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"Fractional reserve" banking is the biggest,:most harmful fraud, and its legal
true
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Under this FUNDAMENTALLY FRUADULANT system economic collapse is inevitable, yet with all the babbling about "the economy" we hear from the big news organizations, the elephant in the room is totally ignored. This isn't conspiracy theory. This is cold hard fact, yet most people shrug their shoulders as if it was impossible to outlaw this particular kind of injustice. Side: true
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Silly. How is it fraudulent? Most anyone knows that the bank lends out some portion of their money in order to make money - and people readily agree to this. When interest rates are high, it means you make a little money by having savings in the bank - when interest rates are low, less so, but it reduces the overall cost of banking and improves efficiencies in lending, etc. What the reserve percentage and target inflation should be etc. are all legitimate questions, but that it is fraudulent is an overstatement. Side: false
Silly How is it fraudulent? Banks are permitted by law to loan out at least 9 times the money they have "on deposit". This is what "fractional reserve" means. Interest charged is irrelevant to this basic fact. It is the fact that they lend what they don't even have that makes it fraudulent. Most anyone knows that the bank lends out some portion of their money in order to make money - and people readily agree to this. Your statement is proof that you yourself are STILL unaware that they are permitted to loan MUCH MORE than they actually possess. The interest they charge is not what makes it fraudulent. What the reserve percentage and target inflation should be etc. are all legitimate questions, but that it is fraudulent is an overstatement. The "reserve percentage" is a set amount of legally permitted fraud. The average person would go to jail for this kind of ponzi scheme. Side: true
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Banks are permitted by law to loan out at least 9 times the money they have "on deposit". This is what "fractional reserve" means. Not exactly - "fractional reserve" just means they can lend out some amount over deposits, it doesn't mean that the reserve amount must be 3%, or 10%, etc. - it could just as easily be set at 75%. Interest charged is irrelevant to this basic fact. I didn't say anything about interest charged (except maybe "improves efficiencies in lending"). What I mentioned was interest paid (to the depositor) - which would be 0 if the bank is not allowed to do anything with the money except put it in a vault. they lend what they don't even have that makes it fraudulent. Fraud requires deception - everyone involved knows (or has the ability to know) the relevant facts. MUCH MORE than they actually possess. As I already said - the amount they are required to keep on hand (the reserve percentage) is a legitimate issue and has varied over time and from country to country, etc. The average person would go to jail for this kind of ponzi scheme. Again - Silly. A) Ponzi schemes require fraudulent intent - see above B) The average person is certainly allowed to owe multiple people at the same time. The same principles are used in insurance and elsewhere. The odds that the average person might go bankrupt is much higher than the odds that the entire monetary system collapses. We accept the minuscule risk of collapse (and mitigate it with the FDIC, etc.) in exchange for the benefits - a secure place to put money and have 24/7 fraud protected access though plastic anywhere in the world for approximately free and in times of high interest rates, they even pay you! People can certainly argue for a higher reserve requirement, but to argue that it is fraud is another matter. Side: false
Not exactly - "fractional reserve" just means they can lend out some amount over deposits, it doesn't mean that the reserve amount must be 3%, or 10%, etc. - it could just as easily be set at 75%. I understand and agree with your clarification. I didn't mean to suggest that a fractional reserve system must be set at one tenth of actual deposits held. I didn't say anything about interest charged (except maybe "improves efficiencies in lending"). What I mentioned was interest paid (to the depositor) - which would be 0 if the bank is not allowed to do anything with the money except put it in a vault. No disagreement there. But this is a side track from the issue I am disputing with you. Which is: Is fractional reserve banking basically fraudulent? Fraud requires deception - everyone involved knows (or has the ability to know) the relevant facts This is your strongest argument so I believe we should focus on it. Agreed? A) Ponzi schemes require fraudulent intent - see above In the interest of keeping the discussion manageable and clear I wish to avoid arguing whether fractional reserve banking amounts to a ponzi scheme definitively. I see similarities but wish to focus on whether it is fraudulent by nature OK? B) The average person is certainly allowed to owe multiple people at the same time Being able to owe more than we have isnt precisely the issue, its being able to use fictitious collateral as a surety for borrowing. That's business as usual for banks and a jailable offense for you and I. The same principles are used in insurance and elsewhere Making promises we might not be able to keep is different than presenting a fundamental fiction. ie fraudulence. Side: true
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Making promises we might not be able to keep is different than presenting a fundamental fiction. ie fraudulence. Then yes, let's focus on the difference between the two since I think the bank is doing exactly the same as taking a loan from the depositor which it will very likely pay back, but "might not be able to". It's been a while, but i think this is literally what is happening from a technical standpoint - will see if I can remember some terms... And, yes, fraud is the key element at issue here. Side: false
Assuming that someone is fully aware that they are borrowing money that doesn't actually exist, only makes them party to the fraud. Is it not true that WHEN MAKING LOANS (I would like to put aside bank's acceptance of liability of customer deposits) that they are able to LEND what they do not have? They are allowed to treat debts as assets which is insanely fraudulent from my perspective. Side: true
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I dony buy into the fiction that "what banks lend" is mainly from "legitimate deposits" rather than mostly from the "money generated from thin air" through fractional reserve banking . It is the act of a bank lending alone that prompts the printing of new "money" solely for the purpose of serving that loan. The value of monies should be tied to actual goods not compex banking formulas soley controlled by bankers. Not to digress, fractional reserve banking makes money itself a fundamentally fraudulent instrument. Side: true
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"money generated from thin air" As you can see from the borrowing to lend to your friend scenario, money isn't actually printed. You have an IOU from the friend for $15,000 The bank has an IOU from you for $5,000 Thus $20,000 of assets where there is only $15,000 in actual currency. It is the act of a bank lending alone that prompts the printing of new "money" solely for the purpose of serving that loan. If anything, the opposite of the above is true. A) The factors that go into the Fed expanding the money supply are, of course, numerous. B) The Fed seeks to expand when banks are NOT lending enough. C) The way the Fed expands the money supply INCREASES bank reserves; For instance, after QE, etc., the bank reserves reached over 99% of M1 in Aug 2014, and are currently around 75%. makes money itself a fundamentally fraudulent instrument Again, with no deception there is no fraud. If a person buys a car with money they don't currently have, is this fraud or a reflection of perceived creditworthiness? Side: false
As you can see from the borrowing to lend to your friend scenario, money isn't actually printed. You have an IOU from the friend for $15,000 The bank has an IOU from you for $5,000 Thus $20,000 of assets where there is only $15,000 in actual currency. Yeah that's exactly the kind of BS you have to accept to be OK with how things operate in the "money is debt" sham perpetrated by the bankster mob. If someone owes someone money, right thinking folks don't count it as an asset until they are paid. Suppose I owed you 100 bucks and I told you I would give it to you in gasoline to be delivered by a tank with an unknown size hole it, you would refuse because you would be getting ripped off. Because of fractional reserve banking, money is just like that. The significant difference is that you can decide not to do business with most companies with shady practices like that,. Just try to opt out of the money sham. Truth is, people dont really have that option. So even if the sham IS known or knowable by everyone, we accept it under duress. A) The factors that go into the Fed expanding the money supply are, of course, numerous. B) The Fed seeks to expand when banks are NOT lending enough. C) The way the Fed expands the money supply INCREASES bank reserves; For instance, after QE, etc., the bank reserves reached over 99% of M1 in Aug 2014, and are currently around 75%. May 2016: 73.7% Reserves / M1 Aug 2014: 99.3% Reserves / M1 No offense but a bullshit rationale written in financial industry jargon is still a bullshit rationale. The Fed controls the size of the hole in the tank (from my analogy above) whether were aware or not were getting ripped off by these crooks. Side: true
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sham perpetrated by the bankster mob. Is lending your friend borrowed money fraud? a sham? (or "a travesty of a mockery of a sham of a mockery of a travesty of two mockeries of a sham"?) right thinking folks don't count it as an asset Yes, they do. If someone owes you money, that is an asset on your ledger - accounting 101 There are only assets and liabilities - not having it in your hand doesn't turn it from an asset into nothing. You haven't yet received your future paychecks, however, your house, car, and other payments are based on money that you may not actually receive. People are right to have some skepticism of future income/assets (the reason for charging interest), but even hard assets that you already posses can be lost, stolen, damaged, or just lose value over time. Suppose I owed you 100 bucks and I told you I would give it to you in gasoline to be delivered by a tank This would depend on your trustworthiness, etc - if I know you to be in the gas delivery business and to have made thousands of deliveries for many years with little loss, I could very well agree to such a situation - even though my delivery could be the one that explodes on the highway. If you have little to no reputation, I would probably either demand a much higher repayment (aka interest) or not accept the arrangement. More likely I would only trade for a certain amount of gas being actually delivered - thus loss in transportation would be your problem. Again - there is no deception or fraud here. Just try to opt out of the money sham. You certainly can. You are not required to participate in FRB - you can keep your money under the mattress or in a safe at home or in a safe deposit box in a bank, etc. You can switch to bitcoin, or bartering, or pawn shops, or gold/silver, or other commodities, or ... Is participating more convenient - sure, that's what I said in my very first post. Convenience doesn't make fraud. bullshit rationale written in financial industry jargon Showing that, contrary to your concerns, banks currently have very high reserves and showing your belief that increased lending triggers money printing to be false is "bullshit"?? If facts are irrelevant, then debating is pointless... The Fed controls the size of the hole in the tank In that scenario the Fed would actually control something more akin to the value of all gasoline. By increasing the money supply, the value of money decreases - and vice versa. whether were[sic] aware or not Awareness goes to whether there is fraud. So far you've offered nothing to show deception/fraud - the crux of your argument. ripped off by these crooks Have you ever lost one dollar to "these crooks"? Side: false
Yes, they do. If someone owes you money, that is an asset on your ledger - accounting 101 There are only assets and liabilities - not having it in your hand doesn't turn it from an asset into nothing
Despite your indoctrination Receivables aren't assets until they are......wait for it......received. You haven't yet received your future paychecks, however, your house, car, and other payments are based on money that you may not actually receive. No they are based on perceived credit worthiness...and the collateral of real (legally repossesable) property, and a contractual promise of future money delivered. Im amazed I have to keep telling you this in different ways, but a promise made and a promise delivered are NOT considered the same thing by people with common sense. People are right to have some skepticism of future income/assets (the reason for charging interest), but even hard assets that you already posses can be lost, stolen, damaged, or just lose value over time. Its true that there is no such thing as assets that absolutely cannot lose value, but legal tender currency's value should obviously NOT be tied to pure debt, which is often of no real value at all. if I know you to be in the gas delivery business and to have made thousands of deliveries for many years with little loss, I could very well agree to such a situation - even though my delivery could be the one that explodes on the highway Well thank you for being clear about how you think! Again - there is no deception or fraud here The arrangement I described is one you can realistically refuse. Try to get by without using US currency (which hemmorages value constantly) and see where you end up. You certainly can. You are not required to participate in FRB - you can keep your money under the mattress or in a safe at home or in a safe deposit box in a bank, etc Its not at all safe from devaluation in those places....come on...think Is participating more convenient - sure, that's what I said in my very first post. Convenience doesn't make fraud If you want to pretend that opting out of using US Dollars would be a mere inconvenience, I'll have a hard time taking you seriously. If not fraud than its just outright tyranny. Showing that, contrary to your concerns, banks currently have very high reserves Good grief they print a bunch of fictitiously backed notes to increase " reserves" this exacerbates my concerns and showing your belief that increased lending triggers money printing to be false Look, every dollar printed is based on a loan, this is why the phrase " Money is debt" was coined. Declaring that I am wrong is not showing how I am wrong If facts are irrelevant, then debating is pointless What fact have you presented to show that all money printed does not have an associated loan? You can use Google to verify MY assertions. If you want me to do it for you just ask.
In that scenario the Fed would actually control something more akin to the value of all gasoline. By increasing the money supply, the value of money decreases - and vice versa Your more precise analogy doesn't really affect the general point Awareness goes to whether there is fraud If its more technically correct to refer to it as blatant tyranny rather than fraud I am happy to concede that. Have you ever lost one dollar to "these crooks"? They have helped make ripping people off through (supposedly) clear policy a norm throughout the business world. I can't count how many dollars I have lost. Side: true
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Receivables aren't assets until they are......wait for it......received. False. "Assets are probable future economic benefits obtained or controlled by an entity as a result of past transactions or events." ref ref "An asset is a resource controlled by the entity as a result of past events and from which future economic benefits are expected to flow to the entity" ref ref "A company's IOU is counted as an asset on the balance sheet because another party owes that company money or goods." ref Since teaching you accounting is a bit beyond the scope of the debate, I'll leave it to you to study on your own time. they are based on perceived credit worthiness...and the collateral of real (legally repossesable) property, and a contractual promise of future money delivered. Exactly the same as bank deposits... a promise made and a promise delivered are NOT considered the same thing But a promise made is also not considered nothing - or of no value. The lesser value is made up for by charging interest. legal tender currency's value should obviously NOT be tied to pure debt It isn't - it is tied to economic activity/production. When the money supply increases more than production, that is when inflation occurs and money begins to lose value. pure debt, which is often of no real value at all False. Most debts are, of course, repaid, and interest is used to account for creditworthiness, etc. Its not at all safe from devaluation in those places It is protected from devaluation (due to increased money supply) in the other forms I mentioned, e.g. commodities. fictitiously backed notes If you think the full faith and credit (productivity) of the US is worthless or fictitious, then that is your opinion. show that all money printed does not have an associated loan? You have the equation backwards - not all loans require printed money - the whole concept behind fractional reserve - rather than newly printed money, they use borrowed money. blatant tyranny rather than fraud I am happy to concede that. Well, since your own stated goal was "to focus on whether it is fraudulent by nature", then I will accept your concession. As to tyranny - We the People have the power to amend the the Constitution which grants the power to coin money and regulate the value thereof to Congress (which allows the Federal Reserve act in its stead). Side: false
False. "Assets are probable future economic benefits obtained or controlled by an entity as a result of past transactions or events." ref ref "An asset is a resource controlled by the entity as a result of past events and from which future economic benefits are expected to flow to the entity" ref ref "A company's IOU is counted as an asset on the balance sheet because another party owes that company money or goods." ref Since teaching you accounting is a bit beyond the scope of the debate, I'll leave it to you to study on your own time. The examples you cited mention that the resource should be controlled to be considered an asset. I agree with that. You have no control over another's ability to pay. Its hard to educate common sense into someone but I give it a go for kicks in my spare time. Exactly the same as bank deposits... and when highly speculative "possible future assets" are treated as currency in a bank that's a serious problem. The language used to justify this practice is deceptively fraudulent. Its meant to make ordinary people buy the BS that " debts are assets" But a promise made is also not considered nothing - or of no value. The lesser value is made up for by charging interest Banks treat these highly speculative guarantees as identical to ordinary currency, its a dishonest fraudulent manner of doing business. It isn't - it is tied to economic activity/production. When the money supply increases more than production, that is when inflation occurs and money begins to lose value Production increases aren't what prompt the fed to create new money it is new loans....speculation of possible future production. Educate yourself False. Most debts are, of course, repaid, and interest is used to account for creditworthiness, etc. A promise made is of no value, only a promise kept. Are there corrupt banking processes that effectively obscure this truth? Sure. It is protected from devaluation (due to increased money supply) in the other forms I mentioned, e.g. commodities Someone has their head in the sand concerning inflation. If you think the full faith and credit (productivity) of the US is worthless or fictitious, then that is your opinion. That inflation consistently outpaces production isnt just my opinion. You have the equation backwards - not all loans require printed money - the whole concept behind fractional reserve - rather than newly printed money, they use borrowed money. Me neglecting to mention bank credits as well as printed money isnt getting anything backwards, but do what you have to do to ignore the truth of ALL these monies originating from loans. Well, since your own stated goal was "to focus on whether it is fraudulent by nature", then I will accept your concession I actually still hold that there is deception. It is hidden in purposefully complex language. A gesture of good faith from you and I will take the time to debate it further. Side: true
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the resource should be controlled And it is. As I posted on the other side, you do control the asset (the IOU) - it is within your possession, you can partially or fully forgive it, transfer it, use it to file suit in court, etc. etc. If you have a bond, you don't control how the money is spent - is a bond an asset? (The answer you are looking for here is, yes.) Its hard to educate common sense into someone but I give it a go for kicks in my spare time. Maybe accounting is a less common sense that you need to invest some time in. highly speculative "possible future assets" A) When did a bank deposit become "highly speculative"? B) When did more speculative assets (options, futures, etc.) become not assets at all? " debts are assets" No, LOANS are assets. Banks treat these highly speculative guarantees as identical to ordinary currency Again, no. In exchange for currency right now, they get a promise for that amount plus interest in the future. Accounting for estimated inflation over time, creditworthiness, etc. Production increases aren't what prompt the fed to create new money And is not what I said. I said the value of money is tied to production. what prompt the fed to create new money it is new loans Again - no. As I already pointed out the Fed often increases the money supply when bank lending is low in order to encourage banks to lend more. Educate yourself How does your link backup what you say and contradict something I've said? People should not attempt to look down on others whilst lying on the floor... A promise made is of no value Why work for two weeks before you get your first paycheck? Why hold on to a stock or bond rather than throw it away? Why make a loan or invest in the first place if all promises are worthless? there is deception. It is hidden in purposefully complex language. Your issue is with: lending borrowed money - how are those 3 words "purposefully complex language"? Someone has their head in the sand concerning inflation If you don't know that commodities are the main method people use to avoid monetary inflation, then yes, someone has their head in the sand - you… inflation consistently outpaces production Not sure what you think this comparison offers. Inflation happens when the money supply increases faster than production. ref ALL these monies originating from loans As you already now admit - not all these loans require printing money. A gesture of good faith from you and I will take the time to debate it further. Rather than a gesture of good faith, I just offer corrections to your misconceptions… Side: false
And it is. As I posted on the other side, you do control the asset (the IOU) - it is within your possession, you can partially or fully forgive it, transfer it, use it to file suit in court, etc. etc. If you have a bond, you don't control how the money is spent - is a bond an asset? (The answer you are looking for here is, yes.) You need to learn the difference between contractual documents that reference assets and actual assets. Maybe accounting is a less common sense that you need to invest some time in. Maybe you should ask yourself why accounting practices that clearly run contrary to common sense are accepted so readily by folks like you. A) When did a bank deposit become "highly speculative"? When fractional reserve banking became a norm B) When did more speculative assets (options, futures, etc.) become not assets at all? Expectations (documented or not) never were and never will truly BE assets No, LOANS are assets. No they are formal or informal agreements CONCERNING assets. Why work for two weeks before you get your first paycheck? Why hold on to a stock or bond rather than throw it away? Why make a loan or invest in the first place if all promises are worthless? Because of expected future acquisition of a real asset People should not attempt to look down on others whilst lying on the floor... I have about had it with these jabs. I played along and jabbed back but unless you stop and strictly focus on the actual contention between us, either attempting to teach me something or learn something from me I am done. There is no need for anyone to showcase their superiority complex. Your issue is with: lending borrowed money - how are those 3 words "purposefully complex language"? Thats not my issue and lending borrowed money isn't necessarily complex. But to justify the creation of money from a loan does require complex sounding financial jargon so people will accept the simple fraud and feel unqualified to even discuss it. Just wait until you try to explain how money is created in my simple (lending borrowed money to a friend for coffee) example. I can't wait. If you don't know that commodities are the main method people use to avoid monetary inflation, then yes, someone has their head in the sand - you… In light of that...do you think our currency should be commodity backed or just pure fiat currency? Not sure what you think this comparison offers It speaks to your assertion that the creation of money is tied to production. As you already now admit - not all these loans require printing money. As I now admit??? I spoke loosely. by "printing money" I meant to include all generation of US currency be it federal reserve bank credits or printed dollar. But you sure latched on to that like an opportunity to educate me. This despite that I have long been aware of the distinction. Frankly it seems like you use this technique (like declaring that I am poorly informed about accounting standards...which I am not) to avoid addressing my points. Rather than a gesture of good faith, I just offer corrections to your misconceptions… Describe a misconception of mine that you have corrected so far. Side: true
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learn the difference between contactual documents that reference asset and actual assets , Expectations ( documented or not) never were and never will truly BE assets , they are formal or informal agreements CONCERNING assets See other post contrary to common sense See other post Just wait until you try to explain how money is created in my simple (lending borrowed money to a friend for coffee) example. Already did (2 hours before your post) - your answer was still that an IOU is not an asset - which is incorrect. do you think our currency should be commodity backed That's a different debate (short answer - probably not) It speaks to your assertion that the creation of money is tied to production. What part of that's "not what I said. I said the value of money is tied to production." (bolding in the original) did you not understand exactly? I said that production influences whether the VALUE of money changes. (does bold and underline and all caps help??) As I said days ago "The factors that go into the Fed expanding the money supply are, of course, numerous." - (and yes, one of those factors is production.) I meant to include all generation of US currency be it federal reserve bank credits or printed dollar. Whatever you think bank "credits" are, you are mistaken if you think they are currency. The Fed doesn't generate any kind of new currency for all bank loans. Described a misconception of mine that you have corrected so far. It might be shorter to list the things you've gotten correct, but here's at least a partial list of what you've gotten wrong thus far: A) That there's fraud. (the topic of the debate) B) That there's tyranny. C) That receivables aren't assets until they are received. D) That the Fed prints something for each bank loan. E) That commodities don't protect from monetary inflation. Side: false
See other post I see you have totally ignored the reasoning I offered and figured posting a bunch of links would hide that. Already did (2 hours before your post) - your answer was still that an IOU is not an asset - which is incorrect I showed how....according to your view of debts as assets...we should be able to create "wealth" by simply trading in IOUs. You didn't even try addressing that That's a different debate (short answer - probably not) Its relevant....why not? What part of that's "not what I said. I said the value of money is tied to production." (bolding in the original) did you not understand exactly? I said that production influences whether the VALUE of money changes. (does bold and underline and all caps help??) As I said days ago "The factors that go into the Fed expanding the money supply are, of course, numerous." - (and yes, one of those factors is production.) You see nothing objectionable about the Feds privilege to engineer inflation/ deflation AS OPPOSED to leaving it tied to purely free market factors? Whatever you think bank "credits" are, you are mistaken if you think they are currency. The Fed doesn't generate any kind of new currency for all bank loans. Anyone can do a quick Google search on how money ( currency) is created to know the truth of this A) That there's fraud. (the topic of the debate) It would be nice to understand how creating currency from pure debt isn't fraudulent. Now we might have got to actually have a nuanced discussion about that had you not been so busy citing sources that didn't refute any of the points I was making. B) That there's tyranny. Unchecked, the power that bankers exert over our monetary system and economy is tyrannical. C) That receivables aren't assets until they are received. Something you expect is not something you have. An asset you expect to acquire is not an asset that you have acquired. You NEVER attempted to rationally address this. You tried to make me look uninformed about how these expected assets are handled in common accounting systems but you never took the time to digest my contention. D) That the Fed prints something for each bank loan. Want to pretend that every loan isn't new money by expoiting my imprecise statement that I tried to clarify go ahead.. E) That commodities don't protect from monetary inflation. ?? They are the only thing I know of that can. Besides stripping the fed of its power over money and outlawing fractional reserve banking Side: true
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posting a bunch of links would hide that It doesn't hide anything. It says that literally every single person that does accounting agrees with what I've said. And highlights the fact that you can't provide a single decent source that supports your claim that it is not an asset. according to your view of debts as assets...we should be able to create "wealth" by simply trading in IOUs. At some point your liabilities would be at the limit of your creditworthiness and people would not lend you any more money. Similarly, banks can only lend up to the point where they can maintain the required reserves. Its relevant no, it isn't - create the debate and i'll address it there. the Feds privilege to engineer inflation also irrelevant - create the debate and i'll address it there. Anyone can do a quick Google search on how money ( currency) is created to know the truth of this Anyone except you that is (ref). In the US, the currency is almost exclusively federal reserve notes (dollars and coins) - there is no such currency as "bank credits". The increase in money supply comes from lending borrowed money based on credit not some tangible thing called "bank credits". we might have got to actually have a nuanced discussion about that had you not been so busy citing sources that didn't refute any of the points I was making. By the time you said this: "If not fraud than its just outright tyranny." and: "If its more technically correct to refer to it as blatant tyranny rather than fraud I am happy to concede that.", I had posted 3 links and 1 of those was to a clip from the movie Bananas (the other 2 were for currency / reserves ratio for Aug 2014 and current)... Unchecked We created the Fed through legislation and could modify it or abolish it the same way. An asset you expect to acquire is not an asset that you have acquired. You NEVER attempted to rationally address this. You tried to make me look uninformed about how these expected assets are handled in common accounting systems but you never took the time to digest my contention. I did in multiple ways - not only by showing that EVERYONE considers it such, but demonstrating that you do as well. If you lend $10,000 to someone using a loan contract - would you then turn around and burn that contract - if not, it is because you know that the contract has value even on day one. If it had no value, you would be ok with destroying the piece of paper. my imprecise statement that I tried to clarify Even your clarifications indicated that you didn't seem to know what you are talking about. Yes, the terms in this area have very specific meanings - be prepared to use them correctly or be called on it. You act like you were trying to have to some nuanced discussion, but at the first sign of anything technical you called it "bullshit rationale written in financial industry jargon" and then try to hide your errors in claims of impreciseness. They are the only thing I know of that can. ME:"It is protected from devaluation (due to increased money supply) in the other forms I mentioned, e.g. commodities" YOU:"Someone has their head in the sand concerning inflation." Side: false
It doesn't hide anything. It says that literally every single person that does accounting agrees with what I've said. And highlights the fact that you can't provide a single decent source that supports your claim that it is not an asset. Google "real asset" there you will find several sources that may help you. Its important to know the difference between these and "financial assets" At some point your liabilities would be at the limit of your creditworthiness and people would not lend you any more money. Similarly, banks can only lend up to the point where they can maintain the required reserves. Yeah it becomes real obvious (to me at least) in the simple example that the process is fundamentally unsustainable. With the complexity and magnitude of global banking the sham can be hidden in the mess But with "money" thats based on financial assets as opposed to real assets any reserve requirement becomes meaningless since more reserves can simply be created at will by creating more debt. You may not see the creation of money from debt as a fraud against the public but I do. no, it isn't - create the debate and i'll address it there. -- also irrelevant - create the debate and i'll address it there All this has do do with our banking and monetary system. I will either need to convince you of SOMETHING here or vice versa in order to proceed in good faith anywhere else. Anyone except you that is (ref). In the US, the currency is almost exclusively federal reserve notes (dollars and coins) - there is no such currency as "bank credits". The increase in money supply comes from lending borrowed money based on credit not some tangible thing called "bank credits". If you want to learn about how the fed can "simply imagine up new dollar balances and credit them to other accounts" (quoted from source) read under the heading "Money Creation Mechanism" here at a source YOU have cited By the time you said this: "If not fraud than its just outright tyranny." and: "If its more technically correct to refer to it as blatant tyranny rather than fraud I am happy to concede that.", I had posted 3 links and 1 of those was to a clip from the movie Bananas (the other 2 were for currency / reserves ratio for Aug 2014 and current).. I was wanting to discuss fundamentals of what I see as fraudulent, which doesn't require a robust understanding of the mess it has become. I think we were close to reaching the crux of the issue. But it seems like treating me like a thoughtful person with a different opinion is not something you want to do We created the Fed through legislation and could modify it or abolish it the same way First we have to recognize and identify the corruption of the process I did in multiple ways - not only by showing that EVERYONE considers it such, but demonstrating that you do as well. If you lend $10,000 to someone using a loan contract - would you then turn around and burn that contract - if not, it is because you know that the contract has value even on day one. If it had no value, you would be ok with destroying the piece of paper. That I wouldn't destroy the paper isn't because it has intrinsic value. It is because it is proof that I have claim to something of value. This is the nuance you seem unable to grasp. Even your clarifications indicated that you didn't seem to know what you are talking about. Yes, the terms in this area have very specific meanings - be prepared to use them correctly or be called on it I acknowledged the impreciseness and when I clarified that I meant generation of any currency including bank credits you took the opportunity to divert attention from the main issue. Have you learned about how the bank credits (which is electronic money that hasn't been printed) are created ? You act like you were trying to have to some nuanced discussion, but at the first sign of anything technical you called it "bullshit rationale written in financial industry jargon" and then try to hide your errors in claims of impreciseness. The error I see is rather fundamental and has to do with treating "financial assets" as "real assets" you seem to be doing everything in your power to ignore this. A nuanced discussion need not be technical. Your post about currently high reserves ignores that they are utterly fictitious. Generated at will by buying "financial assets" ME:"It is protected from devaluation (due to increased money supply) in the other forms I mentioned, e.g. commodities" YOU:"Someone has their head in the sand concerning inflation." I said that because you aren't acknowledging the magnitude of artificially created inflation. Side: true
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What you'll want to look at is mutuum. http://thelawdictionary.org/mutuum/ Basically that you are lending the bank money payable on demand with like money rather than storing the money in the bank expecting the same exact money back in return - like in a safe deposit box. Side: true
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I found this here and will defend it as if I wrote it The standard response from the average Joe is “everyone knows that the bank loans out your money.” Or, they will say “all banks in the U.S. include a clause in the depositors’ contract that specifically says that the relationship between the depositor and the bank is exclusively one of creditor and debtor”. Suppose the bank takes your money and loses it all. How does the bank satisfy your expectation that the money is there on demand to pay your rent and electricity bills? It’s simple. They take the money from someone else. If the bank had told you it is lost and unfortunate, there would be no fraud. The fraud occurs the minute the bank takes someone else’s money. The victim of the fraud is the other depositor. The bank runs a Ponzi scheme (a fraudulent activity) that can continue for a very, very long time, but is no less a Ponzi scheme and should be treated as such. Although, you and the bank may be well aware of what is going on, it still should be treated as fraud. The fact that you are aware, or even unaware, of the Ponzi scheme does not diminish the fraud. Government deposit insurance just shifts the ultimate cost of the fraud to other depositors, taxpayers or anyone using currency to conduct transactions. Why is counterfeiting illegal? The counterfeiter is happy since he gets real goods and services, and the store owner is happy since he made a sale and can also get more real goods and services if he spends the money quickly before prices go up. So where is the problem? The transaction has been beneficial to both. It is illegal because of third party effects. The counterfeiter takes from the economic pie but does not contribute to the economic pie. He has basically stolen real goods and services by reducing the purchasing power of the money in everyone else’s wallets. When the fractional reserve banking system creates money out of thin air, it is also a form of counterfeiting, and has undesirable third party effects. Economists know that it is the rapid expansion of money and credit, unjustified by the growth of slow moving savings, that have created the booms and busts of the last two centuries, and the hardships that have gone along with them. Eliminate fractional reserve banking and you eliminate most booms and busts. Unable to create money out of thin air, banking would now just be another sector without the ability to sink the entire world economy. We need to start a serious discussion about ending fractional reserve banking and central banking at the same time. Our current banking system is not free market capitalism. Banking in its current form should be outlawed because it is both fraud and theft. We have a duty to our children to leave them with an economic system that is not constantly swinging from booms to busts. A system that is stable filled with opportunities that only a true capitalist system can provide. Side: true
Suppose the bank takes your money and loses it all. How does the bank satisfy your expectation that the money is there on demand to pay your rent and electricity bills? It’s simple. They take the money from someone else. Not true. The FDIC fully guarantees reimbursement to you if the bank loses all your money, providing the amount is less than 100,000. (as is the case with 98% of Americans who have bank accounts. Why is counterfeiting illegal? Seriously? I will tell you why................ ever heard of the word "inflation?" LOL Banking in its current form should be outlawed because it is both fraud and theft. Not true, and overly harsh. Look--you and I both know that over 90% of American bank account holders, including those of us who take out the occasional loan, do so with NO fraud being foisted upon us by our banks. And certainly with no theft occurring. Hell, we even get some interest dividends from letting them keep our money. You seem to fall into the trap of cherry picking on the rare case of fraud by banks and lending institutions. Thus advocating throwing out the baby with the bathwater and totally eradicating and then re-structuring out entire financial system. This is totally necessary. What IS necessary is for us to fully prosecute those white collar thugs who DO defraud the American public. I too am pissed that nobody went to jail after the '08 Meltdown. But this does not mean I want to tear down the entire system and begin anew. Andrew Jackson tried this. It did not bode well for the economy. And it turns out his reasons for doing so were not as altruistic as he claimed. SS Side: true
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Inflation is caused by an increase in the money supply. This can occur naturally or by design, with or without fractional reserve banking. The FDIC guards against you loosing your savings deposit (loan to the bank) if there is a run on your bank. George Bailey: Fraud?
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The devaluation of money CAN happen without the MASSIVE influx of the fraudulent currency created through unbacked fiat dollars and the fractional reserve system. but it wouldn't be absolutely guaranteed to eventually cause economic collapse.And btw FDIC does exactly squat to stop this massive artificially created inflation which defrauds all users of money, whether they choose to bank or not. Side: true
Your concern over fiat currency and monetary polices that cause inflation are issues that do not rely on fractional reserve banking. Fractional reserve banking does not guarantee economic collapse, nor is it the primary cause of your aforementioned concerns. I never said the FDIC stops inflation, I said it protects your savings account in the even of a bank run. Side: false
Fractional reserve banking entails the creation of unbacked (fiat) currency. Sure you can have fiat currency without fractional reserve banking, but you can't have fractional reserve banking practices without fiat currency. Even while on the gold standard, all money lent in excess of reserves is effectively fiat currency (created solely based on the bank's privilege to lend more than it has) Side: true
When the bank lends you money to invest (on a car, house etc), you are not expected to have that cash on hand. When you lend the bank money to invest (in loans), why would you expect them to have all of it on hand at all times? This is not fraud, it's the borrowing of money. There is no reason to believe that borrowing and lending necessarily leads to economic collapse. A bank can, and usually does, responsibly lend more than it has. This never matters unless there is a run on the bank. When on the gold standard, banks would consistently lend more than they had, but the value of currency waxed and waned. This is because fractional reserve banking is far from the cause of inflation. It is a different subject than the Fed and it's policies. Side: false
When the bank lends you money to invest (on a car, house etc), you are not expected to have that cash on hand. When you get a loan, until you spend it, it is cash on hand. When you lend the bank money to invest (in loans), why would you expect them to have all of it on hand at all times? If you have your money in an investment account you accept the terms of the contract. That's fine. It is that banks are allowed to ledger entirely fictitious assets that I have a problem with. There is no reason to believe that borrowing and lending necessarily leads to economic collapse. A bank can, and usually does, responsibly lend more than it has. This never matters unless there is a run on the bank. It not simple borrowing and lending that are the problem. Its treating unpaid debts as true assets (when they aren't yet) and printing money with these fictitious assets as backing (instead of actual goods) And then passing the losses out to the public by devaluing the dollar. Its embezzling from the public at large. When on the gold standard, banks would consistently lend more than they had, but the value of currency waxed and waned. This is because fractional reserve banking is far from the cause of inflation. It is a different subject than the Fed and it's policies. I beg to differ, fractional reserve banking IS the impropriety at the root of the problem Its not impossible to fraud the public with a gold standard + fractional reserve banking but its nowhere near as easy as when money can be based purely on debt. The acceptance of fractional reserve banking is what lead to the acceptance of our currency being based on nothing at all but bankers privilege of treating debts as assets. When someone owes you, its not really an asset until you are paid. Despite how widespread the delusion is. Side: true
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When you get a loan, until you spend it, it is cash on hand. How is it that borrowed money is somehow real, but an IOU is somehow not? When you buy a tv, you give money for an asset - when you lend money, you do the same - you give money in exchange for an IOU (an asset). If, instead of spending the money, you invest it - your logic would dictate that you have now committed fraud. you accept the terms of the contract. The same is true of bank deposits. Its treating unpaid debts as true assets Then it isn't fractional reserve banking that you have an issues with, it is general accounting principles... and printing money (Again) money isn't printed when a bank makes a loan. passing the losses out to the public by devaluing the dollar. You are conflating (still) the Fed increasing the money supply with banks making loans. The acceptance of fractional reserve banking is what lead to the acceptance of our currency being based on nothing at all Fractional reserved was used in the early years of the country (and before) - we didn't remove the gold backing from the dollar until 1971 - the two aren't exactly coetaneously linked... its not really an asset until you are paid This is the same as saying that all contracts are worthless and is false. Side: false
How is it that borrowed money is somehow real, but an IOU is somehow not? One is a current holding (controllable asset) the other is a possible future holding (not controllable) When you buy a tv, you give money for an asset - when you lend money, you do the same - you give money in exchange for an IOU (an asset) see above If, instead of spending the money, you invest it - your logic would dictate that you have now committed fraud. No. I was clear that I have no problem with people choosing to entrust their money to banks. Its people that choose NOT to bank still being subject to their misdeeds because banking artificially deflates the value of our common currency. The same is true of bank deposits See above Then it isn't fractional reserve banking that you have an issues with, it is general accounting principles... I think its unwise to do accounting where you count likely future assets simply as assets. One can practice GAAP without making that blunder, Again) money isn't printed when a bank makes a loan. Sorry Instead of "printing money" I should have said "generating bank credits (redeemable at will for printed currency) ". !!! You are conflating (still) the Fed increasing the money supply with banks making loans Sounds like you aren't aware that ordinary banks making ordinary loans do so with intimate involvement of the Federal reserve. Fractional reserved was used in the early years of the country (and before) - we didn't remove the gold backing from the dollar until 1971 Yes. Do you see any reason at all why one might think that was a bad decision? - the two aren't exactly coetaneously linked... Here in the US, gold backed currency was once demanded. However, since fractional reserve practices created lots and lots of fiat dollars (and/or bank credits!!!) some powerful folks decided that trying to keep up the illusion (of commodity based currency) was a waste of time. This is the same as saying that all contracts are worthless and is false No its saying that the value of contracts is in their faithful fullfillment, not in their symbolic representation. Side: true
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controllable asset You do control the asset (IOU) - you can forgive part or all of it, you can transfer it (unless you both agree otherwise), etc. etc. Are stocks, options, CDs, gold certificates, etc., etc. controllable assets? RE:If, instead of spending the money, you invest it - your logic would dictate that you have now committed fraud. You:No. I was clear that I have no problem with people choosing to entrust their money to banks. You are still missing the point - if you lend/invest borrowed money, you are doing the exact same thing as the bank is doing, including increasing the money supply. GAAP GAAP and all other accounting systems that I've ever heard of include loans as assets. You really should at least familiarize yourself with accounting 101 when attempting to debate accounting principles. ordinary banks making ordinary loans do so with intimate involvement of the Federal reserve I guess you have a very loose definition of intimate. That aggregate banking influences the Fed monetary policy and vice-versa is without question and logical - that the Fed monitors or controls every car loan, etc. would be quite the stretch. Do you see any reason at all why one might think that was a bad decision? I know of several reasons people think getting off the gold standard was good/bad, but that is separate from fractional reserve banking. gold backed currency was once demanded. However, since fractional reserve practices Again, fractional reserve banking was used for about 200 years before we got off the gold standard. the value of contracts is in their faithful fulfillment On day one of a loan, with no payments yet made, what is the value of the IOU? $0? Then why not throw it away? Side: false
You do control the asset (IOU) - you can forgive part or all of it, you can transfer it (unless you both agree otherwise), etc. etc. You aren't actually controlling the asset in what you describe. What you are controlling is various contractual arrangements that concern the actual asset, or possible future asset. Are stocks, options, CDs, gold certificates, etc., etc. controllable assets? Not in and of themselves. See above for what these actually are You are still missing the point - if you lend/invest borrowed money, you are doing the exact same thing as the bank is doing, including increasing the money supply If you've got a point.....I am still missing it. Suppose I borrow a 20 from from my roommate in the morning and lend my coworker 2 bucks from that for a coffee, how in the world does that increase the money supply? GAAP and all other accounting systems that I've ever heard of include loans as assets. ref ref ref You really should at least familiarize yourself with accounting 101 when attempting to debate accounting principles Well I will bite my tounge concerning that last comment and simply inform you that when you take a loan, typically two journal entries are made. One to assets and one to liabilities. If done correctly the net change is an increase NOT in assets, but liabilities. I guess you have a very loose definition of intimate. That aggregate banking influences the Fed monetary policy and vice-versa is without question and logical - that the Fed monitors or controls every car loan, etc. would be quite the stretch Every bank has an account with the federal reserve. Do your own research if you want to understand precisely what the feds role is in EVERY bank loan, but the gist is that money (in the form of bank credits) is newly created every time specifically for the purpose of serving that loan. Your local bank doesn't even lend from its own reserves. I know of several reasons people think getting off the gold standard was good/bad, but that is separate from fractional reserve banking I want you to understand that: Currency without a tangible commodity backing renders reserve requirements meaningless Again, fractional reserve banking was used for about 200 years before we got off the gold standard. I already knew this BEFORE the first time you mentioned it. Why do you keep mentioning it? And not addressing the points I bring up? On day one of a loan, with no payments yet made, what is the value of the IOU? $0? Intrinsically? Yes its worth nothing. The value of possible future assets that might be obtained depending on its being honored are unknown Then why not throw it away? Because the borrower may very likely honor it obviously Side: true
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What you are controlling is various contractual arrangements Yes - the contract/IOU/loan is an asset. When you purchase something, there are 2 assets involved - the money you give and the thing you get - remember the tv example. The same is true when you purchase an IOU. Suppose I borrow a 20 from from my roommate in the morning and lend my coworker 2 bucks from that for a coffee, how in the world does that increase the money supply? Your roommate has an IOU from you for $20 (supposing 0 interest) You have an IOU from your coworker of $2 Therefore, there are $22 dollars of assets based on $20 in currency EXACTLY WHAT THE BANK IS DOING. (You get an IOU from the bank for your deposit. The bank gets an IOU for the loans it makes.) typically two journal entries are made. One to assets and one to liabilities. Exactly what I've been saying. The debit is the current money going out and the credit/asset is the loan contract/IOU. money (in the form of bank credits) is newly created every time specifically for the purpose of serving that loan I think you are confusing bank credit - the amount that bank can lend as determined by the amount it has on reserves compared to the current reserve requirements - with some kind of "credits". without a tangible commodity backing This is fiat/fiduciary currency - not federal reserve banking. Because the borrower may very likely honor it obviously Exactly. Which is why you make the trade in the first place - and is your assessment of the value of the asset. Where did all the fraud and tyranny go?? I think we should keep flushing out the lending borrowed money to a friend example until it make sense to you. Side: false
Yes - the contract/IOU/loan is an asset. I think we should focus on this until you understand the difference between documents that reference assets (or possible future assets) and the assets themselves.
I think we should keep flushing out the lending borrowed money to a friend example until it make sense to you. Oh please... let's do that. In the scenario there remains 20 dollars in total assets. That 2 of those dollars are referenced twice by separate informal contracts DOES NOT increase the total amount of real assets. If it was as you say we could get rich just by lending promissory notes back and forth Side: true
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I think we should focus on [loan is an asset] until you understand Sure. Do any of these help? (Along with the sources previously offered: ref ref ref ref ref ref ref ref ) Every single knowledgeable source on the subject agrees with me that receivables (including loan receivables) are assets - governments, schools, accountants, investors, accounting applications, etc. etc. etc. Maybe you'd like to give a source that agrees with you. Side: false
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you dodge my point by snipping what you dont want to address Your second statement was premised on the same misunderstanding as the first - that IOUs are not assets. relentlessly appealing to authority Appeal to authority is only a fallacy if the person is not actually an expert or if there is some reason they are wrong. ref ref Relentlessly appealing to literally every authority on the subject is an appeal to reality. It's an appeal to the objective reader to compare the tons of evidence given on the one side to the literally 0 evidence along with constant misunderstandings given on the other. When a loan is taken Speaking of constant misunderstandings - Do you not even know the difference between taking a loan and making a loan? It is the person who MAKES the loan that gets the receivable/IOU/asset. If, when you TAKE a loan you create a liability (and assets and liabilities are the two sides of the ledger) - what do you think you get when you MAKE a loan?? Side: false
Your second statement was premised on the same misunderstanding as the first - that IOUs are not assets. I am trying to get to a faulty premise that you seem to accept without question, which is that its entirely reasonable to treat an expected future holding as a current holding. You seem to want to avoid that discussion at all costs. Speaking of constant misunderstandings - Do you not even know the difference between taking a loan and making a loan? It is the person who MAKES the loan that gets the receivable/IOU/asset. If, when you TAKE a loan you create a liability (and assets and liabilities are the two sides of the ledger) - what do you think you get when you MAKE a loan?? What you get when you make a loan is a (hopefully temporary) NET LOSS of assets, to be (hopefully) later outweighed by the possible future repayment + interest. Do you dispute that? Side: true
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you seem to accept without question I don't accept it without question - I understand it the same way everyone else does. treat an expected future holding as a current holding Which is why people don't. Thus interest rates based on the duration and confidence in getting paid back. What part of that do you not get? Side: false
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It's a little like gambling Is all gambling fraudulent? thru bail outs The public made money from the bank bailouts... "To date, Treasury has recovered $267 billion from TARP’s bank programs through repayments, dividends, interest, and other income – compared to the $245 billion initially invested." - Oct 18, 2012 Side: false
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