The Creation of the Federal Reserve System (Part 4)

Well of course, but it doesn't mean banks don't create money.

 

I didn't read it all, I skimmed through it but I agree with most of it.

I disagree with the introduction paragraph that says that the Fed's manipulation helps maintain low inflation and high employment rates. Unemployment rates have not been so good over the past few years, and the dollar has inflated to lose 97% of it's purchasing power since 1913. Also there have been periods of time like in the early 80s when inflation was upwards of 15%.

It says the Fed was created to stabilize the banking system, but I also disagree that it has succeeeded in this goal. Many banks collapsed during the Great Depression, which was partially caused by the Fed. Many banks have collapsed since then, especially over the past few years.

 

Anybody reading this thread fully would realize how much of a troll you've been. You somehow successfully managed to bring Iriemon and I to agree in an argument against you about your silly notions of how the monetary system works.

 

I'm doing the only educating here. You and Iriemon seem to not know how to research and provide facts. Funny how the most uneducated people typically are the most stubborn and sure of their beliefs.

I just proved to you that there are no where enough reserves to fund loans and you can't even admit you were wrong there. You are embarrassing! You should apologize to everyone who wasted their time reading your vomit.

 

It's very simple akphidelt. $43 billion in required reserves turns into $430 billion bank loans. The difference is $6.25 trillion - $430 billion = $5.82 trillion.

So banks acquired $5.82 trillion worth of reserves that came from alternative sources that were not deposits, and thus were not part of required reserves but were excess reserves. That money got loaned out and never returned back to the banks as a reservable deposit. $1.5 billion of those excess reserves were still in the bank vaults, so that means there was $5.8185 trillion of savings deposits, time deposits, and cash circulating outside of bank vaults in 2007.

Simple stuff, bro.

 

But you guys made a defiant statement saying banks NEED reserves to make loans. Now you are saying they don't need reserves? Hmmmm... sounds sketchy to me. You flip flop more than Romney!!

 

How could you possibly be educating when your own sources and data constantly contradict what you're saying?

Sounds like you:

"Nothing I say can disprove what you said because in your head you aren't open to learning. You have already made up your mind how the system works and there is absolutely nothing anyone in this world can do to change your mind."

It seems like you're talking about yourself.

You proved nothing.

We can let others decide who is spewing vomit and who is embarassing themselves.

 

Depends on how you define "reserves". The alternative funding comes from the banks' capital reserves.

 

well yeah, the fed can make sure all banks never become insolvent.....if you dont mind paying 10 dollars for a happy meal!

 

are you sure about that LOL?

 

nope.....we said banks dont create money......well.....not in the same way the fed does anyways!

 

That wouldn't happen. It doesn't matter if we hold deposits or hold cash. If tons of people wanted to take out cash for their deposits, the Fed creating more cash would not create more money.

We have been over this a million times!

 

Of course, you guys are embarrassing

 

and thats where you are wrong.....if the fed creates new money to cover all deposits or bad loans then this is inflionary...otherwise central banks all over the globe would just create money at will to cover any shortfall that the banks might have!

 

thats because you are ill informed about the "REAL" way money works...not uncle ben's fantasy land

 

Wow this is getting so embarassing. How can you say that the Fed creating more money is not creating more money? You are completely wrong.

If a bank starts out with $10, then it loans it out until it turns into $100 worth of deposits. If there is a run on the bank, then the Fed has to create $90 worth of cash to satisfy everyone. Now there is $100 cash circulating outside of bank vaults, which all come back into the bank as deposits. That $100 then turns into $1000, which very much creates more money.

So embarassing!!! LMAO!

Cash = Money. Please explain how the Fed creating more money would not create more money.

 

As has been pointed out by bacardi, snooop, Iriemon, and myself...you have some pretty silly notions about how our monetary system works. Unfortunately it seems that it will take more than the 4 of us to properly educate you.

 

Deposits = Money.

Cash can be exchanged for Deposits. The Fed does not create "more" money than already exists. They create more base money, but they do not create any more money for the nonbank public.

Please apologize!

 

No it isn't. That is 100% wrong. 90% of transactions in America are done electronically. If the Fed creates more reserves/cash they aren't creating any more money for American's. They are simply creating a form of money to represent a form of money that already exists.

There is a difference between pumping liquidity in to banks to exchange deposits for cash than bailing out banks by paying off their "shortfalls".

I have explain this to you a million times.

 

a rose by any other name

 

Your guys problem is you are too focused on the old school banking system where reserves and cash mattered. I'm trying to educate you guys on the 21st century banking system. Cash is not a huge deal in our system. It is less than 10% of our money and less than 10% of our transactions. And the solvency risk you are talking about does not exist these days. People exchanging deposits for cash is not a problem in our system.

The one and only risk of the banking system is capital. When a bank loses their capital is when deposits are lost. But since the FDIC insures the deposits they are almost as guaranteed as cash.

If you or Dr. R. have any questions, please feel free to ask!

 

Repetetive, established thousands of posts ago.

LOL. You still have yet to explain how the Fed creating more money is not creating more money.

I'm not apologizing for pointing out something about which you are flat out wrong.

 

They still do. If reserves and cash didn't matter, then banks would never have any vault cash and 0% reserves. These kind of statements just go to show that you still are really clueless as to how our banking system works.

Baseless claim.

Unless if you have $150,000 or more in an account, then you're screwed. So saying the solvency risk "does not exist these days" shows a gross misunderstanding of how the FDIC works.

Totally dodging the fact that you were just embarassed twice in a row; nobody can trust what you say because there's a good chance it is wrong.

Banks are not "capital" restrained. A bank can have zero capital aside from its required reserves and still be considered solvent. However it is true that if a bank has positive equity that it is more likely to get bailed out.

Banks can only make loans from either excess reserves or capital reserves.

And you still have yet to explain how the Federal Reserve creating money is not creating money.

 

The keyword here is "more". They are creating more base money. But they aren't creating more M1 or M2. The nonbank public (like you and I) are unaffected by the Fed's creation of reserves other than our borrowing costs.

And like I always say, the Fed simply creates a form of money to represent another form of money.

 

I never said they didn't matter. Please apologize

Lol, you always bring arguments to the most trivial matters... lol. Yes those with over $150,000 in a checking account would be screwed if their bank failed, lol.

You have not said one thing that has embarrassed me. I know what I'm talking about and I actually read up on this stuff. You seem to have all the knowledge in your head but are unable to provide any sources to back it up, lol. And you do realize calling me names doesn't change what the actual facts are.

No it can't. Please provide a source that says a bank with zero capital can remain solvent. Your idea of solvency is still having enough cash on hand to exchange for deposits, lol. Embarrassing human you are!

Lol!!! Before it was banks need RESERVES to make loans. Now it's banks need excess reserves or capital reserves. Please explain to me what "capital reserves" are, lol!! Keep moving the goal post buddy, you'll get there eventually. Pretty soon you will be telling me exactly what I have been telling you and acting like that is what you have been saying the whole time.

I have explained it. I have said over and over again that they are creating a form of money. I didn't say they aren't creating money. I said they are not adding "more" money to the system in terms of money the nonbank public has.