That is PRECISELY how fractional reserve banking works. When a bank makes a loan, it creates new money. It is not really a loan in the sense that the bank has some money received from depositors which it lends out. Most people think this, but they are confused.
Savings and loans and credit unions, on the other hand, do NOT create new money; they lend out existing money received from depositors.
Saying out of thin air oversimplifies the situation. A bank cannot create an unlimited amount of loans, it can create an amount up to the reserve limit, which is regulated by the Federal Reserve.
I’m getting a little away from just talking about fractional reserve vs. non-fractional reserve banking here, but I think it is worth mentioning also. Our money is a fiat currency, so our currency is ultimately backed by faith - and this idea frightens some people. The federal reserve tracks money supply and the flow of money in order to keep inflation within an optimal range. This is considered much better than a gold backed monetary system because it buffers against shocks in the business cycle.
Saying out of thin air disregards or diminishes these realities in my opinion and does not appropriately describe the extent to which the amount of money in the system must meet the realities of production.
When it was backed by gold, people still lost faith. Hence, the Great Depression, the Depression of 1873, etc. Nothing magical about gold, other than that some people believe in it a little bit more than others.
This is what confuses me about todays obsession with gold.
If you truly believe the economy is going to collapse and we’ll be living in some Mad Max like dystopia, why would anyone want gold? You can’t, eat it, drink it, plant it, use it for fuel…
Matches and bullets on the other hand…
Pretty sure that qualifies as “necessary.” In any event, the Soviets were screaming for a second front, and one had long been promised to them for the summer of '44.
Monty Python is annoying and not funny. (Well, not to me, anyways.)
Meaning, it’s not really a contradiction. I think that’s what he was trying to say.
But that isnt what monstro said; she wasnt talking about herself knowing nothing, she said nobody knew anything. If that is in fact true, isn’t it, by definition, unknowable to monstro? Or anyone?
If the whole world is going to collapse, your immediate concerns are safe water first and a reliable source of food second. Apocalyptic scenarios are fun to imagine but more likely, you would just see a decline in safe fiat currencies that force people to move towards more durable stores of wealth. Gold does have some properties that make it inherently valuable whether you work on Wall Street today or live in a Stone Age tribe.
It is rare and cannot be manufactured on demand at least not with any economical technology.
It is easily malleable to an absurd level. You can take an ounce of it and make make sheets of it so thin that you can put it as thin ribbons or flakes on food so that people can ingest them because it is biologically inert. Those sheets only cost a few dollars. People will pay good money for gold plating of anything, especially jewelry. There is surprisingly little gold in the world but it stretches very far. The best estimates I have seen say that all the gold ever mined to date would fit in a cube 67 feet on all sides. That is smaller than many single, unimpressive structures but that is the totality of thousands of years of prospecting for it.
Gold doesn’t tarnish so it remains beautiful forever even if it is stuck in the ground for thousands of years.
Gold is used in small quantities (see the plating references above) for electronics, It is an excellent conductor and, although not always essential, it is stil cheaper to use than the alternatives.
People keep saying this and never bothering to explain what it means. Care to fill us in?
We actually had a 350+ post debate about such idiocy a few months ago, Justin.
The “US is (becoming) a banana republic” meme has been out there for a while, starting with Bush2.
Sure, we are approaching a point whereby there is no middle class, there is a permanent underclass and an upperclass that is security conscious. Having spent years in the third world, I can tell you I don’t see a lot of difference between what I’ve seen there and what I see in a lot of America, mostly we revere our military over our democratic institutions, we have a naive, childlike belief in the greatness of our nation that is not supported by the facts and we have allowed the monied class to take over our political processes. More than anything else, the third world is a state of mind and one I see taking root in the US.
D’oh, I forgot it was monstro. Sorry for calling you a dude, monstro.
That’s still how I interpreted her post. Perhaps she can enlighten us.
Not to mention our literacy, violent crime, and child mortality rates are complete embarrassments for a country as rich as we are.
How are we reaching that point? What’s changing? What does “middle class” mean? How do you explain the fact that a huge number of people have a household income between $40,00 and $100,000?
Well, as pointed out above your post, most of our development indicators our subpar and closer to a second world nation than a first world nation, but you kind of prove my point by clinging to a notion that America is awesome because it is.
Also, if you go to a thread asking people to list things they believe that others will disagree with and then get all butt-hurt when someone says something you disagree with, you kind of are missing the point.
In the interest of hijack avoidance, I am formally requesting this. I find your ideas fresh and fascinating. I would love to understand them better, since I am hazy on where the lines are drawn.
I understand the logic youare coming from, but at the moment I am finding it hard to undrstand it in purely practical terms…so please follow this urge and clarify your thinking.
I look forward to seeing it.
Read it again. I was refuting your statement that the American “middle class” is disappearing.
Actually, this seems to be the majority opinion here, from what I’ve observed.