Thoughts on fractional reserve banking, and it effects?

I seemed to have killed the topic on the US national debt with this:

This is by G. Monbiot (for his wesite www.monbiot.com)

"It is a built on a system called fractional reserve banking. Almost the entire money supply � generally, depending on where you live, between 90 and 95% of it � is issued not by the state, but the commercial banks. It is issued not in the form of notes and coins, but in the form of loans. Between 90 and 95% of the money supply, in other words, is debt."

Now the US is one of the worst where even the rich kids use credit (borrowed money) to buy things even when the have MILLIONS OF THEIR OWN DOLLARS TO SPEND... oh no we need the middle man to lend the rich guy money he dosn't even need.
And then concluded by suggesting it was a waste to worry about the national debt when the whole system and every individual in it is suckered into debt every day.

Edit: adding some more of my own grey matter:

Firstly I wonder if anyone swiping thier plastic actually realizes they are borrowing untill they see the bill at the end of the month and even then it "only another bill".

Secondly, let me just though in another little fact here..

the average US credit bill is exacly the average wage. This means the average Joe gets one months "free" wages as he blows the credit limit in the first month but then spends the rest of his life EXACLTY ONE MONTHS WAGES IN DEBT!

If you had explained the situation to him like this BEFORE he got his little plastic card I don't think he'd buy into the scam do you?

We are being had here people... and i mean REALLY taken to the claeners on this. The politicial pretend were their No.1 prority but they just want more corporate handouts, and the bankers are laughing at us all the way to their own banks.

ONE BIG SCAM!

Any thoughts?


[edit on 22/10/2004 by Corinthas]

The worrying thing about this is that the whole system relies on the ever increasing generation of commodities/resources to make repayment of debt and interest possible. The commodity of the day being oil, which is so fundamental to our existence now on every level, that when we reach peak oil worldwide, and the production of oil falls below its level of demand, the whole global economy will collapse like a house of cards. The effects of this will be catastrophic, unless something is found that can not only supply the energy we derive from oil, but also the materials refined from oil that we so depend on.

The effects will only be felt by the "normal" folks.. the bankers (i DID say bankers.. phew!) won't feel a thing till the mob start poking their torches and pitchforks at them.

The interest rates on Credit cards is fairily high, and they all jump up to very high rates (around 25%) if you miss a single payment on any single credit card.

Now a contrary view, The credit system is sort of a dynamic system. Sort of like flying and swimming it involves using sound structures to move through a medium. [legs and ground would also apply] Funny as it sounds comming from a pretty well confirmed athiest, it operates on faith. The bank loans money on faith [with perhaps some backup collateral] that you will pay it back. You operate on the faith [provided you are not being dishonest] that you can pay it back.

It can be a little unnerving. If you are somewhat conservative you keep your debt small and short term. Learning how to live on a minimum income is the best defense against economic instabilities.

Now if we could teach the Federal Government about living within a budget . . . Oh, Well.

I think perhaps the worst aspect is that some people who live on credit begin to think of it as an 'entitlement'. They begin to forget that everything comes from somewhere, and if you didn't put in the effort to produce it, those who did put in the effort are likely to resent it, and perhaps take steps to remedy the inequity. Producers of things don't owe borrowers anything.
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Originally posted by slank
It can be a little unnerving. If you are somewhat conservative you keep your debt small and short term. Learning how to live on a minimum income is the best defense against economic instabilities.

Now if we could teach the Federal Government about living within a budget . . .

Oh, Well.

Abso- effin -lutely!

The Federal Reserve and banking system is a sham, printing dollars like there is no tomorrow.

Our fairy tale economy is about to crash hard.

I just may get into the "torches and pitchfork" business!

I have never been able to figure out why people actually need to borrow so much money ??

If you have a job and an income, why not save and pay for things with cash. I have never borrowed money, even paid cash for my house.

Saving and gaining money from investment is great, pay cash for it, and it is then yours. When you have enough investment income you can retire. That is what I have done. I no longer work, but live quite well without begging from the government.

Suckers continually borrow at very high interest rates, and end up paying an awful lot more for exactly the same item. They will grow old and end up still being in debt. Poverty in old age is not something to look forward to, but it happens to far too many people.

What are your plans ??????



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I'm very worried about the federal reserve system and our overuse of fractional reserve banking.

since 1913 (if i recall correctly) the us dollar has dropped from being worth 100 cents on the dollar to..... 2 cents on the dollar. this can be directly attributed to the Fed's policy of continual inflation.

there's a great book called 'The Creature From Jekyll Island' all about the genesis of the federal reserve system and the very secretive collaboration between some of the world's wealthiest men that led to its eventual creation.

what i'm going to do... is to use the new american currency that belongs to the people. It's called the Liberty Dollar, and it may not be the solution for all our economic troubles, but after doing some research on it, it's better than holding onto federal reserve notes. www.norfed.org www.libertydollar.org

the liberty dollar is actually backed by silver. unlike the federal reserve notes, which are backed by NOTHING. if the dollar collapses, and you have even a few of the liberty dollars, then you'll be far better off than someone who deals exclusively in federal reserve notes.

and no, i'm not trying to advertise. but i just recently learned of the Liberty Dollar, and it seems to me that we should have a choice of currency, and not be completely dependant on the Fed to relegate our wealth.

THE FEDERAL RESERVE DOESN'T WANT US TO KNOW WHAT IT DOES. The greatest enemy of the federal reserve is knowledge. they don't want you to learn about fractional reserve banking, and how it waters down the entire economy.

simple example: Bill the mailman gets a $100 paycheck from the government. Before he got the check, those dollars didn't exist. and then Bill goes to deposit the check in his bank. The bank now has $100 of new money, never before seen in the economy. And, thanks to fractional reserve banking, which says the bank only needs to keep 10% of its holdings in reserve, they can now loan out $900 to other people. When someone gets that loan of $900 the money appears out of thin air! It's like adding water to soup over and over again, many thousands of times a day.

sorry for the rant, but i feel very VERY strongly about the Fed and the bank scam we all live in.

Originally posted by street
the liberty dollar is actually backed by silver. unlike the federal reserve notes, which are backed by NOTHING.

If we think about this relationship between money and gold, we can gain some insight into how money gains its value: like the beaver pelts and dried corn, gold is valuable purely because people want it. It is not necessarily useful--after all, you can't eat it, and it won't keep you warm at night, but the majority of people think it is beautiful, and they know others think it is beautiful. Gold is something you can safely believe is valuable. Before 1971, gold therefore served as a physical token of what is valuable based on people's perception.

What is money?

simple example: Bill the mailman gets a $100 paycheck from the government. Before he got the check, those dollars didn't exist. and then Bill goes to deposit the check in his bank. The bank now has $100 of new money, never before seen in the economy.

So?

And, thanks to fractional reserve banking, which says the bank only needs to keep 10% of its holdings in reserve, they can now loan out $900 to other people.

Yes... so?

When someone gets that loan of $900 the money appears out of thin air!

Instead of what?

Debunking myths about the federal reserve

more nonsense arguments against the fed