Quick look into how the banking system works
- Thread starter hanimmal
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hanimmal
Well-Known Member
Think about why time matters.
Before Adam Smith, economics was not something that was consistent. It was more 'life lessons'. And our real life insight, is exclusively one sided.
So the idea that I can walk to a goldsmith and tell him I need a loan for a new ox, and he reaches into his vault and pulls out the gold I need, it looks wonderful, and I think he is pulling it out of thin air. I don't realize that he is keeping some of the gold on hand for his depositors daily needs. I just see him lending me more than I could make in a year and helping me triple my work value, and I only have to pay him 10% more after I sell my goods for the next 5 years.
So yeah to them it would seem that in good times the banks were the evil and bane of their existence, and in good time it was a wonderous thing to see this gold pulled out of 'thin air'.
After Adam smith this changed, and businesses started to realize they would do better to follow this new thing "division of labor" and saw how much more efficient their assembly lines would be, because of Adam smiths work to record all the things he seen in the manufactuers that he visited and how some were so much more efficient.
Only after the great depression did this again solidify as something that had a next level the macro economy, which was everyones ability to affect everyone else as a whole. And that the customers were also as important, because they could 'choose' to go somewhere else.
It really is a new science, and quoting the oldies but goodies, does not mean that they had some special insight than what we have today.
Before Adam Smith, economics was not something that was consistent. It was more 'life lessons'. And our real life insight, is exclusively one sided.
So the idea that I can walk to a goldsmith and tell him I need a loan for a new ox, and he reaches into his vault and pulls out the gold I need, it looks wonderful, and I think he is pulling it out of thin air. I don't realize that he is keeping some of the gold on hand for his depositors daily needs. I just see him lending me more than I could make in a year and helping me triple my work value, and I only have to pay him 10% more after I sell my goods for the next 5 years.
So yeah to them it would seem that in good times the banks were the evil and bane of their existence, and in good time it was a wonderous thing to see this gold pulled out of 'thin air'.
After Adam smith this changed, and businesses started to realize they would do better to follow this new thing "division of labor" and saw how much more efficient their assembly lines would be, because of Adam smiths work to record all the things he seen in the manufactuers that he visited and how some were so much more efficient.
Only after the great depression did this again solidify as something that had a next level the macro economy, which was everyones ability to affect everyone else as a whole. And that the customers were also as important, because they could 'choose' to go somewhere else.
It really is a new science, and quoting the oldies but goodies, does not mean that they had some special insight than what we have today.
Most borrowing from Goldsmiths was not in the form of gold, but in the form of a warehouse receipt that traded just like gold did. The receipt could be turned in at anytime by the bearer for the amount of its face value. Since most people never actually came to get the gold the goldsmith realized he could just make up receipts and loan them out for interest and that is exactly how the banking system works today. Your using paper receipts that up until 1913 could be turned into the treasury for gold but now can only be traded for more paper.
And if the Goldsmith is only keeping "Some" of the gold on hand, where is the rest of the gold? Did he dig a hole to bury it in? If all the depositors all came back at the same time and wanted to get all of the gold they had deposited would the goldsmith be able to accommodate them?
hanimmal
Well-Known Member
I cannot remember what my early merchantialism economic beginnings professor told me, because I don't think that is actually a class, and most the stories I know about bankings history usually ends with the prince that is essentially bankrupt killing the jewish person that lent him the money in the first place (good reason for bankruptcy courts). But I do recall from the cartoon you youtubed on page 1 that they used receipts more, because gold is a pain in the ass. So I don't think that I can figure out their reserve requirements.
Not sure if you mean me or not, but I thought I would say no, is it nice out there?
Not sure if you mean me or not, but I thought I would say no, is it nice out there?
hanimmal
Well-Known Member
Ah I see, yeah I just cut and pasted it, I wanted to make sure that there was not some ancient greek mathematician that talked about it, before I blurted out Adam Smith. It is insane how far back folks pull stuff out at times, I didn't want to get into a which religion is oldest thing!
Now Han, just because there was no Formal Economics 101 studies being done, does not mean there was no economy. 5000 years of records indicate economies worldwide were flourishing since man began to trade things for other things. Now your post here is about Banking and not about economic study. Banks DO create money, money that has no backing and is not offset by an equal amount in the banks vaults. When you get a loan only about 10% is actually backed, the rest is just made up out of thin air. Its easy to do, the bank just adds some numbers and applies it to an account, voila money has been created in the form of Debt which you must now pay back, plus interest. The original gold standard let the Congress issue money INTEREST FREE!! Therefore direct taxes ( Income) were not needed. The USA got all its money from excise, imposts and tariffs as should be done today. I hope you do more study on this, because its absolutely true what I am saying.
hanimmal
Well-Known Member
You are not right.
When I go to a bank and get a $2000 loan from them, they have to pull out $2000 and give it to me, they also have to hold 10% of that amount for the reserve requirements.
How else would I get that cash to go buy a computer for my business? The bank does not have a printing press, they have to give me cash that is in their vaults for it, because I cannot just tell dell it's cool the bank said that I have $2000 for it, you actually need the money to buy what you need to.
So it is impossible for them to give out loans based on only having the deposits be 10%. We need the full amount we borrow when we take out a loan, and due to the constraints of reality, it cannot possibly work your way.
They have to have the cash to lend it, what you have explained again is impossible, it would lead to infinite growth in just a few steps.
Now instead lets say I put that $2000 into another bank account (bank 2). They can now lend that money out - 10%. Because they physically have the cash for it.
How is this so hard to understand?
Then it is a good thing I said economics and not the economy.
When I go to a bank and get a $2000 loan from them, they have to pull out $2000 and give it to me, they also have to hold 10% of that amount for the reserve requirements.
How else would I get that cash to go buy a computer for my business? The bank does not have a printing press, they have to give me cash that is in their vaults for it, because I cannot just tell dell it's cool the bank said that I have $2000 for it, you actually need the money to buy what you need to.
So it is impossible for them to give out loans based on only having the deposits be 10%. We need the full amount we borrow when we take out a loan, and due to the constraints of reality, it cannot possibly work your way.
They have to have the cash to lend it, what you have explained again is impossible, it would lead to infinite growth in just a few steps.
Now instead lets say I put that $2000 into another bank account (bank 2). They can now lend that money out - 10%. Because they physically have the cash for it.
How is this so hard to understand?
Then it is a good thing I said economics and not the economy.
They don't give you cash, they give you a check drawn upon the account they just made up. You haven't ever bought a new car or a house have you? Ever use a debit or credit card? Think thats cash coming out on the other end?
Here is how it works in reality:
I mean for Gods sake RIGHT HERE in this graph its showing you how they do it, but your blind and can't see it. The original deposit is only $10,000, but add up all the money that was lent out on that original deposit and you get nearly 100,000! How can you have 1 deposit of 10k and then allows for a $9,090 loan whuich in turn allows for a $8263 loan which in turn allows for a $7500 loan and on and on until you have a zero sum, add all those numbers up, hell just add the first 3 and you come up with 9,090+8263+7500 =$ 24,853. In just the first 3 loans you have accumulated the equivalent of almost $25,000 in loans off the original deposit of 10k. In essence 15k was "Created".
hanimmal
Well-Known Member
That is retarded, if anything what you have just described is one person moving his money 10 times, not one bank doing it.
Seriously, if I take my 1k cash to bank1 (which is getting about 2% interest added to it) and tell them I now need a loan, so give me 909 in a loan, which they give me a 5% rate on (so I am now -3% growth).
Then I take that to bank 2 (That is now giving me another 2% interest), which I promptly deposit and take out another loan for $826 (for another 5% off (-6%)).
Off to bank 3 with that and deposit it (+2%) which I take a loan out again, and go to another bank with $751 (-5%(Total -9%).
Again with $683.01(And -12%), then $620.92 (-15%), then $564.47 (-21%)... perpetually getting small to the point you won't bother (which is why credit is a crunch today).
See the bank is not making money from nothing. People can keep moving funds around forever, constantly racking up interest rates, while when you add up all those numbers above: $4,733 and I am now paying about $994 a year on that, which if I have to pay back at 20% a year would be a monthly payment of: $95. (That is the real amount, I am actually paying 35% in interest and receiving back 14%.
And that pretty much sums it up.
It is not the banks that are making money out of thin air. It is the people that have evolved to the point that they have taken full advantage of it. Credit cards have made this practice much more express. But it is the people that are borrowing this money. They (most of them over 85%) are the ones that have said I will work and pay this back.
Because they enjoy their computers, tv, HPS 1000 watt ballast, and homes, cars, everything. And we work hard for it, and there are times when we go too far.
And guess what when we do we start to pay off those cards, which means that is less things being bought while we deflate our loans and demand falls until we can afford it again, then the businesses pick up as demand increases, and we come up with new things that people want and work to get, on and on.
You are backwards on the banks, they cannot force people to put their funds into their banks, but a bank cannot deposit funds into their own accounts like you are describing. A bank cannot turn a $100 deposit and make up an extra $1,000 in funds to lend out.
Is it finally starting to make sense to you? The way you think banking works is ass backwards. We are the only thing that can make value, not gold, not banks, us. We work hard and the things we produce are of some value to someone else, and that just continues to move around the entire economy and the globe.
Every time someone makes something, new value is added to our globe, and wealth is created, and it has nothing to do with banks, or gold. Paper just represents the value that people place on the service you have provided. And allows it to move faster, and becomes more stable as the world pushes everything into the direction that they wish to buy, like currents.
This is why communism does not work, nothing is as efficient as 330 million people deciding what they deem most important with the use of their wealth to vote for what goods and services they want.
So bank 2 is fine when the carpenter that built my home gives them a check that they know is worth nothing (because it is a loan from my bank that I took out to pay for the services I received), and that they just give all the other companies that don't receive cash money for their accounts, which means nothing, and we just keep working and producing, oh wait, see we are right back to building true wealth again, as soon as we go back to us working, it is being built.
It all comes back to us working off our debts. And when we save it is good, but when we spend it works too (as long as we get to a place we can live well when we no longer want to work).
Seriously, if I take my 1k cash to bank1 (which is getting about 2% interest added to it) and tell them I now need a loan, so give me 909 in a loan, which they give me a 5% rate on (so I am now -3% growth).
Then I take that to bank 2 (That is now giving me another 2% interest), which I promptly deposit and take out another loan for $826 (for another 5% off (-6%)).
Off to bank 3 with that and deposit it (+2%) which I take a loan out again, and go to another bank with $751 (-5%(Total -9%).
Again with $683.01(And -12%), then $620.92 (-15%), then $564.47 (-21%)... perpetually getting small to the point you won't bother (which is why credit is a crunch today).
See the bank is not making money from nothing. People can keep moving funds around forever, constantly racking up interest rates, while when you add up all those numbers above: $4,733 and I am now paying about $994 a year on that, which if I have to pay back at 20% a year would be a monthly payment of: $95. (That is the real amount, I am actually paying 35% in interest and receiving back 14%.
And that pretty much sums it up.
It is not the banks that are making money out of thin air. It is the people that have evolved to the point that they have taken full advantage of it. Credit cards have made this practice much more express. But it is the people that are borrowing this money. They (most of them over 85%) are the ones that have said I will work and pay this back.
Because they enjoy their computers, tv, HPS 1000 watt ballast, and homes, cars, everything. And we work hard for it, and there are times when we go too far.
And guess what when we do we start to pay off those cards, which means that is less things being bought while we deflate our loans and demand falls until we can afford it again, then the businesses pick up as demand increases, and we come up with new things that people want and work to get, on and on.
You are backwards on the banks, they cannot force people to put their funds into their banks, but a bank cannot deposit funds into their own accounts like you are describing. A bank cannot turn a $100 deposit and make up an extra $1,000 in funds to lend out.
Is it finally starting to make sense to you? The way you think banking works is ass backwards. We are the only thing that can make value, not gold, not banks, us. We work hard and the things we produce are of some value to someone else, and that just continues to move around the entire economy and the globe.
Every time someone makes something, new value is added to our globe, and wealth is created, and it has nothing to do with banks, or gold. Paper just represents the value that people place on the service you have provided. And allows it to move faster, and becomes more stable as the world pushes everything into the direction that they wish to buy, like currents.
This is why communism does not work, nothing is as efficient as 330 million people deciding what they deem most important with the use of their wealth to vote for what goods and services they want.
So bank 2 is fine when the carpenter that built my home gives them a check that they know is worth nothing (because it is a loan from my bank that I took out to pay for the services I received), and that they just give all the other companies that don't receive cash money for their accounts, which means nothing, and we just keep working and producing, oh wait, see we are right back to building true wealth again, as soon as we go back to us working, it is being built.
It all comes back to us working off our debts. And when we save it is good, but when we spend it works too (as long as we get to a place we can live well when we no longer want to work).
You clearly demonstrate your complete misunderstanding of the subject every time you post. You won't make it as an economist, might wanna rethink that history thing, although I think perhaps digging ditches may be in your future.
hanimmal
Well-Known Member
There it is, you prove you lost and have given up because you know it by getting angry. You have not once been right about this.
You have not done one example or shown one law, I have done it over and over again. , your big swing and a miss was a flipping youtube cartoon. I have very clearly laid out exactly how monetary growth works, and shown you how a deposit can grow if you keep moving it from bank to bank, by about 10x with a 10% RR.
And you refuse to actually think about the math, because it is becoming apparent that you cannot or you will not.
I will be more than happy to continue with my actuarial degree, because guess what, if I only have to worry about people like you in the field as my job competition, there is a very big market for me.
What you should be doing is actually realizing your argument means you are pissed off at people from taking out their money in loans. And if you take away the ability of people to take out their own money from banks. Well then your the biggest fascist of them all right?
You have not done one example or shown one law, I have done it over and over again. , your big swing and a miss was a flipping youtube cartoon. I have very clearly laid out exactly how monetary growth works, and shown you how a deposit can grow if you keep moving it from bank to bank, by about 10x with a 10% RR.
And you refuse to actually think about the math, because it is becoming apparent that you cannot or you will not.
I will be more than happy to continue with my actuarial degree, because guess what, if I only have to worry about people like you in the field as my job competition, there is a very big market for me.
What you should be doing is actually realizing your argument means you are pissed off at people from taking out their money in loans. And if you take away the ability of people to take out their own money from banks. Well then your the biggest fascist of them all right?
First you were going into History,But you figured that would be boring, so then you were going to be an economist, this week your going into insurance. I don't think you've been honest with anyone, are you even a real student?
So the only link of mine you bothered to check out was the one with a cartoon eh? Are you sure your 30 years old? My 10 year old likes cartoons too.
Go ahead and check my math, even your very own posts and info you got off of wiki reinforces what Im saying, its just over your head to grasp the concept of money in the USA.
Here some more links for you to peruse. the first one makes it quite simple to understand I highly recommend you watch it.
[youtube]Hg_1iXbIjFQ[/youtube]
"The Process by which money is created is so simple that the mind is repelled" ~ John Kenneth Galbraith
[youtube]qIxhsF6JLEA[/youtube]
This next one is a series of CARTOONS so you should enjoy it as long as you can hold out for the hour it takes to watch it, it goers into more detail.
[youtube]sanOXoWl0kc[/youtube]
this one is good also, well made 3 part series I will link all 3 so you can't claim ignorance.
[youtube]AgKFLk9xffA[/youtube]
part 2
[youtube]4wQWVxk49ts[/youtube]
part 3
[youtube]BFMqsBAP4Q4[/youtube]
Can you provide even 1 youtube/google/somebody's homemade video from their moms basement that backs up your claims, even 1?
Here A link to "Modern Money Mechanics" produced and underwritten by THE FEDERAL RESERVE!!!!! http://www.rayservers.com/images/ModernMoneyMechanics.pdf
Im going to link this again JUST IN CASE YOU MISSED IT!!!!
http://www.rayservers.com/images/ModernMoneyMechanics.pdf
IT PROVES EVERYTHING YOU THINK IS WRONG WRONG WRONG!!!!!
Im not angry either, but I have to yell so you snap out of your sleep you have been in your entire life and didn't know it. Its ok to admit your wrong when you are wrong, I won't rub it in, I will applaud you because now you will REALLY understand what is happening and you can PROTECT yourself!
http://www.rayservers.com/images/ModernMoneyMechanics.pdf
IT PROVES EVERYTHING YOU THINK IS WRONG WRONG WRONG!!!!!
Im not angry either, but I have to yell so you snap out of your sleep you have been in your entire life and didn't know it. Its ok to admit your wrong when you are wrong, I won't rub it in, I will applaud you because now you will REALLY understand what is happening and you can PROTECT yourself!
hanimmal
Well-Known Member
Actuarial economics:
Just because I am not going for the easy economics degree before going on to grad school does not mean that it is not economics.
Yeah I am sure of my age.
And fine, I will check your math Deposit of $10.
By your math, bank1 can now loan $100, bank 2 can use that to loan $10000, bank 3 can use that to make $100,000,000, and bank 4 can loan $10,000,000,000.
Impossible. in 4 steps they have turned 10 bucks into 10billion. How are the companies that are going to use these funds going to get cash? Banks cannot print it.
Are you going to continue to defend your position that banks can do this?
And that last website is a joke, and I will watch your youtube videos later, after I get home from my imaginary classes, that will allow me to get a very well paid imaginary career. I just wish I learned economics from youtube and quack websites so that I could have a real chance.
But in the meantime I thought I would actually get you a link from a actual Fed website:
http://www.newyorkfed.org/aboutthefed/fedpoint/fed45.html (go to the main page of both websites, and tell me which looks legit, incase you cannot find your post right above here is your link: http://www.rayservers.com/images/Mod...yMechanics.pdf)
This is from the actual Fed website:
But your understanding is ass backwards. You are saying a bank can get your $100 and keep that as 10% and loan out $1,000. You are wrong.
My link is 100% legit. IT COMES FROM THE FED!! IT WAS MADE BY THE FED!! Do a little checking and research if you want, you will see i am 100% correct.
BTW keep linking stuff from the fed that backs up what im saying 100% and completely destroys your argument.
Its wake up time Han.
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