Is anyone actually buying into this load of crap?

Originally posted by CookieMonster09
When I deposit a $1.00, that deposit is technically a liability of the bank because I can withdraw that $1.00 at any time. It is not an asset - Deposits are liabilities.

You're trying to use common sense.

The fact is that when you deposit into a bank, the bank puts the $1.00 as an asset, AND a liability. An asset because it has money, a liability because it can be demanded by the customer.

Originally posted by CookieMonster09
If the bank lends out 50 cents from my $1.00 deposit, I don't have $1.00 on deposit in the bank anymore, now do I? I now have 50 cents on deposit, and 50 cents out on loan.

Exactly. You can't have your cake and loan it too. This is where the fraud comes into play. They create more cake.

If a depositor puts a million dollars into a bank, and his money is still there, but they loaned it to someone else, where is it? It can't be in two places at once, though with one hand they will tell the depositor his money is still in the possession of the bank, but with the other hand they have loaned it out to someone else.

The fraud can only be noticed if you add up all the amounts. Your deposit exists, and so does the deposit made by the borrower. If 90% of your deposited money can be loaned out (as per fractional reserve regulations) then your $1 million is in your account, AND $900k gets deposited into the account of the borrower. So one pile of money became almost two.

This is called the "money multiplier effect". This process isn't even a secret in the banking industry, although very few people know about it or understand its ramifications. What it comes down to is that with the loan process of banks, new money is created.

This is where money comes from. Not printing presses. Loans.

Follow the dancing ball:

$1,000,000 deposit

$900k gets loaned out and deposited back into the banking system

$810k gets of that $900k can then be loaned out

$810k gets deposited somewhere

$729k of that $810k can be loaned out...

...

And the process continues until after some amount of time, the interaction of all the banks together turns a pile of one million dollars into ten million.

The new $9 million is created out of loans.

You must be assuming that banks operate on a 100% reserve rate. Everybody assumes this that hasn't taken a very close look at how the system works, or has been informed somehow.

It's natural to not want to believe these claims, because it flys in the face of intuition and common-sense. But once you examine it, and realize that what it boils down to is a sleight-of hand trick of bookkeeping, you realize that banking is closer to a magic trick than precise accounting.


[edit on 23-5-2010 by 30_seconds]

Originally posted by 30_seconds

This is called the "money multiplier effect". This process isn't even a secret in the banking industry, although very few people know about it or understand its ramifications. What it comes down to is that with the loan process of banks, new money is created.

This is where money comes from. Not printing presses. Loans.

Follow the dancing ball:

$1,000,000 deposit

$900k gets loaned out and deposited back into the banking system

$810k gets of that $900k can then be loaned out

$810k gets deposited somewhere

$729k of that $810k can be loaned out...

...

And the process continues until after some amount of time, the interaction of all the banks together turns a pile of one million dollars into ten million.

The new $9 million is created out of loans.

You must be assuming that banks operate on a 100% reserve rate. Everybody assumes this that hasn't taken a very close look at how the system works, or has been informed somehow.

It's natural to not want to believe these claims, because it flys in the face of intuition and common-sense. But once you examine it, and realize that what it boils down to is a sleight-of hand trick of bookkeeping, you realize that banking is closer to a magic trick than precise accounting.


[edit on 23-5-2010 by 30_seconds]

And then, before any repayments have been made on any of these loans, the bankers calculate and pay themselves their bonus's!

How convenient for the bankers that they can set up a system that allows them to collect profits on 'products' that have yet to be realised and thereby enslave individuals and countries in an ongoing and sometimes endless downward spiral of servicing debt.

So now you're responding with ad hominem attacks against 30_seconds' sources in order to refute the validity of the quoted materials?

You should read the post above yours where he says I remind him of a bureaucrat from India. And I can't even read Sanskrit. Sheesh. : )

Honestly, the authors he quotes are from the 1970's, and all have a political bent in the wrong direction.

I mean, when you quote a well-known eugenicist (Fisher), and a very well-known socialist (Quigley), it's hard to take you seriously. These are not valid and competent sources. The fact that he claims that these were found in a university library is downright scary.

Lately, the economist that seems to me to be right on the money has been Nouriel Roubini ("Dr. Doom" as he's called, lol). He's smart, articulate, well-read, and up to date on current economic events - including the banking sector. He's gotten a lot of media attention lately, and it will be interesting to see what he has to say in the coming months.

When you quote an author with highly suspect and questionable credentials, dated from 1936 or even the 1970's, it's really hard to convince me that you know what you are talking about. A lot has changed since then. Even his own sources say so.

If a depositor puts a million dollars into a bank, and his money is still there, but they loaned it to someone else, where is it? It can't be in two places at once, though with one hand they will tell the depositor his money is still in the possession of the bank, but with the other hand they have loaned it out to someone else.

This concept that you cite is like looking in a wind tunnel. You're failing to acknowledge that the bank also has its own cash reserves. That is, cash it owns outright in its own name. The bank is a business that makes profit - It earns cash through interest on loans.

What do you think the bank does with this cash? It puts it to work, lending it out to businesses and individuals.

Yes, there are deposits. Agreed. But the bank also has other assets that it can lend against. First, its own money. Second, investments such as stock and bonds, etc.

If you look at the Balance Sheet of any publicly-traded bank, you will see that these banks oftentimes have hundreds of millions of dollars - sometimes billions of dollars - in liquid cash reserves that it owns. These are not deposits. This is the bank's own cash.

Originally posted by CookieMonster09
This concept that you cite is like looking in a wind tunnel. You're failing to acknowledge that the bank also has its own cash reserves. That is, cash it owns outright in its own name. The bank is a business that makes profit - It earns cash through interest on loans.

What do you think the chances are that NLP is an institionalised staff training method at the banks?

Throughout this Thread people have acknowledged that banks have grown fat on the exhorbitant interest rates they charge to people, commerce and governments.

[edit on 23/5/2010 by teapot]

[edit on 23/5/2010 by teapot]

Throughout this Thread people have acknowledged that banks have grown fat on the exhorbitant interest rates they charge to people, commerce and governments.

So Teapot, which is it going to be? Do banks charge interest rates on loans, and thus earn a profit, allowing them to use said profits for additional lending? Or do they "manufacture money out of thin air"? You tell me. Because it's either one or the other. You can't have it both ways. Either banks earn profits from lending, or they don't. And if they do earn profits, what do you think they do with those profits? Is it possible that they actually use these profits to make additional loans at interest? Is that even a concept you can wrap your little teapot brain around? (Sorry, I couldn't resist. Just kidding. With a name like teapot, what else would you expect?) : )

The fact is that when you deposit into a bank, the bank puts the $1.00 as an asset, AND a liability. An asset because it has money, a liability because it can be demanded by the customer.

Deposits are listed as liabilities on a bank's Balance Sheet. Not assets. Take a look at an example:

media.corporate-ir.net...

Your statement defies basic principles of accounting - Items on a Balance Sheet are either assets, or they are liabilities, not both.

Originally posted by CookieMonster09
Your statement defies basic principles of accounting - Items on a Balance Sheet are either assets, or they are liabilities, not both.

So, these items on the balance sheets, the loans are listed as assets are they not? Interest payable is also an asset isn't it?

But until the loan has been repaid and the interest collected, the actually money does not exist as an actual anything owned by the bank.

On paper the bank appears to be worth xbillion. In reality it is only worth the net value of any loan repayments and interest charged, actually paid.

Way to instill false confidence in the market!

I'm just eternally grateful I'm not a bread-head! I would hate to have such faith in so foul an enterprise as banking!

So, these items on the balance sheets, the loans are listed as assets are they not? Interest payable is also an asset isn't it?

Incorrect. Both loans receivables and interest receivables would be assets. Deposits are liabilities. Interest payable would be a liability. Just look at the Balance Sheet link given above.

But until the loan has been repaid and the interest collected, the actually money does not exist as an actual anything owned by the bank.

That's not exactly right, either. Any receivable - be it an Accounts Receivable, a Loan Receivable, Interest Receivable, etc. - These are all assets of the bank by GAAP (Generally Accepted Accounting Principles).

Accounts Receivables are assets of pretty much any ordinary business. A manufacture makes a widget that costs $15,000, and ships it to the distributor. The distributor owes the manufacture $15,000, and is contractually obligated to pay for the widget via a signed, legal Purchase Agreement contract. The distributor might have 30-60-90 days to pay for the widgets depending on the terms of the contract. Until he gets paid, on the manufacturer's books, he lists an asset called an Accounts Receivable in the amount of $15,000. Once the manufacturer has shipped the goods, he might not be paid immediately - But he is still owed the money.

In the case of a Loan Receivable, at closing, the bank has issued a check to the seller of a piece of real estate, for example, and has a signed and notarized legal loan contract with the borrower for repayment at "X" dollars over a term of "Y" years.

What you are proposing would be the fundamental destruction of basic accounting principles in the business world. You are also asking me to agree to the idea that legal contracts - in the case of a bank, a loan contract - are null and void. Nothing could be further from the truth.

One more thing: When a bank makes a loan on a piece of collateral such as real estate, the bank is typically in a first lien position on the collateral. This means that the bank has a first security lien interest in the property. If the borrower reneges on the contract and fails to pay, the bank can seize the collateral (in the example given, a piece of real estate property).

Also, banks generally have an LTV (Loan to Value) guideline based on the type of collateral. For example, in real estate, a bank may only lend say 80% of the appraised value of the real estate - For example, the bank would lend $80,000 on a property appraised for $100,0000. Other examples: 50% of the stock price of a stock investment if the stock is pledged as collateral. For hard asset equipment, the bank might only lend 75% of the purchase price of the equipment. You get the idea. The bank almost always allows some cushion to take into account devaluation and/or depreciation in the event of default.

So, basically, for all of the Loans Receivable that you see on a bank's Balance Sheet, I can assure you that the bank has a 1st lien position on the large majority of the assets being financed, with some cushion to account for devaluation over time. For every loan, they also have a signed and notarized legal loan contract that will under almost every circumstance be upheld in a court of law in the event that the borrower defaults.

Not exactly the thin air you described earlier, now is it?

On paper the bank appears to be worth xbillion. In reality it is only worth the net value of any loan repayments and interest charged, actually paid.

Net Worth = Total Assets minus Total Liabilities

Add up all of the assets of the bank (not just loan receivables)- loan receivables, real estate owned, equipment, raw land, cash, investments, etc. These are your Total Assets.

Then take all of the Liabilities - Deposits, Account Payables, Taxes Owed, etc.

Subtract the Total Assets from the Total Liabilities. That's the Net Worth of the bank.

Again, these are basic and fundamental accounting principles. Pretty straightforward stuff.

[edit on 23-5-2010 by CookieMonster09]

Originally posted by CookieMonster09
What you are proposing would be the fundamental destruction of basic accounting principles in the business world.

Yes. The complete and utter destruction of all falsely constructed apparatus of enslavement.

You are also asking me to agree to the idea that legal contracts - in the case of a bank, a loan contract - are null and void. Nothing could be further from the truth.

Yes. The Rule of Law and the straight jacket of the culture of debt work in concert to enslave humanity.

A legal contract laying out the terms of a debt is worth nothing until it has been fulfilled, either by voluntary compliance or enforcement.

One more thing: When a bank makes a loan on a piece of collateral such as real estate, the bank is typically in a first lien position on the collateral. This means that the bank has a first security lien interest in the property. If the borrower reneges on the contract and fails to pay, the bank can seize the collateral (in the example given, a piece of real estate property).

Indeed! The moneymongerers have got it wrapped up alright! How to save costs on actual enforcement by providing legally binding fear factors such as losing the roof over your head or the business you have built up, each by honest toil, spending your energy, your life. Billions of people, held to legal ransom, so that the banks can realise their assets.

Also, banks generally have an LTV (Loan to Value) guideline based on the type of collateral. For example, in real estate, a bank may only lend say 80% of the appraised value of the real estate - For example, the bank would lend $80,000 on a property appraised for $100,0000. Other examples: 50% of the stock price of a stock investment if the stock is pledged as collateral. For hard asset equipment, the bank might only lend 75% of the purchase price of the equipment. You get the idea. The bank almost always allows some cushion to take into account devaluation and/or depreciation in the event of default.

Focusing on the minutia is the simplest way to ignore the big picture.

Ignoring your (the banks) own LTV guidelines was the primary cause of the sub-prime fiasco.

So, basically, for all of the Loans Receivable that you see on a bank's Balance Sheet, I can assure you that the bank has a 1st lien position on the large majority of the assets being financed, with some cushion to account for devaluation over time. For every loan, they also have a signed and notarized legal loan contract that will under almost every circumstance be upheld in a court of law in the event that the borrower defaults.

The entrapment system is well understood by this little teapot.

Not exactly the thin air you described earlier, now is it?

Did I describe thin air? I do not recall mentioning thin air anywhere in my posts in this Thread. Is thin air the image you conjured up in response to my claim that bank assets that bankers pay themselves huge bonus's for, do in fact only actually exist in the accounting rooms? A Freudian slip on your part perhaps?

Again, these are basic and fundamental accounting principles. Pretty straightforward stuff.

Indeed.

Different angle:

1) Goods, and services to maintain those goods are produced by labor.

2) Banking is not labor that produces goods or services.

3) If everyone worked as a banker, no goods or services would be produced.

4) Bankers consume goods and services.


So, non-producers are consuming goods and services of those who labor.


True or False?

OK, I've read about 6-7 pages of this topic, and I have a little bit of information and a lot of questions. Presently, the loan-to-deposit ratio for all U.S. banks is at 79% (www.mortgagenewsdaily.com...), about 7 trillion in loans versus 9 trillion in deposits. So, the banks supposedly have sufficient collateral. The U.S., it would seem, is in decent shape. Look at this chart: media.stratfor.com... Curious, though, that China and Japan aren't on that list.

Now, what I'm wondering is if the overall status of the banking system is so healthy, with the recent record-breaking profits and whatnot, why was the bank bailout necessary a few months ago? If they had trillions of dollars more in deposits then they did in loans, couldn't they have handled those losses without becoming completely insolvent (which would have ruined our economy, we were told)?

Of course, one answer is that the problem was caused by a few, relatively isolated banks, and that the loan-to-deposit ratio at these banks was particularly out of order (90% or higher). When people defaulted on their loans, these "bad" banks didn't have the capital on hand to deal with the losses while at the same time remaining operational as banks. While other banks could have used their assets to bail out those banks without government intervention, it had little value to them as an investment. Where was the profit?

Hence, we see the government "bailout", giving over a trillion dollars to the big banks so they could buy insolvent banks at a profit. That's all it really was. The banks had no interest in public welfare. They had to be bribed. And, as a consequence, the big banks are now more powerful than ever. It was a true win-win for them. The big banks are now using their newly gained powers to job the system using complex computerized trading algorithms, high flash trading, and other devious schemes. Who can stop them now? They've driven smaller banks and all of the real people out of the stock market and other financial markets. With those systems in place, it is almost literally impossible for the banks and investment firms to not make a profit. No wonder they paid back their government loans so fast.

The downside to this is that it makes our currency look like a farce. The stock market is largely based on speculation, these days, which is not tangible.

At least, that's my ill-informed conclusion. I don't know much about the banking system. I also wonder what all of these 'deposits' really are. I know some are legitimate deposits of wealth, but I feel like that can't account for all of it. How much of these bank deposits are based on derivatives, fractional wealth (loaning out one object ten times to ten different people, which is OK as long as they don't actually all ask for it at the same time), and other more imaginary forms of wealth? But as long as you find a way to classify it as a deposit, it's OK - it's solid, right?

Actually, that could all invalidate the theory I came up with earlier in this post. It could be that the banks just didn't have enough REAL deposits to handle the loan defaults and that they had to borrow government money until they could cover it up. It's just fishy, to me, that despite our economy being so weak in so many ways, we have such a "healthy" loan-to-deposit ratio. Please, someone, enlighten me. I want to know more about what bank deposits really are. I want percentages and real sources (maybe, when I have more time, I'll find them myself).

[edit on 24-5-2010 by ireallyknowthetruth]

Yes. The complete and utter destruction of all falsely constructed apparatus of enslavement.

If not rule of law based on contracts, what would you prefer? Rule of law based on the whims of a dictator? I don't get it.

Yes. The Rule of Law and the straight jacket of the culture of debt work in concert to enslave humanity.

Read the book, Gulag Archipelago, or a book about Pol Pot. You really have no idea what enslavement is.

Indeed.

It helps when you understand the difference between an asset, and a liability.

Different angle: 1) Goods, and services to maintain those goods are produced by labor. 2) Banking is not labor that produces goods or services. 3) If everyone worked as a banker, no goods or services would be produced. 4) Bankers consume goods and services. So, non-producers are consuming goods and services of those who labor. True or False?

If a banker serves in the capacity of an adviser, and an investor in a business, then he is providing a legitimate, and much needed service.

Banking is a service just like any other professional service.

Banks provide capital to businesses to help them grow and prosper. It is also a highly competitive service - Why? Because entrepreneurs have plenty of banking service providers to choose from. Bankers have to bend over backwards to earn a company's deposit and lending facilities business. Those bankers that do not provide professional, efficient service, are replaced with bankers that do.

Originally posted by CookieMonster09

Yes. The complete and utter destruction of all falsely constructed apparatus of enslavement.

If not rule of law based on contracts, what would you prefer? Rule of law based on the whims of a dictator? I don't get it.

Rule of law based on Natural, Universal law, that no man has the right of ascendency over another. That all are equal, a natural made person upon whom no man-made construct, be it government, religion or finance, may infringe.

Yes. The Rule of Law and the straight jacket of the culture of debt work in concert to enslave humanity.

Read the book, Gulag Archipelago, or a book about Pol Pot. You really have no idea what enslavement is.

There are many forms of tyranny and enslavement. It is easier to catch flies with honey than with vinegar. I read Gulag Archipelago some years ago. Solzhenitsyn exposes the ultimate futility of harsh enslavement. It would not suprise me if Gulag is required reading for any would be tyrant; how not to do things!

It helps when you understand the difference between an asset, and a liability.

It helps when you understand the difference between life and money.



[edit on 1/6/2010 by teapot]

[edit on 1/6/2010 by teapot]

If I remember correctly the founding fathers were against the banking establishments and warned people against their use.

Can anyone back me up on this or am I remembering wrong?

Rule of law based on Natural, Universal law, that no man has the right of ascendency over another. That all are equal, a natural made person upon whom no man-made construct, be it government, religion or finance, may infringe.

If you look at banking from a business perspective, there is no attempt on the part of the banker to achieve "ascendancy" over their clientele. Banks thrive when their clients thrive. Banks fail when their clients fail - As we see nearly every Friday as the FDIC shuts down failed banks. Why are these banks failing? Because their loan clients are defaulting on their loan contracts.

Traditional banking is not a political instrument. It's a business. Now, maybe at the World Bank level, or the IMF, finance might be utilized for political purposes. But your traditional banks are businesses, not political entities.

There are many forms of tyranny and enslavement. It is easier to catch flies with honey than with vinegar. I read Gulag Archipelago some years ago. Solzhenitsyn exposes the ultimate futility of harsh enslavement. It would not suprise me if Gulag is required reading for any would be tyrant; how not to do things!

You cannot compare the Gulag Archipelago, or Pol Pot, to anything that is remotely happening here in the United States from the perspective of our financial system. There is simply no comparison. We don't have debtor's prisons in this country.

When people willingly sign a loan contract, then that is called a standard business transaction, not enslavement. No one forced borrowers to sign on the dotted line. No one put a gun to their head. Plenty of individuals and families get along just fine with renting a house or apartment, without assuming ownership of real estate.

It helps when you understand the difference between life and money.

We're talking fundamental economics and accounting, not philosophy. Let's stay on topic.

If I remember correctly the founding fathers were against the banking establishments and warned people against their use.

Earlier in the thread, someone brought up some quotes from Thomas Jefferson, perhaps one of the most reckless, and undisciplined borrowers in U.S. political history. Due to Jefferson's completely reckless borrowing habits, he lost a substantial part of his fortune despite having been born into a wealthy family. It's no wonder he despised banks.

Certainly, banking has a proper function and role in society. If it didn't, we would all be bartering goods and services. And, at the pace of the bank failures, we may revert back to bartering in due time anyways.

Originally posted by CookieMonster09

The fact is that when you deposit into a bank, the bank puts the $1.00 as an asset, AND a liability. An asset because it has money, a liability because it can be demanded by the customer.

Deposits are listed as liabilities on a bank's Balance Sheet. Not assets. Take a look at an example:

media.corporate-ir.net...

Your statement defies basic principles of accounting - Items on a Balance Sheet are either assets, or they are liabilities, not both.

Yes deposits are liabilities but since banks are only held liable for 10% of all deposits that technically means their liabilities are ALSO 10% and they can loan out 9 TIMES MORE or 900% THE ACTUAL DEPOSITS!

They simply call up their local Federal Reserve Bank branch(there are 12 nationwide)and order money based on this formula while simultaneously agreeing to pay the FED their prime rate "commission". For every $1 the FED prints it collects its commission from commercial banks and then the comercial banks tack on their commission/interest to consumers WHILE EXPONENTIALLY INCREASING THE MONEY SUPPLY IN THE PROCESS!

Its called INFLATION! Inflation is an over-abundance of money in circulation, meaning prices go up because there are not enough goods.
That is the reason why a pack of chewing gum used to cost *5 cents* back in the 50's and now it costs 10-20 times that.

[edit on 2-6-2010 by EarthCitizen07]

[edit on 2-6-2010 by EarthCitizen07]

Yes deposits are liabilities but since banks are only held liable for 10% of all deposits that technically means their liabilities are ALSO 10%

Again, you cannot defy basic rules of accounting.

If a bank has $100 million in deposits, then each and every dollar of those deposits is a Liability on the bank's accounting records.

To say otherwise is pure nonsense. A liability, in accounting terms, cannot be reduced to 10% or any other whimsical percentage figure, unless the liability is paid off - in full, and in cash.

They simply call up their local Federal Reserve Bank branch(there are 12 nationwide)and order money based on this formula while simultaneously agreeing to pay the FED their prime rate "commission".

First, the "Prime Rate" is typically what businesses pay when they borrow money from a bank. A business might borrow at Prime, just above Prime, or just below Prime, depending on the creditworthiness of the business, and banks competing amongst one another for the loan business from the borrower.

Secondly, the "Fed Funds" rate is the rate that the banks pay when they borrow - usually only temporarily on an overnight basis - from the Federal Reserve System.

From Wiki:

"In the United States, the federal funds rate is the interest rate at which private depository institutions (mostly banks) lend balances (federal funds) at the Federal Reserve to other depository institutions, usually overnight. It is the interest rate banks charge each other for loans."

It's basically one bank lending to another bank - temporarily - via the Federal Reserve system.

Well funded banks, with significant cash, assets, and deposits, don't need or want to borrow from another bank if they don't have to. It cuts into their profits.

Its called INFLATION! Inflation is an over-abundance of money in circulation, meaning prices go up because there are not enough goods. That is the reason why a pack of chewing gum used to cost *5 cents* back in the 50's and now it costs 10-20 times that.

Inflation has been running at a clip of 3-3.5% a year for many decades now. Some select areas of the economy - such as gas prices, costs of a college education, medical costs, etc. - have, however, grown faster than 3.5%.

Hyperinflation can be caused by an excessive growth in the money supply. Most modern economists, however, favor a low steady rate of inflation to reduce the severity of recessions.

3-3.5% per year is not hyperinflation.

Low or moderate inflation may be attributed to fluctuations in real demand for goods/services, or changes in available supplies such as during scarcities, as well as to growth in the money supply.

It's a silly misconception that banks "create money out of thin air," as if they don't lend out of deposits or as if lending is counterfeiting. If banks did that, auditors would catch them immediately. Banks may commit fraud, but that's not an example of it.

I don't believe fractional reserve banking is unknown to most depositors. I think most people understand that it's based on the idea that most people won't want their money at the same time and, if they did, the bank couldn't repay them immediately. That's not fraudulent.