument that reaches critical mass with the guy my points are evaded. Everytime I offer some resource of information such as a link or a dvd, I get a no response, an I'll check it out, or a "my browser isn't working right" comment and nothing changes.
In any case I'll repeat my earlier comment that to everyday people an asset and liability is one thing and to a bank or central bank in the process of creating money it is not the same.
To an everyday person a dollar is an asset and when they loan it out to somebody that's a liability.
To a bank creating money a deposited dollar which is a bank liability as percieved by us ordinary folks is, get this,
reclassified by the bank as an asset. Then given the RR of 10% they only have to keep 10% of this deceptively called "asset" on hand. The other 90% is considered excess reserve (in truth they're calling 90% of a liability an excess reserve! hahaha). On this basis of excess reserve, 90% of the original deposit is loaned out as a new loan,
but it is not using the old money that was deposited, it is using BRAND NEW CREATED MONEY. Put simply the bank's debt was used as collateral to create brand new debt now owed to the bank.
Only because the bank reclassified the liability as an asset and created a new liability comparable to that asset allows the books to be balanced and Mr Bill's hogwash of assets = liabilities comment to be correct...yet absolutely deceptive.
I have addressed your points, but they were found wanting. No, I have not looked at any videos. I could not. I have finally downloaded Money Masters, but have not looked at it to the end. My evenings and weekends are spent lifting weights, running, swimming, cycling, playing tennis, drinking with buddies, getting laid and not obsessing with peak oil dot com. In short, I have a life.
Oh yah, I am in on it! ; - ) My very small company with 2-traders and 13-back office people have made one billion dollars in the past two years. Don't believe me? I will email you our audited financial statements. But first when 2006 is approved in March/April. I am not keeping track, but that puts me ahead of the Hunts or Jim Rogers nevermind the GSCI. To be honest it is sometimes about being in the right place at the right time. But I have some skin in the game. I am not on the sidelines jerking-off. You said you worked for some investment banks? Well, they work for me! HAHA!
The organized state is a wonderful invention whereby everyone can live at someone else's expense.
by MonteQuest » Sat 24 Feb 2007, 20:19:34
$this->bbcode_second_pass_quote('MrBill', ' ') I went to great lengths to explain in detail how money creation and credit expansion works in practice.
In direct contradiction to what the Federal Reserve itself publicly publishes. This has been shown to you clearly several times, but you fail to address the inconsistencies in your version. My version squares with the FED.
You also have stated that our debt-based money system is not dependent upon economic growth.
That is utter nonsense.
$this->bbcode_second_pass_quote('', 'H')ave a nice weekend MonteQuest. I do not carry any grudges. I hope one day we can see eye to eye and have a beer together. That is the best outcome. Not who is right or wrong. The future will decide that! Cheers. Mr Bill ; - )
The whole money creation system is quite confusing and perplexing and I readily admit to not having a 100% grasp, but who does? It is a constant moving target. Even FED money controls don't seem to work anymore like they used to.
But I just don't see that the
pubicly stated FED policy with regard to money creation is wrong and your version is right.
Have a nice weekend, yourself!
MQ
A Saudi saying, "My father rode a camel. I drive a car. My son flies a jet-plane. His son will ride a camel."
