[envenonearo]

About a year ago, one of these threads was introduced here, and someone (I can't remember who) said "as far as I'm concerned this subject can't ever be discussed enough". I agreed with him/her then and I agree with them now. I'm going to give my understanding of the system and I'd love to here feedback on it as well as the perspective of other members of this forum. BTW I don't consider myself an expert.

A consumer goes to a bank and fills out a credit application. We'll say that it is an application for a credit card, for 5k. The bank approves the loan at, say, 20% interest. The consumer proceeds to cash advance the card for 5k, then the consumer pays off the loan over a year. What just happened?

First of all, I believe that the bank created the 5k out of thin air. Now some people say that the banks have reserve requirements of 10x their deposit base, others 16x, or 20x, and still others say that it's unlimited. Some people concede the reserve requirements, but claim that the bank doesn't necessarily use their reserves to fund loans. I believe that when banks extend credit, it is always created out of thin air. The reason is simple: why risk real money when you don't have to? I think most people on this forum would agree that when banks extend credit, it is money created out of thin air.

I often hear from people that concede that banks create credit out of thin air that the credit extended is not inflationary, only the interest is. They will often say, "when the money is paid back, it dissapears into a black hole from where it came from." I don't agree with this conclusion. I say the credit is inflationary based on the laws of supply and demand. If I take out a 5k cash advance and spend the money, 5k just got added to the system that wasn't there before. The net result is an increase of 5k into the system. First rule of economics: you can't get something for nothing. That 5k is paid for via inflation. However, I don't see how the interest on the loan is inflationary. If the interest is repaid, the money has to come from somewhere...it doesn't simply appear as bank credit loans do. If the interest is repaid, it has to be taken from someone else's pocket. This is one of the ways that the system creates inevitable poverty.

Implications: bank risks nothing and does nothing productive to create the credit. Loan is paid for by the people, via inflation. Bank either a: loses nothing if loan goes unpaid, b: reaps a reward of the loan in the form of interest if loan is repaid, c: reaps the reward of a free asset in the case of collateralized loans that go unpaid and are acquired through what the system calls 'repossession' or 'foreclosure'.
Obviously the loan is fraudulent from the start as the interest charged is predicated on a non existent risk. Furthermore, the bank is engaging in high treason by unlawfully creating money without the authority to do so (much like the federal reserve).

In this world, money is power. Assets are money. Money is money. Bank parlays acquired assets into policical power through bribery, press manipulation, obfuscation of balance sheets, creation of shell companies, favorable legislation, and a million other ways. As bank slowly acquires more and more assets/money/power, bank can effectively hedge their risk in a million different ways including buying enough PMs to insure that even under a system change/reset, they maintain their power.

This is my understanding.

dys

[Casyimipist]

What just happened was that the Bank allowed the person seeking the loan to access their future earnings, today.

When enough people do that, it expands the money supply to allow exponentially more economic activity than would otherwise be able to occur without it.

Here's an example I've used.

Ever seen Wimpy in the Popeye cartoon? Why won't the guy let Wimpy pay tomorrow for a hamburger today?
Because he doesn't know if Wimpy is worth it or not. So along comes the banker who the guy knows is good for it as he has a vault full of "money". Surely he can be trusted to pay tomorrow for a hamburger today.

So the banker extends some oh his credit to Wimpy for a price {interest} and Wimpy gets to eat today instead of waiting 'til after he's possibly earned some "money" at some point in the future.
...and because sales are up, the guy selling hamburgers can then spend the newly created private bank credit on more hamburger meat.

Also, now that there is more "money" available in the market place, it will be easier for Wimpy to be able to earn that "money" back so that he may be able to re-pay the banker for having extended him credit yesterday.

Possibly by delivering hamburger meat, because due to people spending private bank credit as "money", they sold a lot more hamburgers than they otherwise would have. So now there's a new job opening at the butcher shop to deliver hamburger meat that wouldn't have otherwise existed.

Now, times that by 300,000,000 people all using the next several decades worth of "future money" today, and we end up with all this stuff you see that's still all owed for.
Everything from the roads you drive on to the houses we sit in to the buildings we work in. {or outside of, as the case may sometiimes be}

So ultimately the loan is just as fictitious or not as your potential future earning ability is, or is not.

The big problem with a system like this is that it doesn't work so good in reverse.
And it goes into reverse when the collective future earning potential falls too much to support the borrowing of the past. Thats when it starts to sputter and die. Which exibits itself in things like lost jobs.

Thank you special agent. Considering that the your employer is beholden to the bankers, I would surmise that you have a very uniqure perspective on the system.

dys

[Munccoughe]

Not just permanent growth, but permanent exponential growth. That's where globalism comes in. Now once sovereign countries are dependent on other countries for trade, and that's where globalist merchants become the master. The west talks about this as if it's something new, but from my readings, china has been doing this for thousands of years.

[SappyAppy]

When you figure it out you might want to keep quiet about it and not try to put the same system into practice for your benefit.

The Montana Freemen (it is said) were right on with their approach and some still have not been either charged nor released.

Abandon all hope, yea who enter here.

[Vomazoono]

I'm just tellin' you what it is they're actually doing. ie lending you your own "money" you haven't earned yet.

When you go submit that 5K loan application, they tend to look at your assets, payment history and future earning potential. Why do you think the guy who's held a good job for many years with a good solid company can get a loan for a nice big house, a car, a vacation, his daughters wedding, etc etc etc, but a guy workin' at McDonalds for the past 8 months can't get a loan for a new scooter?


The bad part is that once this treadmill of fractional reserve lending gets going, there's no real good way to stop it without a lot of hurt being inflicted. Which is where I blame those alive at the time for letting this crap get started to begin with. Did they really think permanent growth would actually become a permanent thing?

No sir. The bank risks nothing when they lend money save the lendee receive something for nothing.

dys

[BashBeissedat]

I see 2 distinct problems:

1- money created out of thin air, exponentially
2- interest on something that doesnt exist


Couldnt the US Treasury print fiat currency and charge 0% interest?


OOOPS. Sorry, didnt mean to give away the big secret. Not that im a fan of paper (Im not), but its the interest that is never printed into circulation, that KILLS all of us and our country.


The whole deal with credit is this: You can freely increase the money supply WITHOUT AN INCREASE IN GOODS AND SERVICES.

THAT is what causes inflation.

[DevaRextusidis]

I see 2 distinct problems:

1- money created out of thin air, exponentially
2- interest on something that doesnt exist


Couldnt the US Treasury print fiat currency and charge 0% interest?


OOOPS. Sorry, didnt mean to give away the big secret. Not that im a fan of paper (Im not), but its the interest that is never printed into circulation, that KILLS all of us and our country.


The whole deal with credit is this: You can increase the money the money supply WITHOUT AN INCREASE IN GOODS AND SERVICES.

THAT is what cause inflation.

Well there are 2 seperate issues...credit created out of thin air, and interest created out of thin air. Thank you for clarrifying that. The interest created out of thin air is not the interest repaid by those requesting credit, it is the interest owed to those that use the exponential function when they put their money in the bank or buy T-bills or whatever. Correct?

dys

[RogHammon]

When you figure it out you might want to keep quiet about it and not try to put the same system into practice for your benefit.

The Montana Freemen (it is said) were right on with their approach and some still have not been either charged nor released.

Abandon all hope, yea who enter here.

So let's say my tribe doesn't like the montana freemen because my tribe thinks their hair looks funny, so I wage a war against them. Since I use fractional reserve banking, credit, digital money, and the freemen use gold and silver, i drastically grow my tribe through easy credit and amass a huge cache of weapons, missiles, bombs, and military specialists. Since I now vastly outnumber you, I decide to invade you....you lose.


how do you fight that?

[Peretool]

So let's say my tribe doesn't like the montana freemen because my tribe thinks their hair looks funny, so I wage a war against them. Since I use fractional reserve banking, credit, digital money, and the freemen use gold and silver, i drastically grow my tribe through easy credit and amass a huge cache of weapons, missiles, bombs, and military specialists. Since I now vastly outnumber you, I decide to invade you....you lose.


how do you fight that?

The Montana Freemen decided to use the same techniques as the bankers.

One aspect of lawform is the type of money that is used.

You don't beat someone by joining them (5th column techniques?)

You propel yourself into a different plane of existence, one where your lawform is predominant and the others methods don't even exist. In this plane it doesn't matter that the other side is using ficticious notes. Gravity doesn't apply to them either in this plane . They float. Their feet don't even touch the soil. They don't own anything because they have nothing of substance to purchase what they might own.

Possession is, as it were, the position of the foot. When your feet don't touch soil then you don't even have possession.

[POMAH_K]

I think that as soon as you stated "inflation" you went off track.

Inflation or deflation are relative to the market and the supply of products for which there will be a demand.

You sign a contract (promissory note) to pay back any "borrowed" (licensed) FRNs with interest. This is not inflationary in itself. The note you signed becomes an "asset" held by the bank. As long as you keep that asset healthy by making the payments, the bank is not at risk. And, as long as the economy is growing with more supply and more demand increasing, there is a need to increase money supply to match that market.

Now, when you pay off the note, you extinguish the money supply borrowed (principal) leaving only the interest as the new and immortal money. The growth of interest amounts make up the longterm and permanent growth of the money supply. All else is temporary.

To aggravate this, if suddenly the market begins to falter and the notes are not serviced- delayed or missed payments, the note becomes unhealthy and the growth of that immortal portion is now attacked. The immortal interest is then being killed. If the note is defaulted, all its future interest growth is killed and the lost principal counteracts the growth of the old interest amounts in the money system. This is a deflationary cycle, but is not really deflation unless we have a surplus of goods and buyers with decreasing money available. We always need to compare the market with the money supply, including, very importantly its velocity, to see whether we have inflation or deflation.

One more monkey wrench. The money masters manipulate the numbers, dispersement of funds and exchanges among world banks as well as with private corporations. They answer to noone so it is impossible to track what they do.

[YTmWSOA5]

I think that as soon as you stated "inflation" you went off track.

Inflation or deflation are relative to the market and the supply of products for which there will be a demand.

You sign a contract (promissory note) to pay back any "borrowed" (licensed) FRNs with interest. This is not inflationary in itself. The note you signed becomes an "asset" held by the bank. As long as you keep that asset healthy by making the payments, the bank is not at risk. And, as long as the economy is growing with more supply and more demand increasing, there is a need to increase money supply to match that market.

Now, when you pay off the note, you extinguish the money supply borrowed (principal) leaving only the interest as the new and immortal money. The growth of interest amounts make up the longterm and permanent growth of the money supply. All else is temporary.

To aggravate this, if suddenly the market begins to falter and the notes are not serviced- delayed or missed payments, the note becomes unhealthy and the growth of that immortal portion is now attacked. The immortal interest is then being killed. If the note is defaulted, all its future interest growth is killed and the lost principal counteracts the growth of the old interest amounts in the money system. This is a deflationary cycle, but is not really deflation unless we have a surplus of goods and buyers with decreasing money available. We always need to compare the market with the money supply, including, very importantly its velocity, to see whether we have inflation or deflation.

One more monkey wrench. The money masters manipulate the numbers, dispersement of funds and exchanges among world banks as well as with private corporations. They answer to noone so it is impossible to track what they do.

Regardless of the technical terms, I don't agree with this. Again, if the bank is not loaning money that is on deposit, they are not practically/effectively risking one penny. Their methods of accounting may suggest that they are taking a risk, but how can you risk something that you never had in the first place? I say, you can't. Their only risk is that they won't earn money that they weren't entitled to in the first place. Furthermore, if the money loaned is placed into the system, that is new money that didn't exist previously. New money= new supply. Increased supply effects the scarcity of money and thus translates into higher prices (and yes, I know this is not the technical definition of inflation) as long as all other factors are equal.

dys

[Sarah Armstrong]

The Montana Freemen decided to use the same techniques as the bankers.

One aspect of lawform is the type of money that is used.

You don't beat someone by joining them (5th column techniques?)

You propel yourself into a different plane of existence, one where your lawform is predominant and the others methods don't even exist. In this plane it doesn't matter that the other side is using ficticious notes. Gravity doesn't apply to them either in this plane . They float. Their feet don't even touch the soil. They don't own anything because they have nothing of substance to purchase what they might own.

Possession is, as it were, the position of the foot. When your feet don't touch soil then you don't even have possession.

Surely you have a physical body. Surely I can see you. What if I just don't like what I see and decide to kill you just because that's how I am? what if I'm just a bloodthirsty, demonic, complete devil-worshiping satanic luciferian that wants to kill, and I've got you in my sights? (note this is completely hypothetical).

The native indians were living in their own other reality too until the europeans came. Look what happened to them.

[freevideoandoicsI]

Surely you have a physical body. Surely I can see you. What if I just don't like what I see and decide to kill you just because that's how I am? what if I'm just a bloodthirsty, demonic, complete devil-worshiping satanic luciferian that wants to kill, and I've got you in my sights? (note this is completely hypothetical).

People tend to mess with their own kind. Violence by Chinese is committed upon Chinese. Bystanders who become involved are going to have violence extended towards them as well.

The native indians were living in their own other reality too until the europeans came. Look what happened to them.

Same thing as what happened to the English when the William the Conqueror happened along. With war there is generally a winner and a loser. The loser has to put up with some changes. If they learn to adapt then they might outlive the winners' occupation.

[seatlyled]

Again, if the bank is not loaning money that is on deposit, they are not practically/effectively risking one penny. Their methods of accounting may suggest that they are taking a risk, but how can you risk something that you never had in the first place? I say, you can't. Their only risk is that they won't earn money that they weren't entitled to in the first place. Furthermore, if the money loaned is placed into the system, that is new money that didn't exist previously. New money= new supply. Increased supply effects the scarcity of money and thus translates into higher prices (and yes, I know this is not the technical definition of inflation) as long as all other factors are equal.

dys

Here is how I see it. I may not be perfectly accurate.

The bank is LICENSED to AUTHENTICATE Federal Reserve Notes. They are licensed and audited by their regional bank. If they fail the audit they are bankrupt. Just like any corporation a bank can lose its sanction to operate if their balance sheet is in the red. Yes, they can lose from loan defaults. They must account for the FRNs that they AUTHENTICATED in accordance with their LICENSE. The bank is a franchise of the federal reserve system.

[investor]

http://www.federalreserve.gov/moneta...req.htm#table1

Reserve requirements are the amount of funds that a depository institution must hold in reserve against specified deposit liabilities. Within limits specified by law, the Board of Governors has sole authority over changes in reserve requirements. Depository institutions must hold reserves in the form of vault cash or deposits with Federal Reserve Banks.

The dollar amount of a depository institution's reserve requirement is determined by applying the reserve ratios specified in the Federal Reserve Board's Regulation D to an institution's reservable liabilities (see table of reserve requirements). Reservable liabilities consist of net transaction accounts, nonpersonal time deposits, and eurocurrency liabilities. Since December 27, 1990, nonpersonal time deposits and eurocurrency liabilities have had a reserve ratio of zero.

The reserve ratio on net transactions accounts depends on the amount of net transactions accounts at the depository institution. The Garn-St Germain Act of 1982 exempted the first $2 million of reservable liabilities from reserve requirements. This "exemption amount" is adjusted each year according to a formula specified by the act. The amount of net transaction accounts subject to a reserve requirement ratio of 3 percent was set under the Monetary Control Act of 1980 at $25 million. This "low-reserve tranche" is also adjusted each year (see table of low-reserve tranche amounts and exemption amounts since 1982). Net transaction accounts in excess of the low-reserve tranche are currently reservable at 10 percent.

Beginning October 2008, the Federal Reserve Banks will pay interest on required reserve balances and excess balances.

For more history on the changes in reserve requirement ratios and the indexation of the exemption and low-reserve tranche, see the annual review in the H.3 statistical release. Additional details on reserve requirements can be found in the Reserve Maintenance Manual (682 KB PDF) and in the article (119 KB PDF) in the Federal Reserve Bulletin, the appendix of which has tables of historical reserve ratios.




At the end of any loan, after the loan is paid off, the only money left in the system from this loan is this reserve money and as we can see the reserve may be as low as zero.

[AndyPharmc]

Here is how I see it. I may not be perfectly accurate.

The bank is LICENSED to AUTHENTICATE Federal Reserve Notes. They are licensed and audited by their regional bank. If they fail the audit they are bankrupt. Just like any corporation a bank can lose its sanction to operate if their balance sheet is in the red. Yes, they can lose from loan defaults. They must account for the FRNs that they AUTHENTICATED in accordance with their LICENSE. The bank is a franchise of the federal reserve system.

I think this is an excellent explanation. The way I look at it (and I can't prove this), is that even though certain banks may 'fail' when too high of a percentage of their loans default, someone is benefitting from the asset aquisitions that accompany 'failed' loans. How? I'm not sure. Possible explanations= shell companies, payoffs/briberies, mergers or partial mergers, golden parachutes, et al in combinations or singularly among other gamuts. I guess what I'm saying is that these banks only pretend to fail.

dys

[Lafclaria]

This thread is fraught with errors. In the original example, there's no reference to the deposits that the bank has on hand, which critical to the discussion. So let's start over:

Amy is an artist who sells paintings, and has a $1000 surplus which she deposits in Angus Bank. To understand, we'll assume that this is all the money in the world. We're also going to assume that Amy gets about 0% interest on her deposit, which is sadly realistic.

Under a fractional reserve system requiring 10% reserve (which is variable, but let's keep it simple), Angus Bank is allowed to loan out all but 10%. So they lend $900 to Builder Bob at 10% annual interest. Bob's not ready to invest the money yet in his construction project, so he deposits it in Beta Bank.

Amy has $1000 in demand deposit. [+1000]
Angus Bank has a $1000 liability to Amy, plus $100 in reserve., plus a $900 asset in the money that Bob is going to pay back. They didn't really "create" the $900; it's money that Amy gave them. So they are neutral [+0]
Bob has a $900 demand deposit at Beta Bank. But he owes $900 to Angus Bank. [+0]
Beta bank has a $900 liability owed to Bob, plus $900 in reserve. [+0]

So in terms of net value, it remains at $1000. However, the "M1 money supply" is Amy's demand deposit ($1000) plus Bob's deposit ($900). This is the amount of liquid assets available for withdrawing and spending. (The money in bank reserve can't be spent, because it must remain in reserve to meet the fractional requirement). So in this sense, the available spending money supply has been increased out of thin air. But it required Amy's initial cash deposit, which she created by being productive.

Now Beta Bank loans $810 to Chef Charlie at 10% interest rate, keeping $90 (10%) in reserve. Charlie deposits the money in Cantina Bank.

Then a year goes by. Now:

Amy has $1000 deposited in Angus Bank. [+1000]
Angus Bank has $100 in reserve, plus a $1000 liability to Amy, plus a $900 asset from Bob, plus Bob owes $90 in interest. [+90]
Bob owes $900 to Angus Bank, and he owes them $90 interest, and he has a $900 deposit with Beta Bank. [-90]
Beta Bank has $90 in reserve, plus a $900 liability to Bob, plus a $810 asset from Charlie, plus Charlies owes $81 interest. [+81]
Charlie owes $810 to Beta Bank, and he owes them $81 interest, and he has a $810 deposit with Cantina Bank. [-81]
Cantina bank has $810 in reserve, an $810 liability to Charlie [+0]

So the net value in the system remains +1000.

But the spendable/loanable money supply not "trapped" by reserve requirements is:
Amy's $1000 deposit
Angus Bank's $90 interest.
Bob's $900 deposit.
Beta Bank's $81 interest.
Charlie's $810 deposit.

This totals to $2881. You can see if this process were to continue, the money "created" would be the interest owed to the banks when it is repaid, but the supply of money to grease the economy would be much greater than that. Brought to its extreme limit, it could increase the money supply by 10x of Amy's original earned $1000. So the increase in the money supply is much greater than the money "created". But remember, there's still only $1000 in FRNs to support the whole system.

The next lesson would be how the loaned money unwinds...

[Klorissana]

This thread is fraught with errors. In the original example, there's no reference to the deposits that the bank has on hand, which critical to the discussion. So let's start over:

Amy is an artist who sells paintings, and has a $1000 surplus which she deposits in Angus Bank. To understand, we'll assume that this is all the money in the world. We're also going to assume that Amy gets about 0% interest on her deposit, which is sadly realistic.

Under a fractional reserve system requiring 10% reserve (which is variable, but let's keep it simple), Angus Bank is allowed to loan out all but 10%. So they lend $900 to Builder Bob at 10% annual interest. Bob's not ready to invest the money yet in his construction project, so he deposits it in Beta Bank.

Amy has $1000 in demand deposit. [+1000]
Angus Bank has a $1000 liability to Amy, plus $100 in reserve., plus a $900 asset in the money that Bob is going to pay back. They didn't really "create" the $900; it's money that Amy gave them. So they are neutral [+0]
Bob has a $900 demand deposit at Beta Bank. But he owes $900 to Angus Bank. [+0]
Beta bank has a $900 liability owed to Bob, plus $900 in reserve. [+0]

So in terms of net value, it remains at $1000. However, the "M1 money supply" is Amy's demand deposit ($1000) plus Bob's deposit ($900). This is the amount of liquid assets available for withdrawing and spending. (The money in bank reserve can't be spent, because it must remain in reserve to meet the fractional requirement). So in this sense, the available spending money supply has been increased out of thin air. But it required Amy's initial cash deposit, which she created by being productive.

Now Beta Bank loans $810 to Chef Charlie at 10% interest rate, keeping $90 (10%) in reserve. Charlie deposits the money in Cantina Bank.

Then a year goes by. Now:

Amy has $1000 deposited in Angus Bank. [+1000]
Angus Bank has $100 in reserve, plus a $1000 liability to Amy, plus a $900 asset from Bob, plus Bob owes $90 in interest. [+90]
Bob owes $900 to Angus Bank, and he owes them $90 interest, and he has a $900 deposit with Beta Bank. [-90]
Beta Bank has $90 in reserve, plus a $900 liability to Bob, plus a $810 asset from Charlie, plus Charlies owes $81 interest. [+81]
Charlie owes $810 to Beta Bank, and he owes them $81 interest, and he has a $810 deposit with Cantina Bank. [-81]
Cantina bank has $810 in reserve, an $810 liability to Charlie [+0]

So the net value in the system remains +1000.

But the spendable/loanable money supply not "trapped" by reserve requirements is:
Amy's $1000 deposit
Angus Bank's $90 interest.
Bob's $900 deposit.
Beta Bank's $81 interest.
Charlie's $810 deposit.

This totals to $2881. You can see if this process were to continue, the money "created" would be the interest owed to the banks when it is repaid, but the supply of money to grease the economy would be much greater than that. Brought to its extreme limit, it could increase the money supply by 10x of Amy's original earned $1000. So the increase in the money supply is much greater than the money "created". But remember, there's still only $1000 in FRNs to support the whole system.

The next lesson would be how the loaned money unwinds...

The thing is, when Amy deposits the 1000$, does the bank literally use that deposited money to loan out, OR does it simply press a button on their keyboard and create the money? It's a subtle difference, but an important one. I have heard some people claim that banks have unlimited reserve requirements. How could this be if they are literally loaning out Amy's money?

dys

[Uttephabeta]

And then there is the case where the bank takes Amy's $1000 and puts the whole amount on deposit with their FRB.

[kuzbaslachek]

So what happens when Builder Bobs plans fall flat and the stuff he bought with the $900 is now worth $250, Charlies asset the Bank holds is worth half and Amy, due to lack of work, withdraws $500 to live on? What happens to the Banks balance sheets and the money supply then?

The system goes to shit. That's the next lesson.