I don’t know anything about legal judgments and regulations thereof, so I couldn’t say.
ETA: What would the judgment be, exactly? B owes A, not the other way around.
The judgment would cause A to owe B because of annoying text messages etc
This is true. The whole banking system depends on most debt eventually being paid off. When there is a lot of bad debt in the system, there are serious consequences.
This is not true. Again, the bank must have money in order to lend it. It cannot lend out more until either that money is paid back or it gets deposits from elsewhere.
As for the current 0% reserve limit, there are still going to be natural effects limiting the amplification. Cash that’s sitting in a wallet, or cash register, or under a mattress isn’t available for lending.
Not sure that checks out, as Bank B would have to prove at least $10 worth of damages to secure a $10 judgment, but again, that’s not my area.
None of that seems new or correct
Judgments are pretty much arbitrary think the $1m for spilling coffee at mcdonalds etc. Especially in finance theres huge potential for dumb judgmenets.
H
And no the bank doesn’t need enough money to lend that’s the point of fractional reserves. Even if it loses $1 it still created $10 of free money for someone else and the associated liabilities are killed by lawsuits.
Can you please start providing cites for these outlandish claims? Thanks!
Also, don’t you think that if a bank could create infinite money, some evil banker would already be a quadrillionaire? It seems like the non-existence of practically infinite money is an argument against your claims.
If anything, finance would lend itself to less ambiguity, as damages would be purely financial, not pain and suffering and the like.
The reserve is the portion of deposits that must be kept on hand to pay out withdrawals. 90% reserve means you can lend $9 of every $10 deposited, not that you can lend $90 for every $10 deposited.
This is literally hyperinflation. Its probably happening now.
None of that seems to help. I don’t think you see the problem. Since factional resevere systems are based on creating money from debt, then any debt, not just lending, will create money by killing opposing debt and freeing infinite free money.
That is one possible explanation.
Here’s how lending creates money:
April deposits $100 at Bank A. Bank A uses April’s money to lend $90 to Bob. Bob now has $90, but April still has a $100 balance at Bank A. $100 has turned into $190.
Here’s where your model is breaking down:
Say April deposits $100 into Bank A. Bank A uses April’s money to lend $90 to Bank B. Bank A now has both an asset - the loan to Bank B - and a liability - April’s $100 balance. If Bank A goes under, its assets - including the loan to Bank B - are used to pay its liabilities - including April’s deposit balance. If there’s a shortfall, FDIC kicks in. You see, the asset and the liability can’t be decoupled to allow Bank A to gift Bank B $90 and then have the loan disappear.
The projected inflation rate for 2020 is 0.62%. In what way, shape, or form is that hyperinflation???
It’s fascinating that you’ve been corrected - quite rightly - by everyone in this thread, yet you repeat the same false claim over and over as if that somehow will make it true.
We see this kind of behavior often, from moon hoaxers to birthers to anti-vaxxers. Not company you should want to be compared to. If you have an actual argument to make and want to be taken seriously, my advice is that you provide facts and realistic scenarios and cites and substantive answers to the points that other posters have made.
Its pretty simple to understand, B gets a legal judgment and wipes out their liabilities. How does this not lead to free money.
Food shortages, empty shelves, rising prices etc. The cpi is only for crap things, food prices are growing several percent a month.
Food prices are included in the market basket used to calculate the CPI.
For twenty years I worked with the US Treasury. My purview was anti-money laundering. However, of course we examined banks, credit unions and what not to make sure they were following the AML laws, Patriot Act, OFAC, etc.
Not only have I never seen what the Op talks about, but I have never even heard of it. If, indeed, it is such a huge “flaw”, then of course the OP can point to dozens of examples where it happened?
AskReddit,
You say that the flaw must be rectified. What do you envision as the appropriate way to rectify this flaw?
So Bank A (I guess) intentionally commits a tort against Bank B, Bank B sues and collects a judgment without actually proving damages, and/or depends on a punitive damage award. I don’t know why you’d even have the step of issuing a loan first, since B could just collect the judgment in cash from A. A then either goes under and its depositors are bailed out by FDIC, or pays the cost with its insurance policy, or absorbs the loss.
This is only “free money” in the sense that any fraudulent lawsuit with no damages or risk is “free money”. It really has nothing to do the financial system. If I work at McDonald’s corporate, I could conspire with someone at a cattle company to induce a tort and hope for a big punitive award. The cost of the “free” money is borne by the cattle company, their shareholders, or their insurance company.