The $in Of Pursuit
Giving Every Individual An Equal Voice
"History records that the money changers have used every form of abuse, intrigue, deceit, and violent means possible to maintain their control over governments by controlling the money and its issuance."
-James Madison
11 comments:
MONEY CHANGERS are the BANKERS. They are NOT capitalists. They are s separate group that needs governments to allow their schemes to survive. If I personally lent out 10x the amount of money that I had someone would probably shoot me. Not the bankers! They are FDIC insured!
Christ.
At least get a quote that backs up the ridiculous claim that "capitalism" is a "pyramid scheme". Nothing could be further from the truth.
Cato:
The idea is to stimulalte thought and to educate us readers. Everything doesn't have to fit like a glove. There would probably be fewer capitalists without the banking scheme and visa versa.
And I believe Christ was not a big fan of the money lenders...
No Jesus was not a fan, and neither am I.
I don't think making money off of lending out money to others is wrong. Making money off of imaginary money you made up and then lending out to others though is.
As for the "idea": the picture does fit with the quote, nor does the quote fit with the title of the post.
I can't very well do the following:
666 IS GAY
[picture]http://www.comedycentral.com/press/images/southpark/BigGayAl.jpg[/picture]
And the silken sad uncertain rustling of each purple curtain
Thrilled me - filled me with fantastic terrors never felt before;
So that now, to still the beating of my heart, I stood repeating
`'Tis some visitor entreating entrance at my chamber door -
-Edgar Allan Poe
IT MAKES NO SENSE
Cato:
When you say "gay," do you mean the old fashioned lighty, fluffy gay or newer fangled brotherly love kind of gay?
Cato said:
"If I personally lent out 10x the amount of money that I had someone would probably shoot me. Not the bankers! They are FDIC insured!"
Cato:
Are you saying that banks can loan more than the funds they have on deposit?
Just because deposits are FDIC insured, does that allow banks to loan 10x over the amount of their revenues?
I'd be interested in more info on this.
This explains how the Federal Reserve managements the deposit requirements. Concerning monetary policy, if the Fed wants to tighten the money supply, they can raise the percent of deposit requirements needed to be on hand. This will decrease the amount of money in the economy and tighten it up. Controlling the deposit percentage is a key component of monetary control.
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Reserve Requirements
Reserve requirements, a tool of monetary policy, are computed as percentages of deposits that banks must hold as vault cash or on deposit at a Federal Reserve Bank.
Reserve requirements represent a cost to the banking system. Bank reserves, meanwhile, are used in the day-to-day implementation of monetary policy by the Federal Reserve.
As of June 2004, the reserve requirement was 10% on transaction deposits, and there were zero reserves required for time deposits.
Reserve requirements are the portion of deposits that banks may not lend and have to keep either on hand or on deposit at a Federal Reserve Bank
The Monetary Control Act (MCA) of 1980 authorizes the Fed's Board of Governors to impose a reserve requirement of from 8% to 14% on transaction deposits (checking and other accounts from which transfers can be made to third parties) and of up to 9% on nonpersonal time deposits (those not held by an individual or sole proprietorship). The Fed may also impose a reserve requirement of any size on the amount depository institutions in the United States owe, on a net basis, to their foreign affiliates or to other foreign banks. Under the MCA, the Fed may not impose reserve requirements against personal time deposits except in extraordinary circumstances, after consultation with Congress, and by the affirmative vote of at least five of the seven members of the Board of Governors.
In order to lighten the reserve requirements on small banks, the MCA provided that the requirement in 1980 would be only 3% for the first $25 million of a bank's transaction accounts, and that the $25-million figure would be adjusted annually by a factor equal to 80% of the percentage change in total transaction accounts in the United States. An adjustment late in 2005 put the amount at $48.3 million. Similarly, the Garn-St. Germain Act of 1982 provided for a 0% reserve requirement for the first $2 million of a bank’s deposits. This level, too, rises each year as deposits grow, but it is not adjusted for declines in deposits. For 2005, that level is $7 million.
The transactions-account reserve requirement is applied to deposits over a two-week period: a bank's average reserves over the period ending every other Wednesday must equal the required percentage of its average deposits in the two-week period ending the Monday sixteen days earlier. Banks receive credit in one two-week period for small amounts of excess reserves they held in the previous period; similarly, a small deficiency in one period may be made up with excess reserves in the following period. Banks that fail to meet their reserve requirements can be subject to financial penalties.
Reserve Requirements and Money Creation
Reserve requirements affect the potential of the banking system to create transaction deposits. If the reserve requirement is 10%, for example, a bank that receives a $100 deposit may lend out $90 of that deposit. If the borrower then writes a check to someone who deposits the $90, the bank receiving that deposit can lend out $81. As the process continues, the banking system can expand the initial deposit of $100 into a maximum of $1,000 of money ($100+$90+81+$72.90+...=$1,000). In contrast, with a 20% reserve requirement, the banking system would be able to expand the initial $100 deposit into a maximum of $500 ($100+$80+$64+$51.20+...=$500). Thus, higher reserve requirements should result in reduced money creation and, in turn, in reduced economic activity.
In practice, the connection between reserve requirements and money creation is not nearly as strong as the exercise above would suggest. Reserve requirements apply only to transaction accounts, which are components of M1, a narrowly defined measure of money. Deposits that are components of M2 and M3 (but not M1), such as savings accounts and time deposits, have no reserve requirements and therefore can expand without regard to reserve levels. Furthermore, the Federal Reserve operates in a way that permits banks to acquire the reserves they need to meet their requirements from the money market, so long as they are willing to pay the prevailing price (the federal funds rate) for borrowed reserves. Consequently, reserve requirements currently play a relatively limited role in money creation in the United States.
Reserve Requirements and Monetary Policy
Reserve requirements, the discount rate (the interest rate that Federal Reserve Banks charge depository institutions for short-term loans), and open market operations (the buying and selling of government securities) are the Fed's three main tools of monetary policy. There is a continual flow of reserves among banks, representing the ever-changing supply and demand for these reserves at individual banks. When the Fed engages in open market operations, it adds to or subtracts from the supply of reserves. The effectiveness of the Fed's actions result from the reasonably predictable demand for reserves that is created by reserve requirements.
The Fed changes reserve requirements for monetary policy purposes only infrequently. Reserve requirements impose a cost on the banks equal to the foregone interest on the amount by which required reserves exceed the reserves that banks would voluntarily hold in order to conduct their business, and the Fed has been hesitant to make changes that would increase that cost. (Between 1980 and 1987 reserve requirements underwent a series of changes mandated by the MCA. Requirements on banks that were members of the Federal Reserve System were lowered, while those on nonmember depository institutions were raised gradually from zero to the final levels applied to the member banks.)
There have been only a handful of policy-related reserve requirement changes since the MCA was passed in 1980. In March 1983, the Fed eliminated the reserve requirement on nonpersonal time deposits with maturities of 30 months or more, and in September 1983, it reduced that minimum maturity to 18 months. Then, in December 1990, the Fed cut the requirement on nonpersonal time deposits and on net Eurocurrency liabilities from 3% to 0%. In April 1992, it cut the requirement on transaction deposits from 12% to 10%. In announcing its December 1990 move, the Fed noted that the cut would reduce banks' costs, "providing added incentive to lend to creditworthy borrowers." Similarly, in announcing its April 1992 cut in reserve requirements, the Fed observed that the reduction would put banks "in a better position to extend credit." Current reserve requirements are low by historical standards. From 1937 to 1958, for example, the rate on demand deposits was always at least 20% for banks in New York and Chicago, which were "central reserve cities"—a term now obsolete.
Before the passage of the MCA in 1980, only banks that were members of the Federal Reserve System had to meet the Fed's reserve requirements. State-chartered banks that were not Federal Reserve members had to meet their state's reserve requirements, which typically were lower. As a result, many banks dropped their Federal Reserve membership, and member bank transaction deposits fell from nearly 85% of total U.S. transaction deposits in the late 1950s to 65% two decades later, weakening the Fed's ability to influence the money supply. The MCA sought to solve this problem by authorizing the Fed to set reserve requirements for all depository institutions, regardless of Fed membership status.
The Fed has long advocated the payment of interest on the reserves that banks maintain at Federal Reserve Banks. Such a step would have to be approved by Congress, which traditionally has been opposed because of the revenue loss that would result to the U.S. Treasury. Each year the Treasury receives the Fed's revenue that is in excess of its expenses. The payment of interest on reserves would, of course, be an additional expense to the Fed.
June 2006
Remeber is the movie "It's A Wonderful Life" when the people went to get their money out of the bank and they were told it wasn't all there? That's basically going on here. If a bank took in $100 and was required to $100 on hand, how would a bank earn any money? A bank would have to charge customers a storage fee for holding their $100 bill.
During the time of "It's a Wonderful Life" money was still backed by silver. There wasn't the "Federal Reserve" (which is a private bank that has around 1% "on reserve" -- so the name is an Orwellian masterpiece) back then either.
666 you are wrong. If a bank got 100 bucks -- they can lend out 100 bucks. That's fine. But the way the system is set up they can lend out 1000 bucks for every hundred they have. And then charge interest on all of it!
Banks have done this for a long time. If you think about it, there is little chance that everybody is going to come demanding their debts be paid all at once. So they can lend out money that doesn't actually exist. They just made it up. Then they charge interest.
It's the biggest scam ever.
And the whole thing is based off of the debt-money system. If the US was not in debt to the (private) Federal Reserve, we would have no money. Well, none of the money as we know it. We could always go back to debt free money, but then interest wouldn't be destroying poor people's savings since it wouldn't exist!
From The Money Masters:
For the Fed to "create money":
Step 1. The Fed Open Market Committee approves the purchase of U.S. Bonds on the open market.
Step 2. The bonds are purchased by the New York Fed Bank from whomever is offering them for sale on the open market.
Step 3. The Fed pays for the bonds with electronic credits to the seller’s bank, which in turn credits the seller’s bank account. These credits are based on nothing tangible. The Fed just creates them.
Step 4. The banks use these deposits as reserves. Most banks may loan out ten times (10x) the amount of their reserves to new borrowers, all at interest.
In this way, a Fed purchase of, say a million dollars worth of bonds, gets turned into over 10 million dollars in bank deposits. The Fed, in effect, creates 10% of this totally new money and the banks create the other 90%.
This also explains why the Fed consistently holds about 10% of the total US Treasury bonds. It had to buy those (with accounts or Fed notes the Fed simply created) from the public in order to provide the base for the rest of the money the private banks then get to create, most of which eventually winds up being used to purchase Treasury bonds, thus supplying Congress with the borrowed money to pay for its expenditures.
Due to a number of important exceptions to the 10% reserve ratio, some loans require less than 10% reserves, and many no (0%) reserves, making it possible for banks to create many times more than ten times the money they have in “reserve”. Due to these exceptions from the 10% reserve requirement, the Fed creates only a little under 2% of the total US money supply, while private banks create the other 98%.
To reduce the amount of money in the economy, the process is just reversed — the Fed sells bonds to the public, and money flows out of the purchaser’s local bank. Loans must be reduced by ten times the amount of the sale. So a Fed sale of a million dollars in bonds, results in 10 million dollars less money in the economy.
Cato:
It's been about 30 years since I had a class in money and banking, but I believe banks are required to carry certain reserve levels.
There are state and federal chartered banks. I believe, regardless the charter, a bank must have a certain level of reserves.
The actions for creating and removing money from the economy are tools of monetary control related to monetary policy. I think Milton Freidman was big on monetary policy. Greenspan was also into economy tweaking with things like Federal Reserve rates adjustments.
Are you suggesting we go back to the gold standard?
Greenbacks our government actually issued before worked well.
Many people have stood up against the banks. President Jackson told the Courts off about this issue, and someone tried to kill him. Someone killed Lincoln with his Greenbacks. Kennedy tried to issue silver dollars, he died. Not to sound too conspiracy theory orientated but... well, it's just how it is.
In 1933 FDR stole everyone's gold in the entire country. Owning gold became illegal. It was sent to Fort Knox.
Since, IIRC, Eisenhower's time, Ft. Knox has not been audited. The reason? There isn't any gold there. It was sold to the Rothchilds and the like years and years ago, before Nixon lifted the ban on gold (sending gold prices skyward so that those we sold the gold to at set rates of ~30 now could sell it back and make a killing!!).
The Federal Reserve is privately held and makes outrageous amounts of money. They don't pay income taxes and have not been audited.
I'm not advocating a gold standard. Look to Lincoln's precedent. In England the king once made a system of sicks for money. Tally sticks. They were accepted because the King said they were to be used as payment for taxes. This kept the money changers away for over 700 years, until Parliament ordered all the sticks burned in 1834 to heat the building (and then Parliament burned down). Anyway, the use of sticks was where we get the terms "stock holder" and the expression "short end of the stick" because of the way they were used. You can look it up. Doesn't matter. What matters is that the money doesn't have to be debt-money. That's all I'm saying.
Just curious Cato, what role do you see mass psychology playing in markets? What I mean is. If enough people start believing a recession is around the corner and stop spending, they create a self fulfilling prophesy. I'd guess the opposite would be true to to create a boom market.
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