The Fed Just Acknowledged Its Too Big To Jail Policy

a reply to: TheBandit795

Then I'm not wasting any time to watch any links dodgy economic theories you post. Simple. This discussion will obviously go nowhere.

As you please. I didn't start it.

The video you posted is almost thirteen minutes long. In comparison, it took me roughly two minutes to read the article at my link. But perhaps you don't read as fast as I do.

And as for the cause. It's two things: The Central banks having the right to purchase securities with money they can legally create out of nothing. All QE is nothing more than these loans, bonds etc.. bought with money that didn't exist the day before. That's the first cause of monetary expansion.

This is fantasy economics. The money isn't 'legally created out of nothing'; its value resides in securities held by other parties, which are bought up by the central bank. It's a straightforward asset swap: liquid cash for illiquid securities. The amount of money in the economy does not increase. Here's a short article that explains the process; read it or not, just as you like.

The second cause is banks having a requirement to hold just a fraction of money in their accounts and being able to loan out the rest. Being able to lend out money that they don't have.

Really? Banks lend money they don't have? News to me.

bitsforbytes said that banks lend money they don't hold. That is correct; they can make loans above and beyond the quantity of specie they actually hold in their vaults. However, the money they lend comes from the other side of the ledger — deposits — and, on occasion, on funds borrowed from others, including central banks. Money you borrow is money you have, at least until it's time to pay it back.

Here is a calculator...

You seem to think that the power to lend money not held in direct reserves is some kind of scandalous falsehood. It is not. As for creating money 'out of thin air', this is tripe. The money is created based on a borrower's promise of repayment; in other words, it is the fruit of increased economic production. This is the process by which economic value is converted into money.

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I'll go with you as far as this: people who don't understand the rules of finance shouldn't play the game. Eschew credit, buy nothing you cannot afford to pay for with cash on the nail, and you will be safe and sound.

People complaining about the unfairness of the financial system are usually those who have got burned trying to live inflated lifestyles on money they didn't have, and are angry because the bank asked for it back. They think bankers are doing the same thing as they are, and want to see them punished, too. They little realize that what they are actually asking for is not for bankers to go to gaol, but for the collapse of the banking system. In other words, they want the whole nation to share the misery they brought upon themselves with their irresponsible borrowing.

Revenge economics. Stupidity. Madness.

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originally posted by: Astyanax
a reply to: TheBandit795

The video you posted is almost thirteen minutes long. In comparison, it took me roughly two minutes to read the article at my link. But perhaps you don't read as fast as I do.

I've rarely seen any posts of you in which you do not attempt to belittle whoever you are talking to. FYi I can read a 300 page book in a day, I used to be able to do it within 2 or 3 hours (back in high school & college).

This is fantasy economics. The money isn't 'legally created out of nothing';

Yes it is. Central banks have admitted it.

German Central Bank

www.zerohedge.com...

(translated in English)

4.4 Creation of the banks money

Money is created by "money creation". Both [central banks] and private commercial banks can create money. In the euro monetary system [money creation] arises mainly through the granting of
loans, as well as the fact that central banks or commercial banks to
buy assets such as gold, foreign currencies, real estate or securities.
If the central bank granted a loan from a commercial bank and crediting
the amount in the account of the bank at the central bank, created
“central bank money.”

www.wissensmanufaktur.net... (In German)

Bank of England:

www.washingtonsblog.com...

Commercial banks create money, in the form of bank deposits, by making new loans. When a bank makes a loan, for example to someone taking out a mortgage to buy a house, it does not typically do so by giving them thousands of pounds worth of banknotes. Instead, it credits their bank account with a bank deposit of the size of the mortgage. At that moment, new money is created. For this reason, some economists have referred to bank deposits as ‘fountain pen money’, created at the stroke of bankers’ pens when they approve loans.

its value resides in securities held by other parties, which are bought up by the central bank. It's a straightforward asset swap: liquid cash for illiquid securities. The amount of money in the economy does not increase. Here's a short article that explains the process; read it or not, just as you like.

Where does that liquid cash come from?

Anyway, that's actually one of my favorite sites besides ATS, financialsense.com

From the same author, Matthew Kerkhoff: www.financialsense.com...

As we're going to see, money in our modern banking system has the ability to multiply through bank lending. Each time a loan is made, money is created. Out of where, you may ask? Out of thin air. Most people would attribute this feat only to the Federal Reserve, but in actuality, every bank does it with every loan they make.

Let's walk through a hypothetical example to show how the act of bank lending creates new money. Say that person A has $100 dollars in cash and decides to deposit this money into a bank. The bank has a reserve ratio of 10%, and so it must keep $10 in reserves but can loan out the other $90. Let's say the bank makes a $90 loan to person B.

Time to stop and recap what just happened. Person A originally had $100 cash and consequently $100 worth of purchasing power. When person A deposits this money into a bank, they still have $100 in purchasing power. The bank then loaned out the $90 that it was not required to hold as reserves and this money went to person B. Now person B has $90 worth of purchasing power, and person A still has $100 of purchasing power. Money was just created.

You seem to think that the power to lend money not held in direct reserves is some kind of scandalous falsehood. It is not. As for creating money 'out of thin air', this is tripe. The money is created based on a borrower's promise of repayment; in other words, it is the fruit of increased economic production. This is the process by which economic value is converted into money.

That doesn’t mean it isn’t created out of thin air. To be fair, a bank should be able to use it’s own money. Not my money, not your money to lend out. The reserve requirement should be 100%, not 10% or some other percentage.

I'll go with you as far as this: people who don't understand the rules of finance shouldn't play the game. Eschew credit, buy nothing you cannot afford to pay for with cash on the nail, and you will be safe and sound.

That I agree with.

a reply to: TheBandit795

I've rarely seen any posts of you in which you do not attempt to belittle whoever you are talking to.

Clearly you haven't been reading many of my posts.

Here's what you posted earlier.

But you have the same amount of time to post on ATS... smh...

Let me put it simple for you.

I always give back in the same coin I get. With interest.

If you want respect from me, you now know how to earn it.

a reply to: Astyanax

Earn?? I don't need it.

a reply to: TheBandit795

That's probably just as well. But next time you start talking to others about their 'belittling' ways, consider your own first.

a reply to: Astyanax

Doesn't mean that you shouldn't be reminded of your belittling ways either.