0
14

[–] fusir 0 points 14 points (+14|-0) ago  (edited ago)

What is this, the 60s?

Where's the part where the reserve amount is 0.1% and can exist as cash equivalent investments and a fed res loan of less than 0% real interest rate can cover any gap in the reserve amount.

Really banks don't get most of the money they lend out from depositors at all. If compared directly to that the reserve amount would be negative. Also the amount deposited impacts the amount lent almost zero. The idea that some proportion like that is relevant to today's system is an imagination.

Instead think of it as two separate businesses. The bank stores your money for free and makes really zero money on it other than a relationship to convince you to have them as your first consideration for other products. Then as a separate business a bank will rent out receipts dripped down through them from the federal reserve. The amount it costs them to get those receipts is slightly impacted by deposits but not in a significant way. So long as the cost of obtaining those receipts (in NPV terms) is less then the value they derive from selling you a loan (in NPV terms) they will sell sell sell a loan, which it's guaranteed it will be because the fed hands out those receipts like they were paper.

0
1

[–] rejectedfromreddit 0 points 1 point (+1|-0) ago 

Thanks for the explanation. The diagram makes sense, but I've never heard the counterargument, which is just as logical.

0
5

[–] Rawrination 0 points 5 points (+5|-0) ago 

Not so much a counter argument. Just a clarification that the diagram is outdated and optimistic in the extreme.

Modern money almost exclusively exists as data on someone's machine.

Our enemies LITERALLY have the infinite money cheat codes to life. The only thing stopping them from just printing it endlessly all at once is the desire to still be able to acquire real goods and services for that currency before it becomes worth less than toilet-paper.

[–] [deleted] 2 points 8 points (+10|-2) ago  (edited ago)

[Deleted]

0
5

[–] theshopper 0 points 5 points (+5|-0) ago 

And then comes the federal reserve to create that cash out of thin fucking air.

It's really quite simple how we're all getting fucked, but quite hard to get anyone to do something about it.

[–] [deleted] 3 points -2 points (+1|-3) ago  (edited ago)

[Deleted]

0
2

[–] FUCK__ISLAM 0 points 2 points (+2|-0) ago 

You have it wrong by an order of magnitude. Assuming, as the graphic does, a 10% reserve ratio then at step 1 the bank will loan $9,000. They don't make loans with deposits, they use deposits as a basis for making loans. They create the money at the time it is loaned. The Federal Reserve and its member banks are a money-printing government-backed cartel. Yet they are rapacious and crooked enough to sometimes go bankrupt despite a license to print money and evil and brazen enough to ask for public handouts when they do.

0
1

[–] JewsAreWhite 0 points 1 point (+1|-0) ago 

this is the way that i've understood it

0
1

[–] TheAntiZealot 0 points 1 point (+1|-0) ago 

Good post. Great username.

0
2

[–] prairie 0 points 2 points (+2|-0) ago 

Leaves out the critical things: bank reaps interest from $thousands in loans they can make based on your $1000 deposit, and all this creation of money devalues everyone's money by driving up prices.

0
1

[–] GunsSaveLives 0 points 1 point (+1|-0) ago 

This is accurate. Sadly. And the only thing backing the money is IOUs by the U.S. government to the Federal Reserve Bank, and - get this - the IOUs themselves are to be paid with U.S. dollars. If the government ever paid off all of the national debt our financial system would crumble.

0
1

[–] Ilisyer 0 points 1 point (+1|-0) ago 

There are only 100 dollars.

I loan you 100 dollars.

You now owe me 105 dollars.

0
1

[–] TheAntiZealot 0 points 1 point (+1|-0) ago 

There are 0 dollars.

You loan me 1,000 dollars.

I owe you 1,050 dollars.

0
1

[–] gosso920 0 points 1 point (+1|-0) ago 

I have $10,000.

I buy shares of stock in BAC, C, WFC, JPM, GS, MS, PNC, STI, USB.

I have $16,000

0
1

[–] ARsandOutdoors [S] 0 points 1 point (+1|-0) ago 

0
4

[–] Gumbatron 0 points 4 points (+4|-0) ago 

Indeed, although lots of them have now dropped the "reserve" requirement entirely...

https://en.wikipedia.org/wiki/Reserve_requirement

0
2

[–] ARsandOutdoors [S] 0 points 2 points (+2|-0) ago  (edited ago)

I'm big into finance and history of finance. I'm concerned that the Central banks across the world are stockpiling gold, instead of purchasing bonds from other central banks, of which have essentially an "unlimited" balance sheet. The world is awash in cash, because you have to convert to dollars to purchase oil we've been able to offshore the inflation. With interest rates rising, it's costly to hold US cash, harder to service your debts. The globe seems to be preparing for the end of the dollar-reserve and swift system. At this point America's debt can be weapon(ized?) against them.

0
0

[–] BloatedVoatGoat ago 

People don't borrow money to put back into a bank. Doesn't make sense

0
0

[–] ARsandOutdoors [S] ago 

The money eventually makes it back into the bank, where it becomes an asset on their balance sheet from which they can loan out against. They can do that over and over again until they hit their reserve ratio and can't do it any more.

0
0

[–] BloatedVoatGoat ago 

They still have the liability ratio to maintain against the loans of 9:1. So they cannot make new loans using depreciating items like cars or non colletral loans but can against things that do appreciate like a home. So if you have paid down 10% on your home and have 20% equity they can write out 100% of the value in another loan. And with that we can see how housing broke the market.

load more comments ▼ (2 remaining)