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Juice
If you are in debt, if you've ever been in debt, or if you simply care to take a look at how our monetary system works, check out this video:

Money as Debt

Basically, everything you know about credit card debt is built upon a lie. That lie is this: The bank loaned you their money. The truth is that this money, which the bank pretended to loan you via the maximum credit limit on your credit card, does not, and never did, exist. You are, quite literally, paying interest on money that does not exist.

Here's how it works: You submit an application to the bank for one of their cards. The bank determines if you are a good credit risk and, if so, how much of the bankís imaginary money you could probably be expected to pay back Ė at exorbitant interest rates, of course. Then, the most miraculous step in the process occurs. The bank, quite literally, out of thin air, creates imaginary money to back up the maximum credit limit on your card. This imaginary money is not in the form of cash. This imaginary money is not backed up by any of the "real" money in the bank's checking and savings accounts. This imaginary money does not exist other than as numbers in your bankís computer database. But, the State allows your bank to treat the numbers as if they were real money.

Which means that: Even if you spent your entire maximum credit limit, and never paid back a dollar of principal or interest, the bank would not lose a cent, other than the operational costs of its credit card related departments. So, you should ask, how can the bank get away with charging you 30% interest, and late fees, if you are a couple of months late on a payment? Well, the banks get away with it because the State allows it. Even those of us who think we are wise consumers by paying more than the minimum monthly payment are, in fact, also getting ripped off.

The video above does a good job of explaining why it is actually inevitable, and not the result of irresponsibility on our part, that we find ourselves slipping further and further into debt. The wealth of America is illusionary. It's not built upon gold, or silver, and not even labor or American ingenuity - but debt. Our economic system cannot be sustained because we cannot continue to fall further and further into debt as individuals and as a nation. We all sort of already know this, unconsciously, but we are consciously in denial about it. Only a moron, or someone in complete denial of reality, could think that our floundering economy could sustain all the money we are flushing into military bases all over the world, the war in Iraq, the war in Afghanistan, the clandestine war in Iran, all those Economic Stimulus Checks, and all the recent bailouts of financial institutions like Bear Stearns, Freddie Mac, and Fannie Mae.
Styl
Good post, right on point. I think that a lot of people really don't understand our money system and how debt works, buts its really quite simple. That's why I have the "Ehh, it's just money" attitude. I spend a lot of money every month on my car, house, and other bills, but I have a decent job, and there's always more money coming along. But I also try not to cross that line between spending lots of money and going into debt.

Interest is another thing that disillusions people also. They see a sticker price on a car of $12k or $15k and say, "Oh I can pay this off in a couple of years". Add a good 10%-15% interest or more, and you add on thousands of dollars. Same with credit cards and late fees too.
Pieface
Its a business... They have interest to make profit...
Hardcore Ottoman
This explains why the govt only pays off the interest on its debts--it doesn't want to pay any more than it has to by giving banks free money. Hilarious. This video explained this stuff all too well. Mid-teens could understand it!
Styl
QUOTE(Pieface @ Jul 23 2008, 06:40 PM) [snapback]1456129[/snapback]
Its a business... They have interest to make profit...

Of course, that goes without saying. What I meant was that sometimes people aren't aware of how much extra they're paying when interest is added in. It's really just simple math, but some consumers don't comprehend this.
Qdeathstar
QUOTE(Juice @ Jul 23 2008, 07:04 PM) [snapback]1456081[/snapback]
If you are in debt, if you've ever been in debt, or if you simply care to take a look at how our monetary system works, check out this video:

Money as Debt

Basically, everything you know about credit card debt is built upon a lie. That lie is this: The bank loaned you their money. The truth is that this money, which the bank pretended to loan you via the maximum credit limit on your credit card, does not, and never did, exist. You are, quite literally, paying interest on money that does not exist.

Here's how it works: You submit an application to the bank for one of their cards. The bank determines if you are a good credit risk and, if so, how much of the bankís imaginary money you could probably be expected to pay back Ė at exorbitant interest rates, of course. Then, the most miraculous step in the process occurs. The bank, quite literally, out of thin air, creates imaginary money to back up the maximum credit limit on your card. This imaginary money is not in the form of cash. This imaginary money is not backed up by any of the "real" money in the bank's checking and savings accounts. This imaginary money does not exist other than as numbers in your bankís computer database. But, the State allows your bank to treat the numbers as if they were real money.

Which means that: Even if you spent your entire maximum credit limit, and never paid back a dollar of principal or interest, the bank would not lose a cent, other than the operational costs of its credit card related departments. So, you should ask, how can the bank get away with charging you 30% interest, and late fees, if you are a couple of months late on a payment? Well, the banks get away with it because the State allows it. Even those of us who think we are wise consumers by paying more than the minimum monthly payment are, in fact, also getting ripped off.

The video above does a good job of explaining why it is actually inevitable, and not the result of irresponsibility on our part, that we find ourselves slipping further and further into debt. The wealth of America is illusionary. It's not built upon gold, or silver, and not even labor or American ingenuity - but debt. Our economic system cannot be sustained because we cannot continue to fall further and further into debt as individuals and as a nation. We all sort of already know this, unconsciously, but we are consciously in denial about it. Only a moron, or someone in complete denial of reality, could think that our floundering economy could sustain all the money we are flushing into military bases all over the world, the war in Iraq, the war in Afghanistan, the clandestine war in Iran, all those Economic Stimulus Checks, and all the recent bailouts of financial institutions like Bear Stearns, Freddie Mac, and Fannie Mae.


Actually, your wrong. A Bank's "money" is backed by the federal reserve, which in turn is backed by the United States governement, which is in turn back up, in part, by gold reserves. The additional value held in the "dollar" is intrensic, that is, that other investors and governments respect the "dollar" and believe it's value is reliable.

Thats why there are variations in the value of the dollar.

When a bank makes a loan, it's loaning real money. Lets say you buy a house with a thirty year mortgage. When you buy the house, you go to the bank to get a loan. The bank gives you the loan, BUT it owns the house untill you pay off the loan. At that moment, the bank must give the value of the loan in "real" money to the person who sold the house to the bank.

The bank has to have real money to give the seller, after all, as i'm sure the seller is not interested in an IOU for $250,000 dollars.

I think you missunderstand what fractional reserve banking is. What that means, is that BANKS have to have, in cash, real money that they can't make loans on. So, if a bank had 100 dollars in deposits to loan out, and its fractional reserve requirement was 20 percent, it would only loan out 80 dollars the deposits it received. Banks can't loan out imaginary money because the ammount they can loan out is less than the ammount of deposits the bank received.

The problem with Bear Sterns was that they made bad loans, and people couldn't pay them back. Normally, they would foreclose on the houses, and sell them to recoup the loan. However, the number of foreclosures was exceptionally high because the banks had made exceptionally bad loans, and therefore the bankers were unable to sell the homes that they had foreclosed on because there was too much supply.

This is a double whammy, persay. Not only are the banks NOT receiving cash from the loans, they are also having to payout taxes on the properties they now take responsibility for.

Before i move on, i should point out that banks, from time to time, take loans from other banks who have reserves that exceed the fractional reserve requirement, in order to meet their own fractional reserve requirements. However, because of Bear Sterns poor decisions regarding their loans, credit rating agences, (which rate the credit of banks) lowered the value of Bear Sterns credit, which caused other banks to no longer want to loan to Bear Sterns.

At that point, Bear Sterns could no longer raise the funds required to meet their fractional reserve requirement, and the federal reserve took control over the bank, which was then bought by citibank.




The bottom line is that banks can't loan out imaginary money because they can only loan a fraction of the deposits that are made.






Also, on interest.

5.5% on a $250,000 30 year loan nets the bank $261,000 dollars on top of the original loan ammount. However, if you adust for the future value of money, that ammount dwindles down to just under $100,000 dollars. Also, there is a large ammount of risk they have to take regarding the loan, ei risk of default, and the fact that without the bank, theres no way you'd be able to buy the house, its not really all that "outragious".


Also, juice... http://www.gta4.tv/forums/index.php?s=&...t&p=1453818
Hardcore Ottoman
Did you watch the video Q?
Qdeathstar
Not yet, i was just responding to the fallacies in Juice explanation of the video. I can't see the point in watching the video if after Juice watched the video, thats the conclusion he came to. Because he is simply wrong about the imaginary money idea and the idea that America's wealth is backed only by debt.

He's just simply clearly wrong about that.

psychÝ
QUOTE(Sittin @ Jul 27 2008, 03:11 PM) [snapback]1456514[/snapback]
Not yet, i was just responding to the fallacies in Juice explanation of the video. I can't see the point in watching the video if after Juice watched the video, thats the conclusion he came to. Because he is simply wrong about the imaginary money idea and the idea that America's wealth is backed only by debt.

He's just simply clearly wrong about that.

Indeed, I agree with you, I don't have the knowledge to explain how banks work in a precise manner but juice's explanation was clearly wrong.

You can't loan imaginary money simply for the fact that if that occurred it would mean more was printed and therefore there would be a larger supply and the value of the currency on the market would reduce and that doesn't happen, the supply of money in most developed economies now a days is control by the changing of interest rates.
Styl
QUOTE(psychÝ @ Jul 27 2008, 10:07 AM) [snapback]1456525[/snapback]
the value of the currency on the market would reduce and that doesn't happen

Actually that is happening in America. Compare the current value of the dollar to the Euro or the Pound. That's why we're evidently in a "recession".
Jovin109
QUOTE(Sittin @ Jul 26 2008, 02:40 PM) [snapback]1456422[/snapback]
QUOTE(Juice @ Jul 23 2008, 07:04 PM) [snapback]1456081[/snapback]
If you are in debt, if you've ever been in debt, or if you simply care to take a look at how our monetary system works, check out this video:

Money as Debt

Basically, everything you know about credit card debt is built upon a lie. That lie is this: The bank loaned you their money. The truth is that this money, which the bank pretended to loan you via the maximum credit limit on your credit card, does not, and never did, exist. You are, quite literally, paying interest on money that does not exist.

Here's how it works: You submit an application to the bank for one of their cards. The bank determines if you are a good credit risk and, if so, how much of the bankís imaginary money you could probably be expected to pay back Ė at exorbitant interest rates, of course. Then, the most miraculous step in the process occurs. The bank, quite literally, out of thin air, creates imaginary money to back up the maximum credit limit on your card. This imaginary money is not in the form of cash. This imaginary money is not backed up by any of the "real" money in the bank's checking and savings accounts. This imaginary money does not exist other than as numbers in your bankís computer database. But, the State allows your bank to treat the numbers as if they were real money.

Which means that: Even if you spent your entire maximum credit limit, and never paid back a dollar of principal or interest, the bank would not lose a cent, other than the operational costs of its credit card related departments. So, you should ask, how can the bank get away with charging you 30% interest, and late fees, if you are a couple of months late on a payment? Well, the banks get away with it because the State allows it. Even those of us who think we are wise consumers by paying more than the minimum monthly payment are, in fact, also getting ripped off.

The video above does a good job of explaining why it is actually inevitable, and not the result of irresponsibility on our part, that we find ourselves slipping further and further into debt. The wealth of America is illusionary. It's not built upon gold, or silver, and not even labor or American ingenuity - but debt. Our economic system cannot be sustained because we cannot continue to fall further and further into debt as individuals and as a nation. We all sort of already know this, unconsciously, but we are consciously in denial about it. Only a moron, or someone in complete denial of reality, could think that our floundering economy could sustain all the money we are flushing into military bases all over the world, the war in Iraq, the war in Afghanistan, the clandestine war in Iran, all those Economic Stimulus Checks, and all the recent bailouts of financial institutions like Bear Stearns, Freddie Mac, and Fannie Mae.


Actually, your wrong. A Bank's "money" is backed by the federal reserve, which in turn is backed by the United States governement, which is in turn back up, in part, by gold reserves. The additional value held in the "dollar" is intrensic, that is, that other investors and governments respect the "dollar" and believe it's value is reliable.

Thats why there are variations in the value of the dollar.

When a bank makes a loan, it's loaning real money. Lets say you buy a house with a thirty year mortgage. When you buy the house, you go to the bank to get a loan. The bank gives you the loan, BUT it owns the house untill you pay off the loan. At that moment, the bank must give the value of the loan in "real" money to the person who sold the house to the bank.

The bank has to have real money to give the seller, after all, as i'm sure the seller is not interested in an IOU for $250,000 dollars.

I think you missunderstand what fractional reserve banking is. What that means, is that BANKS have to have, in cash, real money that they can't make loans on. So, if a bank had 100 dollars in deposits to loan out, and its fractional reserve requirement was 20 percent, it would only loan out 80 dollars the deposits it received. Banks can't loan out imaginary money because the ammount they can loan out is less than the ammount of deposits the bank received.

The problem with Bear Sterns was that they made bad loans, and people couldn't pay them back. Normally, they would foreclose on the houses, and sell them to recoup the loan. However, the number of foreclosures was exceptionally high because the banks had made exceptionally bad loans, and therefore the bankers were unable to sell the homes that they had foreclosed on because there was too much supply.

This is a double whammy, persay. Not only are the banks NOT receiving cash from the loans, they are also having to payout taxes on the properties they now take responsibility for.

Before i move on, i should point out that banks, from time to time, take loans from other banks who have reserves that exceed the fractional reserve requirement, in order to meet their own fractional reserve requirements. However, because of Bear Sterns poor decisions regarding their loans, credit rating agences, (which rate the credit of banks) lowered the value of Bear Sterns credit, which caused other banks to no longer want to loan to Bear Sterns.

At that point, Bear Sterns could no longer raise the funds required to meet their fractional reserve requirement, and the federal reserve took control over the bank, which was then bought by citibank.




The bottom line is that banks can't loan out imaginary money because they can only loan a fraction of the deposits that are made.






Also, on interest.

5.5% on a $250,000 30 year loan nets the bank $261,000 dollars on top of the original loan ammount. However, if you adust for the future value of money, that ammount dwindles down to just under $100,000 dollars. Also, there is a large ammount of risk they have to take regarding the loan, ei risk of default, and the fact that without the bank, theres no way you'd be able to buy the house, its not really all that "outragious".


Also, juice... http://www.gta4.tv/forums/index.php?s=&...t&p=1453818


That is absolutely correct. I'm glad you posted that, because I was preparing to get into it.

To add upon what you stated about the housing crisis, there was quite a bit of fraud going on. Banks were giving out mortgages to individuals who they knew would not be able to pay it off, because the banks were pooling all their loans and selling them to investment banks. The investment banks were aware that some of the loans were not going to be paid off, but they were pooling bad loans with good loans and selling them to investors and keeping some for themselves. The people buying these pooled loans had no idea what they were buying (it was a very knew financial instrument). To top this all off, these instruments were given the highest credit rating possible AAA, even though many would not be paid off. When the first few people began to default on their mortgages it was not a big deal. The bank foreclosed on the houses, however, the foreclosed houses began to bring the value of houses down. When the value of the houses dropped, you had people paying off 2,000,000 dollar mortgages on a house only worth 750,000,000. This goes on for a few years and you have a huge crisis, of Investment banks declaring HUGE losses on their new financial instruments. And we are in the situation we are in today. This is a very shortened version of the housing crisis, but it's a base for some people who may not have understood it previously.

Please don't only watch one video about how the U.S. economy and financial systems work. If you want to start somewhere, do some research on T-bills, T-notes, and T-bonds. This is will give you a good foundation on how the government issues debt and if you look deep enough you can see how issuing notes controls the federal reserve rate.
psychÝ
QUOTE(Styl @ Jul 27 2008, 05:50 PM) [snapback]1456536[/snapback]
QUOTE(psychÝ @ Jul 27 2008, 10:07 AM) [snapback]1456525[/snapback]
the value of the currency on the market would reduce and that doesn't happen

Actually that is happening in America. Compare the current value of the dollar to the Euro or the Pound. That's why we're evidently in a "recession".

I knew someone would bring this up even though it is a completely irrelevant point, the reason the dollar is so weak is due to the massive trade deficit with China and too a smaller extent other countries, this is due to china not having a free currency and therefore controlling the exchange rate meaning it doesn't balance out.
Jovin109
QUOTE(psychÝ @ Jul 27 2008, 11:07 AM) [snapback]1456525[/snapback]
QUOTE(Sittin @ Jul 27 2008, 03:11 PM) [snapback]1456514[/snapback]
Not yet, i was just responding to the fallacies in Juice explanation of the video. I can't see the point in watching the video if after Juice watched the video, thats the conclusion he came to. Because he is simply wrong about the imaginary money idea and the idea that America's wealth is backed only by debt.

He's just simply clearly wrong about that.

Indeed, I agree with you, I don't have the knowledge to explain how banks work in a precise manner but juice's explanation was clearly wrong.

You can't loan imaginary money simply for the fact that if that occurred it would mean more was printed and therefore there would be a larger supply and the value of the currency on the market would reduce and that doesn't happen, the supply of money in most developed economies now a days is control by the changing of interest rates.


You can't loan imaginary money, per say, but there is something known as the money multiplier effect. For example, let's say I'm a bank and as of now I have $0, the reserve requirement (how much money I must have at the end of every day) is 20%. You are my first customer and deposit $100. I can loan out $80 immediately (I'm holding 20% of my total money). The person I loaned the money to is going to pay me back, therefore money IS created. but that doesn't make it imaginary by any means. To theoretically calculate how much money will be created by any deposit into a bank (this holds true if the bank lends the maximum percentage allowed), you calculate the "money multiplier." The money multiplier is the inverse of the reserve requirement, 20%. 20% can be expressed as 1/5, so the multiplier is 5. Now you find the excess amount of money you deposited, ($100*.2= $20 100-20= $80), and multiply the excess by the multiplier (80*5=400). so with a $100 deposit, theoretically $400 is created.

Inflation is watched carefully by the Federal reserve (it's part of their double mandate), and they monitor it several ways (which I'm not going to take the time to explain). But their methods help control the amount of lending which goes on.
psychÝ
QUOTE(Jovin109 @ Jul 27 2008, 06:18 PM) [snapback]1456541[/snapback]
QUOTE(psychÝ @ Jul 27 2008, 11:07 AM) [snapback]1456525[/snapback]
QUOTE(Sittin @ Jul 27 2008, 03:11 PM) [snapback]1456514[/snapback]
Not yet, i was just responding to the fallacies in Juice explanation of the video. I can't see the point in watching the video if after Juice watched the video, thats the conclusion he came to. Because he is simply wrong about the imaginary money idea and the idea that America's wealth is backed only by debt.

He's just simply clearly wrong about that.

Indeed, I agree with you, I don't have the knowledge to explain how banks work in a precise manner but juice's explanation was clearly wrong.

You can't loan imaginary money simply for the fact that if that occurred it would mean more was printed and therefore there would be a larger supply and the value of the currency on the market would reduce and that doesn't happen, the supply of money in most developed economies now a days is control by the changing of interest rates.


You can't loan imaginary money, per say, but there is something known as the money multiplier effect. For example, let's say I'm a bank and as of now I have $0, the reserve requirement (how much money I must have at the end of every day) is 20%. You are my first customer and deposit $100. I can loan out $80 immediately (I'm holding 20% of my total money). The person I loaned the money to is going to pay me back, therefore money IS created.
No it isn't it is just that persons savings isn't sitting around any more, the money isn't created. If that person were too take there $100 out of the bank then they couldn't this is normally countered by people having things in various types of accounts where they can't use or do anything with the money therefore meaning it is secure for the bank too do whatever it wants with it such as investing it to make a greater profit than the interest paid on it.

The same occurs with some banks in the UK with cheques it takes them 5 days to cash the check just so they can use the money that that have already receive to invest to make a profit before putting the amount in your account, therefore making profit off it before you have even received it.
Jovin109
QUOTE(psychÝ @ Jul 27 2008, 12:41 PM) [snapback]1456543[/snapback]
QUOTE(Jovin109 @ Jul 27 2008, 06:18 PM) [snapback]1456541[/snapback]
QUOTE(psychÝ @ Jul 27 2008, 11:07 AM) [snapback]1456525[/snapback]
QUOTE(Sittin @ Jul 27 2008, 03:11 PM) [snapback]1456514[/snapback]
Not yet, i was just responding to the fallacies in Juice explanation of the video. I can't see the point in watching the video if after Juice watched the video, thats the conclusion he came to. Because he is simply wrong about the imaginary money idea and the idea that America's wealth is backed only by debt.

He's just simply clearly wrong about that.

Indeed, I agree with you, I don't have the knowledge to explain how banks work in a precise manner but juice's explanation was clearly wrong.

You can't loan imaginary money simply for the fact that if that occurred it would mean more was printed and therefore there would be a larger supply and the value of the currency on the market would reduce and that doesn't happen, the supply of money in most developed economies now a days is control by the changing of interest rates.


You can't loan imaginary money, per say, but there is something known as the money multiplier effect. For example, let's say I'm a bank and as of now I have $0, the reserve requirement (how much money I must have at the end of every day) is 20%. You are my first customer and deposit $100. I can loan out $80 immediately (I'm holding 20% of my total money). The person I loaned the money to is going to pay me back, therefore money IS created.
No it isn't it is just that persons savings isn't sitting around any more, the money isn't created. If that person were too take there $100 out of the bank then they couldn't this is normally countered by people having things in various types of accounts where they can't use or do anything with the money therefore meaning it is secure for the bank too do whatever it wants with it such as investing it to make a greater profit than the interest paid on it.

The same occurs with some banks in the UK with cheques it takes them 5 days to cash the check just so they can use the money that that have already receive to invest to make a profit before putting the amount in your account, therefore making profit off it before you have even received it.


In the example stated, you are correct, the person would not be able to take out their money. However, I wanted to make it a very very simple example. The reserve requirement (the amount the bank MUST keep), is set up for a couple reasons, but one of the main reasons is in order to ensure that the bank can give money out to anyone withdrawing money. If everyone who has money in the bank tries to withdraw at the exact same time the bank would not be able to give everyone there money back.

Yes, people can place money into frozen accounts as well and they are given a higher interest rate, but this is not the money which is always loaned out. The Reserve requirement is set by the government and is always changing, but banks can loan everything except that small percentage. When people LOAN money, there is a money multiplier effect in which money is created. This money is real, but it is created. It is simple macroeconomics.

Also, about currency, when people say a currency is rising or dropping it needs to be in comparison to another currency. The US dollar may fall against the Euro but rise against Canadian dollar. It is a very complex topic which is effected by many many factors.
psychÝ
QUOTE(Jovin109 @ Jul 27 2008, 07:03 PM) [snapback]1456548[/snapback]
QUOTE(psychÝ @ Jul 27 2008, 12:41 PM) [snapback]1456543[/snapback]
QUOTE(Jovin109 @ Jul 27 2008, 06:18 PM) [snapback]1456541[/snapback]
QUOTE(psychÝ @ Jul 27 2008, 11:07 AM) [snapback]1456525[/snapback]
QUOTE(Sittin @ Jul 27 2008, 03:11 PM) [snapback]1456514[/snapback]
Not yet, i was just responding to the fallacies in Juice explanation of the video. I can't see the point in watching the video if after Juice watched the video, thats the conclusion he came to. Because he is simply wrong about the imaginary money idea and the idea that America's wealth is backed only by debt.

He's just simply clearly wrong about that.

Indeed, I agree with you, I don't have the knowledge to explain how banks work in a precise manner but juice's explanation was clearly wrong.

You can't loan imaginary money simply for the fact that if that occurred it would mean more was printed and therefore there would be a larger supply and the value of the currency on the market would reduce and that doesn't happen, the supply of money in most developed economies now a days is control by the changing of interest rates.


You can't loan imaginary money, per say, but there is something known as the money multiplier effect. For example, let's say I'm a bank and as of now I have $0, the reserve requirement (how much money I must have at the end of every day) is 20%. You are my first customer and deposit $100. I can loan out $80 immediately (I'm holding 20% of my total money). The person I loaned the money to is going to pay me back, therefore money IS created.
No it isn't it is just that persons savings isn't sitting around any more, the money isn't created. If that person were too take there $100 out of the bank then they couldn't this is normally countered by people having things in various types of accounts where they can't use or do anything with the money therefore meaning it is secure for the bank too do whatever it wants with it such as investing it to make a greater profit than the interest paid on it.

The same occurs with some banks in the UK with cheques it takes them 5 days to cash the check just so they can use the money that that have already receive to invest to make a profit before putting the amount in your account, therefore making profit off it before you have even received it.


In the example stated, you are correct, the person would not be able to take out their money. However, I wanted to make it a very very simple example. The reserve requirement (the amount the bank MUST keep), is set up for a couple reasons, but one of the main reasons is in order to ensure that the bank can give money out to anyone withdrawing money. If everyone who has money in the bank tries to withdraw at the exact same time the bank would not be able to give everyone there money back.
Which is exactly what I said.
QUOTE
When people LOAN money, there is a money multiplier effect in which money is created. This money is real, but it is created. It is simple macroeconomics.
Money isn't created the money always exists, it is just the people receiving the extra money have more money too spend and leave less in savings due to them feeling more secure, the flow of money increases therefore aggregate demand increase, the amount of money does not, the speed at which is moves does.
Qdeathstar
QUOTE(Styl @ Jul 27 2008, 04:50 PM) [snapback]1456536[/snapback]
You can't loan imaginary money, per say, but there is something known as the money multiplier effect. For example, let's say I'm a bank and as of now I have $0, the reserve requirement (how much money I must have at the end of every day) is 20%. You are my first customer and deposit $100. I can loan out $80 immediately (I'm holding 20% of my total money). The person I loaned the money to is going to pay me back, therefore money IS created.


No, its not. Unless that guy has a printing machine he is going to have to get the money from someone in exchange for a good or service that he provides.

You missunderstand the Multiplyer effect.

What that means, is that if your a bank with 100 dollars in deposits, a customer walks in and takes out a loan, which the bank then pays to whomever the loan is for (ie the cars salesman). The Carsalesmen then deposits that 80 dollars into another bank, and now that bank has 64 dollars to loan out.

Now that we have to banks, we can loan out 146 dollars instead of just 80 dollars, but that doesn't mean that money was created as the ammount is still below the 100 plus the value of the original loan.



If the items which the first customer was getting the loan for had zero value, then you'd be right.... but because houses, cars, ect all have values attached to them money isn't created, its just transfered...
Skinny†
QUOTE(Sittin @ Jul 28 2008, 02:17 PM) [snapback]1456591[/snapback]
If the items which the first customer was getting the loan for had zero value, then you'd be right.... but because houses, cars, ect all have values attached to them money isn't created, its just transfered...

No, it's created. What the video says is that a small percent of the "money" in circulation, and running the economy, is the paper money printed by the Mint/Fed. Reserve. Most of it only exists hypotheticly. Like, your promise to repay the loan is of value, so the bank pretends to be using money to buy you your house, car etc. when they are only pretending the money exists, and the seller of what you want to buy, is only receiving digital credit (hypothetical money) wich they get from the bank, keep in a bank, but can still spen on goods and services. This hypothetical currency, is a good 80% of the economy, meaning the people controlling the banks, control the entire economy. The video explains it better.

and lawl at punxtr, after he tried to rip into me for talking about banking conspiracies a while ago.
psychÝ
QUOTE(No Shirt. No Shoes. FINAL DESTIN @ Jul 28 2008, 08:52 AM) [snapback]1456595[/snapback]
QUOTE(Sittin @ Jul 28 2008, 02:17 PM) [snapback]1456591[/snapback]
If the items which the first customer was getting the loan for had zero value, then you'd be right.... but because houses, cars, ect all have values attached to them money isn't created, its just transfered...

No, it's created. What the video says is that a small percent of the "money" in circulation, and running the economy, is the paper money printed by the Mint/Fed. Reserve. Most of it only exists hypotheticly. Like, your promise to repay the loan is of value, so the bank pretends to be using money to buy you your house, car etc. when they are only pretending the money exists, and the seller of what you want to buy, is only receiving digital credit (hypothetical money) wich they get from the bank, keep in a bank, but can still spen on goods and services. This hypothetical currency, is a good 80% of the economy, meaning the people controlling the banks, control the entire economy. The video explains it better.

The video is wrong...........
Juice
QUOTE(Sittin @ Jul 26 2008, 02:40 PM) [snapback]1456422[/snapback]
Actually, your wrong. A Bank's "money" is backed by the federal reserve, which in turn is backed by the United States governement, which is in turn back up, in part, by gold reserves. The additional value held in the "dollar" is intrensic, that is, that other investors and governments respect the "dollar" and believe it's value is reliable.

Thats why there are variations in the value of the dollar.

When a bank makes a loan, it's loaning real money. Lets say you buy a house with a thirty year mortgage. When you buy the house, you go to the bank to get a loan. The bank gives you the loan, BUT it owns the house untill you pay off the loan. At that moment, the bank must give the value of the loan in "real" money to the person who sold the house to the bank.

The bank has to have real money to give the seller, after all, as i'm sure the seller is not interested in an IOU for $250,000 dollars.

I think you missunderstand what fractional reserve banking is. What that means, is that BANKS have to have, in cash, real money that they can't make loans on. So, if a bank had 100 dollars in deposits to loan out, and its fractional reserve requirement was 20 percent, it would only loan out 80 dollars the deposits it received. Banks can't loan out imaginary money because the ammount they can loan out is less than the ammount of deposits the bank received.


The Fed does not have any reserves. The gold and silver in the US mint doesn't enter into the equation because USD has not been backed by gold or silver for many years. USD, literally, is not worth the paper it is printed on. Its only value is as fiat currency - which means that we have to hope that someone will exchange something of real value for our worthless dollar bills.

Your basic sentiments are correct but you aren't seeing the simple picture. Let's say you put $1000 in the bank, let's further say that the fractional reserve rate is 10%. $100 of it goes into reserves. The bank is able to then lend out $900 of that $1000 in the form of a loan and earn interest off your money. Because the person who took out the $900 loan inevitably feeds that money back into the banking system where it is lent out again. This goes on and on until an extremely large amount of money has been invented and added to the system from minimal reserves. However, the money needed to pay interest doesnít exist in the system yet, so more debt is required through more loans to pay the interest off. This leads to an exponential increase in debt, which in turn requires perpetual economic growth to service the debt.

You think this is okay because you do not understand that this system of money is mathematically guaranteed to collapse. It can not be sustained. At some point, all this imaginary money is going to go up in smoke because it is not, and never was, real. It is not based on anything of value.

Central Banks can lend fiat money, created out of thin air and backed by nothing of real value, to rich people at very low interest rates. Those rich people can then lend that make believe money to poor people at very high interest rates. Those poor people pay those high interest rates with the only source of real wealth in the entire system - their labor.

It all underscores exactly what Cheney meant a while back when he said "deficits don't matter". We all thought he was having a W moment, but he actually had just slipped up and spoken the truth for a change. In the short term, the deficits of the Federal Guvmint, and all these investment banks, truly don't matter because, no matter how astronomical the deficit is, the Fed will type a few digits into a central bank's computer database and make it go away - for the short term.

Of course, in the long term, creating money out of thin air, with nothing of value to back it up, is a guaranteed recipe for inflation, devaluation of the USD, and economic depression. And, we have been experiencing all those symptoms for quite a while. The current state of the economy is the direct result of the greed of financial institutions, unchecked by the federal government, who, for the last several years, have escalated the costs of home loans and credit card debt far and beyond what the clueless American citizen could afford to pay.

QUOTE
The problem with Bear Sterns was that they made bad loans, and people couldn't pay them back. Normally, they would foreclose on the houses, and sell them to recoup the loan. However, the number of foreclosures was exceptionally high because the banks had made exceptionally bad loans, and therefore the bankers were unable to sell the homes that they had foreclosed on because there was too much supply.

This is a double whammy, persay. Not only are the banks NOT receiving cash from the loans, they are also having to payout taxes on the properties they now take responsibility for.

Before i move on, i should point out that banks, from time to time, take loans from other banks who have reserves that exceed the fractional reserve requirement, in order to meet their own fractional reserve requirements. However, because of Bear Sterns poor decisions regarding their loans, credit rating agences, (which rate the credit of banks) lowered the value of Bear Sterns credit, which caused other banks to no longer want to loan to Bear Sterns.

At that point, Bear Sterns could no longer raise the funds required to meet their fractional reserve requirement, and the federal reserve took control over the bank, which was then bought by citibank.


If you or I get behind on our bills, our society call us financially irresponsible, the bank forecloses on our home, the IRS takes our car, and our creditors garnishee our paychecks from now until the debt is paid. But, when rich folks get behind on their bills, they just have the Fed print them up some new money out of thin air. Was it necessary that the Federal Reserve assume $30 billion of Bear Stearns debt, even though Bear Stearns has $17 billion in cash reserves just sitting around collecting interest?

Bear Stearns gets itself into a hole through the process of their own greed. They decide they do not want to file bankruptcy and lose their $17 billion in cash (which they never had any intention of using to pay their bills with anyway). So, another set of rich folks, the ones running the Fed, bails them out. And, this is all supposed to be legal?

If America really believed in the self-correcting sanctity of the free market, Bear Stearns would have been allowed to collapse. To bail out incompetent rich white folks, merely because they are rich and white, only serves to reinforce in their minds that they are gods among men - to reinforce the notion that what is good for them is synonymous with what is best for everybody When Massa sick, we sick. It reinforces the notion that it is both wise and necessary to bail Massa out of the pickle into which his own greed and avarice got him.

If you, or I, due to unwise business decisions, pushed our business into an early grave, no one would expect the fed to bail us out. But, when rich white folks drive their good ship into an iceberg [Chrysler, Bear Stearns, and the entire banking industry], oh, Lord! That's different.

The richest people in America and the world have acquired what they have purely from speculation (i.e. stealing wealth from the losers without creating anything worthwhile). Bankers, hedge funds, stockbrokers, investment banks; they all leverage their investments with money that is not even theirs, and when they win it is simply a transfer of wealth into their hands - nothing is created. Take the stock market as one small example. Every stock traded on the common exchanges is in the secondary market, meaning it has already been sold as an IPO long ago and is no longer making the issuing company any money. But, due to our inflationary monetary system, everyday people must take risk with their money in order to keep it from losing value over time - so they invest in the stock market. What happens when the individual investor loses his life savings in the market? Who gets it? Has any real wealth been created? No, just transfered to someone else.
psychÝ
QUOTE
Your basic sentiments are correct but you aren't seeing the simple picture. Let's say you put $1000 in the bank, let's further say that the fractional reserve rate is 10%. $100 of it goes into reserves. The bank is able to then lend out $900 of that $1000 in the form of a loan and earn interest off your money. Because the person who took out the $900 loan inevitably feeds that money back into the banking system where it is lent out again. This goes on and on until an extremely large amount of money has been invented and added to the system from minimal reserves.
Awesome you fail to even understand what you are talking about.

I put $1000 in the bank, bank lends $900, guy puts $900 in the bank, whereas money is being "created" which it isn't really it is just be leant without the other persons knowledge, the person who put it in can still get their money back as there isn't only $100 there, there is 1bn, and inevitably the other person has to pay the money back at a higher interest rate than the person who has the money in the savings account.

Of course the other use for it is to invest the $900 excess in stocks and shares and make money off the dividends as well as having the worth of the shares increase (if done correctly)

QUOTE
Central Banks can lend fiat money, created out of thin air and backed by nothing of real value, to rich people at very low interest rates. Those rich people can then lend that make believe money to poor people at very high interest rates. Those poor people pay those high interest rates with the only source of real wealth in the entire system - their labor.
The money is backed by something it is backed by the fact people think it is worth something, if everyone agrees to pay $1 for a pint of milk you can make the conclusion that a pint of milk is worth a $1, but wait someone says I think it is worth $1.10, then they all sell to him and it is suddenly worth that amount, what you seem to fail to comprehend is that a lot of things aren't worth anything at all it is just what people are willing to pay simple demand and supply.

QUOTE

Of course, in the long term, creating money out of thin air, with nothing of value to back it up, is a guaranteed recipe for inflation, devaluation of the USD, and economic depression.
That is why they don't do it....

QUOTE

If you or I get behind on our bills, our society call us financially irresponsible, the bank forecloses on our home, the IRS takes our car, and our creditors garnishee our paychecks from now until the debt is paid. But, when rich folks get behind on their bills, they just have the Fed print them up some new money out of thin air. Was it necessary that the Federal Reserve assume $30 billion of Bear Stearns debt, even though Bear Stearns has $17 billion in cash reserves just sitting around collecting interest?
Got it all figured out haven't you, what you don't realise is that if the banks go down the world goes down, forget an oil crisis there is no money too buy it with might as well go see how many goats you can trade per barrel in your almighty world.

QUOTE

If America really believed in the self-correcting sanctity of the free market, Bear Stearns would have been allowed to collapse. To bail out incompetent rich white folks, merely because they are rich and white, only serves to reinforce in their minds that they are gods among men

OMG the white man is oppressing me, well maybe if you hadn't fucked your life up and got your act together you could have joined them in the play pen, but of course it isn't your fault your black, it is society, facts are if they had declared bankruptcy, the people who run it wouldn't lose out, they would go get another job. It would be the person with the bank account who can't get the money who does, and then every other person who didn't run too their bank before everyone else destroying the whole banking system.



QUOTE
If you, or I, due to unwise business decisions, pushed our business into an early grave, no one would expect the fed to bail us out.
No that is because in 5 years your business still won't be making any money, people already have enough fried chicken, however people still will want a bank, yes they cocked up and most companies would then go too the bank to get an extra loan to help them through the hard times, just like they did.

QUOTE

The richest people in America and the world have acquired what they have purely from speculation (i.e. stealing wealth from the losers without creating anything worthwhile). Bankers, hedge funds, stockbrokers, investment banks; they all leverage their investments with money that is not even theirs, and when they win it is simply a transfer of wealth into their hands - nothing is created.

Tragic, you fail to see me caring because anyone can do it get off your lazy ass and done some work at school and you could be sitting in an office, you seem to whine and whine and whine about these people, maybe you should get off your ass and do what they are doing. Except when you get there you will realise you actually suck at it and lose all your money, which would be hilarious.
Skinny†
QUOTE(psychÝ @ Jul 29 2008, 03:01 AM) [snapback]1456663[/snapback]
QUOTE(No Shirt. No Shoes. FINAL DESTIN @ Jul 28 2008, 08:52 AM) [snapback]1456595[/snapback]
QUOTE(Sittin @ Jul 28 2008, 02:17 PM) [snapback]1456591[/snapback]
If the items which the first customer was getting the loan for had zero value, then you'd be right.... but because houses, cars, ect all have values attached to them money isn't created, its just transfered...

No, it's created. What the video says is that a small percent of the "money" in circulation, and running the economy, is the paper money printed by the Mint/Fed. Reserve. Most of it only exists hypotheticly. Like, your promise to repay the loan is of value, so the bank pretends to be using money to buy you your house, car etc. when they are only pretending the money exists, and the seller of what you want to buy, is only receiving digital credit (hypothetical money) wich they get from the bank, keep in a bank, but can still spen on goods and services. This hypothetical currency, is a good 80% of the economy, meaning the people controlling the banks, control the entire economy. The video explains it better.

The video is wrong...........

Did you even watch it?
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