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John Moosie
climber
Beautiful California
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"http://www.kwaves.com/mises.htm
Watch the two videos on this site Lois for your answers.
We need to go back on a gold standard and do away with the central bank system that creates fiat money. Fiat money creates inflation.
Currently the federal reserve can loan more money then it has. The rates change but usually they have to have 10 percent of what they loan. Then commercial banks can borrow this money and create even more money as they only have to have 20 percent.
What this does is create extra money which people use to buy products. But since this is extra money, it ends up driving prices up and this ends up creating an up and down cycle of boom and bust. It also takes a portion of our wealth and gives it to these super wealthy people who make money out of nothing.
A gold standard would solve much of this. Watch the video if you don't believe me.
There is a bit more too it, but a gold standard would be a start.
Money is only suppose to represent something, it isn't suppose to be created out of nothing. It is meant as a medium of exchange of value for value.
Everytime we have gone to a gold standard, our economy has grown. As soon as we go off of it to finance a war, we end up with inflation. Inflation is a hidden tax.
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TradIsGood
Chalkless climber
the Gunks end of the country
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Gold Standard - It's time has come.
Turn it on and we can pull the troops out of Iraq tomorrow.
And send them to South Africa.
Did you miss the other little piece? For a Gold Standard to work you have to jam it down the throats of all of the other countries in the world?
We're not in the 19th century anymore, Alice.
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Karl Baba
Trad climber
Yosemite, Ca
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Topic Author's Reply - Oct 1, 2008 - 03:14pm PT
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I don't know what monetary system would be workable as the economy has grown so huge.
We have to recognize that ultimately, this fiat money system is a sinking ship and it keeps the government a puppet of the money creating bankers.
"Bankers own the earth. Take it away from them, but leave them the power to create money and control credit, and with a flick of a pen they will create enough to buy it back." -- Sir Josiah Stamp, former President, Bank of England
"The real truth of the matter is, and you and I know, that a financial element in the large centers has owned the government of the U.S. since the days of Andrew Jackson. History depicts Andrew Jackson as the last truly honorable and incorruptible American president." -- President Franklin Delano Roosevelt, November 23, 1933 in a letter to Colonel Edward Mandell House
"Some people think the Federal Reserve Banks are U.S. government institutions. They are not ... they are private credit monopolies which prey upon the people of the U.S. for the benefit of themselves and their foreign and domestic swindlers, and rich and predatory money lenders. The sack of the United States by the Fed is the greatest crime in history. Every effort has been made by the Fed to conceal its powers, but the truth is the Fed has usurped the government. It controls everything here and it controls all our foreign relations. It makes and breaks governments at will." -- Congressman Charles McFadden, Chairman, House Banking and Currency Committee, June 10, 1932
"Give me control over a nation's currency and I care not who makes its laws." -- Baron M.A. Rothschild (1744 - 1812)
"I sincerely believe ... that banking establishments are more dangerous than standing armies, and that the principle of spending money to be paid by posterity under the name of funding is but swindling futurity on a large scale." -- Thomas Jefferson to John Taylor, 1816.
“We are in danger of being overwhelmed with irredeemable paper, mere paper, representing not gold nor silver; no sir, representing nothing but broken promises, bad faith, bankrupt corporations, cheated creditors and a ruined people.”--Daniel Webster, speech in the Senate, 1833
“Capital must protect itself in every possible way, both by combination and legislation. Debts must be collected, mortgages foreclosed as rapidly as possible. When through the process of law the common people lose their homes, they will become more docile and more easily governed through the strong arm of government applied by a central power of wealth under leading financiers. These truths are well known among our principal men who are now engaged in forming an imperialism to govern the world. By dividing the voter through the political party system we can get them to expend their energies in fighting for questions of no importance. It is thus by discreet action we can secure for ourselves that which has been so well planned and so successfully accomplished." - 1924 US Banker’s Association Magazine
"I have unwittingly ruined my country." - W. Wilson, upon passage of Federal Reserve Act, 1913
"History records that the money changers have used every form of abuse, intrigue, deceit, and violent means possible to maintain their control over governments by controlling the money and its issuance." - James Madison
“It is well enough that the people of this nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning." - Henry Ford
How many of you know that it is theoretically impossible to pay off the National Debt-EVER! The money for it doesn't and can't exist because the "interest" doesn't exist. (you'll get it if you understand the system, check the links)
The dependence on growth to fuel the cycle of money was fine as long as we had lots of oil, not so many people, and plenty of land. The real question is, when will the music stop in this game of musical chairs?
That peak oil is nearly upon us means it's time to understand where we are and review what kind of alternatives we have. I think we need a whole different paradigm of working with each other.
on other note. I'm wondering if this meltdown is an "october surprise" of some sort.
Peace
Karl
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Mungeclimber
Trad climber
sorry, just posting out loud.
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I seem to remember someone posting the name of a Japanese economist who was theorizing about about vibrant, and yet zero growth economies.
anyone remember the name? or the theory?
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Mungeclimber
Trad climber
sorry, just posting out loud.
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"How many of you know that it is theoretically impossible to pay off the National Debt-EVER! The money for it doesn't and can't exist because the "interest" doesn't exist. (you'll get it if you understand the system, check the links)"
Doesn't this depend on who does the financing of the debt? The interest exists if someone/country is there to enforce it.
damnit, i got sucked in again.
I'll never post in an off topic thread again. [kinda how I approach Wall climbing]
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TradIsGood
Chalkless climber
the Gunks end of the country
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Just for fun, let's play with the Baba-weschrist model of banking.
Act 1
We will just call our bank BW Federal. Mr. and Mrs. Prudent visit the bank. Their parents said "pay yourself first", which they have done. They have amassed a tidy little nest egg of $20,000 over the last 4 years.
BW Federal has been taking out ads promising "highest rates in the country - guaranteed - 6% for 6 months". They search around, not sure whether "guaranteed" means that they are the highest rates, or that the deposit is guaranteed by FDIC. Sure enough, they discover that nobody else will borrow money for 3 months at this level today, and they even see the FDIC logo on the front door.
They smile. Hand over a check, and sign the account statement jointly. Yep, just in case, it grows to over $100,000, they will be insured to 200K. (Smart aren't they!)
Woohoo. In six months, they expect to roll over $20,600.
They shake hands with Karl, and wesc shows them to the front door.
Act 2
K and w rush into the back room. They now have 200,000 dollars to lend (by their calculations). A few calls to their local business customers and offer them the greatest deal in town. K and w agree to lend below Treasury levels. Nobody can pass that up and the notes are signed by noon. Six month bills are paying just over 1% now, and 10 happy business fat cats have just borrowed $20,000 at just 1%. They will pay it back in 6 months ($20,100).
Act 3
w punches up the calculator. 10 times 20,100 = $201,000. Subtract 20,600 to pay off the Prudents. "Whoa, we are making 180,400 using Mr and Mrs Prudent's money!" shouts w. "Not so fast there!" answers K. "That's not right We lent 20K times ten, so when they pay it back you can't count the 20K, only the interest." K grabs the calculator and punches in 10 * 100 = $1,000. "Hmm, subtract 600, for the interest we have to pay that nice couple and we got $400 guaranteed! Let's go climbing. The tellers can handle the rest." (ok, they are unconventional bankers and eschew golf.)
Act 4
LOL. I leave this one to the TStand. First bankers in history to lend at low rates, borrow at high rates and make money!
Enjoy!
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Karl Baba
Trad climber
Yosemite, Ca
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Topic Author's Reply - Oct 1, 2008 - 04:52pm PT
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That's not the point about the maturity of the debt. The issue is that all money created is debt money and therefore no money is created to constitute the interest to be paid on that debt.
Here's a reasonably simple although not-unbiased explanation
"The crime committed in 1913, (I think treason puts it mildly) is that our representatives delegated the Constitutional authority of the Congress to coin (create) money to a private corporation, not accountable to anyone, that creates our money with a stroke of the pen and lends it to us at interest. This corporation is called the Federal Reserve, though it's neither Federal, nor a reserve. Woodrow Wilson said three years later, "I have unwittingly destroyed my country".
The main problem is the fact that our money is created through "credit" (debt) which we have to repay with interest. When the interest has to be paid, we are forced to borrow more money to pay it, else remove that amount of money from circulation, impairing economic activity. Thus the debt can never be repaid - there's not enough money. If by some magic we could repay the debt, that would wipe out all the money, and we would have a huge disaster. Thus ongoing bigger and bigger deficits cannot be structured out of the system. Inflation is a necessary part of the structure. The structured inflation is a hidden tax placed on everyone to benefit the Fed's owners and their friends, not the people. The geniuses in Congress that say they will "balance the budget" and "pay down the debt" are either stupid or lying, or both. The ones that are benefiting from the system like it the way it is - they're getting very rich at our expense. They also lie about the real state of affairs regarding deficits and spending by using fantasy accounting which would land us in prison if we did the same.
This system has functioned as planned (by Warburg, JP Morgan, et al) since 1913, when the Dollar was denominated in silver and gold "certificates", until our gold was mostly gone by 1933, having been paid to the Fed as interest on the debt. In that year, Rosevelt stole the rest of people's gold and declared that "federal Reserve Notes" (based on nothing) shall be legal tender domestically. Nixon later finished the job by repudiating the dollar's redeemability in gold internationally as well.
Fiat money created from "credit" eventually has to fail, whether it's based on anything or not, because ongoing increases in the money supply are structured into it. Thus we see hyperinflation scenarios in fairly recent times where several "zeros" had to be erased from the currency, in South America, Mexico, the Weimar Republic (that one was nine zeros) Italy, etc. .."
or this
"The Federal government (remember, the business owned by all the people) has often been forced to become borrower of last resort, borrowing from the banks to bring enough money into circulation to prevent major depression and mass foreclosures. It is called deficit spending. But nothing has been done to prevent the systemic exponential growth of interest and debt, which is the driving mechanism, leading to the failure. Meanwhile, Government borrowing to create money to maintain the economy has created a ballooning government debt.
In the early and mid 90’s there was an increase in individual debt, largely due to the increasing use of credit cards, taking some of the debt load off the federal government. The entry of the former Soviet Union and China into the international market has also opened new growth markets and, more importantly, assets to be monetized and borrowed upon to temporarily sustain the appetite for growth of the international money system.
In the late 90's private debt increased in the US to the point that the Federal Government thought it was going to be able to pay off the national debt. But as the economy has slowed down, the government gave away its surplus, and consumer spending and debt has been insufficient to meet the demand for an increased money supply, it is becoming evident that Government debt is not going away, and on the contrary is increasing again.
Those who would balance the Federal budget and reduce the Federal deficit under the present money creation ground rules do not recognize that their goal is simply not feasible. If the government stops its continued borrowing and balances its budget, and private borrowing does not take up the slack, the money supply will be so drastically shrunk that there will not be enough money to pay interest (or principle) on outstanding private debt, and the economy will go into a tailspin. This happened in 1836-37 after President Andrew Jackson paid off almost all the federal debt. The ground rules of money creation must be changed."
Interesting eh?
This whole game has deliberately be made confusing so the average american, or even the intelligent informed americans, have no idea how our monetary system creates money
Peace
karl
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Karl Baba
Trad climber
Yosemite, Ca
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Topic Author's Reply - Oct 1, 2008 - 05:03pm PT
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TIG, I'm not going to research for you why banks don't loan out money cheaper than they pay interest.
The fact is, even Fatty (whose family owns a bank) says I'm writing the truth and the Wiki article is accurate. Can you tell me you read it?
Here's another explanation that will reconcile you idea that banks lend 90% with the fact they lend money they don't have
"The money created by this process has no corporeal existence other than numbers in a bank’s ledger. Keep in mind that no notes have been printed and no coins have been minted. This is the secret of understanding money mechanics which I call ledger entry legerdemain or ledger entry shell game. Also, keep in mind that if you or I did such a thing, we would be called federal although not Federal Reserve Bank officer. We would be called federal prisoner.
The deposit made by the securities dealer creates an addition to the commercial bank’s reserve account. Commercial banks may lend a portion of the value of the reserve account. The portion is determined by the specified fractional reserve requirement. If the specified fraction is 10%, the bank may lend 90% of its reserve account value.
If the Fed wrote a check for $1000 to the securities dealer, the commercial bank would accrue $1000 in new reserves and could lend $900. The $900 loan creates new deposits and a transfer of $900 of reserves to the recipient bank. The recipient bank may lend $810. The deposit of $810 and transfer of reserves enables a loan of $729. The process limits the commercial banking system to a maximum creation limit of $9000 from an original $1000 dollar deposit and reserve creation by the Fed. It is a cascading system of money creation that is limited by the reserve ratio. Do not forget that all the money was created out of nothing by bank officers’ signatures on checks. The Fed checks are not written against funded accounts. Commercial banks’ checks are written against make-believe reserves. The reserve account, to the extent that it is supported by deposits, is a bookkeeping fiction that enables the bank to show you that your money is in your account even though it has used your money as the basis of a loan. This is what I call ledger entry legerdemain or ledger entry shell game. Which account is the money in? The deposit account? The reserve account? The loan account? Or all three at the same time?
Technically, checks are no longer necessary. All operations can be done by computers.
Actual reserve ratios required to be held are variable.(5) Presently they are 10%, 3%, and 0%. The theoretical limit of 3% ratio is 32 times multiplication of reserves. 0% has no theoretical limit. Actual commercial bank multiplier of the system as a whole is around 12 to 14.
Commercial banks do not lend out money that has been deposited with them as is commonly believed. In reality, banks create the money, lend it, and accept it as additional deposits. Modern Money Mechanics, published by the Federal Reserve Bank of Chicago, explains on page six, "Of course, they [commercial banks] do not really pay out loans from the money they receive as deposits. If they did this, no additional money would be created. What they do when they make loans is to accept promissory notes in exchange for credits to the borrowers’ transaction accounts." Remember that no corporeal thing has been created at all. It is entirely numbers transferred by checks. The fractional reserve requirement limits how much money commercial banks can create. It is the Fed’s most powerful regulatory method. Changes made in reserves whip-crack through the banking system with an approximate 12 times effect.
The art of commercial banking is the bookkeeping management of this ledger entry shell game. Banks are constantly accepting deposits, paying demand checks, making loans and receiving pay back of loans. When a bank’s loan-reserve ratio cannot otherwise be maintained, the bank may go to the Fed with Treasury securities as collateral and borrow. The interest the Fed charges the commercial bank is the discount rate of interest. The discount rate generally influences all other interest rates."
From
http://landru.i-link-2.net/monques/monques.html
peace
Karl
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TradIsGood
Chalkless climber
the Gunks end of the country
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Maybe his family owns a bank. Maybe not.
A couple things he has posted makes it pretty clear that he has no management role in a bank.
:-)
Yeah, read it and understand it. It is a bit dated. Kind of the Alan Greenspan picture back when he was blindly trying to measure and control money supply as Fed Chairman.
It did not work. And I know why that is as well. I think he found out afterwards.
Anyway, back to Act 4.
Fill it in.
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Karl Baba
Trad climber
Yosemite, Ca
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Topic Author's Reply - Oct 1, 2008 - 05:15pm PT
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Here the conclusion section of the article linked above (I'm coming up with these pretty fast (damn time wasting) but with anything of course, you try to learn and pick out the bias and wrong info.
"MYTH No. 1. The government prints money. This myth is supported by semantic sophistry. Printing money and issuing money are two entirely different things. As explained above, the Bureau of Printing and Engraving prints Federal Reserve Bank Notes, but the government does not issue them. The Fed does. The government mints coins, an insignificant part of the money supply, taxes, and borrows in the open market from private investors. Perpetrators of this myth equate this to printing money.
When the Fed or commercial banks buy government securities, new money is created as described above. The total of those bank transactions constitutes about 20% of the Gross Public Treasury Debt erroneously labeled the "national" debt, or about $1 trillion. This is less than 20% of the money supply, but it must be remembered that all money, coins excepted, originates as debt. The true money supply is the dynamic creation and payback of debt. The perpetrators of this myth resort to polemical sophistry. New money is created when anyone borrows from a fractional reserve institution. ANYONE!
MYTH No. 2. Inflation is caused by printing too much money. The explanation in Myth No. 1 explodes this myth. No printing press, no printing press inflation.
MYTH No. 3. We must pay off the national debt. This is one of the more pernicious myths. When money is created by debt at interest and canceled by repayment, it is impossible to pay off all debt and maintain a money supply. It is mathematically possible for the government to pay off its debt to all but the Fed; but if the government paid off the Fed, bank reserves would disappear and so would the money supply. The debt can never be paid off until an alternate source of money is available with which to do it. I repeat, the debt cannot be paid off without an ALTERNATE SOURCE OF MONEY.
MYTH No. 4. Inflation is caused by too much money chasing too few goods. To believe this myth, one must be deaf, dumb, and blind. Open your eyes and observe that there is no shortage of goods. In fact, there are too many goods chasing too few dollars. Consumer debt is more than $1 trillion for goods not yet paid for. Stores are full and begging us to buy more by debt erroneously called credit. There has been too little money since W.W.II, yet inflation as measured by prices is endemic. The perpetrators of this myth engage in the doublethink that money derives its value from scarcity while at the same time they assure us there is too much money! That surely must cause Orwell to twist in his grave.
MYTH No. 5. Consumer Price Index is a valid measure of inflation. This would be true only if inflation is defined that way. CPI is massaged to create false images for political consumption. The product base, the weighting, and the time base are all altered for political subterfuge. CPI is also distorted by price decreases caused by technological innovation.
MYTH No. 6. Business makes money. This myth is largely supported by semantic confusion. Only banks make money; businesses get money that has been created by banks as debt.
MYTH No. 7. The problems of unemployment and debt can be solved by producing more. Producing more what? We cannot pay for what we have already produced because of an obvious shortage of money. Production means nothing without concomitant consumption. The more we produce and consume by going into debt, the faster the debt rises in a vicious spiral of financial and social stratification.
MYTH No. 8. The problems of unemployment and debt can be solved by exporting goods. Exports in excess of imports only earn debt currency issued by foreign banks. Foreign debt currency is useless in the domestic market. Here we encounter yet another mathematical impossibility. All nations CANNOT be net exporters. The objective of foreign trade is to get an advantage in the competition for resources and artificially scarce money. What a colossal folly to export our real wealth for useless debt currency issued by foreign banks. The ultimate end of this fallacious competition is WAR—yet another creator of debt and waste.
MYTH No. 9. One of the most tenacious and emotionally charged myths is that the physical substance of money matters. It is of no consequence what-so-ever what money is made of as long as it is issued as debt. The mechanism, the irreconcilable mathematics, and mal-distribution of wealth will result in the same social, financial, environmental, and political chaos. It always has. The historical records of the junkyard of empires show it well.
MYTH No. 10. The myth of eminent bankruptcy. One glimpse at the exponential increase in Total Sector Assets, Liabilities, Credit Market Debt, and money supply shows there is no inherent reason for the fictions touted by bankruptcy mongers such as Henry Figge. All functions increase along similar curves. In articles published in The Spotlight on February 27 and March 6, 1995, we addressed this myth in more detail including a graph of the functions. Only mismanagement or deliberate management could cause debt to ever exceed assets. The subtle effect of inflation makes it so. Nothing here should be construed to mean the depression of the 1930s or hyper-inflation such as Germany in 1923 did not happen or will not happen again. If and when they happen, they will happen by design to accomplish some political or financial goal.
MYTH No. 11. The myth that there is a simple solution to a complex problem. This myth is not unique to money, but it supports all money myths one way or another. There is mathematical proof that a system of n variables must have no less than n solutions. The empirical reasoning is that in any system of interdependent variables, changing one variable affects all other variables. Hence, they must all be solved simultaneously. I have outlined only a few variables. There are many more. Is the solution to this money problem beyond the reach of human intellectuality? I hope not, but perhaps that is just my wishful thinking. But if scientific methodology can put men on the moon and bring them back, why can it not solve the money problem? I hope it can if we opt for the necessary mental discipline and begin to deal with real data in real time. When we do that we will see that many problems facing society are a result of the financial structure. No change is possible without a change in the structure. Just as an automobile cannot fly due to its structure no matter how much one tinkers with the engine or what color it is painted, the financial system can only do what it was designed to do. What it is designed to do is perpetuate an exponentially increasing annuity to the financial oligarchy.
If we divide the total money of the nation by the total population of the nation we conclude that there is about $21,500 for each person. This sounds like plenty of money for everyone. Unfortunately, there is about $58,000 of debt for every person. Apply your $21,500 to the debt and $37,500(6) of debt would remain. Your options are forfeiture of assets or borrow more money. Can you borrow yourself out of debt? You cannot!
Since the average person only deals with money after it has been created, perhaps it is not surprising that the cause of the ever increasing debt is not widely perceived. But it must be widely perceived before there is any hope of correcting it.
Since the established mechanism of money creation and uncreation is itself the cause of ever increasing debt, it is not possible to correct the debt problem using any method that deals with money after it has been created.
Working harder or longer will not correct it.
Having a job for everyone will not correct it.
Neither raising nor lowering wages will correct it.
Neither greater nor lesser utilization of natural resources will correct it.
Neither increasing nor decreasing exports will correct it.
Neither more nor less spending will correct it.
Neither full employment nor less than full employment will correct it.
Changing interest rates will not correct it.
Changing tax rates will not correct it.
The only thing that will correct it is the one thing that is a sacrosanct non-subject in media, education, politics, religion, and even social discourse. The only thing that will correct it is to strip banks of their power to create their money as debt at interest and adopt a method of money creation whereby the U. S. Treasury creates our money as CREDIT!
This issue is the key issue in the financial future of our nation and world!
This FRAUDULENT money mechanism is utilized throughout the world and is destroying nations, communities, families, and individuals right before our eyes!
We must turn an entrenched, centuries old financial establishment on its ear!
READ ABOUT IT.
STUDY IT.
UNDERSTAND IT.
TALK ABOUT IT.
THEN RAISE SOME HELL!"
Peace
karl
Somebody chime in and help me out here. I gotta try and get something done today
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Sparky
Trad climber
vagabon movin on
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The History of 2 + 2 = 5
by Houston Euler
"First and above all he was a logician. At least thirty-five years of the half-century or so of his existence had been devoted exclusively to proving that two and two always equal four, except in unusual cases, where they equal three or five, as the case may be."
 Jacques Futrelle, "The Problem of Cell 13"
Most mathematicians are familiar with -- or have at least seen references in the literature to -- the equation 2 + 2 = 4. However, the less well known equation 2 + 2 = 5 also has a rich, complex history behind it. Like any other complex quantitiy, this history has a real part and an imaginary part; we shall deal exclusively with the latter here.
Many cultures, in their early mathematical development, discovered the equation 2 + 2 = 5. For example, consider the Bolb tribe, descended from the Incas of South America. The Bolbs counted by tying knots in ropes. They quickly realized that when a 2-knot rope is put together with another 2-knot rope, a 5-knot rope results.
Recent findings indicate that the Pythagorean Brotherhood discovered a proof that 2 + 2 = 5, but the proof never got written up. Contrary to what one might expect, the proof's nonappearance was not caused by a cover-up such as the Pythagoreans attempted with the irrationality of the square root of two. Rather, they simply could not pay for the necessary scribe service. They had lost their grant money due to the protests of an oxen-rights activist who objected to the Brotherhood's method of celebrating the discovery of theorems. Thus it was that only the equation 2 + 2 = 4 was used in Euclid's "Elements," and nothing more was heard of 2 + 2 = 5 for several centuries.
Around A.D. 1200 Leonardo of Pisa (Fibonacci) discovered that a few weeks after putting 2 male rabbits plus 2 female rabbits in the same cage, he ended up with considerably more than 4 rabbits. Fearing that too strong a challenge to the value 4 given in Euclid would meet with opposition, Leonardo conservatively stated, "2 + 2 is more like 5 than 4." Even this cautious rendition of his data was roundly condemned and earned Leonardo the nickname "Blockhead." By the way, his practice of underestimating the number of rabbits persisted; his celebrated model of rabbit populations had each birth consisting of only two babies, a gross underestimate if ever there was one.
Some 400 years later, the thread was picked up once more, this time by the French mathematicians. Descartes announced, "I think 2 + 2 = 5; therefore it does." However, others objected that his argument was somewhat less than totally rigorous. Apparently, Fermat had a more rigorous proof which was to appear as part of a book, but it and other material were cut by the editor so that the book could be printed with wider margins.
Between the fact that no definitive proof of 2 + 2 = 5 was available and the excitement of the development of calculus, by 1700 mathematicians had again lost interest in the equation. In fact, the only known 18th-century reference to 2 + 2 = 5 is due to the philosopher Bishop Berkeley who, upon discovering it in an old manuscript, wryly commented, "Well, now I know where all the departed quantities went to -- the right-hand side of this equation." That witticism so impressed California intellectuals that they named a university town after him.
But in the early to middle 1800's, 2 + 2 began to take on great significance. Riemann developed an arithmetic in which 2 + 2 = 5, paralleling the Euclidean 2 + 2 = 4 arithmetic. Moreover, during this period Gauss produced an arithmetic in which 2 + 2 = 3. Naturally, there ensued decades of great confusion as to the actual value of 2 + 2. Because of changing opinions on this topic, Kempe's proof in 1880 of the 4-color theorem was deemed 11 years later to yield, instead, the 5-color theorem. Dedekind entered the debate with an article entitled "Was ist und was soll 2 + 2?"
Frege thought he had settled the question while preparing a condensed version of his "Begriffsschrift." This condensation, entitled "Die Kleine Begriffsschrift (The Short Schrift)," contained what he considered to be a definitive proof of 2 + 2 = 5. But then Frege received a letter from Bertrand Russell, reminding him that in "Grundbeefen der Mathematik" Frege had proved that 2 + 2 = 4. This contradiction so discouraged Frege that he abandoned mathematics altogether and went into university administration.
Faced with this profound and bewildering foundational question of the value of 2 + 2, mathematicians followed the reasonable course of action: they just ignored the whole thing. And so everyone reverted to 2 + 2 = 4 with nothing being done with its rival equation during the 20th century. There had been rumors that Bourbaki was planning to devote a volume to 2 + 2 = 5 (the first forty pages taken up by the symbolic expression for the number five), but those rumor remained unconfirmed. Recently, though, there have been reported computer-assisted proofs that 2 + 2 = 5, typically involving computers belonging to utility companies. Perhaps the 21st century will see yet another revival of this historic equation.
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TradIsGood
Chalkless climber
the Gunks end of the country
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Act 5
K and w are roped up...
Meanwhile back at BW Fed business is about to pick up. A young 20'ish guy walks in. He and Mr Prudent are avid cyclists. His best friend from college owns 3 gas stations in the area and is negotiating to buy a fourth one. He borrowed money anticipating that purchase this very morning.
The branch manager greets him and asks if he can help him.
"Yes, I think you can. My name is Raj Arbit. I just graduated from the top engineering college in Mumbai. I hear that you can lend money at very low rates."
"Correct. Currently I can lend at 1%. That is even below US government rates!"
Raj replies, "I heard that but I could not believe it. I bet my friend a six-pack of India Pale Ale that he was full of it. I guess I will have to pick up his beer on the way home. But since I am here, I would like to borrow $100,000."
The branch manager is a little suspicious. He gets Raj's social security number and determines that he has an excellent credit rating. Still he is a little old school. "How do you plan to repay the loan and interest?", he asks. Raj replies, "Elementary. I can take the $100,000 and invest in 6 month bills, and I will earn 625. I will only owe you 500, and I can use the $125 to start to pay off my student loans."
He seems to be a genuinely good guy, smart, just a hint of an accent and very respectable. He pays back his loans. In short order the loan is arranged and Raj walks out with his check.
Across the street at the deli, Raj watches the branch manager head out for lunch. He crosses the street quickly and deposits the check in the bank's 6 month CD. He walks out with a smile and a plan to return tomorrow.
After all, he is now set to earn 5% interest on $100,000 that he never had, the 6% he will receive, less the 1% he will have to repay on his loan. Looks like starting 6 months from now, he will be earning about $2500 per day, for nothing more than signing his name!
Cool.
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Karl Baba
Trad climber
Yosemite, Ca
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Topic Author's Reply - Oct 1, 2008 - 08:29pm PT
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Jesus TIG, I've proved my point in this thread and you refuse to read it but waste your time in imaginary stuff.
This is the Federal Reserve's own words:
Modern Money Mechanics, published by the Federal Reserve Bank of Chicago, explains on page six, "Of course, they [commercial banks] do not really pay out loans from the money they receive as deposits. If they did this, no additional money would be created. What they do when they make loans is to accept promissory notes in exchange for credits to the borrowers’ transaction accounts."
Again, just read this tiny bit
"..two fundamentally different types of reserve ratios. The one which allows a bank to multiply $100 by 10 to create $1000 only applies to central banks. The commercial banks however are only allowed to loan out 90% of their money, so on $100 deposited they can only lend out $90. Once this money is once again deposited, $81 is lent out, and so on as the amount approaches $0. So central banks multiply by the ratio (in this case 10) while commercial banks divide by it. This is also why onbooks it appears as though commercial banks always have 10% mroe deposits than loans, creating the myth that they actually loan out their deposits..."
The only reason you're not making a fool of yourself here is that nobody else understands the banking system either.
So it's the central banks that turn $1000 into $10,000, and the commercial banks make loans based on reserves that aren't really there because they are recycled loan money that was already lent. (not a clear explanation but it's hard to keep simple
PEace
karl
Edit: Just another way to look at it. Forget the fed for a minute, the bank has $100 and loans out $90 to joe blow, who writes a check to sally who deposits it in the same bank which uses that deposit to loan out $81 to harry who puts that in the bank which in turn uses that to loan out more money. Where's that $100?
Peace
karl
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Karl Baba
Trad climber
Yosemite, Ca
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Topic Author's Reply - Oct 1, 2008 - 09:42pm PT
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Hi Fatty
I'm not standing behind or against all those things labeled as myths. They are food for thought but the intention is to think of them long term in regards to our situation with the monetary system.
If you'd like to pick a myth and discuss it in those regards, I'm sure it would be interesting but I know you won't cause you'd rather make money and spend only a little time sniping on the keyboard.
Which is what I should do as well
Peace
karl
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TradIsGood
Chalkless climber
the Gunks end of the country
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wes fer christs sakes. It does not work that way. Banks do not lend money they don't have either.
At least Karl sort of recognizes that...
maybe, not really sure.
I am starting to think he hates math as much as happie. Seems like he would rather grab something off the net than work it out.
Act 6
Seeing that fractional lending is win-win, Karl figures out that his next Thailand trip is going to be first class airfare.
He now urges his employees to market a package deal. You deposit 50,000 and borrow 100,000. That means he only has to find 8 other borrowers instead of 10. And his loyal customer gets more too!
After the House passes the fractional lending rescue act he intends to take advantage of the new FDIC limits and go national with a 200-800 program.
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Karl Baba
Trad climber
Yosemite, Ca
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Topic Author's Reply - Oct 1, 2008 - 10:44pm PT
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"Banks do not lend money they don't have either. "
Yes they do TIG. Just research it a bit.
A lot of the money on their "reserve" books is simply duplicate entries of the same money, being lent on paper over and over again. If it had to be done with actual pieces of paper, it wouldn't work...Period!
Peace
karl
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TradIsGood
Chalkless climber
the Gunks end of the country
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Karl, take out a #2 pencil. Check my math. I am using your model...
With your model, there can never be a liquidity crisis, or even a credit crisis!
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John Moosie
climber
Beautiful California
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I'll take 100 million
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sibylle
Trad climber
On the road again!
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I've been reading a book, "Grip of Death: A study of modern money, debt slavery, and destructive economics", by Michael Rowbotham, which provides insight into money creation and the current mess. So far I'm impressed with the book
I have not yet gotten very far in the book, but when I finish it and look at Karl's links, I'll post more cogently!
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