I suppose I was being a bit too simplistic. The 10 to 1 creation occurs throughout the banking system (see money creation, money multiplier - Wikipedia has a good article on fractional as well as full reserve banking).
At any rate going back to your example - you're incorrect. Lets set X = 100. So if you deposit $100 dollars in to a bank, the modern fractional reserve requirement is $10. Your argument is that the bank will thus keep $10 and loan out $90. What the bank CAN also do thanks to fiat currency and its bank charter is actually keep all $100 in reserve, and CREATE $500 and loan it out.
As Wikipedia notes generally the banks won't do this directly, but rather let it happen organically throughout the system. So the $90 loaned out in your example is redeposited in to another bank which keeps $9 and loans out another $81, etc. Thus expanding money 10 to 1.
I'm not opposed to letting banks loan out money I have on deposit with them, but it would be an investment like any other with RISK and REWARD. I could have some money as "demand" deposits (checking, short term savings) that indeed are not loan-able. However there are plenty of investment opportunities (stock market, bonds, etc) that I could CHOOSE to invest in if I wanted a return on my money.
Without inflation chasing us down I think a lot of people are quite happy to have some portion of their money "merely" safe.
Why do I care that I get 0.2% interest on my checking account when the bank loans it out at 6%?
Since communism failed should we never try anything again?
Your point is well taken - its not always possible to implement something totally new in a "clean" environment.
I'll make this analogy as I did in another post - think of the economy like an aging application. You have all these patches holding it together. Now the patches aren't working and the application keeps breaking. At what point is it no longer a crazy idea to consider re-writing the application?
I am proposing an asset backed currency, the elimination of fractional reserve lending, and the elimination of the federal reserve.
What do you think is positive about fractional reserve lending? Does it seem odd to you that banking is such a large industry?
>The economy worked fine on this system long before the US was founded, long before fiat currency, when currency was actually made of pressed gold coins. There is no great artificial construct, there is no horrible crash waiting to happen. This system is proven over centuries upon centuries of human history.
Agreed! A sound currency is a strong foundation for a crash-free economy.
>Enough with this fractional reserve banking as a conspiracy crap.
It's not a conspiracy; it simply IS. Just intuitively to you - does it seem fair that one class of citizen can create money from nothing? What if I told you that for every 1 dollar you have you can now spend 10?
Fractional Reserve banking is so inherently UNJUST that the only reason it continues to exist is ignorance.
The SEC banned naked short selling (rightly so - it doesn't make sense that I should be able to sell something I don't have), yet we allow banks every single day to loan out money they don't have.
Think of these recent problems like you have a complex application. You had all these patches in place to hold it together, but then someone rolled back one of the patches and your application broke again. Well we can continue to patch or we can rewrite the code. There are certainly arguments for both strategies, but I hardly think the people proposing rewriting the code are dingbats...
Its pretty simple. Sound Currency. No Fractional Reserve Lending. No Federal Reserve.
What are your beliefs? Why is fractional reserve lending equitable? Why is it you think bankers are so wealthy? What special skill set does the federal reserve have to determine interest rates?
How can you consider a system with fractional reserve lending, a central bank, and fiat currency to be a "free market". The market is decidedly UN-libertarian and UN-free.
If Greenspan's policies were libertarian, he would have abolished his own job and the federal reserve and returned to sound asset-backed currency (like it says in THE CONSTITUTION).
Please don't consider de-regulation of certain industries while maintaining a grossly unbalanced system to be libertarian.
Actually google started its path towards the dark side when it went public. The impossible pressure of MEETING EARNINGS twists every company. This is why Google has been misbehaving; they need to keep growing market share at any cost.
Well, Apple didn't have to pay licensing costs to Sun or QNX, right? So thats money that could be re-invested elsewhere. You're right BSD didn't get anything - but would you expect to get anything if you're giving away something? Thats what gifts are all about; sacrificing your assets to improve someone else's assets.
All Apple users benefited from their use of BSD code. By utilizing existing code, the apple development team was able to focus on other issues - such as the user interface. Similarly everyone has benefited from Microsoft's use of the BSD stack - did you really want them writing their own stack anyways? Using a known-good stack gives them more time to work out other bugs in their system.
The free use terms of the BSD license did in fact benefit a large number of people when looked at in the context of development time.
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Got me!
I suppose I was being a bit too simplistic. The 10 to 1 creation occurs throughout the banking system (see money creation, money multiplier - Wikipedia has a good article on fractional as well as full reserve banking).
At any rate going back to your example - you're incorrect. Lets set X = 100. So if you deposit $100 dollars in to a bank, the modern fractional reserve requirement is $10. Your argument is that the bank will thus keep $10 and loan out $90. What the bank CAN also do thanks to fiat currency and its bank charter is actually keep all $100 in reserve, and CREATE $500 and loan it out.
As Wikipedia notes generally the banks won't do this directly, but rather let it happen organically throughout the system. So the $90 loaned out in your example is redeposited in to another bank which keeps $9 and loans out another $81, etc. Thus expanding money 10 to 1.
I'm not opposed to letting banks loan out money I have on deposit with them, but it would be an investment like any other with RISK and REWARD. I could have some money as "demand" deposits (checking, short term savings) that indeed are not loan-able. However there are plenty of investment opportunities (stock market, bonds, etc) that I could CHOOSE to invest in if I wanted a return on my money.
Without inflation chasing us down I think a lot of people are quite happy to have some portion of their money "merely" safe.
Why do I care that I get 0.2% interest on my checking account when the bank loans it out at 6%?
Since communism failed should we never try anything again?
Your point is well taken - its not always possible to implement something totally new in a "clean" environment.
I'll make this analogy as I did in another post - think of the economy like an aging application. You have all these patches holding it together. Now the patches aren't working and the application keeps breaking. At what point is it no longer a crazy idea to consider re-writing the application?
I am proposing an asset backed currency, the elimination of fractional reserve lending, and the elimination of the federal reserve.
What do you think is positive about fractional reserve lending? Does it seem odd to you that banking is such a large industry?
I'm confused by your post.
>The economy worked fine on this system long before the US was founded, long before fiat currency, when currency was actually made of pressed gold coins. There is no great artificial construct, there is no horrible crash waiting to happen. This system is proven over centuries upon centuries of human history.
Agreed! A sound currency is a strong foundation for a crash-free economy.
>Enough with this fractional reserve banking as a conspiracy crap.
It's not a conspiracy; it simply IS. Just intuitively to you - does it seem fair that one class of citizen can create money from nothing? What if I told you that for every 1 dollar you have you can now spend 10?
Fractional Reserve banking is so inherently UNJUST that the only reason it continues to exist is ignorance.
The SEC banned naked short selling (rightly so - it doesn't make sense that I should be able to sell something I don't have), yet we allow banks every single day to loan out money they don't have.
Think of these recent problems like you have a complex application. You had all these patches in place to hold it together, but then someone rolled back one of the patches and your application broke again. Well we can continue to patch or we can rewrite the code. There are certainly arguments for both strategies, but I hardly think the people proposing rewriting the code are dingbats...
Its pretty simple. Sound Currency. No Fractional Reserve Lending. No Federal Reserve.
What are your beliefs? Why is fractional reserve lending equitable? Why is it you think bankers are so wealthy? What special skill set does the federal reserve have to determine interest rates?
How can you consider a system with fractional reserve lending, a central bank, and fiat currency to be a "free market". The market is decidedly UN-libertarian and UN-free.
If Greenspan's policies were libertarian, he would have abolished his own job and the federal reserve and returned to sound asset-backed currency (like it says in THE CONSTITUTION).
Please don't consider de-regulation of certain industries while maintaining a grossly unbalanced system to be libertarian.
Actually google started its path towards the dark side when it went public. The impossible pressure of MEETING EARNINGS twists every company. This is why Google has been misbehaving; they need to keep growing market share at any cost.
Well, Apple didn't have to pay licensing costs to Sun or QNX, right? So thats money that could be re-invested elsewhere. You're right BSD didn't get anything - but would you expect to get anything if you're giving away something? Thats what gifts are all about; sacrificing your assets to improve someone else's assets.
All Apple users benefited from their use of BSD code. By utilizing existing code, the apple development team was able to focus on other issues - such as the user interface. Similarly everyone has benefited from Microsoft's use of the BSD stack - did you really want them writing their own stack anyways? Using a known-good stack gives them more time to work out other bugs in their system.
The free use terms of the BSD license did in fact benefit a large number of people when looked at in the context of development time.