Question about "Money As Debt" movie
In the movie "Money As Debt" Paul Grignon explains two different ways that fractional reserve banking works. The first is that a deposit in the central bank can be multiplied by 9, so that $1,111.12 can be turned into a $10,000 loan. Then that $10,000 can be deposited in a bank and the bank can loan out $9,000 of that.
My first question is why can't the new $10,000 be treated the same as the original money, and be multiplied by 9 to create a $90,000 loan? How is the system able to distinguish between the original "high powered money", and the subsequently created money?
My second question is, how could you avoid the second way of multiplying money? If I deposit $10,000 in a bank, if there were a 100% reserve requirement, the bank would not be allowed to lend out any of it in order to truly protect against a bank run. In that case banks could never loan out money. What am I missing here?
Here’s the scoop George
The “High Powered Money” is created when the government creates a debt out of nothing. The government puts ink to paper (or pushes a key on the computer now) and creates a liability. When the Fed was started in 1914 the Treasury took all of its money (mainly gold) and deposited it at the Fed. Then the reserve requirement was 40%. So for each dollar of gold it deposited it became $2.50 in currency in circulation. As time has gone by that reserve requirement has been reduced to approx 10%. So each new dollar of Treasuries bought by the Fed becomes $10 in commercial bank deposits. The commercial bank has to keep only $1 dollar as a reserve at the fed and can lend out 10 times that reserve requirement. The pyramid becomes 100 to 1 in the end, for every dollar the fed buys from the government it can become 100 in the economy through commerical bank deposits when paid to a vendor of the government and then reloaned out by the comerical banks.
If you want a deeper explanation I recommend the von Mises web site and look for the video “Money Banking and the Federal Reserve” or Murray Rothbard’s book “ A History of Money and Banking in the United States”
As far as the first point,
As far as the first point, demand for cash and reserve requirements hinder the ability to pyramid/loan out 100% of reserves.
Second point, I don't really know but you better believe that lending would be severely limited. This is why I think getting rid of fractional reserve banking should not be a priority.
Ventura 2012
Basicly Reserves in todays
Basicly Reserves in todays vocabulary relate to an insurance policy premium which cannot possibly cover everyones butt. The Reserve is the Mother of all derivatives.
YES, good people do good things.. The rest are liars.
That's simple
as the money gets transferred to each lending facility the reserve amount, which is actually in most cases less than 10 percent, needs to be stored away at the Fed or in vault cash. So the second bank who recieves the funds sends their reserves to the Fed, than the third bank recieves a little less but sends their reserve requirement to the Fed and so on.
Actual reserve ratios from the Fed's Report are on page number 402 of the 2008 CAFR.
http://cafr1.com/STATES/FEDERAL-RESERVE/FR2008AR.pdf
As you can see any transaction less than $9.3 million requires 0 reserves and up to $43.9 million only 3%, as of December 20, 2007.
So this new money we've created.
could soon explode?
Ron Paul 2012
www.josiahgarber.com/blog
www.heirloomgardenpro.com
www.mennonitesforronpaul.com
Hi George,
I think you are missing the critcal step in this process. The 2nd bank does multiply the money, the same way the 1st bank did. So the 10,000 dollars was turned into 90,000 (rounded numbers) and loaned out and so on and so on. I have just an elementary understanding of this, so I don't speak to you with any authority, but I just finished the 3.5 hour course Crash Course and it helped me to understand this matter so much better. It's on you tube and offered by a guy named Chris (something). His video series goes into everything from fuzzy money, gpd, cpi and inflation. I highly encourage you to watch it. It's in 20 video segmants. If you can't find it and want it emial me through the contact list and I will get it for you.
Ron Paul cured my apathy - I cured my ignorance!
!!!Truth is treason in the EMPIRE OF LIES!!!
" Single acts of tyranny may be ascribed to the accidental opinion of they day; but a series of oppresssions...pursued unalterably, through every change of ministers, too plainly proove delibrate, systematical plan of reducing us to slavery..."
Tho
Money funds are no longer
Money funds are no longer backed up by tangible assets which renders funds worthless when a run occurs...This is what you have seen take place ..A run by investers on funds that did not have any tangable backing.(Someone) pulled their funds from the funds in order to create Chaos Then they got bailout monies & what they already pulled out ..So they are sitting back now with their pockets full while we finance the debt they stuffed into their pockets to enable them to buy back into the markets cheap..CIT just got a miracle..? .And in the housing market, one person only NEEDS so many houses that cannot be paid for. WE have become the Worlds' patsies. And now ,they have to rid the World of the U.S Constitution.. Let that task to Obama.
yes, good people do good things..The rest are liars ???
And they think they are SOOOO smart.
Fed creation of money
Go here: http://www.freerepublic.com/focus/f-news/888963/posts
And in the feds own words go here:
http://www.archive.org/details/ModernMoneyMechanics
Good stuff there.
Thanks for those links.
"Never doubt that a small group of thoughtful, committed citizens can change the world. Indeed, it is the only thing that ever has." ~ Margaret Mead