Thread: The Creation of the Federal Reserve System (Part 3)

Originally Posted by akphidelt2007

False, deposits are claims on reserves just like bank notes were claims on gold.

I agree with this. The key word is "were". Today, Federal Reserve Notes are not claims on anything other than government debt. It is good to see that you are finally admitting that deposits are claims on reserves.

Originally Posted by akphidelt2007

It's still money just like cash is money. When I use my credit card I don't pay someone with reserves, I pay them with the little bytes in my account.

Banks do not transfer money from account to account. There is no money in your deposit account. If the bank doesn't transfer its reserves, the payee does not get the money. The only time reserves don't need to be transferred is if the payee and payer have the same bank. Then all the bank does is shift their bookkeeping to indicate that the payee has gained a claim on the bank's reserves equal to the amount of claim that the payer loses.

Originally Posted by akphidelt2007

Account statements aren't money. I can bring my debit card though and purchase something by transferring my money (in the form of bytes) to their account. Just like people used bank notes.

That's not how it works. See above. Paying in cash is not the same thing as transferring funds through a bank.

Originally Posted by akphidelt2007

I never said they weren't claims. I have said from the beginning that you can call them claims if you want. But in reality they are money.

Sure you did:

Originally Posted by akphidelt2007

This "claims" idea you have is laughable.

Originally Posted by akphidelt2007

You guys are the ones saying they are claims and not money

They get counted as money in some money supply equations, but they are not the same kind of money that cash/reserves are.

Originally Posted by akphidelt2007

False, I do not use bank reserves as money. I use cash or my deposit account. Which both are the same.

They are not the same at all. Deposit accounts are worthless without reserves. Cash is not worthless without bank reserves.

Originally Posted by akphidelt2007

I grasp it fully. It's you who can't get off this claims kick. I do not pay for anything with reserves.

Reserves and cash are the same kind of money. Deposit accounts do not represent the same kind of money.

Originally Posted by akphidelt2007

I pay for things with my account by transferring my money to another account.

Repetetive and already debunked.

Originally Posted by akphidelt2007

I can care less what banks do in the background.

You should, because your transaction is not going to happen if the bank has insufficient reserves.

Originally Posted by Dr. Righteous

I agree with this. The key word is "were". Today, Federal Reserve Notes are not claims on anything other than government debt. It is good to see that you are finally admitting that deposits are claims on reserves.

I never said deposits weren't claims. I said they are money just like cash is money. And cash is still a claim. You guys were the ones trying to say there is nothing in your bank account.

Banks do not transfer money from account to account. There is no money in your deposit account. If the bank doesn't transfer its reserves, the payee does not get the money. The only time reserves don't need to be transferred is if the payee and payer have the same bank. Then all the bank does is shift their bookkeeping to indicate that the payee has gained a claim on the bank's reserves equal to the amount of claim that the payer loses.

Lol, right on cue. Been over this a million times. When I use a debit card to make a purchase they transfer money from my account to another account. The reserves are done behind the scenes and after the fact. You will never learn!

That's not how it works. See above. Paying in cash is not the same thing as transferring funds through a bank.

Of course it is. I don't pay for anything with reserves. I either pay for stuff with the numbers in my account or with cash.

They get counted as money in some money supply equations, but they are not the same kind of money that cash/reserves are.

They are not the same as cash held in the bank vaults/reserves. They are the exact same as cash held by the public.

They are not the same at all. Deposit accounts are worthless without reserves. Cash is not worthless without bank reserves.

No they aren't. And how do you cash in our system with out having reserves?

Reserves and cash are the same kind of money. Deposit accounts do not represent the same kind of money.

No they aren't

You should, because your transaction is not going to happen if the bank has insufficient reserves.

Sure it will. Been proven a million times. Banks can be in deficiency in reserves. Your transaction will not be declined if a bank has negative reserves. You are once again going over things that have been proven a million times. Try again!

Originally Posted by akphidelt2007

I never said deposits weren't claims. I said they are money just like cash is money. And cash is still a claim. You guys were the ones trying to say there is nothing in your bank account.

There isn't any cash that you can spend. There is only a claim on the bank's reserves, which get counted as money in some equations for deriving money supply. Please explain how "money" in a worthless deposit account from a failed bank is exactly the same as holding money in cash. This is extremely obvious and yet you are refusing to confront it because it contradicts your flawed and illogical position.

"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."

You are being this person.

Originally Posted by akphidelt2007

Lol, right on cue. Been over this a million times. When I use a debit card to make a purchase they transfer money from my account to another account. The reserves are done behind the scenes and after the fact. You will never learn!

Iriemon sufficiently debunked your baseless claim long ago in the old thread.

Originally Posted by Iriemon

Your claim contradicts MMM step 6.

The lending banks, however, do not expect to retain the deposits they create through their loan operations. Borrowers write checks that probably will be deposited in other banks. As these checks move through the collection process, the Federal Reserve Banks debit the reserve accounts of the paying banks (Stage 1 banks) and credit those of the receiving banks. See illustration 6.

Your account and their account is credited and debited if an only if the reserve accounts are credited and debited.

No cash/reserves, no deal.

The reserve transfers are not done "after the fact". They are done after you initialize the transaction, but before the payee's account is credited.

Originally Posted by akphidelt2007

Of course it is. I don't pay for anything with reserves. I either pay for stuff with the numbers in my account or with cash.

Bank reserves and cash are the same form of money. The numbers in your deposit account are not the same form of money as cash/reserves.

Originally Posted by akphidelt2007

They are not the same as cash held in the bank vaults/reserves. They are the exact same as cash held by the public.

Now you're just making stuff up. Deposit accounts are not cash. They are not cash held by the public.

Originally Posted by akphidelt2007

No they aren't. And how do you cash in our system with out having reserves?

I have no idea what you're trying to ask me because your question was riddled with grammatical errors.

Originally Posted by akphidelt2007

No they aren't

Repetetive and previously debunked many many times.

Originally Posted by akphidelt2007

Sure it will. Been proven a million times. Banks can be in deficiency in reserves.

This is true. Banks can be deficient in reserves but the transaction cannot happen if the bank is too deficient in reserves.

Originally Posted by akphidelt2007

Your transaction will not be declined if a bank has negative reserves. You are once again going over things that have been proven a million times. Try again!

This is completely wrong. See Iriemon's quote above.

Originally Posted by Dr. Righteous

The first thread had much more discussion in it. Most of the second one and all of this third one have been Iriemon and I trying to convince akphidelt2007 that the money in deposit accounts are not the equivalent of cash/bank reserves.

I figured something went wrong.

Originally Posted by Dr. Righteous

There isn't any cash that you can spend. There is only a claim on the bank's reserves, which get counted as money in some equations for deriving money supply. Please explain how "money" in a worthless deposit account from a failed bank is exactly the same as holding money in cash. This is extremely obvious and yet you are refusing to confront it because it contradicts your flawed and illogical position.

If no one would accept cash, it would be worthless. Doesn't mean the cash doesn't exist. Just like bank notes that people didn't accept were worthless.

"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."

You are being this person.

I understand fully what you are saying and what I'm saying. You guys are just too stubborn to admit that you are wrong. Deposits = Cash.

Iriemon sufficiently debunked your baseless claim long ago in the old thread.

No he didn't

The reserve transfers are not done "after the fact". They are done after you initialize the transaction, but before the payee's account is credited.

No they aren't.

Bank reserves and cash are the same form of money. The numbers in your deposit account are not the same form of money as cash/reserves.

Deposit accounts != Cash in bank vaults/Reserves
Deposit accounts = Cash in the hands of the public

Now you're just making stuff up. Deposit accounts are not cash. They are not cash held by the public.

Of course they aren't cash. They are exactly like cash.

This is true. Banks can be deficient in reserves but the transaction cannot happen if the bank is too deficient in reserves.

Sure it can! Show me a source that states that banks NEED reserves for a transaction to take place.

This is completely wrong. See Iriemon's quote above.

You and Iriemon are both completely wrong. Why would I see his quote for validation?

So here's where we are at...

Are deposit accounts money?
My Position: Yes
Your guys Position: It's a claim on reserves and money depending on what you call money.

Why you are wrong: People do not use reserves to make payments. People do not accept reserve for payments. People use their deposit accounts to transfer MONEY from their account to another account. So yes, deposits are money and we pay for things with our deposits.

Are deposits like cash held by the public?
My Position: Yes, paying with my debit card is no different than paying with my cash

Your Position: No, cash is like reserves. Deposits are claims on reserves.

Why you are wrong: If you take cash out of the bank to make a payment, you are draining that banks reserves and if the cash gets deposited in another bank you are increasing their reserves.

When you make a payment with your deposit account you are draining reserves from that bank and transferring reserves to another bank. But this is done electronically instead of physically.

Deposits and cash are no different. If a bank doesn't have cash then you can't get cash to transfer just like if a bank can't get reserves (because it doesn't have capital) you can't transfer money from deposit accounts.


Deposits are absolutely no different than cash. It is money like cash is money.

Originally Posted by akphidelt2007

If no one would accept cash, it would be worthless. Doesn't mean the cash doesn't exist. Just like bank notes that people didn't accept were worthless.

That's an excellent observation, but it really has absolutely nothing to do with my point that you are responding to. It doesn't answer the question I posed to you either.

Originally Posted by akphidelt2007

I understand fully what you are saying and what I'm saying. You guys are just too stubborn to admit that you are wrong. Deposits = Cash.

They are not. They are claims on a bank's reserves. Claims on a bank's reserves are not cash.
If you give your friend $5,000, you do not have the cash anymore. If he spends it on his loan shark, he does not have the cash anymore. You still have a claim against him for $5,000. You cannot go to Wal-Mart and buy $5,000 worth of stuff with the claim you have against your friend.

Originally Posted by akphidelt2007

No they aren't.

Originally Posted by Iriemon

Your claim contradicts MMM step 6.

The lending banks, however, do not expect to retain the deposits they create through their loan operations. Borrowers write checks that probably will be deposited in other banks. As these checks move through the collection process, the Federal Reserve Banks debit the reserve accounts of the paying banks (Stage 1 banks) and credit those of the receiving banks. See illustration 6.

Originally Posted by akphidelt2007

Deposit accounts = Cash in the hands of the public

Wrong. If my bank fails, my deposit account becomes worthless. I have no cash in my hands.

Originally Posted by akphidelt2007

Of course they aren't cash. They are exactly like cash.

Blatant contradiction.

Originally Posted by akphidelt2007

Sure it can! Show me a source that states that banks NEED reserves for a transaction to take place.

MMM, Step 6:

Originally Posted by Iriemon

The lending banks, however, do not expect to retain the deposits they create through their loan operations. Borrowers write checks that probably will be deposited in other banks. As these checks move through the collection process, the Federal Reserve Banks debit the reserve accounts of the paying banks (Stage 1 banks) and credit those of the receiving banks. See illustration 6.

Your account and their account is credited and debited if an only if the reserve accounts are credited and debited.

No cash/reserves, no deal.

Originally Posted by akphidelt2007

You and Iriemon are both completely wrong. Why would I see his quote for validation?

Because his post is a direct citation of MMM. In light of that, it's good to see that you are finally coming out in the open and saying that you believe that MMM is wrong. At least now you have admitted it and we can deem your points as uncredible.

Originally Posted by akphidelt2007

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.

Now if we can only get you to admit that you were talking about yourself here.

Originally Posted by Dr. Righteous

That's an excellent observation, but it really has absolutely nothing to do with my point that you are responding to. It doesn't answer the question I posed to you either.

Sure it does. It explains fully how deposit accounts are money just like cash is money. I'll give you the point that it is a claim on something. But all money is a claim. Cash is a claim on goods and services in the US. If people didn't accept cash, cash would be worthless, if banks don't accept transfers of deposits from another bank, than that deposit is worthless. Doesn't mean they don't exist and their not used as money.

They are not. They are claims on a bank's reserves. Claims on a bank's reserves are not cash.
If you give your friend $5,000, you do not have the cash anymore. If he spends it on his loan shark, he does not have the cash anymore. You still have a claim against him for $5,000. You cannot go to Wal-Mart and buy $5,000 worth of stuff with the claim you have against your friend.

There is no difference between me having $5,000 in my wallet or my friend holding $5,000 for me other than the physical location of the money. Both instances all you do is have a claim on $5,000 worth of spending. If you are going to call everything claims, than be truthful across the board. The cash in your wallet is a claim also.

Wrong. If my bank fails, my deposit account becomes worthless. I have no cash in my hands.

Cash in your hands has to come from some bank.

MMM, Step 6:

Yes, but reserves can be deficient, so the transfers are not reserve constrained, as in the transfer can still go through if the bank doesn't have enough reserves.

Because his post is a direct citation of MMM. In light of that, it's good to see that you are finally coming out in the open and saying that you believe that MMM is wrong. At least now you have admitted it and we can deem your points as uncredible.

No, MMM is not wrong. It's a simple explanation of how the banking system works. I have never said reserves are not transferred between banks. I said they are not a constraint on our deposit accounts being transferred.

Originally Posted by akphidelt2007

So here's where we are at...

Are deposit accounts money?
My Position: Yes
Your guys Position: It's a claim on reserves and money depending on what you call money.

Why you are wrong: People do not use reserves to make payments. People do not accept reserve for payments. People use their deposit accounts to transfer MONEY from their account to another account.

I have never once claimed that people "use reserves" to make payment or "accept reserves" for payment. That is a gross mischaracterization of my position.

The fact that you are explaining this as being a reason that I am wrong shows how little you understand about my position.

If the reserves don't exist, the transaction doesn't take place because the bank is insolvent. If there was spendable money in your deposit account, then bank runs wouldn't occur and you could still spend money even if your bank failed.

The "money" that you're referring to that gets transferred to another account is a claim that is transferred. This claim is what gets counted as money in some money supply equations that count deposits as money. The actual cash reserves are transferred behind the scenes at the bank before the recipient account can be credited with an equal claim that is being deducted by the sending account. If the reserves cannot be transferred or do not exist, then the payment does not occur.

Originally Posted by akphidelt2007

So yes, deposits are money

Depends on how you define "money". By the strictest definition, no they are not.
By the more broad definition, they are. But you have to understand that it is the deposit claim on reserves that is considered "money" by the broad definition.

Originally Posted by akphidelt2007

and we pay for things with our deposits.

We do not pay for things with our deposits. We attempt to redeem our claim on our deposits with the bank in order to transfer some or all of our claim to another account. This transfer of claim cannot occur if the reserves are unable to be transferred.

Originally Posted by akphidelt2007

Are deposits like cash held by the public?
My Position: Yes, paying with my debit card is no different than paying with my cash

Your Position: No, cash is like reserves. Deposits are claims on reserves.

Why you are wrong: If you take cash out of the bank to make a payment, you are draining that banks reserves and if the cash gets deposited in another bank you are increasing their reserves.

I agree with this. Withdrawing cash from a bank is the equivalent of redeeming some or all of your claim on a bank's reserves.

The fact that you are explaining this as being a reason that I am wrong shows how little you understand about my position.

Originally Posted by akphidelt2007

When you make a payment with your deposit account you are draining reserves from that bank and transferring reserves to another bank. But this is done electronically instead of physically.

Sure. But if the reserves can't be transferred, then the transaction does not take place.

The fact that you are explaining this as being a reason that I am wrong shows how little you understand about my position.

Originally Posted by akphidelt2007

Deposits and cash are no different.

Repetetive and wrong.

Originally Posted by akphidelt2007

If a bank doesn't have cash then you can't get cash to transfer just like if a bank can't get reserves (because it doesn't have capital) you can't transfer money from deposit accounts.

Now we're starting to make some progress. It's good to see that you've finally admitted that you were wrong about claiming that money is transferred directly from the sender's account to the recipients account, regardless of the bank's reserve status.

Originally Posted by akphidelt2007

Deposits are absolutely no different than cash. It is money like cash is money.

Repetetive and wrong.

Originally Posted by Dr. Righteous

I agree with this. The key word is "were". Today, Federal Reserve Notes are not claims on anything other than government debt. It is good to see that you are finally admitting that deposits are claims on reserves.



Banks do not transfer money from account to account. There is no money in your deposit account. If the bank doesn't transfer its reserves, the payee does not get the money. The only time reserves don't need to be transferred is if the payee and payer have the same bank. Then all the bank does is shift their bookkeeping to indicate that the payee has gained a claim on the bank's reserves equal to the amount of claim that the payer loses.



That's not how it works. See above. Paying in cash is not the same thing as transferring funds through a bank.


Sure you did:




They get counted as money in some money supply equations, but they are not the same kind of money that cash/reserves are.

They are not the same at all. Deposit accounts are worthless without reserves. Cash is not worthless without bank reserves.[/QUOTE]

Isn't cash worthless without faith?

Reserves and cash are the same kind of money. Deposit accounts do not represent the same kind of money.



Repetetive and already debunked.



You should, because your transaction is not going to happen if the bank has insufficient reserves.[/QUOTE]

Sorry for the interruption.