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Neat little video about the monetary system

Discussions about the economic and financial ramifications of PEAK OIL
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Re: Neat little video about the monetary system

Postby firestarter » Wed 21 Feb 2007, 19:15:30

$this->bbcode_second_pass_quote('Yvan', 'D')ebt is not an asset? Debt has no value? If you were holding a government or corporate bond would you hand it over to me for free?



Government debt is a depreciating asset.
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Re: Neat little video about the monetary system

Postby Yvan » Wed 21 Feb 2007, 19:18:06

$this->bbcode_second_pass_quote('firestarter', 'G')overnment debt is a depreciating asset.

So?
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Re: Neat little video about the monetary system

Postby firestarter » Wed 21 Feb 2007, 19:23:04

$this->bbcode_second_pass_quote('Yvan', '')$this->bbcode_second_pass_quote('firestarter', 'G')overnment debt is a depreciating asset.

So?



Then it's ultimately a shitty asset, or in other words a liability.
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Re: Neat little video about the monetary system

Postby Yvan » Wed 21 Feb 2007, 19:28:34

A bond is equal to the present value of its cash flows which rarely amounts to "shit" unless the maturity is infinity or the principal is equal to zero.
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Re: Neat little video about the monetary system

Postby firestarter » Wed 21 Feb 2007, 19:43:24

$this->bbcode_second_pass_quote('Yvan', 'A') bond is equal to the present value of its cash flows which rarely amounts to "shit" unless the maturity is infinity or the principal is equal to zero.



Getting back to my initial point, it doesn't make it an appreciating asset merely because it's a government bond, unless you want to swallow the way the Gov crunches numbers to arrive at its official rate of inflation. Nevertheless, and not to belabor the off topic point, to each his own.
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Re: Neat little video about the monetary system

Postby Bas » Wed 21 Feb 2007, 20:23:04

$this->bbcode_second_pass_quote('MacG', '')$this->bbcode_second_pass_quote('Bas', 'y')ou still think that a bank with a 100$ deposits can instantly supply you with a loan of 900$, don't you MacG?

Aside from that, bankruns are always a risk and I'm sure we'll see a couple of those when PO hits.


*Heavy sigh*

You have not paid attention.

The Netherlands?

You got some really groovy stuff there, White widow? Envy you big time!

Will take the risk, and repeat myself a bit:

http://video.google.com/videoplay?docid ... ey+as+debt

And it that's not detailed enough:

http://landru.i-link-2.net/monques/mmm2.html


your video creates a fundamentally false impression, MacG, when will you finally admit it?
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Re: Neat little video about the monetary system

Postby MonteQuest » Wed 21 Feb 2007, 20:56:45

$this->bbcode_second_pass_quote('Bas', 't')he point is, that the video suggests that the banking system goes from 100$ to a 900$ new loan directly which is a lie. They make a new loan of 90$ and if that get's disposited, they can make a loan of 81$, theoretically ending up at 900$ if every penny is disposited. Thing is, after reaching that 900$ they won't be able to expand any further; a whole lot different from the exponentially growing money supply as suggested by the documentary. Such a system would blow itself up within no time.


No they don't. They explain it just like you did. What you miss is that each new loan sets up this fractional expansion. If we expand the money supply too much, we have inflation. To counter this, the FED raises interest rates to curtail new loans.
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Re: Neat little video about the monetary system

Postby Bas » Wed 21 Feb 2007, 21:00:49

the fed sells bonds to extract high powered money from the market. And why is it then, MQ, that so many people on this thread think that a bank with a 100$ in deposits can create a 900$ loan and a $8100 loan out of that?
Last edited by Bas on Wed 21 Feb 2007, 21:01:27, edited 1 time in total.
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Re: Neat little video about the monetary system

Postby MonteQuest » Wed 21 Feb 2007, 21:01:07

$this->bbcode_second_pass_quote('Yvan', 'I')n fact the money is not created by the bank it is created by the depositor. If deposits were elaborated as true loans to the bank (principal paid at maturity) instead of being redeemable at any time there would be no money creation.


Deposits are loans from banks. The only way a depositor can get money to deposit is from a bank's creation of money. There is no money in existance, save the coins in your pocket that is not money borrowed at interest from somewhere. If you have money in the bank, someone, somewhere has a loan out on it or it would not exist.
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Re: Neat little video about the monetary system

Postby MonteQuest » Wed 21 Feb 2007, 21:12:42

$this->bbcode_second_pass_quote('Yvan', 'I')f a bank was able to create as many loans as it wants and earn interest on them the inflation would be infinite.


Just like it is.

However, banks can create as many loans as they want until the inflation of the money supply causes the FED to tighten the money expansion through higher interest rates, reserve requirements, open market sales, etc. the number of loans being made slows. If it slows too much, you have deflation...much like the Depression. Lots of goods and services, but no one had any money to buy them. Why? No jobs, no ability to repay a loan=no loans = a shrinking of the money supply.
Last edited by MonteQuest on Wed 21 Feb 2007, 21:48:48, edited 1 time in total.
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Re: Neat little video about the monetary system

Postby MonteQuest » Wed 21 Feb 2007, 21:19:48

$this->bbcode_second_pass_quote('Bas', 't')he fed sells bonds to extract high powered money from the market. And why is it then, MQ, that so many people on this thread think that a bank with a 100$ in deposits can create a 900$ loan and a $8100 loan out of that?


Perhaps they missed the part where the difference between loans from deposits and loans based upon reserves was explained?

As it clearly was.
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Re: Neat little video about the monetary system

Postby mmasters » Wed 21 Feb 2007, 21:20:14

$this->bbcode_second_pass_quote('Yvan', 'D')ebt is not an asset? Debt has no value? If you were holding a government or corporate bond would you hand it over to me for free?

In our current system debt is considered an asset and that's where the problem lies.

$this->bbcode_second_pass_quote('', 'Y')ou have to pay you debts, so what? The same goes for the bank. It has to honor its liabilities. The bank is taking the full credit risk for the depositor. If a loan defaults the bank still has to honor the deposits.

It's not the same for the bank. The bank and the individual are not equals - the banking system is partnered with the federal government and is its single largest lender. You might want to read that sentance over a few times.
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Re: Neat little video about the monetary system

Postby MonteQuest » Wed 21 Feb 2007, 21:31:49

$this->bbcode_second_pass_quote('MrBill', ' ')Because actually, I do have a grasp of this, MQ! ; - )


Don't think so. Even the FED disagrees with you.

$this->bbcode_second_pass_quote('', 'O')f course, they do not really pay out loans from the money they receive as deposits. If they did this, no additional money would be created. What they do when they make loans is to accept promissory notes in exchange for credits to the borrowers' transaction accounts.


Federal Reserve Bank of Chicago

Just like the video says.
Last edited by MonteQuest on Wed 21 Feb 2007, 21:47:58, edited 2 times in total.
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Re: Neat little video about the monetary system

Postby Bas » Wed 21 Feb 2007, 21:32:14

$this->bbcode_second_pass_quote('MonteQuest', '')$this->bbcode_second_pass_quote('Bas', 't')he fed sells bonds to extract high powered money from the market. And why is it then, MQ, that so many people on this thread think that a bank with a 100$ in deposits can create a 900$ loan and a $8100 loan out of that?


Perhaps they missed the part where the difference between loans from deposits and loans based upon reserves was explained?

As it clearly was.


While it's in there, they clearly create an illusion that doesn't represent the facts; that banks with a 100$ of deposits can make a 900$ loan based on that. It's a treacherous little video.
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Re: Neat little video about the monetary system

Postby MonteQuest » Wed 21 Feb 2007, 21:50:31

$this->bbcode_second_pass_quote('Bas', 'W')hile it's in there, they clearly create an illusion that doesn't represent the facts; that banks with a 100$ of deposits can make a 900$ loan based on that. It's a treacherous little video.


Clear as a bell to me.
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Re: Neat little video about the monetary system

Postby joewp » Wed 21 Feb 2007, 22:16:43

$this->bbcode_second_pass_quote('Bas', '
')While it's in there, they clearly create an illusion that doesn't represent the facts; that banks with a 100$ of deposits can make a 900$ loan based on that. It's a treacherous little video.


Of course it can make $900 worth of loans, didn't you read the Fed piece I posted? Here's the pertinent part again:
$this->bbcode_second_pass_quote('', 'I')f 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).
link


Actually, it's worse than that, since the same piece says that reserve requirements are virtually extinct, there's nothing to prevent banks from making as many loans as they can.
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Re: Neat little video about the monetary system

Postby MacG » Thu 22 Feb 2007, 02:39:52

$this->bbcode_second_pass_quote('Bas', 'y')our video creates a fundamentally false impression, MacG, when will you finally admit it?


*Sigh*

It's not "my" video. And apparently you have not payed attention when watching it. What kinds of impressions it create when _you_ watch it, and how those impressions conflict with previous impressions, and thus can be perceived as "false", that, Sir, is far beyond my imagination.
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Re: Neat little video about the monetary system

Postby NEOPO » Thu 22 Feb 2007, 03:20:58

$this->bbcode_second_pass_quote('MacG', '')$this->bbcode_second_pass_quote('Bas', 'y')our video creates a fundamentally false impression, MacG, when will you finally admit it?


*Sigh*

It's not "my" video. And apparently you have not payed attention when watching it. What kinds of impressions it create when _you_ watch it, and how those impressions conflict with previous impressions, and thus can be perceived as "false", that, Sir, is far beyond my imagination.


All I know is that economic's is kinda like religion.
MacG - Just tell them that you regret making the video and have since began to love our current economic system again and this can all be over.... :lol:


I hold anyone suspect who attempts to legitimize the existence and NEED for the FR the same as I would anyone who would try to tell me that PO will not occur until 2035 because the EIA or USGS says so or that global warming and climate change is not manmade because some government agency hired a few scientists and they said so or that 2 planes naturally caused 3 buildings to collapse at near free fall speed into almost their own foot print on 9.11 because a hand picked kangaroo commission said so.

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Re: Neat little video about the monetary system

Postby Yvan » Thu 22 Feb 2007, 04:33:17

$this->bbcode_second_pass_quote('', 'G')etting back to my initial point, it doesn't make it an appreciating asset merely because it's a government bond, unless you want to swallow the way the Gov crunches numbers to arrive at its official rate of inflation. Nevertheless, and not to belabor the off topic point, to each his own.

Which doesn't make it worthless unlike what you said. I even gave you the math.

$this->bbcode_second_pass_quote('', 'A')ctually, it's worse than that, since the same piece says that reserve requirements are virtually extinct, there's nothing to prevent banks from making as many loans as they can.

If it was the case the dollars in your pocket would be absolutely worthless. Just look at the math.

$this->bbcode_second_pass_quote('', 'I')f it slows too much, you have deflation...much like the Depression. Lots of goods and services, but no one had any money to buy them. Why? No jobs, no ability to repay a loan=no loans = a shrinking of the money supply.

Which could not happen under your hypothesis that banks can create as much money as they want out of thin air.

Also the fact that there is no RR for M2 is not a problem at all because the deposits for M2 cannot be withdrawn for a predefined period of time. Hence no money is created.

$this->bbcode_second_pass_quote('', 'D')eposits are loans from banks. The only way a depositor can get money to deposit is from a bank's creation of money. There is no money in existance, save the coins in your pocket that is not money borrowed at interest from somewhere. If you have money in the bank, someone, somewhere has a loan out on it or it would not exist.

This is exactly my point. The problem is not the bank lending money. The problem is that the depositor wants its money available at any time. This creates money. Not the loan which makes all sense in the world because the bank must pay an interest on its deposits.
Last edited by Yvan on Thu 22 Feb 2007, 04:51:09, edited 3 times in total.
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Re: Neat little video about the monetary system

Postby MacG » Thu 22 Feb 2007, 04:45:22

$this->bbcode_second_pass_quote('NEOPO', ' ')All I know is that economic's is kinda like religion.


This is very true. "Economy", "science" and "democracy" form our current belif system. Personally I'm a mid level priest in the church of "science". We usually dont see it, like the fish who dont see the water it swims in.
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