Yes they shaved it away, and you grew it back like a beard down below.
And why can’t they just keep reserves accumulated at Christmas and use them to manufacture the toys in July, rather than borrowing? I I call not putting your reserves in short term paper for six months and then borrowing your cost of goods that interest a bad business practice.
Here’s where you went back to the textbook version. If you look at the Federal Reserve website, you’ll see the only transaction accounts have any kind of reserves, and only then it tops out at 10% on accounts over $135 million dollars. (don’t quote me on that figure though!) In other words, there is no reserve. Banks are pretty much free to loan out as much as they want and as long as those debts are being serviced faithfully, the banks are fine. But if there is a rash of missed payments, the small and medium-sized banks get taken over by bigger banks and the big banks put their hands in our pockets for a bailout.
How often does it have to happen before we collectively get a clue?
The alternative is something that’s been successful for thousands of years. It’s commodity money. Through history, the most successful commodity monies have been, of course, precious metals. When the US was on the bi-metal standard we had close to zero inflation for hundred and 50 years. Then the Federal Reserve was created, and the dollar has lost 97% of its value in 100 years.
Is it obvious that fiat paper money eventually returns to its intrinsic value, zero?
Of course they’re difficult to pass, because the bankers own the politicians.
Did you see the latest? The banks give big bonuses to their executives that leave to go work for the government. I think that’s just a little bit of a conflict of interest, don’t you?
What I’m suggesting basically is we take the money creation power away from private for-profit institutions and give it back to the people, to which it constitutionally belongs. please note that the Constitution gives Congress the power to coin money and regulate its value. It’s almost like money was something that already existed at all Congress was to do was to put it in coin form. Did you ever hear of “free silver coinage”?
Money should be something of value, that takes labor to produce. Money creation should be subject to the same law of supply and demand that everything else in the economy is. That’s what we had for 150 years before The Crime of 1913.
Since this is the Straight Dope, I figured I’d link to this Cecil article. You should read through it and then rethink what you are suggesting. The reason we went with the current system was because under the old system the economy tended to fluctuate wildly, and it was pretty much a disaster.
As for why we don’t go back to a gold or silver (or some other precious metals) standard, that’s another discussion, but to summarize…it would be a very bad idea.
I’m sorry, I don’t know how you can call not liking the fact that privately owned institutions are given the privilege of creating money willy-nilly at interest, “fringy”. Why is it okay for you that when the banks feel like lending to all comers, housing prices go up, and when they suddenly get conservative, housing prices go down? Why do you want private for-profit institutions to have that power over your financial life?
Actually fractional reserve banking got its start with I believe the bank of Venice back in the 16th century. I believe greenbacks began circulation in 1863. But yes I would rather have a government printed unbacked interest-free currency than debt-backed private bank debt as my medium of exchange.
I’m enjoying the exchange, Measure. I think I can teach you something. LOL
If you actually had experience running a large business, you’d look at this and laugh.
Short-term debt gives you the power to do something that is essential in a global, technological marketplace—the ability to act quickly in response to events.
Waiting and saving is something that only works on small scales. It creates enormous lost opportunity costs on large scales.
Remember, in the long run, we are all dead. So to have positive impact on s broad scale we have to act now.
Well, I’m sorry. I have a couple of Straight Dope books and always thought Cecil was a straight shooter, but that article is a complete whitewash and totally wrong.
This sentence stuck out to me as about the only place he’s telling the truth. The Fed’s chief aim is the stability of their owners, the banking system. And if stability of the dollar is one of their aims, they are doing a lousy job. The only reason they want the US economy to grow so that the debt gets paid back with interest.
So it’s better to let the bankers manipulate monetary policy for their own gain?
Come on Cecil, I’m not that stupid! You know, with just what I know in my little brain and a couple of books for reference I could completely destroy him on a debate on this topic. I’m really disappointed that Cecil sold out on is very important subject.
Since Cecil was brought up, I want to make my position clear on him and any other so-called “authority”.
“They must find it difficult, those who have taken authority as truth, rather than truth as authority.”
It makes absolutely no sense to base the total worth of our economy on how much metal we can dig out of the ground. And you should take a look at how good it was back in the good ol’ days.
Not only that, but it would hugely favor some nations – Russia, South Africa, Peru, Canada – over others – Burma, Egypt, Philippines, Iraq. We’ve seen how bad it is basing our economy on the random geographic distribution of oil: do we really want to make the same mistake again, consciously?
Are you suggesting that businesses should wait until they reach the astronomic success of a handful of the most lucrative companies before they ever take a risk?
And are you suggesting that the people in these few rarified golden ventures have never considered taking loans to get where they are?
Unregulated private banks were creating money, in the form of letters of credit, for centuries before 1913. During the 19th century, unregulated American banks created their own paper money, nominally backed by gold, though there were no government requirements about reserves. In this way, money was indeed subject to free-market laws of supply and demand. (Although varying supply of precious metals introduced some uncertainty.)
In this utopia, bank failures, boom-bust cycles, and major recessions were common. Google “long-term chart of U.S. economic growth” to learn that the Federal Reserve Act led to weaker and fewer boom/bust cycles and higher overall economic growth.
JoeTheBartender, may I please ask where you get your information about modern finance? Any particular teachings? Links to webpages or youtubes?
Keep reading that list, it doesn’t much improve after the Fed took over.
I still would like to know from somebody why they think it’s a good idea that a certain privileged class known as banks get to create our money and derive the benefits from that activity?
No I’m suggesting that I have seen many businesses make do without any debt. I have also seen businesses where debt got out of control and drove them to bankruptcy.
Why do you think that’s clueless? I think it’s a very good business practice to avoid debt. I only invest in businesses that have low or no debt. Why should I as an owner of the company, share profits with bankers?