America will pay a fortune to the elderly, mostly for health care entitlements. The obvious solution to is to euthanize everyone over 65. You had a good run Boomers, but it’s time for the new generation to screw up the country.
The second sentence here is true. It’s a “liability” you can’t collect on.
The first sentence is clearly false, as is demonstrated daily. I can buy food with green paper. I can purchase gasoline for my vehicle. I can watch a movie. The paper is valuable. It is accepted for tangible goods and services precisely because it is valuable. You seem to be upset that the paper is valuable, to the point that you deny its value and call it “worthless” despite countless transactions that happen literally every single day. But your personal discomfort is not the ultimate arbiter of the paper’s value. Tangible exchanges in the real world demonstrate the value, and your wounded feelings and ideology are not relevant to that.
“Fraud” is a legal term. It’s based on deceit. You don’t have to believe me on this, you can ask a law-talking-person.
If you got your way and fractional-reserve banking were nixed, then it would not be illegal because of fraud. It would be illegal because of strict government regulation. I can’t buy and sell plutonium on the open market, not because the market for fissile material is necessary fraudulent – I might have the real goods – but because the government has deemed that even a non-fraudulent transaction is detrimental to the public welfare. You want something similar to happen with banking, but you don’t have the requisite vocabulary to talk about that issue, so you are relying on the inaccurate word “fraud” as a crutch. It is not a credit to your argument that you can’t even describe your own views accurately in standard English.
You want “full reserve” banking. Which is the pretty much the same as saying that you want government banks, or their equivalent. Every “full reserve” bank in history has been a government institution. You are an advocate of fierce government regulation.
One day, you might even realize that.
China is going to be the end of the Great Keynesian Experiment for us but not by cancelling the credit card.
They will simply make use of;
A) the massive gold reserves they have been superstitiously amassing.
B) the SWIFT settlement desk they and Russia have created (off the US Dollar).
C) the new gold spot establishment system that will end the manipulation of the bullion banks and allow price discovery based on market values.
D) the new higher valuation of gold (perhaps 2X - 5X current spot) to put the Yuan on the gold standard.
At that point the US Dollar will become worthless.
The new gold valuation system starts in 9 days . . .
Wait, what? No. I’m sorry, this is completely loony. You’re suggesting that the Chinese will deliberately destroy the world economy in order to put the yuan on the gold standard. You’re suggesting that the full faith and credit–and productivity and capital–of the US will become valueless overnight because of the gold market.
Yeahno.
At least this time there’s a short time frame. Apparently 9 days.
I’m not sure I want to hear the gnashing of teeth when the foretold global economic collapse fails to occur next week or the week after. Nor the conspiracy theories on just why it failed to occur despite gold being a natural <mumble, mumble, mumble, incomprehensible pseudo-economic talk>.
ETA: Incidentally, that article says nothing about China going on the gold standard or even the remote implication of it. That appears to be added commentary by Abatis. I’d love to know if there’s any actual evidence China is even contemplating such a foolish course of action. And if they do, I’d like to be on the ground floor to take advantage of the suckers.
Buy gold now for only $1150 per ounce and it will be worth $2000 to $5000 by the end of March. Guaranteed.
(If gold fails to rise you can be pretty sure more Illuminati mischief is to blame. Or Benghazi or something.)
The 9 day window is what’s left for the bullion banks to have full rein over the paper gold market giving them the ability to drive price down with naked shorts.
***IF ***China and the other seats on the new gold fix exchange do not end the paper fraud, gold is going to continue to fall with the yen. They have been attached at the hip for years. Back in November a big break happened as the physical market was stressing trying to deliver at the paper price (London GOFO was the most negative since 2001).
Without a forced reset to actual market value and with the yen’s continuing fall, paper gold will be traded right with the yen by the algos until the GOFO goes way negative again . . . Problem is, only a few will really see that coming; the LBMA conveniently stopped publishing GOFO six weeks ago. For most of us, in an unmitigated paper / physical crisis like that, we will see paper gold close at 900 and in the morning it will be 2500 . . . with no place to buy physical at any price.
China, once it possesses the ability to force the end of the open short price destruction, will certainly do it. There is no reason for China to allow the value of its physical gold to be set by the NY COMEX algo driven / naked short price fraud.
Well, I’m glad you have presented a testable proposition, though I will note that March 20 is a Friday. It’ll be a few mornings later that the result will be seen.
In any case, I do look forward to checking the news on Monday, March 23 and seeing that gold prices have not spiked and the Illuminati still reigns supreme.
Hellestal, I think your problem is that you don’t read enough of the gold buggery conspiracy websites to understand the misunderstanding.
A lot of folks are confused about how banking works, and the gold buggers feed that confusion. They think fractional reserve banking means that a bank with $10 (in a 10% fractional reserve environment) can lend out $100 without the intervening step of borrowing the other $90 from depositors or other lenders.
Banks create money in one sense in that they can lend real money by borrowing money from its depositors and giving the depositor an IOU for their money but they need depositors to deposit money with them (or they need to borrow money from some other source) before they can lend it. So the depositor has a $100 in its bank account and the borrower has $100 in their. However the borrower ALSO has a $100 debt and the net assets in existence have not changed one bit. Yes, banks create money in a sense, but they don’t create it out of thin air.
I am just as capable as a bank of borrowing money from you and then lending it to a third party for a spread. I would probably not attract a lot of depositors.
No the real reason for the FDIC is because banking relies on the public confidence in banks to prevents runs on the bank. Haven’t you ever seen its a wonderful life? Under what form of banking does a bank have the ability to redeem all outstanding obligations and deposits while still running a business?
And wtf do you think happens today? Do you think the bank just creates some book entries and lends me money that it didn’t have to borrow or raise in some other way first?
Monetary policy might be the single most important factor that got us out of our most recent recession. I think a lot of people hanker after the good old days (back when recessions came almost every ten years and banking crises came almost as frequently as that.
But, it doesn’t. Hyperinflation does happen sometimes, but nothing in the nature of fiat currency makes it inevitable. Economic history bears this out.
No, sometimes paper money’s value against precious metals goes up. That depends on a lot of factors, including the supply of the metals, which can be devalued by a big gold-strike or silver-strike. Furthermore, inflation, if at a moderate rate, is not always a bad thing economically; it’s deflation you gotta watch for, that’s a symptom of depression.
Here are some facts with which you need to acquaint yourself.
Inflation does not “demean the value of labor,” that phrase being phrased in moralistic rather than economic terms.
:rolleyes: And here are some more.
A venture capitalist writing an IOU for money he has is not creating money? Actually he is, if that IOU can be treated as money.
You are confused about banking and credit, and think they are something different.
A bank with $10 in assets cannot lend out $100. Agree or disagree? A bank with $100 in assets can lend out $100, or if we require them to keep a reserve in cash, they can lend out $90.
A bank absolutely cannot, in America in 2015, lend out $100 if they have only $10 in assets. You’re confused about this. They can lend out only what assets they have. You’re concerned that the money a bank lends (their assets) is illiquid–they can’t call in the money they lend out immediately, but the money on deposit (their liabilities) is liquid, that is, the depositors can demand their money immediately. And this is true.
But nowadays we require them to get deposit insurance. So if a bank’s depositors demanded their money en masse, and the bank couldn’t sell off their assets fast enough to pay off the creditors, the depositors would get paid out from deposit insurance, and then the bankruptcy lawyers would pick over the bank’s corpse and decide what parts get sold off to what other banks to wind down the bank.
This is the important part that goldbugs (and silverbugs like yourself) can never seem to understand. A bank’s balance sheet has to balance. A depositor puts $1 in the bank. That gives the bank a $1 asset, but a $1 liability. The bank is no better off than before.
Suppose you’re broke, and I lend you a dollar. You have a dollar asset now, but you’ve also got a dollar liablity because now you owe me a dollar, so you started with nothing and what you’ve got still adds up to nothing. You’re going to buy food with it, but then your even more broke friend comes along and asks you to lend him a dollar. Well, you’ve got the dollar I lent you, so you lend him the dollar. Now you don’t have the dollar, but you’ve got an asset of $1, because your broke-ass friend owes you a dollar. You’re still at zero, just like before. You owe me a dollar, your friend owes you a dollar, you’re still at zero.
Guess what, you’re a bank! Because this is exactly how banks operate. Everybody has the same net worth as before. Only the funny thing is, despite the fact that me, you and your friend have the same net worth as before, there’s more money than there was before. Huh? I thought I said everything was the same as before? Except I have an account with you that says I can get a dollar from you. And your friend has a dollar. If I can treat your IOU as money, then now there are two dollars in the world. Like, if I went to the store, showed them the IOU you wrote, and told them “Joe owes me a dollar, so I’ll just give you this note that says he owes a dollar, and take this loaf of bread that costs a dollar”. If the store is fine with that, then that IOU is money worth a dollar. Just by borrowing a dollar from me and lending a dollar you’ve created a dollar.
That is, as long as that IOU really can be taken to the store and used as money. In real life it sometimes can be, other times it cannot be. I really can write a check at lots of stores, which really is a way of telling the store that my bank has some of my money, but the bank will hand it over. Other places might not take my check, like if I stopped at Joe’s Bar, where they take only silver coins. So the bank’s IOU isn’t quite as good as cash money for some purposes, but for other purposes it’s better. I can pay my bills online from my checking account, but I can’t do that with banknotes. And since I know I could convert my IOU from the bank to paper money, I don’t worry about the fact that the IOU isn’t actual paper money in my hand.
Now, as for your complaint that you can’t convert your government fiat paper to “real money”, I don’t get it. You can covert your government fiat paper to any sort of silver or gold. Note that back when we were on the so-called “gold standard” it was illegal to buy gold coins! Your complaint is that people won’t accept your gold or silver coins, and prefer the worthless government wastepaper.
But so what? Who says other people have to accept what you call money? In lots of places whiskey, cacao beans, cigarettes, giant stone wheels, cowrie shells, cattle, cloth, gold and silver has been used as money. But if you only take silver coins at your establishment, and a Maasai warrior walks into your bar and offers to pay in cows, and a priest comes in and offers to pay in holy water, and a German POW comes in and offers to pay in cigarettes, you’re free to tell them to get bent. But they sputter back “In my country, cows/holy water/cigarettes are real money!” Still doesn’t matter. You don’t have to take cigarettes in payment. The problem that other people don’t agree with you about what constitutes “real money” is not our problem, it’s your problem.
Your worries about things like inflation and fraud don’t have to affect you, you don’t have to experience the crippling inflation the rest of us do, just trade your dollars for silver bullion, and you’ve beat inflation, 100 years from now an ounce of silver will still be an ounce of silver. You don’t have to keep your assets in a bank. Yes, you do have to convert your silver to government fiat money to pay your taxes. So what, you buy paper money at the spot value on the day you pay your taxes, and don’t worry about it. You should come out ahead because the value of paper is falling all the time, right? If holding paper money is like holding a melting ice cube, then don’t hold paper money or assets denominated in dollars or euros, hold physical durable goods like silver or gold or pork bellies or orange juice. The fact that the dollar denominated value of those goods goes up or down shouldn’t bother you.
Well yeah they did, the moral hazard in this case is theirs. Deposit insurance removes from them the risk of bank failure. They no longer care whether the bank is stable or not before loaning the bank their money.
Please note that it’s little banks that got killed and their assets bought up by larger banks. Typically the FDIC will cover any shortfall after selling off the assets to a larger bank. It’s not a moral hazard that the bank buying the assets doesn’t have to make the depositors whole?
I think you’re agreeing that too big to fail is a moral hazard, correct?
You see this is why I don’t post that often here! You open up another can of worms in re what the government does with regard to banks. You seem to think any laws that deregulate the banks come from the government! No they come from the banks. The banks basically own our government. I would hope you noticed how the teeth have been pulled from the Dodd Frank act? The banks already loosening all the regulations and are reducing loan requirements again, which is why predict a housing bubble pop in 2019 or 2020. They’re pretty regular things when you look at the history because the same thing happens. The bubble pops, regulations are put into place, the banks chip away the regulations, we have another bubble, the bubble pops…
Rinse and repeat.
Did you ever hear that at one time people actually saved for things? I live in the Northeast US. There are a lot of convenience stores that owned by Indian immigrants. Do you know how they bought those stores? Their families in India pooled their savings and sent them to this country to start a business. That’s how you can do it without banks creating money.
But I can tell by your post that you’re one of the people who thinks rich people create jobs when they really don’t. It’s consumer demand, and only consumer demand that creates jobs. In case you didn’t know, one of the first things you do when formulating a business plan is to gauge consumer demand for your product or service. This hopefully keeps the complete idiots from forming a snow removal company in Naples, Florida.
Oh yeah I know this is like a month late, I’ve been busy. But this is what’s great about message boards! You pick up a conversation six months later.
I put your note that you’re going to pay me back $10,000 +5% interest on the assets side of the ledger and the $10,000 that I loaned you on the liabilities side of the ledger.
BALANCED!
Oh yeah, I need to have some reserves for that $10,000 I created, at most 10%. Hey I know! I’ll take $1000 out of my pocket and deposit it in my own bank!
You know why banks will give you a better interest rate if you buy points on your mortgage? Because they can use the points you paid as the reserve for the money they created to buy your house.
One of those ounces of silver better be my tip!
You must be an economist. Economists come up with silly examples like: you as a banker spending your deposits in my bar. Banks use deposits as reserves for their liabilities, liabilities like your deposit and the money they create when they classify your loan as an asset and the money that went to buy your car as a liability.
The banker’s nightmare!
Many loans can be called immediately. Even if you missed one payment years ago on your mortgage it can be accelerated and you can be foreclosed.
And don’t forget the granddaddy of moral hazard, that good old lender of last resort, the Federal Reserve! I wish I could borrow money at 0 to .25% to pay my creditors.
Whatever. Except the real problem is not “Sunshine Bank of Pensecola”, whatever made up local bank you want to name, but those too big to fail banks that really run our money system by the overwhelming ownership of the most powerful regional bank, the New York Fed. And those banks are too big to fail. And we as taxpayers actually support their squeezing profits out of us.
Oh alas! Where, oh where is the rational center? America has a powerful upper-class intent on devising more and more ways to steal from the poor and give to the rich, and nearly half the electorate is gullible to vote their way.
But as a counterweight to that group we have Americans mesmerized by gold-bug Youtubes, who are pretty sure the New World Order and the Rothschild family have hidden all the gold and filled Fort Knox with paper.
I had hopes for Occupy Wall Street … but it turned into a dismal game of Who can Out-Lunatic the previous Guy.
The modern industrial world would not exist without fractional-reserve banking. I recommend this documentary – it’ll take less than 4 minutes.
[1] Yes. The way forward is to elect intelligent good-spirited politicians like Elizabeth Warren, not to reinvent novel economics and finance.
[2] It took them longer to start their business than if they’d borrowed. And if they earned interest on their savings they were participating in banking anyway.
[3] Although his PhD is in computer science, Voyager is a progressive liberal and understands economics much better than you.
[4] No problem about the delay: quality is better than quantity. Next time wait 2 or 3 months if it helps.
Wow, thread back from the dead.
At least we saw the outcome of this experiment:
I’ll note that the US dollar hasn’t collapsed, gold hasn’t doubled, and there’s no signs of China moving towards any metal based standard.
Not that we needed another, but there’s a clear goldbug prediction that failed to materialize.
For the sake of posterity, I’ll provide a chart of recent gold price movements, with March 19, 2015 highlighted. There was no data for March 20th - the next data date was March 22.
Chart: http://wm40.inbox.com/thumbs/83_130b3b_d1f4a778_oG.gif.thumb
It’s hard to see that anything special occurred at that time. Gold prices went up then down then up, and not by a lot.
Source: http://www.goldprice.org/
Incidentally, gold was last below $900 in 2009. Recently it has been in the $1100-1300 range. I would expect it to be below $1200 (current approx price) when the Fed funds rate hits 3.5%.
You seem unclear on this concept. First, banks might have been stable when depositors put in their money. Are you suggesting they check up every month?
Second, during the Depression many stable banks became unstable because of irrational panics. What are depositors supposed to do about that?
Third, you think the instability of the banks that failed due to deregulation during Republican rule is obvious? The problem often is bad loans. Exactly how is your average depositor supposed to figure that out? Or have time to do it? Or get access to the books?
Why should their investors have to make good someone else’s mistakes? Why would a bank every agree to buy another one in that case. During the recent crash the Fed put pressure on some investment houses to take over other ones - and they are now responsible for some of the sins of those banks. It will probably be harder next time.
Yeah, letting them make bets with the downside covered by the government is the true moral hazard. Bringing the whole economy down to show them a lesson is not a good solution. Making them have more capital reserves is a better one, breaking them up so they are no longer to big to fail is even better.
Now you’re talking. I gave money to Elizabeth Warren, you should too. She’s about the only person in Congress to stand up to the banks.
Rinse and repeat.
Are you okay? You suddenly turned progressive halfway through your post!
My point was that it is hard for people to save when they have been kept on low wages for decades and can barely make it. I’m lucky enough to have enough to save, and I’m not worried one bit about having enough money to retire one.
When I was in elementary school the local bank had a program where kids - 2nd graders - could start a savings account and put in a quarter a week. No such thing when my kids were in school. The banks would probably charge them $1 a week for the privilege. Open an account, lately? The presumption seems to be that anyone wanting to open an account is a drug dealer at best or terrorist at worst, opening the account only to launder money. Jeez.
BTW, search for my posts. I’ve challenged people who thing giving the rich more money will create jobs. You are right - consumption creates jobs, with the proviso that innovation can create consumption (and thus jobs) where there were none before.
Unfortunately for us, said dollars are created only from debt.
You made the point anyhow, that the Federal Reserve doesn’t like competition.
Strip away the government legal tender laws and what do you have?
A worthless piece of paper.
Calling a loan to a bank a “deposit” is pretty deceitful if you ask me. Also, as we all know, constant growth in a finite environment is not possible. A system that requires constant growth to survive is a deceit. It’s a slow motion ponzi scheme.
“Government regulation” is what created the beast known as the Federal Reserve. I advocate private full reserve banks, not government run. The government should only be in the business of coining money and spending it into the economy.