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Old 10-18-2018, 01:56 AM
Little Nemo Little Nemo is offline
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How fractional reserve banking and M0 work

Based on this thread which got a little off the rails and was closed. I just want to see if we're all clear on the concepts involved.

Fractional Reserve Banking is a system that requires a bank to keep a portion of the assets which have been deposited with it on hand so they are available to be withdrawn. In the United States, the percentage varies from three to ten percent (depending on the total amount of the assets). So, as an example, if you ran a bank and people had deposited a hundred million dollars in your bank, you would be required to keep three million dollars on hand. You could loan out the other ninety-seven million and receive interest from those loans.

M0 is the term for the total amount of currency. It's essentially the amount of bills and coins that are in circulation. It's the simplest description of how much money exists.

Is this what mustang19 (the OP from the other thread) understands these terms to mean? And if so, can he explain what he means by banks buying M0? Buying money won't generally make you any wealthier because the amount you're paying is equal to the amount you're receiving.

Obviously, I may be the one who's wrong in my understanding of these terms. If so, I'd welcome somebody explaining them to me.
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Old 10-18-2018, 02:09 AM
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Originally Posted by Little Nemo View Post
Fractional Reserve Banking is a system that requires a bank to keep a portion of the assets which have been deposited with it on hand so they are available to be withdrawn. In the United States, the percentage varies from three to ten percent (depending on the total amount of the assets). So, as an example, if you ran a bank and people had deposited a hundred million dollars in your bank, you would be required to keep three million dollars on hand. You could loan out the other ninety-seven million and receive interest from those loans.

M0 is the term for the total amount of currency. It's essentially the amount of bills and coins that are in circulation. It's the simplest description of how much money exists.
You got it.

Quote:
Is this what mustang19 (the OP from the other thread) understands these terms to mean? And if so, can he explain what he means by banks buying M0? Buying money won't generally make you any wealthier because the amount you're paying is equal to the amount you're receiving.

Obviously, I may be the one who's wrong in my understanding of these terms. If so, I'd welcome somebody explaining them to me.
I won't pretend to understand what mustang19 thinks these terms mean, but his JAQing-off seems reminiscent of various conspiratorial lines of thought regarding radical full reserve banking proposals.

Full reserve isn't necessarily completely insane, but it's, like, 90% insane.
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Old 10-18-2018, 02:12 AM
Little Nemo Little Nemo is offline
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I'm assuming there's some misunderstanding and he's actually referring to some other financial terms. I'm hoping to clear up the confusion. I'm not saying I'll agree with his idea but I'd like to at least understand what his idea is.
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Old 10-18-2018, 02:14 AM
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I think what he's saying is why don't banks simply get low interest loans from the fed and then use that to offer more and more consumer loans at a higher rate - repeat infinitely to generate infinite profit - but frankly I'm not very sure that's even it.

Last edited by zoid; 10-18-2018 at 02:18 AM.
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Old 10-18-2018, 02:18 AM
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Full reserve isn't necessarily completely insane, but it's, like, 90% insane.
The obvious problem with full reserve banking is that banks have no incentive to do it. Why should they take on the responsibility of holding your money when they can't use it to generate income via interest?

The answer would be that banks would require people to pay them significant fees to hold their money. And most customers would resist using such a service.
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Old 10-18-2018, 02:24 AM
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I think what he's saying is why don't banks simply get low interest loans from the fed and then use that to offer more and more consumer loans at a higher rate - repeat infinitely to generate infinite profit - but frankly I'm not very sure that's even it.
It's the "repeat infinitely" part that has me confused. Fractional reserve banking doesn't give a bank access to infinite assets. It still limits a bank to the amount of money its depositors have put into the bank. To use the example from my OP, the bank I described doesn't have infinite assets; it has ninety-seven million dollars.

Once again, I'd like to have mustang19 come in and give us the details on what it is he's proposing.
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Old 10-18-2018, 02:43 AM
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Yeah, the other OP was pretty much word salad, there's no point trying to deconstruct what it means. I'm just worried about that poor goat.
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Old 10-18-2018, 09:53 AM
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I think what he's saying is why don't banks simply get low interest loans from the fed and then use that to offer more and more consumer loans at a higher rate - repeat infinitely to generate infinite profit - but frankly I'm not very sure that's even it.
And note that fractional reserve banking can operate independently of the Federal Reserve System. A bank can just take in deposits, for which it pays interest, and then lend out money, for which it charges interest. No Federal Reserve needed.

Many people leave most of the money they've deposited untouched for a long time, which is what allows fractional reserve banking to work. It's only a problem if everyone wants to withdraw all of their money all at once. This was nicely illustrated in the movie It's A Wonderful Life in the scene in which the panicked residents are trying to withdraw all of their money from the building and loan society. George Bailey says to them, "You're thinking of this place all wrong. As if I had the money back in a safe. The money's not here. Your money's in Joe's house right next to yours. And in the Kennedy house, and Mrs. Macklin's house, and a hundred others. Why, you're lending them the money to build, and then, they're going to pay it back to you as best they can. Now what are you going to do? Foreclose on them?"

And of course the amount of money that actually exists in paper form (M0) is a lot less than the amount that exists in bank accounts. I know for me personally, my bank deposits are a hundred or a thousand times greater than the amount I have in paper form.
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Old 10-18-2018, 10:20 AM
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I think I kind of understand what mustang19 meant. He had a badly distorted idea of what "fractional reserve banking" means, which understanding seems to be shared by the crankier overlap of sovereign citizens, gold bugs, and full reserve banking enthusiasts.

I think mustang19 thinks that fractional reserve banking works basically in the reverse of how it actually works. If I understand the reasoning correctly, it goes like this. Bank A has $3 million in actual specie on hand. The bank declares by fiat a 3% fractional reserve. It now has $97 million in nominal, m1, money that it can lend out.

Yes, I realize this is not how fractional reserve banking works.

Under this scheme, mustang19 is wondering why the bank doesn't use its nominal, m1, money to buy actual, m0, specie money, then add that m0 to its reserves, then apply the fractional reserve rules to create m1, then use that to buy m0, and so on, ad infinitum.

An obviously absurd result from applying a basic rule might lead one to suspect that their understanding of that basic rule is flawed. Equally, if an obvious outcome from applying a basic rule seems like it should happen all the time but in reality never actually happens might also lead one to suspect that their understanding of that basic rule is flawed. However, mustang19 seems so convinced of their understanding of fractional reserve banking that they are looking for some added complicating factor that forbids the obviously absurd result that doesn't actually happen.
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Old 10-18-2018, 10:25 AM
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Originally Posted by zoid View Post
I think what he's saying is why don't banks simply get low interest loans from the fed and then use that to offer more and more consumer loans at a higher rate - repeat infinitely to generate infinite profit - but frankly I'm not very sure that's even it.
That sounds like the misunderstanding is equating debt obligations as assets with deposits as assets. In one case, Joe has given you $1M to hold. In the other case, Bob has borrowed $900,000 and the bank holds a marker of his for that amount; technically an asset, whereas Joe's $1M is actually a liability balancing the asset they used to have of $1M now $100,000 plus the loan asset. AFAIK, IANABanker, this does not mean the bank now "has" a $1.9M kitty to use and count toward the credit in central reserve. It still only has $1M.

(But... if Bob puts his $900,000 loan back in the bank as a deposit, then...)
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Old 10-18-2018, 11:44 AM
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But if they paid $27 for the rooms and the bellboy has $2, where is the extra dollar?
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Old 10-18-2018, 11:57 AM
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But if they paid $27 for the rooms and the bellboy has $2, where is the extra dollar?
$20, same as in town.
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Old 10-18-2018, 12:08 PM
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nm

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Old 10-18-2018, 12:17 PM
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And note that fractional reserve banking can operate independently of the Federal Reserve System. A bank can just take in deposits, for which it pays interest, and then lend out money, for which it charges interest. No Federal Reserve needed.
I assume that you are talking about what could happen in a hypothetical unregulated economy?

In reality, of course, the reserve fraction is a statutory requirement for all banks. Since the reserve may only be physical currency in their vault or a deposit at the Fed, no banks can operate independently of the Fed. All banks hold a reserve balance at their regional Fed (some smaller banks may hold their reserves at a larger correspondent bank that passes them through to the Fed).

Last edited by Riemann; 10-18-2018 at 12:21 PM.
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Old 10-18-2018, 12:23 PM
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Double-entry book-keeping should be a required curriculum for all high-school students. It really clarifies the movement of money. Here's a really basic example.
SPOILER:
Let's start a bank with zero assets and zero debts, for a net worth of $0 = $0 - $0.

Alice deposits $1000 with the bank. That increases the banks assets by $1000 (that's the cash on hand) and increases the debts by $1000 (what it owes Alice). The bank's net worth is $0 = $1000 - $1000.

Betty takes $800 loan from the bank. That decreases the bank's cash by $800 (cash given to Betty) but creates an asset worth $800 (what Betty owes the bank). The bank's net worth is $0 = $200 + $800 - $1000.

The bank pays 1% interest to Alice. That increases the bank's debts by $10, so the net worth is decreased to -$10 = $200 + $800 - $1010.

The bank is paid 2% interest by Betty. That increases the bank's cash by $20, so the net worth is increased to $10 = $220 + $800 - $1010.
And so on. The important points are that every transaction changes two numbers and the equality is preserved.

How does the bank get more cash? By "buying" it: increasing the cash on hand and increasing its debts. And those decrease its net worth when the interest is paid. How does the bank increase its net worth? By "selling" cash (decreasing its cash and creating loan assets) and collecting interest on it (increasing its cash and net worth).

But cash has very little to do with the bank increasing its net worth. It's only a medium of exchange for transforming its debts into loans. The fractional reserve is simply a limit for how much of a bank's assets must be in the form of cash. In the above example the bank has cash equal to 22% ( = $220 / [$220 + 800] ) of its assets.
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Old 10-18-2018, 12:39 PM
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That was a weird thread.

It's difficult to understand why the OP would tell others to "do more reading", while simultaneously asking a question. If the OP had done reading personally, then wouldn't they already have the answer to their own question? Wouldn't they have figured it out?



But it's actually an interesting question, when approached the right way. I hope the following might be a slightly more clear presentation of how it works.
Quote:
Originally Posted by mustang19
Under fractional reserve banking everything comes from m0. Therefore banks could just buy m0 repeatedly and create infinite money. What stops this? Is it a specific law or just procedural things like the government blocking cash deposits to prevent inflation from destroying the world?
Banks absolutely can buy currency in circulation ("M0") by increasing their own deposit obligations.

This is normal. Happens all the time. This is called a "deposit" at the bank. When you show up at the teller and plunk down a Franklin to put in your account, this is exactly what the bank is doing. They are buying your physical cash, and issuing you a deposit liability in exchange for that cash. And that fact, almost by itself, explains why banks can't get "infinite money" out of this process.

In order for the bank to get that physical cash, it needs to convince someone to sell them a physical dollar in exchange for a deposit liability dollar. Why do people give banks physical dollars in exchange for having a credit to their account at the bank? One dollar handed over = one dollar change in the ledgers. Why? Well, it's useful to have a bit of money in checking to write checks or use a check card. It's also useful to have a bit of money in savings, earning a small rate of return, rather than earning 0% in the sock drawer. This is to say that deposit liabilities are actually liabilities for banks. They're not free. Banks have to provide a service in order to entice people to exchange their dollars for bank account numbers. This service costs the bank money. And what does the bank get out of that money? Physical cash?

So what?

The value of holding physical currency is not, generally speaking, going to match the cost of holding large deposit liabilities. (There's a potential wrinkle on this given IOR, but we can ignore that wrinkle at present.) So while it's technically possible that a bank could use its own vault cash as required reserves in order to issue more deposit liabilities, in order to increase its vault cash required reserves, in order to issue more deposit liabilities... there is no incentive for any bank to do this. The cash in the vault is (basically...) just sitting there are doing nothing. But the deposit liabilities are a genuine cost to the bank. The bank would be losing money. It would become insolvent. The assets aren't valuable enough to justify the increase in the liabilities.

And all of its depositors would then want to pull their deposits out of the bank. An insolvent bank can't provide the services, most especially the interest payments, that depositors want from their banks.

The business of banking is not buying low-return cash in exchange for low-return deposit liabilities. The business of banking is buying high-return loans in exchange for low-return deposit liabilities. High-return loans can justify the costs of those deposit liabilities. And if the loan returns are sufficiently high enough, banks can offer higher interest rates on their accounts, with which they can buy M0 (i.e. attract depositors) who will continue to give them low-interest deposits which can help them continue to finance their high-interest loans.




A final point on all of this is that even if a bank could mysteriously convince everyone to fork over their physical cash in exchange for deposit liabilities, there is still a limit on the process. The private bank itself does not create the M0 (or the MB). There is a limited amount of monetary base in the world, and even if the private bank gobbled up literally all of it, they can't create more by themselves.

Base money is created by the government bank. So even if one private bank somehow monopolized all available reserves, that still wouldn't dictate "infinite money", given the ultimate limitation on base money that is not determined by them.
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Old 10-18-2018, 12:41 PM
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I think mustang19 thinks that fractional reserve banking works basically in the reverse of how it actually works. If I understand the reasoning correctly, it goes like this. Bank A has $3 million in actual specie on hand. The bank declares by fiat a 3% fractional reserve. It now has $97 million in nominal, m1, money that it can lend out.

Yes, I realize this is not how fractional reserve banking works.

Under this scheme, mustang19 is wondering why the bank doesn't use its nominal, m1, money to buy actual, m0, specie money, then add that m0 to its reserves, then apply the fractional reserve rules to create m1, then use that to buy m0, and so on, ad infinitum.
Okay, I can see how somebody might think this.
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Old 10-18-2018, 12:48 PM
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And note that fractional reserve banking can operate independently of the Federal Reserve System. A bank can just take in deposits, for which it pays interest, and then lend out money, for which it charges interest. No Federal Reserve needed.
I assume that you are talking about what could happen in a hypothetical unregulated economy?

In reality, of course, the reserve fraction is a statutory requirement for all banks. Since the reserve may only be physical currency in their vault or a deposit at the Fed, no banks can operate independently of the Fed. All banks hold a reserve balance at their regional Fed (some smaller banks may hold their reserves at a larger correspondent bank that passes them through to the Fed).
The thread we're talking about seems to lump the idea of fractional reserve banking and the Federal Reserve. I was just trying to make it clear that it's not necessary to lump them together. Yes, you need some sort of regulatory mechanism so that the banker isn't just loaning out money whether or not there are sufficient reserves. But that doesn't have to be the Fed.
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Old 10-18-2018, 01:19 PM
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If banks were rational they would just buy m0 with m1 and infinitely inflate the monetary base.

The only thing preventing banks from having infinite money is their own laziness and indifference.

Last edited by mustang19; 10-18-2018 at 01:21 PM.
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Old 10-18-2018, 01:29 PM
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That was a weird thread.



Base money is created by the government bank. So even if one private bank somehow monopolized all available reserves, that still wouldn't dictate "infinite money", given the ultimate limitation on base money that is not determined by them.
Yes it would. Because the mint replenishes consumer cash demand, so every time cash is withdrawn new money is created. So "consumers", meaning whoever participates in this scheme, can keep withdrawing and depositing in different banks indefinitely and the MB will continually increase. The only reason the world hasnt collapsed is that nobody has deliberately tried to withdraw and redeposit massive amounts of cash at separate banks.
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Old 10-18-2018, 01:34 PM
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I did not read the original thread, but I am trying to wrap my head around something that I previously read on the Dope. I remember a (conservative) poster on here trying to explain that when a bank makes a loan, it was not actually loaning out the depositor's money. What this poster said was that banks were actually creating wealth when they wrote a loan, because they just write a check to whomever the home is being bought from. The understanding I got about fractional reserve banking from this person was that a bank had no upper limit on the loans it could write, as long as it kept a fraction of the money (set by law) in reserve. (I guess this is similar to what the OP of the other thread was saying). So taking the bank that Little Nemo describes above, with a law of 3%, if a bank has $100 million in deposits, if they keep $3 million on hand, they can make $97 million in loans, but if they keep $30 million on hand, they can actually make $970 million in loans, and if they keep it all on hand, they could make $3.333 billion in loans. This is supported, kind of, by the "Money Multiplier" section of this wiki article. https://en.wikipedia.org/wiki/Fracti...eserve_banking. The graph basically shows that $100 in cash can generate $900 in "broad money" (M0?) in a 10% fractional reserve environment. Further down, there is a fictional balance sheet for a New Zealand bank that shows that indeed, assets cannot exceed liabilities, as Pleonast shows. So what is the wiki saying when it says that a $100 deposit can generate up to $900 "broad money"?
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Old 10-18-2018, 01:35 PM
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Example

Bank 1: $1 m0 and $10 m1
Bank 2: $1 m0 and $10 m1
Reserve requirement 10%

$1 m0 is withdrawn from bank 1. Mint replenished this.

It is now

Bank 1: $1 m0 and $9 m1
Bank 2: $1 m0 and $10 m1
"Consumer": $1 m0

Now Bank 1 issues more loans to top up m1.

Bank 1: $1 m0 and $10 m1
Bank 2: $1 m0 and $10 m1
"Consumer": $1 m0

Now consumer deposits in Bank 2.

Bank 1: $1 m0 and $10 m1
Bank 2: $2 m0 and $10 m1

Bank 2 can now create $20 of m1 and repeat infinitely.
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Old 10-18-2018, 01:37 PM
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The thread we're talking about seems to lump the idea of fractional reserve banking and the Federal Reserve. I was just trying to make it clear that it's not necessary to lump them together. Yes, you need some sort of regulatory mechanism so that the banker isn't just loaning out money whether or not there are sufficient reserves. But that doesn't have to be the Fed.
Um, not really, no. The concept of fractional reserve banking intrinsically involves a statutory requirement to hold a reserve at the central bank. Fractional reserve banking is not just a matter of ensuring that a bank stays solvent, it's also a mechanism by which the government (through the central bank) regulates money creation. One commercial bank could not (for example) just hold its fractional reserves as a deposit an another commercial bank, since that would be a circular process that would place no constraint on money creation. Reserve balances at the central bank are a different kind of money. Physical currency plus reserve balances at the central bank is the Monetary Base, the basis for the creation of other types of money. That's how Open Market Operations work, increasing or decreasing the money supply by increasing or decreasing banks' reserve balances at the Fed.
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Old 10-18-2018, 01:39 PM
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Um, not really, no. The concept of fractional reserve banking intrinsically involves a statutory requirement to hold a reserve at the central bank. Fractional reserve banking is not just a matter of ensuring that a bank stays solvent, it's also a mechanism by which the government (through the central bank) regulates money creation. One commercial bank could not (for example) just hold its fractional reserves as a deposit an another commercial bank, since that would be a circular process that would place no constraint on money creation. Reserve balances at the central bank are a different kind of money. Physical currency plus reserve balances at the central bank is the Monetary Base, the basis for the creation of other types of money. That's how Open Market Operations work, increasing or decreasing the money supply by increasing or decreasing banks' reserve balances at the Fed.
But fractional reserve banking does not limit money creation. Banks can just buy m0 forever and create exponentially more money.
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Old 10-18-2018, 01:44 PM
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But fractional reserve banking does not limit money creation. Banks can just buy m0 forever and create exponentially more money.
So, banks are not creating an infinite amount of money for themselves because they are just too lazy to do it?

"Sure, I COULD have an infinite amount of money, but I'm just to lazy to do it. Instead I'll risk my money by giving out loans that I hope will be paid back"

Something seems wrong to me about that line of reasoning.
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Old 10-18-2018, 01:44 PM
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Now Bank 1 issues more loans to top up m1.
As above, study up on double entry book-keeping. This part in particular doesn't work the way you think it does.
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Old 10-18-2018, 01:46 PM
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As above, study up on double entry book-keeping. This part in particular doesn't work the way you think it does.
But that part doesnt matter. Bank 1 can be a shell company that keeps crashing and being re established to feed money into bank 2.
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Old 10-18-2018, 01:51 PM
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But fractional reserve banking does not limit money creation. Banks can just buy m0 forever and create exponentially more money.
Take a step back from the issue for a moment.

When you have a mental model for how something works, and it implies some apparently crazy thing, but that crazy thing is not actually happening, what should you conclude?

Ok, I won't keep it a secret. You should conclude that your mental model for how that thing works probably includes some fundamental misconception.

The post by Hellestal above is a good starting point. Have you read it?
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Old 10-18-2018, 01:53 PM
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Take a step back from the issue for a moment.

When you have a mental model for how something works, and it implies some apparently crazy thing, but that crazy thing is not actually happening, what should you conclude?

Ok, I won't keep it a secret. You should conclude that your mental model for how that thing works probably includes some fundamental misconception.

The post by Hellestal above is a good starting point. Have you read it?
I did and explained why it was wrong.
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Old 10-18-2018, 01:54 PM
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But that part doesnt matter.
You say the $1 is "replenished". But that creates a liability.

They have $11 and also $1 in debt they took on to "replenish" their supply. That part doesn't just come out of thin air, i.e. the Fed will send them $1 in physical cash, but it'll cost the bank $1 to get it. Again, study up on double entry.

ETA: And if the bank doesn't have enough in reserve at the Fed, they're not getting any physical cash from them for that purpose. They'll have to take out a loan to get that dollar bill from elsewhere.

Last edited by Great Antibob; 10-18-2018 at 01:56 PM.
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Old 10-18-2018, 01:55 PM
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You say the $1 is "replenished". But that creates a liability.

They have $11 and also $1 in debt they took on to "replenish" their supply. That part doesn't just come out of thin air, i.e. the Fed will send them $1 in physical cash, but it'll cost the bank $1 to get it. Again, study up on double entry.
Yes all the Bank 1 shell entities would collapse and be re established. Insolvency doesnt matter as long as bank 2 survives.
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Old 10-18-2018, 01:57 PM
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Yes all the Bank 1 shell entities would collapse and be re established. Insolvency doesnt matter as long as bank 2 survives.
They collapse but they still have liabilities on the books. You keep ignoring that part.

Those liabilities will have to be eaten by somebody - either with the remaining assets of Bank 1 or whoever loaned them the money. Bank 1 can't just 'keep' collapsing. That money appears as debits/credits on somebody else's ledger. In the end, it all balances out.

ETA: so, yeah, I guess this is a way for Bank 2 to make some dirty money (not infinite but some) but at the cost of somebody else losing their shirt. It's not coming out of thin air.

Last edited by Great Antibob; 10-18-2018 at 01:59 PM.
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Old 10-18-2018, 01:58 PM
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Originally Posted by mustang19 View Post
I did and explained why it was wrong.
Again, given that the crazy thing that you hypothesize is not actually happening, which is more likely:

(a) you don't understand this very well;

(b) everybody else (including all economists, and every central bank since the 17th century) don't understand this very well, and no bank has ever spotted the loophole.

Until you stop blustering, accept the basic logical conclusion that (a) is most likely correct and adopt a more reasonable attitude, nobody is going to be much included to help you.

Last edited by Riemann; 10-18-2018 at 01:59 PM.
  #34  
Old 10-18-2018, 01:58 PM
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They collapse but they still have liabilities on the books. You keep ignoring that part.

Those liabilities will have to be eaten by somebody - either with the remaining assets of Bank 1 or whoever loaned them the money. Bank 1 can't just 'keep' collapsing. That money appears as debits/credits on somebody else's ledger. In the end, it all balances out.
Its not the same Bank, its just different shells that keep being created by "consumers" using their fdic money from the collapses.
  #35  
Old 10-18-2018, 01:59 PM
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So, banks are not creating an infinite amount of money for themselves because they are just too lazy to do it?

"Sure, I COULD have an infinite amount of money, but I'm just to lazy to do it. Instead I'll risk my money by giving out loans that I hope will be paid back"

Something seems wrong to me about that line of reasoning.
And it's every single bank in the country that's too lazy to do a little trading and produce infinite income. There's not a single executive at any bank in the country who's willing to get up off his ass and make himself fabulously wealthy. Seems like there's a big opportunity for mustang19 to get himself a job at a bank and take over the world's finances.
  #36  
Old 10-18-2018, 02:00 PM
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And it's every single bank in the country that's too lazy to do a little trading and produce infinite income. There's not a single executive at any bank in the country who's willing to get up off his ass and make himself fabulously wealthy. Seems like there's a big opportunity for mustang19 to get himself a job at a bank and take over the world's finances.
Exactly I will.
  #37  
Old 10-18-2018, 02:02 PM
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Step one - get an executive level job at a bank. Just show then your plan.
  #38  
Old 10-18-2018, 02:02 PM
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Its not the same Bank, its just different shells that keep being created by "consumers" using their fdic money from the collapses.
If you think the world works this way - start your own bank, and get rich!
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Old 10-18-2018, 02:02 PM
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Step one - get an executive level job at a bank. Just show then your plan.
They would have the same excuses you do.
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Old 10-18-2018, 02:04 PM
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If you think the world works this way - start your own bank, and get rich!
I will.
  #41  
Old 10-18-2018, 02:04 PM
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Its not the same Bank, its just different shells that keep being created by "consumers" using their fdic money from the collapses.
It doesn't really matter. You keep ignoring the liabilities. Even if they're different shell companies, the liabilities from each are on the books somewhere, perhaps a lot of somewheres.

At some point, Bank 1 (whichever iteration it's on) can't actually get anymore money because nobody else has sufficient in reserve to give them a physical dollar anymore or are unwilling to do so. Meanwhile, there are a ton of people who have simply lost their money because of the Bank 1 (all iterations combined) collapses. And the Fed isn't going to send cash for no reason.

That's assuming that anybody is willing to loan that dollar to Bank 1 anymore. People aren't infinitely gullible, and Bank 1 can't just ask the Fed for more money (that's the purpose of the reserve requirements - they aren't just going to send cash every time you ask). They have to get it from somebody else and there is nowhere else at some point.

That's another point that appears to be missing. You assume the Fed is just going to keep sending cash. Why do you assume this? They will only do so up to a point.

Last edited by Great Antibob; 10-18-2018 at 02:07 PM.
  #42  
Old 10-18-2018, 02:04 PM
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They would have the same excuses you do.
That banking doesn't work even remotely as you've described? Yes, I believe they would.
  #43  
Old 10-18-2018, 02:05 PM
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A serious question, mustang - what's your view on the Sovereign Citizen movement?
  #44  
Old 10-18-2018, 02:06 PM
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It doesn't really matter. You keep ignoring the liabilities. Even if they're different shell companies, the liabilities from each are on the books somewhere, perhaps a lot of somewheres.

At some point, Bank 1 (whichever iteration it's on) can't actually get anymore money because nobody else has sufficient in reserve to give them a physical dollar anymore because it's all been hoovered by Bank 2. Meanwhile, there are a ton of people who have simply lost their money because of the Bank 1 (all iterations combined) collapses.
No they havent because of fdic. Nobody loses money except the Bank 1 shell company which never mattered anyway except as a cash source.
  #45  
Old 10-18-2018, 02:06 PM
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Exactly I will.
Please do. A few years from now, I look forward to reading your book about how you accomplished this feat.

(wanders away while not hold my breath and wondering what the normal people are doing)
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  #46  
Old 10-18-2018, 02:07 PM
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A serious question, mustang - what's your view on the Sovereign Citizen movement?
Sovereign Citizens are Fascists
  #47  
Old 10-18-2018, 02:09 PM
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If you think the world works this way - start your own bank, and get rich!
And then invest the money in a perpetual motion machine!
  #48  
Old 10-18-2018, 02:09 PM
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No they havent because of fdic. Nobody loses money except the Bank 1 shell company which never mattered anyway except as a cash source.
FDIC is insurance. That's paid for by the banks. It's not coming out of thin air.

And those "loans" that Bank 1 sent out are also assets. Again, you are ignoring the liabilities. They keep loaning money but you never show it on your ledger.

Last edited by Great Antibob; 10-18-2018 at 02:12 PM.
  #49  
Old 10-18-2018, 02:09 PM
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Sovereign Citizens are Fascists
Setting aside their politics, do you think their legal reasoning is sound?

Last edited by Riemann; 10-18-2018 at 02:10 PM.
  #50  
Old 10-18-2018, 02:11 PM
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I will.
Cool! Let us know how it goes.

Before you do, you might want to read this.
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