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Originally posted by rue:
http://carolynbaker.net/site/content/view/95/

"Banks create money, not from their own earnings or from the funds deposited by customers, but from the borrowers' promises to repay loans. Most importantly, borrowers not only promise to repay, but to repay with interest, and the bank writes the amount of money of both into the borrower's account."

http://www.discusseconomics.com/banking/where-do-banks-get-their-money/

"Turns out money creation sometimes appears out of thin air. All banks lend based on a reserve ratio of their deposit: they must keep a certain % of each deposit at the bank but can lend out the rest. Of course, the whole system is dependent on a) the bank being responsible with lending, b) everyone not defaulting on their loans. If these two things happen eventually the system collapses which is what we're seeing in the current market."

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Originally posted by SignyM:
So if you agree that monopolization is an inherent economic force, and you don't like government control... how do you propose creating and maintaining real competition?

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Well, I don't agree that monopolies are inherent

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But, let's assume Marx was right

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In that case we can vigorously disrupt monopolies when they occur.

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Can't we at least agree such policies need to end?

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Originally posted by rue:
I think you are arguing just because. Surely you have heard of capital ratio, capitalization etc ?

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Oddly enough, those 'assets' are outstanding loans the bank has made. Generally, banks are required to be between 4% and 8% capitalized - in other words, to have 4% to 8% of the value of outstanding loans in actual cash.

The rest is just made up out of thin air.

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Originally posted by rue:
Citizen

READ THIS:

"Banks are required to hold reserves, a monetary amount equal to a pre-set percentage of all outstanding loans and obligations (NOTE: NOT a percentage of deposits). Reserves must be liquid such as cash, financial instruments that can be quickly used to cover withdrawals and other demands on the bank (NOTE: these are to cover daily CASH transactions made at the bank.). ... When banks’ reserves drop below legal limits, they must borrow to make up the deficit."

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Originally posted by rue:
Not the same as capitalization ratio, is it ?

Now, what were we talking about ? Oh yes - capitalization ratio. Cash on hand compared to assets, which, oddly, are outstanding loans, reserve notes and other IOUs.

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Originally posted by SignyM:
Capitalization requirements limit the amount of loans a bank can make and is based on the stocks and retained earnings, but has nothing to do with actual bank deposits.

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Amount of money and liquid assets that Federal Reserve System member banks must hold in cash or on deposit with the Federal Reserve System, usually a specified percentage of their demand deposits and time deposits. also called Federal Reserve requirement and reserve ratio.

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The capitalization ratio measures the debt component of a company's capital structure, or capitalization (i.e., the sum of long-term debt liabilities and shareholders' equity) to support a company's operations and growth. Long-term debt is divided by the sum of long-term debt and shareholders' equity. This ratio is considered to be one of the more meaningful of the "debt" ratios - it delivers the key insight into a company's use of leverage.

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Originally posted by SignyM:

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In that case we can vigorously disrupt monopolies when they occur.

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How??? You need SOMETHING other than economic forces. But you don't like government. So, what are your options?

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Can't we at least agree such policies need to end?

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You don't hear me supporting corporations, nor corporate control of government, do you?

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I'm actually suggesting a complete revamp of the system to prevent ANY sort of power centralization, whether that power is the law, money, or the power of the pulpit.

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Originally posted by SignyM:
Citizen, dont' let snark get in the way of discussion. Rue is correct, banks have two entirely different requirements placed on them. One is the reserve requirement

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But you don't seem to recognize they way corporations use government to interfere with the economy on their behalf. And much of the regulation and "oversight" you argue for does exactly that.

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Originally posted by rue:
Citizen

Nowhere is a bank required to back its loans 100% either by deposits or with loans from other banks, as you claim.

They do, indeed, create money out of nowhere.

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So, let's do this your way. Find me the quote, regulation, definition, calculation ... that shows banks MUST have 100% of their loans backed by deposits, investors, or loans from other banks.

I'll wait, but probably not more than a week.

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Rue makes a claim its a fact, and the fact Rue said it is all the evidence required

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Originally posted by SignyM:
It wasn't Rue.

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Originally posted by RUE:
They do, indeed, create money out of nowhere.

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Originally posted by SignyM:
I have more than once suggested that the corporate form be abolished, business and personal taxes be treated exactly the same, the right to privacy of people from business be the same as businesses from people, that theft laws be equalized (stealing from a corporation is an automatic felony no matter how small the amount), copyrights and patents be done away with etc. I know how binding arbitration often works against the little guy. I want the bailouts to stop. I have also pointed out many of our foreign wars had more to do with making the world safe for capitalism, not democracy. I suspect I have at least as thorough knowledge about business abuse of law as you. If you haven't heard me say these things, you haven't been listening.

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Originally posted by rue:
"Banks can't lend money they don't have" doesn't require any proof on your part, Citizen ? Everyone else's assertions require some kind of proof, but yours don't ? Isn't that just a tad - hypocritical ?

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BTW - both SignyM and I have provided you with definitions that show that banks are not required to 100% back their loans with actual cash. As for you - you've got nothing.

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Banks create money in the economy by making loans

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Now, what about my "who decides?" questions?

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Originally posted by SignyM:

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Now, what about my "who decides?" questions?

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I don't have a direct answer. I can't point to "who" because I'm more interested in "how". How does power concentrate? How can we keep it from concentrating? So my answer is - everybody. And nobody.

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Originally posted by rue:
And you still have nothing to back up your assertions.

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Silence is consent.

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Originally posted by SignyM:
Ah, Rue, I see you beat me to the post.

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Banks create money in the economy by making loans

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from How Stuff Works
http://money.howstuffworks.com/personal-finance/banking/bank1.htm

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Originally posted by SignyM:
Also, I would like to know what alternatives you propose.

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You've also stated the desire to task the government with preventing "concentrations of power", so I'm interested how we detect a concentration of power and curtail it. I'm also interested in what you're definition of an unacceptable concentration of power is.

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You seem to be talking about something more commonplace than an actual monopoly.

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Originally posted by SignyM:
Citizen, if I have $1 and apply the multiplier effect to it, I have the equivalent of $1 * X.

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Originally posted by SignyM:
Rue and I talked about this offline. She read through a pdf which talked SPECIFICALLY about how banks lend out MORE MONEY THAN THEY HAVE. This wasn't some sort of bogus wild-hair opinion, it was a historical document from (I think) the Eisenhower Administration which traced how all of this began (back to the day of gold scrip).

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Originally posted by SignyM:
It would help if you wouldn't get so damn snarky, because even if you had a point (which I don't think you do) it gets lost in the muddle.

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the effect of literal currency to be greater than it's supply would suggest. This gives the effect of having more money than there is, but in reality all that is happening is that the same unit of currency is being lent more than once.

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Originally posted by SignyM:
Well, then we agree.

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Originally posted by rue:
SHITizen

This isn't snark ? Dooood - you started it. Expect it back.

Fuck you.

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Originally posted by rue:
Oh, BTW SHITizen

If you follow the references, like, for example, Modern Money Mechanics put out by the Chicago Federal Reserve, you will find quotes like this:
"Then, bankers discovered that they could make loans merely by giving their promises to pay, or bank notes, to borrowers. In this way, banks began to create money.
More notes could be issued than the gold and coin on hand because only a portion of the notes outstanding would be presented for payment at any one time. Enough metallic money had to be kept on hand, of course, to redeem whatever volume of notes was presented for payment."

It goes further to explicitly state (in long-winded prose that I will not reproduce here) that BANKS CREATE MONEY by lending money out of thin air. But I suppose that's just the 'opinion' of the federal reserve bank, eh ?

Meanwhile, you STILL have nothing. And, you are wrong.

Fuck you.

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Originally posted by SergeantX:
go rue!

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Originally posted by citizen:

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Originally posted by SergeantX:
go rue!

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What, she promised you a freebie did she?

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Originally posted by JKiddo:
CITIZEN: Okay, so on reflection this is what happens. Let's say that a bank gets a $100,0000 deposit. It has to keep a 10% reserve, but loans out $90,000 to Customer A.

For the sake of discussion, let's say that this Customer A redeposits his $90,000 in the same bank. The bank then loans it out again to Customer B up to its reserve limit, which is 90% of $90,000 or $81,000. Customer B redeposits his $81,000 in the bank, which loans it out again, this time to customer C, who gets a $73,000 loan. Customer C deposits in the bank, which loans it out again to Customer D, who gets a $65,000 loan.

Without doing the infinite loop to negligible amounts, the bank has just loaned out $309,000 of an original $100,000 deposit. Is that a "multiplier effect", or has the bank just created money? Or are the two concepts one and the same?

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Originally posted by SignyM:
printing more dollars will cause inflation ONLY IF it more than replaces the money that was "lost".

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Originally posted by SignyM:
Therefore, printing more dollars will cause inflation ONLY IF it more than replaces the money that was "lost".

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Originally posted by SergeantX:

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Originally posted by Magonsdaughter:
I also see that the conflict is there with private insurance as well, and the capacity to sue when things go wrong, hence laws get made to reduce the chances of payouts being made.

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But private insurance companies don't have the ability to control people themselves. They can only do that by manipulating government - and we need to put a stop to that.

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