I know nothing about the monetary system of the United States but this sounds a bit far fetched to me. These videos are a little lengthy but very interesting in what they say. Are there any of you here that understand this and agrees this is how it works? It’s almost like a propaganda film.
It’s a fifteen-minute video and is only part one of four. Do you care enough to summarize it here?
Thread title edited to indicate subject.
Colibri
General Questions Moderator
Very farfetched.
The only alternative to fractional reserve is full reserve - an idea no one takes seriously anymore.
No need to watch the whole Youtube. The creator puts its website URL at the beginning, which leads immediately to:
With a few more clicks, you’ll find this organization believes vaccines are poisons, the 9-11 attack was by the U.S. itself, etc.
Learning about the money supply from this Youtube would be … Pitworthy.
The section where it explains how money is created makes the same strange assumption that all of these Zionist conspiracy theorist videos make: money is never withdrawn from a bank.
They show an example where, for some bizarre reason, the Federal Government borrows $10 billion from the Federal Reserve and then just deposits it in a commercial bank account and lets it sit there, untouched. Then the bank makes loans to several generations of borrowers who are also satisfied with taking the loan money, depositing it in their checking accounts at the same bank, and letting it sit. They never explain why people borrow money just to let it sit in their checking accounts.
This is a condensed version of another video where they do actually show a borrower writing a check against their checking account which gets deposited at another bank. The longer version makes the flawed assertion that the bank against which the check was written does not need to transfer any of its assets (“reserves”) to the bank which accepts the check for deposit.
The video certainly has an agenda and is at times misleading, but it does not appear to be outright wrong. Is there anything particular that seems far fetched to you?
Its far fetches that there is a point to watching the video, if no point to the video could so far be provided.
The entire banking system is a confidence game - in the real meaning of the word confidence. A bank accepts a cheque from another bank, accepting that there is enough money to pay them; once all the numbers are reconciled, the confidence is there that Bank A will remti to Bank B the diffference. the Fed has the confidence that the banks are sufficiently balanced that if Bank A finds itself temporarily short of assets to reconcile, it will draw on a loan from the central bank to cover any differences.
What happened in 2008 was that so many banks had so much in bad debt (mortgages, bundled mortgage backed bonds, etc.) and there was no confidence that these were worth anything, no confidence that the banks holding them had the assets to even cover the daily cheque cashing from other branches, etc. - eventually the whole system threatened to grind to a halt.
Does the banking system encourage an increase in the money supply? Of course! If the feds see the expansion being too fast, it threatens to create a bubble or inflation, they raise interest rates. Heck, your limit on your credit card is the equivalent, sort of, of a loan sitting in the bank. A loan is just taking money from the future for a cost (interest) to spend it now.
IANAE (Economist) and I suspect the people making all these claims have limited experience too. The concept of loaning a percentage of deposits, overcommitting, and how it relates to the economy and interest rates - has been studied to death, and all implications well documented by the experts in the field. You can make a solid case that the 2008 failure wa a result of too little regulation (and outright fraud) not nanny state manipulation.
Of course, whenever a web site mentions “nanny state” you know it’s someone who has not considered minor details like typhoid, tuberculosis, or e coli… Or details like consumer protection laws, food safety laws, or child product safety laws, or laws about fencing swimming pools, or laws about truth in labelling and advertising… We take the nanny state so much for granted that we forget why all those “smothering” rules were put in place.
Not just the banking system, but money itself is a confidence game. When you accept a $20 bill in return for something of value, you have confidence that others will be willing to accept the same bill tomorrow for something of the same value.
Society itself is a confidence game. People operate within the constructs of society because they have confidence that others will follow the rules agreed upon by society. Actually got into a pretty interesting discussion last week about cooperation and how it pretty much dictates society whether we like it or not.
Yes, ultimately people follow rules based on the liklihood of getting caught if they break them, and the consequences.
But for the OP - there’s a big difference between the banks (or credit card companies) where they can loan greater than the amount on hand, based on the confidence of others that the bank can make good on any obligations.
Then there’s the national central bank, which not only can lend however much money the government wants, but can create money (and print it) and the limit is the ability and desire to expand or constrict the money supply - with its won consequences.
Agreed. I was just being a bit snarky about the “confidence game” comment. Fractional reserve banking does rely on consumer confidence but to keep runs at bay, the FDIC insurance is the main reason for the “confidence” - which is government-backed and not bank-backed.
I won’t argue that the concept of fiat money is entirely a confidence game and paper money are essentially IOUs but have evolved to the point where it’s just “money” and we’ve all completely bought into the concept of representative value. Convenient.
It should also be said that controlling the money supply should be viewed more as a tool and not a power. What I mean is that a tightrope walker doesn’t have the POWER of a balance-stick but uses the stick as a tool. The same is with the government. It doesn’t have the POWER of printing money but rather fine tunes the money it prints as to best influence inflation and purchasing power.