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sawin
climber
On the ocean the last I checked.
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I just got more census numbers.
The US had about 225,000,000 persons when I was
born. The world was just under 3 billion people.
Today the US population is about 270,000,000 and the
world with the latest report is under 7 billion not over
10 billion as has been reported before.
What I don't know is how the quantity of elements ie. gold,
platinum etc. are reproduced in comparison to people and
currency.
Regards the subject it's called credit and maybe dangerous.
I suppose it could be time again to raise interest rates as
during the Reagan administration and tighten up the goofy
loans, however that could be a disaster with current home
prices still high and where I'm at I don't see sell offs now
only foreclosures and there has been a significant drop in home
prices, though they would still not be affordable with a rise in
interest such as the 80's 15%+ rates.
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WBraun
climber
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I read all your stuff again Karl, thanks so much for putting all that extra effort into that.
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bachar
Gym climber
Mammoth Lakes, CA
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Yeah good info. I just finished "The Creature From Jekyll Island" by Griffin. Scary stuff but important to understand.
Many economists think we may be on the verge of collapse of our present fiat currency system - especially after recent events.
Here's some more sobering history...
http://www.dailyreckoning.com/rpt/fiathistoryWP.html
It seems quite possible to me that we could suddenly experience hyperinflation and the demise of the Federal Reserve and it's fabrication of fiat.
Anybody got any good insight on that?
Cheers, jb
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yossarian
climber
WA
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John M:
Quickly looking over the Board's 2007 Annual Report, current income was $42,576,025,000 and expenses were $3,510,206,000 resulting in a net income of around $39,065,819,000. The Federal Reserve Banks kept $3,125,533,000 and the $992,353,000 was paid to its stockholders as dividends.
http://www.federalreserve.gov/boarddocs/rptcongress/annual07/pdf/AR07.pdf
Most of the profits go to the US Treasury.
weschrist:
Your elected representatives and proposing the $700B because they believe it is the best course of action. Banks are not forcing this on the nation. As you capitulated that banks, as we know them, would not exist if they were required to keep all deposits on hand, I would argue the benefits of modern banking vastly outweigh $700B (which is not the cost to taxpayers by the way), but feel this is rather obvious and will not attempt to quantify.
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happiegrrrl
Trad climber
New York, NY
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Time to start bartering amongst ourselves whenever/wherever possible, it seems.
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Karl Baba
Trad climber
Yosemite, Ca
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Topic Author's Reply - Oct 3, 2008 - 12:52pm PT
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TIG
The "fractional lending" is just one surprising aspect of the entire monetary system which people have no clue about. What's the point in starting a new thread about the role of banks in isolation?
Folks don't realize that Bank create money and money is "uncreated" when loans are paid back to Banks. Can we agree on that?
I am wrong about one thing. I said the bank lending would be impossible if we were using "real" money. Not quite, it works as long as certain conditions are met.
Example in a closed system of one bank
Bank has 100 gold coins and loans 90 to Jstan
Jstan buys shoes from Bachar with the 90 and Bachar deposits 90 in the bank. The Bank then loans Baba 80 and he buys haulbag from Fish with the 80 and Fish deposits the 80 in the bank. Bank uses Fish's 80 and loans 70 to Jody to buy Ammo from Eric. Eric deposits the 70 in the bank. The process goes on but lets stop there.
Everybody got their loan in gold coins. The bank still has 100 gold coins and is owed 240 by all those guys. Those guys also think they have 240 in the bank, which is cool until they want their coins at once, which would be a run on the bank.
Anybody want to deny that's the way the banking end works?
Money is created by lending. Anybody want to deny that?
If all these guys paid off their loan to the bank, what's the effect on the money supply?
What do you think the effect of creating giant piles of debt money to finance the war and this bailout will be on the economy?
Irony: we always thing the US is invulnerable and will the strongest and best country forever. Even when our own government tells us disaster is at the door, we don't see the danger.
Other empires have been there before with the same hubris. We have to wake up or be woken up.
Peace
Karl
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Karl Baba
Trad climber
Yosemite, Ca
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Topic Author's Reply - Oct 3, 2008 - 01:01pm PT
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From Bachar's link
"Post-World War I Weimar Germany was one of the greatest periods of hyperinflation that ever existed. The Treaty of Versailles was essentially a financial punishment placed on Germany to make reparations.
The sums of money to be paid by Germany were enormous, and the only way it could make repayment was by running the printing press. (Huge unpayable debt -- that sounds familiar. I wonder what the solution in the U.S. will be.)
Inflation got so bad in this period that German citizens were literally using stacks of marks to heat their furnaces. Here is a brief timeline of the marks per one U.S. dollar exchange rate:
April 1919: 12 marks
November 1921: 263 marks
January 1923: 17,000 marks
August 1923: 4.621 million marks
October 1923: 25.26 billion marks
December 1923: 4.2 trillion marks."
Now that's inflation!
Peace
Karl
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midarockjock
climber
USA
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Collector's currency != Fiat money.
I use to collect these in 10's, 20's, 50's along with US $500.00,
$1000.00, and other rare notes. My 401K was over $50,000.00 I was
living in the 2'nd home I and then wife purchased with (5%?) down
on $170,000.00 in 1997. The home rose to $600,000.00 and is
probably now about $390,000.00. My savings averaged over
$5000.00 daily besides checking.
These items were aquired by my own work (being climbing)with
very minimal parental support other than rent reduction from
the x's mother to begin with.
Yes those books including the House Built by the Rothchilds are
scary and I question them no differently than Chariots of the
Gods and Crash goes to the Chariots.
It's a good thing that British system of SS is a lot more solvent
than many think as I'm currently fighting private trolls,
communist and rouge government entities to get back what I lost
except for the SS. Following are the monthly rates in the US.
62 withdrawl = > $600.00 && < $700.00
67 withdrawl = > $900.00 && < $1000.00
70 withdrawl = > $1100.00 && < $1200.00
Hoping never to collect this.
SS for disabled = > $1400.00 && < $1500.00
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yossarian
climber
WA
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Karl, Thanks for posting, I’m learning a lot.
To keep organized, I would say your assertion that the Fed is “a private institution [that] is allowed to create VAST sums of money and profit from the interest.” has been refuted by looking at the numbers (2007 Annual Report).
The next crux seems to be the issue of fractional leading (good or bad). No one is stating a monetary system that includes fractional lending is without risk, but I think it has yet to be shown how the alternative(s) would be better. Sort of like Democracy is the worst form of government except for all those others that have been tried.
Examples of hyper-inflation and the like should be in the periphery, as inflation can occur without “banks creating money out of thin air” (fractional lending).
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TradIsGood
Chalkless climber
the Gunks end of the country
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Karl, even the math in your example is wrong.
Right - Bank still has its own 100 coins.
Wrong - Owes and is owed 240.
So the bank's equity is still 100.
As to the lending... That is part of what needs to be explained.
Clearly if all of the bank loans are demand notes, then the bank calls up the matching borrower and demands full payment that day.
If it goes to more than 100, the bank calls another bank or the central bank for overnight gold coins. If it were not structured that way, the bank would only take the 90 coin deposit to match by 90 coin loan.
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midarockjock
climber
USA
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Karl's German Diagnosis is probably real close to the numbers
that downed their wall.
Btw,
for those conned by volunteering. SS is no different than
personal investments, IRA's, 401K's(Usually annuities.),
Mutual Funds (Basicly the same as annuities.) etc. being
that if you did not pay into it you have no SS just as you
have none of these others. I just mentioned the dangers of
welfare usually run by PERS (Public Employees Retirement
System) employees.
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Karl Baba
Trad climber
Yosemite, Ca
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Topic Author's Reply - Oct 3, 2008 - 02:32pm PT
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Tig wrote
"Karl, even the math in your example is wrong.
Right - Bank still has its own 100 coins.
Wrong - Owes and is owed 240.
So the bank's equity is still 100.
As to the lending... That is part of what needs to be explained.
Clearly if all of the bank loans are demand notes, then the bank calls up the matching borrower and demands full payment that day.
If it goes to more than 100, the bank calls another bank or the central bank for overnight gold coins. If it were not structured that way, the bank would only take the 90 coin deposit to match by 90 coin loan."
My math was wrong TIg, I added in my head while posting.
That said, I was making a simple illustration to show how a bank can loan out more than it really has. The bank owes and is owed 240 but they only had 100 to start with. The banks leger shows 240 in additional deposits so why can't they loan out more than 100? Deposits are part of the reserve of the Bank and they can loan out 90% right?
Peace
Karl
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Karl Baba
Trad climber
Yosemite, Ca
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Topic Author's Reply - Oct 3, 2008 - 02:53pm PT
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Yossarian writes in ""
"Karl, Thanks for posting, I’m learning a lot.
To keep organized, I would say your assertion that the Fed is “a private institution [that] is allowed to create VAST sums of money and profit from the interest.” has been refuted by looking at the numbers (2007 Annual Report)."
Thanks. The Fed does create VAST sums of money no? Who else is creating money? Commercial Banks. ALL the money is created by one or another right? And they DO profit from it. I didn't say their profit was vast. Now there are other ways to profit besides directly from being part-owner of the Fed. It's not a very transparent institution and the devil is in the details, so we don't know as much as we think. Nobody has the power to audit the Fed. It's quite a power to control a nation's money. Many institutions are subject to government regulation, but who OWNS the Fed? It' a tough one. The GOV claims conflict with other evidence.
Here's a court case that ruled the fed was privately owned.
http://www.save-a-patriot.org/files/view/frcourt.html
"...Federal reserve banks are not federal instrumentalities for purposes of a Federal Tort Claims Act, but are independent, privately owned and locally controlled corporations in light of fact that direct supervision and control of each bank is exercised by board of directors, federal reserve banks, though heavily regulated, are locally controlled by their member banks, banks are listed neither as "wholly owned" government corporations nor as "mixed ownership" corporations; federal reserve banks receive no appropriated funds from Congress and the banks are empowered to sue and be sued in their own names. . . ."
"The next crux seems to be the issue of fractional leading (good or bad). No one is stating a monetary system that includes fractional lending is without risk, but I think it has yet to be shown how the alternative(s) would be better. Sort of like Democracy is the worst form of government except for all those others that have been tried."
I'm not saying fractional reserve lending is bad. I don't think bolting is necessarily bad either. Just trying to get folks to understand the smoke and mirrors behind the banking world and the creation of money. After all, a big part of the the current crisis is banks not being able to lend and the lending system is a part of that.
"Examples of hyper-inflation and the like should be in the periphery, as inflation can occur without “banks creating money out of thin air” (fractional lending)."
Yes and no. After all, the current administration has borrowed hundreds of billions for the war and wants to borrow hundreds of billions more for the rescue. Inflationary or not? America doesn't much know in what sense this borrowed and created money is going to affect their lives in the near or far future. Look at what's happened to the dollar under bush
from
http://www.americanprogress.org/issues/2008/05/weak_dollar.html
"Since January 2000, the dollar has fallen by 37 percent against the euro, with nearly two-thirds of that decline occurring since January 2006. The dollar has fallen 31 percent against the Canadian dollar, and 17 percent against the British pound."
We're getting cheap Chinese goods so we don't notice that our money has CHOKED in recent years. What does the fed have to do with that? From the same link
"But the recent policies of the U.S. Federal Reserve have had an extraordinary effect on the value of the dollar.
When the Federal Reserve began cutting rates last September the dollar traded against the euro at 0.73 euros to the dollar. The 14 percent decline in the dollar over the succeeding eight months can be clearly tracked against each of the seven cuts in the Federal Funds Rate over that period (see chart below).
The explanation is relatively simple—the lower the interest paid on a currency, the less likely foreign investors will want to invest in bonds, money market funds, and other instruments denominated in that currency, and the more likely U.S. investors will want to search for better returns overseas.
Certain industries do very well with low interest rates and a weak dollar. The banks and Wall Street investment firms are greatly benefited by low interest rates, which is why the Federal Reserve has made the dramatic cuts that have occurred since last September."
Gas costs 3x as much, food costs more. It's like boiling a frog slow. We're sheep being led to slaughter. These guys found that you can tax people without requiring them to know they are paying
Peace
karl
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yossarian
climber
WA
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Perhaps I perceived your posts to be more conspiracy theory-ish that simply trying to bring the issue of fractional lending to the forefront. But when you use terms such as “smoke and mirrors behind banking” it seems to imply that bankers are deceptive boogy-men. The system is complicated, but very transparent when compared to historical predecessors. The same could be said of the US government.
The issue of whether the Fed is public/private is complicated. Here’s some analysis that addresses the question.
http://libertyunbound.com/archive/2004_10/woolsey-fed.html
On some minor points, the Fed is audited and reports to Congress regularly. While the Fed does create money, they do not profit from the interest (returned to US Treasury). Member banks receive dividends that are relatively small. And while member banks can profit from lending, this is not unique to being a member bank of the Federal Reserve.
Inflation is a separate issue, though the term “hidden tax” seems appropriate. Too bad I-bonds are not the deal they once were.
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Karl Baba
Trad climber
Yosemite, Ca
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Topic Author's Reply - Oct 3, 2008 - 03:33pm PT
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Now I'll be the first to admit I'm not an expert on economics. I'll say, from the performance of economists over time and especially lately, that I'm not sure experts are experts on the economy. I smell a Rat and I am in good company.
Thomas Jefferson said,
"If the America people ever allow private banks to control the issuance of their currencies, first by inflation and then by deflation, the banks and corporations that will grow up around them will deprive the people of all their prosperity until their children will wake up homeless on the continent their fathers conquered."
so lots of this "fed conspiracy" theory is the pet dog of libertarians and extreme conservatives, but I think it's important to get at the kernal of truth, as obviously from my quotes earlier, important founding fathers and presidents also called this spade a spade.
I 'feel' that this current financial crisis is designed to liquidate the wealth of the country and let it be repurchased at fire sale prices by the most rich, most elite. It's already happening.
From
http://www.federal-reserve.net/whatisthefederalreservebank.htm
"....Keep that fractional banking concept in mind as we examine our first central bank, the First Bank of the United States (BUS). It was created, after bitter dissent in the Congress, in 1791 and chartered for 20 years. A scam not unlike the current FED, the BUS used its control of the currency to defraud the public and establish a legal form of usury.
This bank practiced fractional lending at a 10:1 rate, ten dollars of loans for each dollar they had on deposit. This misuse and abuse of their public charter continued for the entire 20 years of their existence. Public outrage over these abuses was such that the charter was not renewed and the bank ceased to exist in 1811.
The war of 1812 left the country in economic chaos, seen by bankers as another opportunity for easy profits. They influenced Congress to charter the second central bank, the Second Bank of the United States (SBUS), in 1816.
The SBUS was more expansive than the BUS. The SBUS sold franchises and literally doubled the number of banks in a short period of time. The country began to boom and move westward, which required money. Using fractional lending at the 10:1 rate, the central bank and their franchisees created the debt/money for the expansion.
Things boomed for a while, then the banks decided to shut off the debt/money, citing the need to control inflation. This action on the part of the SBUS caused bankruptcies and foreclosures. The banks then took control of the assets that were used as security against the loans.
Closely examine how the SBUS engineered this cycle of prosperity and depression. The central bank caused inflation by creating debt/money for loans and credit and making these funds readily available. The economy boomed. Then they used the inflation which they created as an excuse to shut off the loans/credit/money.
The resulting shortage of cash caused the economy to falter or slow dramatically and large numbers of business and personal bankruptcies resulted. The central bank then seized the assets used as security for the loans. The wealth created by the borrowers during the boom was then transferred to the central bank during the bust. And you always wondered how the big guys ended up with all the marbles.
Now, who do you think is responsible for all of the ups and downs in our economy over the last 85 years? Think about the depression of the late '20s and all through the '30s. The FED could have pumped lots of debt/money into the market to stimulate the economy and get the country back on track, but did they? No; in fact, they restricted the money supply quite severely. We all know the results that occurred from that action, don't we?
Why would the FED do this? During that period asset values and stocks were at rock bottom prices. Who do you think was buying everything at 10 cents on the dollar? I believe that it is referred to as consolidating the wealth. How many times have they already done this in the last 85 years?..."
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TradIsGood
Chalkless climber
the Gunks end of the country
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That said, I was making a simple illustration to show how a bank can loan out more than it really has. The bank owes and is owed 240 but they only had 100 to start with. The banks leger shows 240 in additional deposits so why can't they loan out more than 100? Deposits are part of the reserve of the Bank and they can loan out 90% right?
The ledger should now show on the Asset side 10 (not 100, pardon my mistake from above) in cash remaining from the initial equity, and 240 of assets (not clear whether they are current, or long term etc.
Total Assets 250.
On the liability side, 240 in deposits (presumably demand deposits or savings accounts), Leaving 10 in stockholders equity.
Assets = Liabilities + Equity (day 1 in accounting class, I would guess?)
Answers
1) They have already lent too much since the equity to debt is $14 below 10%
2) No. Deposits are not part of the reserve. The reserves (equity) are the fraction of liabilities that must remain unencumbered.
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Raydog
Trad climber
Boulder Colorado
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are we "blaming" the banks..again?
are we "blaming" Bush..again?
are we "blaming" evil corporations..again?
are we "blaming" technology..again?
listen, when I witnessed the re-popularization
of high fuel consumption vehicles after 70's Opec
fiasco, I knew one thing.
The sh*t we are in rests squarly on the
shoulders of the American public, our Values
and...
nowhere else.
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Karl Baba
Trad climber
Yosemite, Ca
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Topic Author's Reply - Oct 3, 2008 - 04:57pm PT
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Ray wrote
" are we "blaming" the banks..again?
are we "blaming" Bush..again?
are we "blaming" evil corporations..again?
are we "blaming" technology..again?
listen, when I witnessed the re-popularization
of high fuel consumption vehicles after the Opec
thing I knew one thing.
The sh*t we are in rests squarly on the
shoulders of the American public, our Values
and...
nowhere else. "
Sure, but those things above all stem from and are created by society
Peace
Karl
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Karl Baba
Trad climber
Yosemite, Ca
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Topic Author's Reply - Oct 3, 2008 - 05:00pm PT
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So TIG, by you numbers they could have lent out 226 which is still more than the 100 which is all that existed in the beginning.
So what are you saying. Do banks create money or not?
PEace
karl
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SuperTopo on the Web
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Banks are not replacements for mattresses or silos. If they were, they would charge you a fee for safe storage of your money.
Let us know!