ANY EXPERTS IN THE HOUSE? - on Fractional Reserve Banking!
Submitted by Ralph Waldo on Fri, 10/31/2008 - 16:04
I am about to go to a meeting to tell some people what a scam the fractional reserve system is and I need some back up and verification on a major fact.
Question - If a bank can loan out 9 imaginary dollars for every 1 dollar they have on deposit, it looks to me like they are earning 100% on each one of those 9 dollars or 900% - just on the principle when it is paid back, not including the interest.
Can someone verify my thinking here - Thanks!
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The Bailout Bill has Changed all of this!!
The reserve required to have on hand by any bank is now ZERO. That is correct, no reserves required. This was suppose to take effect in 2011, but was slid into the bill and the date was changed to 2008. You may want to make a withdrawal, but your bank may tell you that they can't/won't give you all the money that you are wanting. It is best to keep some extra money in a secure place just incase this does occur.
This is Written by a Banker Just for You
I figure that by now your meeting has been held. I hope it went well.
Nonetheless, I recommend this article on the subject. It also deals with other aspercts of banking, but covers fractional reserve banking quite well. You will need to read it all.
The most interesting thing about this article is that it is written by a prominent banker who supports honest, hard, metal money.
I wish all bankers were this smart and honest.
http://www.plata.com.mx/mplata/articulos/articlesFilt.asp?fi...
Here is an easy primer on it.
http://www.chrismartenson.com/crash-course/chapter-7-money-c...
Suggest a visit to fdrs.org
Suggest a visit to fdrs.org click on resource tab, viola...everthing you will want to know (and forget) about the fed and banking system. I would not recommend their service as there are better programs out there, depending on your circumstance, but their resource list is the very best I have seen in over five years of searching.....Clay
The only scam about fractional reserve banking
is that the government sets the fractional reserve rate, and then insures savings investments through the FDIC. Banks should be setting this rate (or better yet, offering different saving plans at different rates and with correspondingly different interest payoffs), and when there is a bank run and collapse, then the individuals who have invested their money should shoulder the cost after liquidation of the bank's assets and not get their money back.
If you want your savings to not be an investment, then you should be paying the bank a small tithe to keep your money safe (this is 100% reserve banking - which would not be so bad if we had a net deflationary currency). It doesn't make any sense to be getting paid to keep your money in a bank for nothing in return. TANSTAAFL. The cost of getting an interest return should be assuming the risk of bank collapse and total loss.
Actually, it has served as
Actually, it has served as the primary source for the injection of inflationary fiat money into circulation, that is prior to this latest banking fiasco, now the FED is taking a much more direct method.
Additionally, think about this, when you deposit YOUR money into a bank, you do so in Trust. Indeed, that bank is asking for your Trust and, in a very real sense, entering into an agreement with you that your funds are held in Trust with that institution. Now, the only reason for the FDIC is because the bank, while operating as an institution of Trust, is actually violating that Trust by not retaining or even taking responsibilty for your money property in full. Why is it necessary to have the FDIC, the reason is simple, there is a lack of Fiduciary Responsibility under the Fractional Reserve System. Under the Fractional Reserve System your money, not the government's is only covered to a degree, but if there is a failure of the bank, where does the responsibility rests for the uncovered portion of your property? There is NONE under the Fractional Reserve System. So, the bank can make poor decisions, make bad investments and yet you are stuck holding the bag if it goes under and you have no recourse against the bank because it falls under the laws of the Federal Charter.
Personally, that sounds very much like a fraudulent system to me!
http://www.1776solution.blogspot.com
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"Men do not willingly read unpalatable truths of themselves. The People like those best who fool them most, by pandering to their vices and flattering their foibles" Raphael Semmes
MONEY BANKING & THE FEDERAL RESERVE
How about making you an old pro in 42 minutes !!
www.youtube.com/watch?v=iYZM58dulPE
The 'Higher Powers': Martial Law vs. Christian Responsibility
This is a well written article and will answer your questions on Romans 13
http://www.lewrockwell.com/orig8/hawes4.html
Liked the video!
I get the understanding that the Fed. Res. is the head, and politics is it's shield.
Maybe this can be part of the solution....
http://video.google.com/videoplay?docid=-9010856874304912516...
well, since they kept ALL the deposit....
and loaned nothing....that would be an understatement
The glass-stiegal act was the end to any frac res lending rules
1934 it was enacted 2008 repealed.The next step is to run out the currency(hyper inflation).THANK G D FOR RON PAUL,only he had the BALLS to speak against the nwo.Alex Jones says hyper stagflation.We will see how it plays out here in a few months.
Glass-Steagull was repealed by Clinton in 1999
http://en.wikipedia.org/wiki/Glass-Steagall_Act
"The bill that ultimately repealed the Act was introduced in the Senate by Phil Gramm (R-TX) and in the House of Representatives by James Leach (R-IA) in 1999. The bills were passed by a 54-44 vote along party lines with Republican support in the Senate[8] and by a 343-86 vote in the House of Representatives[9]. Nov 4, 1999: After passing both the Senate and House the bill was moved to a conference committee to work out the differences between the Senate and House versions. The final bipartisan bill resolving the differences was passed in the Senate 90-8-1 and in the House: 362-57-15. Without forcing a veto vote, this bipartisan, veto proof legislation was signed into law by President Bill Clinton on November 12, 1999."
RalphWaldo----they're all right, but....
The 9:1 thing is no more. It's an ex-policy. They have no reserve requirement anymore.
The scam gets worse.
Explore Orthodox Christianity
: ))) That's ridiculously funny!
But scary at the same time. Are you sure about that as a universal rule for all banks. If so, the economy could be doomed to fail from inflation.
So if a borrower just kept the loan money under his mattress,
then there would be no earnings by other banks and the 9:1 ratio would not apply.
New Hampshire and Ecuador
The 9:1 ratio would apply when the borrower paid the loan back!
!
You understand it just fine.
You understand it just fine. Keep it simple. Here's how I teach people I tell them I have $100 and then I offer to loan them $900. They usually just smile Then I tell them this is exactly what the banks do. They usually know about the 10% reserve requirement but never thought about it much and usually aren't phased much at this point.
However here is the key to getting their attention. I then ask if the bank only has $100 where does the other $900 come from? They don't know, so you tell them it comes out of thin air it doesn't exist they create it right there on the spot and enslave you to payments on something that doesn't exist just by typing it on a computer screen.. Some will say it has to come from somewhere etc. Tell them no it really is out of thin air and is that simple.
I then tell them if I really tried to loan you money I didn't actually have and collect interest on it I could be arrested for fraud. yet banks have laws that allow them to perpetrate this fraud and have been doing it so long everyone accepts it as OK even though no one would accept it from you or me as anything but a fraud.That's what happens when you own politicians who can legislate laws that make fraud legal for a select class. You cannot loan that which you do not have.
I then talk about how this inflates the economy and was responsible for the real estate bubble and how our entire monetary system works the same way. Also that they print money using this same fraud principle. I then use the credit card analogy for printed money and money from nothing. They create debt out of thin air and get you to pay them principle interest on it.
After all that I then ask them where does the principle and interest you have to pay back come from since it hasn't even been created yet? I then explain that; you and I have to compete for the credit notes ( dollars) they have already created and put into circulation to pay it back. All the time they are creating more further diluting the purchasing power (inflation) of the notes already in circulation causing more inflation until the dollar is worthless and the whole system comes crashing down.
I then explain that every fiat system in history has ended very badly because it is mathematically built in to such a fraudulent system and we are at the end of our fiat currency cycle now and the only place it can go is to crash. You cannot defy the math. It is only a matter of time as they only recourse they have is to continue to inflate until we have hyperinflation and the currency is so diluted it is worthless.
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Get Prepared!
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End The Fat
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I think you are right
The fractional reserve system allows the banks to make money off of the imaginary principle and interest.
I am exactly right it really
I am exactly right it really is that simple. The kicker is now the 10% reserve requirement is no more thanks to the bailout bill. They do not need any reserves now.
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Every normal man must be tempted at times to spit on his hands, hoist the black flag, and begin to slit throats. H. L. Mencken
Get Prepared!
-----
End The Fat
70 pounds lost and counting! Get in shape for the revolution!
Get Prepared!
What are the implications of no reserve at all
Are we headed for Bankers Gone Wild?
If you have a few minutes, the following brief article by
Dr. Murray Rothbard will provide you with all the basics you will need:
http://www.lewrockwell.com/rothbard/frb.html
Best regards.
_________________________________________
"An economy built on fiat money is a society on its way to ashes."
_________________________________________
"An economy built on fiat money is a society on its way to ashes."
In action it works differrently
I deposit $100,000 in the bank say at 3% interest from the bank...the bank can loan out $90,000.00 at say 6% interest...this money is then deposited in another bank after used for a purchase...the new bank can lend $81,000.00 which is also ultimately deposited in another bank who then loans out $72,900.00 and so on...until such a time as the original $100,000 has spawned about $900,000 in "new" money.
**“The man who does not read good books has no advantage over the man who cannot read them.” ~ Mark Twain **
"...there is no doubt that it (socialism) could not possibly have affected us so widely and so deeply as it has, had it not been heavily financed". - B. Carroll Reece
So if a borrower just kept the loan money under his mattress,
then there would be no earnings by other banks and the 9:1 ratio would not apply.
New Hampshire and Ecuador
Right...inflation would be halted
**“The man who does not read good books has no advantage over the man who cannot read them.” ~ Mark Twain **
"...there is no doubt that it (socialism) could not possibly have affected us so widely and so deeply as it has, had it not been heavily financed". - B. Carroll Reece
Here's the question,
Here's the question, then...
So we know that a bank must keep 10% of what it loans out in reserve. So if I give the bank $100, it can hold on to $10 and loan out $90. So what's to keep the bank from holding the entire $100 in reserve and loaning out $900? Wouldn't that still fill the requirement? What would keep a bank from doing this?
I agree with what you are saying but I think that is another
branch of the scam. If they can loan out 10 dollars for every 1 they have on deposit, when that loan is paid back including the 9 imaginary dollars, looks to me like they are earning 900% profit just on the principle. Which makes it an even bigger scam than I thought.
Profit and Investment
One trouble you are running into on the "900%" profit concept is considering the bank's own money. Ordinarily if owners invest $100 in a business and make a profit for the year of $25, we can say that they got a 25% return on investment during the year.
But in the bank example, the bank may not be using ANY of its owners' money! If the owner's investment was zero and the bank makes a profit, then what percent ROI is the bank getting? It can't be calculated because the base number is zero.
The bank can run the same scam using nothing but depositor funds. But, in practice, there has to be some investment by owners so it is known who the owners are. Owner equity is not a necessary part of the fractional reserve scam.
So say we have a banker in a small town who invests $100 of his own money and accepts $900 in currency deposits from townfolk. He keeps the $1000 in currency in the vault as the bank's reserve. He can expand bank demand deposits (checking accounts) to $10,000 by loaning out money. Balance sheet: $1000 cash in vault, $9100 owed to the bank by townsfolk, $10,000 owed to townsfolk via checking accounts, $100 equity.
The bank earns revenue of 10% on $9100 or $910 per year. Not all of that is ROI. We first have to deduct expenses.
So have the banker pay himself a salary of $700 per year, and pay other expenses of $150 per year. Profit : $60 per year.
Return on investment is 60% per year paid as a dividend. The banker takes home $760/year on his scam while leaving his $100 equity in the bank to serve as part of the bank's reserves.
The fraud is not that the banker is being paid for all of his hard work. The worst part of the fraud is that he takes the reality of $1000 in currency and turns it into a money supply of $10,000. He causes inflation and malinvestment. He creates asset bubbles which then pop when the fraud is discovered.
It is the harm he does to the economy which is most to be condemned. His "earnings" are the least of the harm done.
ac
liberty yields harmony; tyrany yields chaos
liberty yields harmony; tyrany yields chaos
And if you don't have 71 minutes.....
http://en.wikipedia.org/wiki/Fractional-reserve_banking
That's a good video. I've listened to it twice but
unless I missed it, it still didn't answer my question about the 900% profit.
Griffin says the money springs into being
and that the bank is making interest off of nothing. While he doesn't specifically say that the principle also becomes a profit, we all know that the principle must be paid back as well. So it looks to me like the "principle out of nothing" amounts to a lot more than the interest.
I think you and I see this the same way and that it is really a bigger scam than I thought.
xntryk1 - The principle
is spent by the person that takes out the loan! The bank is accountable to pay that purchase..but for the convenience /need of the customer they charge the interest...which is the profit! Yes, in the meantime the "imaginary money gets "shuffled around" and the bank makes investments etc...off of it but they are still liable to account for and pay the original principle to someone!
Please do not confuse the "business" of banks with the way the FED operates...the banks have shareholders that put up the original money to lend and are accountable for the principle on any loan whereas the Feds just frikkin print the money when they need it and profit off ALL OF IT!! The banks are as much a victim of the FED as individuals!!
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