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Bank Managers, I need 1 hour of your time.

Discussion in 'Political Issues' started by Vic777, May 8, 2012.

  1. aircarver

    aircarver Ride Continues Silver Member


  2. Vic777

    Vic777

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    It goes like this ...
    Someone Starts a Bank with $1000
    That lets them lend you $10,000
    You can deposit that $10,000 in another Bank
    Based on your $10,000 deposit the Second Bank can lend out
    $100,000.

    Apparently this is exactly what's going on!

    But I want an expert to watch the video and tell me if the video is true!

    It kind of explains why all the Farmers etc. the only people who create wealth are in debt to the Banks and owe the Banks everything. Yet the Banks go bust and have to be bailed out by the taxpayer. Who has the money? No one, it's all Debt! You gotta watch the video!

    I need a Banker to watch and comment on this.
     
    Last edited: May 8, 2012
  3. Goaltender66

    Goaltender66 NRA GoldenEagle

    If the video is as you described then, um, no.

    Who has the money? Didn't you see It's A Wonderful Life? It's in houses and businesses and inventory and all sorts of stuff.

    Here's what happens. You deposit $10,000 in the bank. The bank, based on experience, knows that at no time are there demands for 20% of total deposits (In other words, people aren't withdrawing more than 20% of total deposits via debit cards, ATMs, checks, etc). Therefore, the bank loans out $8,000 of that $10k deposit and keeps the remainder as a reserve.

    The books balance because the deposit is a liability of the bank (think about it...they *must* give you the $10k when you demand it) and the loan + remaining cash is an asset.

    Now, if you borrowed that $10k, why in the world would you deposit it in another bank? You're paying interest on it that I guarantee is higher than the interest you'd get as a deposit. But for the sake of discussion, assume you did. The bank would look at that $10k deposit, calculate its reserve requirement (again, say 20%) and loan out $8,000. This assumes the bank's Cashier doesn't notice that the funds came from another bank as loan proceeds and is likely to leave pretty quickly.

    Plus, keep in mind that the borrower is making payments on that money. The problem comes when payments don't come in, since banks rely on the payment stream to meet current cash demand requirements.

    So no, you can't make $10,000 in loans based on a $1k deposit.
     
  4. Gundude

    Gundude

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    Sorry, an hour's a long time, and I'm no bank manager, but one question, which may be answered in the video:

    How does it "let" them lend you $10,000? The bank only owns $1000. Where does the other $9000 it lent you come from? Let's say you took that loan in cash. The bank simply doesn't have that cash to hand over to you. Can it electronically deposit in another bank $10000 in "money" it doesn't have? I'd assume not, but my understanding of what constitutes real money vs. electronic money is limited. I have a feeling this video isn't the one that'll explain it to me accurately.
     
  5. Stubudd

    Stubudd

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    http://en.wikipedia.org/wiki/Fractional_reserve_banking
     
  6. Stubudd

    Stubudd

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    i don't know, it might

    or try this one, the first 5 minutes isn't that good but the rest is pretty good

    [ame="http://www.youtube.com/watch?v=j69Ap4lndl0"]The American Dream (Animated) - YouTube[/ame]

    http://en.wikipedia.org/wiki/Money_creation
    http://en.wikipedia.org/wiki/Money_multiplier
     
  7. Stubudd

    Stubudd

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    here you go, real easy

    [ame="http://www.youtube.com/watch?v=nH2-37rTA8U"]Banking 3: Fractional Reserve Banking - YouTube[/ame]
     
  8. Gundude

    Gundude

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    Yeah, that's what Goalie was referring to. It assumes the bank started out with a greater amount than what it lent, but only retains a fraction of it.

    A bank starting out with $11000 and then only having $1000 left after lending out $10000 is very different than starting with $1000 and lending $10000.

    So yeah, fractional banking increases the money supply, but not at the astronomical exponential rate suggested in Vic777's interpretation of the video, but at a slowing rate that has an upper limit based on the necessity of banks to maintain a reserve.
     
  9. Vic777

    Vic777

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    that's the main astounding "fact" of the video, it comes out of thin air ... the Government lets them do it! They only have to back 10% of their loans!
    me too, that's why this video's claims freak me out
    That's what I'm trying to find out.
     
    Last edited: May 8, 2012
  10. Gundude

    Gundude

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    Not so much out of thin air. Sure, the money is "multiplied," in that the depositor "has" that money in the bank, while the person who borrowed from that bank also "has" up to 80% (or whatever, depending on the bank's retention rate) of that same money in their bank, but the next person then only has 80% of that, and so on until eventually the deposit becomes so small there's no more to lend out. That's the limiting factor. It's not a license to create an unlimited amount of money, as your original description of your video suggested. It's a factor can be calculated and taken into account when determining the value of that money.
     
  11. Stubudd

    Stubudd

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    Goalie missed the point completely, or was working from a poorly stated example. The money is lent again and again, not just once. The part about why would you deposit money you just borrowed into another bank is completely missing the point or again working from a bad example- wherever or whoever you spent the money deposits it in another bank, not "you". Starting with 1k and eventually loaning 10k is almost exactly what happens, not loaning 10k out of 11k and keeping 1k. They loan the 10k, then another 9k, then 8k, then 7k, until many times more money is in the supply than the original 1k. It's the biggest scam in history, and look- even smart people don't know what's going on, just like those quotes in the first video say.

    Like that last vid i posted, there was only 1k in real money to begin with, but pretty soon 20 different people have 900 or 800 or whatever in their accounts or out in the world. It's money out of thin air. That's our system. Having 10x more (i think some of the insurance companies, AIG maybe, were more like 100x more) liability is exactly what brought some of them down in 2008, some of them went down, some were bailed out with more of your money via the gov't after they went too far scamming you with your money in the first place.

    This thread has made it clear one of the last quotes in the OP vid is true- it's the smaller lies that have to be covered up, the big ones are covered by public incredulity, or whatever it was the guy said.
     
    Last edited: May 8, 2012
  12. Stubudd

    Stubudd

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    Well then there's that too... there is a bank with a licence to create an unlimited amount of money. That's a different story.
     
  13. Stubudd

    Stubudd

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    And it might as well be unlimited anyway, because it never stops. It's constantly happening. By the time that $10k is done another 2 or 10 or 1000 cycles of other $10k's have begun. The limiting factors you're talking about are just in the short term- in the long term, there is no limit, and the numbers are so large it might as well be unlimited anyway. Sometimes they dump in trillions at a time. It's happening right now. We'll pay for it eventually, one way or another. We already are- the dollar is worth what, 2% what it was when the Fed was founded? Europe is paying the price right now. A huge scam on us all, with the government as intermediary. We're all gonna pay for our ignorance.
     
  14. Gundude

    Gundude

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    From the wikipedia link you referenced earlier:
    So yeah, the concept of money multiplication can be disconcerting, but that "many times" is still an easily figured, limited value. As long as this is the case, what difference does it make if there are $100 or $500 in the supply? The value of the money can be calculated knowing up front the limit to which it can be multiplied.
     
    Last edited: May 8, 2012
  15. series1811

    series1811 Enforcerator. CLM

  16. Stubudd

    Stubudd

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    It might as well be unlimited, but using it without limits would defeat the purpose and collapse it even faster than it already is. Instead we're just slowly squeezed, and "they" make untold billions pushing numbers around on a computer. They just try to keep a balance to it- sometimes they go too far and a wheel comes off, like in 2008. The other wheels are all wobbling as we speak, all of them, around the world. They're trying like hell to keep it going, but the big cards are already in play. Massive QE, zero interest, all that. There are people here that can explain it much better than i can, but you get the idea.

    http://www.realclearmarkets.com/art..._distorts_the_greater_the_disaster_99652.html
     
  17. Gundude

    Gundude

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    I don't doubt that that could in fact be the situation today.

    It's complex enough an issue that a lot of people can make a lot of claims on either side and the vast majority of people (including myself) simply can't independently figure out who's right and who's wrong and who's simply shoveling the BS to cause a ruckus.
     
  18. Gundude

    Gundude

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    I guess your perspective would depend on how much of that 2.5 trillion ended up in your wallet...
     
  19. Yes, Fractional Reserve Lending is 100% real.

    Look at Mortgage Lending, most loans written are funded with Treasury "credits" (not dollars) from the lender's warehouse line. Mortgages show as Assets on the lenders books and can lend in multipliers between 10 & 40 x's their already written loans. The more you loans you write the more loans you can write.

    Also look at the credit card industry, the credit lines are created out of thin air not by physical assets or deposits.