[Armageddon]

The governemt doesnt go in debt to itself, it borrows money from the federal reserve, which is anything but federal. The federal reserve is owned by mostly by eauropean banks and stock holders. Probably the Rothschilds or Illuminati's. The federal reserve act , which was created in 1913 , was the biggest crime in the history of the world. The US government has to pay interest of every dollar borrowed. We are so in debt, the total amount of taxes the US collects, doesnt even cover the interest on the debt. WE need over 2 billion dollars of foreign investments every day to keep this thing afloat, which is unstustainable. Look for Bush to crash the economy on purpose. Why ? Because in times of collapses, wealth isnt destroyed, it is transfered. The super wealthy will benefit greatly by a collapsing dollar. Plus they can erase all the foreign debt they owe.

[deconstructionist]

$this->bbcode_second_pass_quote('Peak_Plus', '
')"The treasury creates a bond, and "sells" it to the Federal Reserve, who then writes a check to the government.."
Yes, this is the only way that money is "created".
The only way that gold "currency" is created, on the other hand, is by digging up more gold...
Your local bank (a non federal institution) has nothing to do with the process.

It takes your money, pays you 1.5% interest to you and lends it for 6% interest to someone else. That's banking.

Or do you thing the bank should keep it in its safe, where it can't make any interest at all???

How is it supposed to pay your interest PLUS its employees?

[deconstructionist]

$this->bbcode_second_pass_quote('Doly', '')$this->bbcode_second_pass_quote('Peak_Plus', '
')As you see, it's not possible to "create" money at all (even in a semantical sort of way) in this manner.

[deconstructionist]

$this->bbcode_second_pass_quote('armegeddon', 'T')he governemt doesnt go in debt to itself, it borrows money from the federal reserve, which is anything but federal. The federal reserve is owned by mostly by eauropean banks and stock holders. Probably the Rothschilds or Illuminati's. The federal reserve act , which was created in 1913 , was the biggest crime in the history of the world. The US government has to pay interest of every dollar borrowed. We are so in debt, the total amount of taxes the US collects, doesnt even cover the interest on the debt. WE need over 2 billion dollars of foreign investments every day to keep this thing afloat, which is unstustainable. Look for Bush to crash the economy on purpose. Why ? Because in times of collapses, wealth isnt destroyed, it is transfered. The super wealthy will benefit greatly by a collapsing dollar. Plus they can erase all the foreign debt they owe.

[deconstructionist]

$this->bbcode_second_pass_quote('Peak_Plus', '
')Fractual reserve banking is a way to PROTECT the people who put money into a bank, not a way to multiply their money.

[Peak_Plus]

$this->bbcode_second_pass_quote('deconstructionist', 'L')et's say there is a "bank" which offers to keep our gold in its secure vault in exchange for a rental fee.

[Peak_Plus]

$this->bbcode_second_pass_quote('deconstructionist', '')$this->bbcode_second_pass_quote('Doly', '')$this->bbcode_second_pass_quote('Peak_Plus', '
')As you see, it's not possible to "create" money at all (even in a semantical sort of way) in this manner.

[DJ_Mittens]

Banks create money by debiting their accounts receivable (which is a fancy way of saying that they are owed money), and crediting a customer's account for that amount (basically giving them that money). That doesn't have any impact on their cash reserves, doesn't have any impact on anything else.

Now, if that customer withdraws the credit as currency (instead of using a cheque, EFT, debit card, whatever), then yes, there is a change in their cash reserves. Otherwise, the only change is the amount the bank itself thinks it needs to keep on hand.

The banks normally only have about 10% of their account liabilities in currency, because most transactions are just transferring liability (either the customer's or the bank's), rather than currency. The banks estimate that a small percentage of customers will require currency when making withdrawls, and therefore only holds onto that amount plus a premium. In fact, I think it's closer to 3% now, because of the overwhelming number of electronic transactions normally conducted.

With the gold standard, the same was true. However, instead of getting the Federal Reserve to print more greenbacks when the banks required more currency reserves, the banks actually had to have gold in their coffers. If there was no gold, the banks could not loan out more money without risking defaulting on their deposit obligations. That risk no longer exists, at least in the medium-term, because of the ease of printing off currency.

Think about this: When you make a large withdrawl from a bank, they usually opt to give you a teller's receipt rather than currency. That's because they want to make sure they have enough cash on hand for other customers, because of their fractional holdings.


Forgive my semi-coherent ramblings. Any problems, and I'll try to clarify them.

[CrudeAwakening]

$this->bbcode_second_pass_quote('Peak_Plus', '')$this->bbcode_second_pass_quote('CrudeAwakening', '
')If money is spent on goods...

[Peak_Plus]

$this->bbcode_second_pass_quote('CrudeAwakening', 'T')he bank promises to pay both $100 to you and $90 to your friend.

[CrudeAwakening]

$this->bbcode_second_pass_quote('Peak_Plus', '
')I rufuse to discuss this on an accountant level.

[Peak_Plus]

$this->bbcode_second_pass_quote('CrudeAwakening', '')$this->bbcode_second_pass_quote('Peak_Plus', '
')I rufuse to discuss this on an accountant level.

[deconstructionist]

$this->bbcode_second_pass_quote('Peak_Plus', '')$this->bbcode_second_pass_quote('deconstructionist', 'L')et's say there is a "bank" which offers to keep our gold in its secure vault in exchange for a rental fee.

[deconstructionist]

$this->bbcode_second_pass_quote('Peak_Plus', '')$this->bbcode_second_pass_quote('deconstructionist', '')$this->bbcode_second_pass_quote('Doly', '')$this->bbcode_second_pass_quote('Peak_Plus', '
')As you see, it's not possible to "create" money at all (even in a semantical sort of way) in this manner.

[CrudeAwakening]

$this->bbcode_second_pass_quote('Peak_Plus', '
')That's exactly the point. If even a slightly statically larger portion of people than usual DID go to the bank all at once, that is exactly what the bank will tell me.

[Peak_Plus]

$this->bbcode_second_pass_quote('CrudeAwakening', '
')You do have use of your $10. You can write a cheque on it, and buy goods/services. The bank will honour your cheque because you have $10 in your deposit account. At the same time, it will honour a cheque written by whoever borrowed the $9 which was enabled by your deposit.

[Peak_Plus]

$this->bbcode_second_pass_quote('deconstructionist', 's')o you are saying that a deposit into your savings account is a loan from you to the bank? sure, you and i understand this. but how many "average americans" understand that their money may not be there when they want to withdraw it?
<b>Do you think it matters what the average person thinks? It doesn't change the system</b>
and that they support the system which makes it possible through the lost purchasing power if inflation?

Yes the money is "insured" by the FDIC but keep in mind the FDIC holds only 0.5% of the money that they insure in reserve. More often than not, when a large bank becomes insolvent, the FDIC covers the whole thing with newly created money--causing inflation. Yes, it's a scam.

Since 1979, the FDIC has issued $193 billion in bailout funds, 99% of which it did not physically posess--therefore were printed by the Fed, causing inflation which robs the american people of purchasing power. if this is not a scam, what is it?

[DJ_Mittens]

$this->bbcode_second_pass_quote('Peak_Plus', '')$this->bbcode_second_pass_quote('CrudeAwakening', '
')You do have use of your $10. You can write a cheque on it, and buy goods/services. The bank will honour your cheque because you have $10 in your deposit account. At the same time, it will honour a cheque written by whoever borrowed the $9 which was enabled by your deposit.

[deconstructionist]

$this->bbcode_second_pass_quote('Peak_Plus', '
')THANK YOU.
Now we're getting to the heart of it. You have found a scam, but why blame fractional reserve banking? Why not blame bad credit policy? And the false security offered by the fed? Like right now, the banks are lending out money to help you finance ANYTHING! Simply bad risk management.
i absolutely see your point... however, credit cannot be created in such large amounts without FRB. risky banking is encouraged by being able to have the same money be both an asset and a liability simultaneously.

This has little to do with FRB, but a lot to do with the knowlege that the Fed will bail us out.

And a loose monetary policy.

Now, let me disagree with you on a few points, again, nothing of which has to do with FRB. Please, keep these points separate from FRB:
1) Light Inflation is NOT bad. Money is there to be used, invested. Not to be put under a pillow or pay a bank to "hold" it.
2) Deflation (here: rising demand for money while money supply remains constant) is much worse than "high" inflation (10-20%)
3) The gold standard is nonsense, because it can't be expanded to meet expanding needs (population, technology)

[deconstructionist]

perhaps at this point, i should defer to an "expert."

The Money Multiplier: Myth or Reality? by Frank Shostak of the Ludwig von Mises institute.