Is the US national "debt" an illusion?

[Matthew Libman]

The corporate oligarchy is another ball of wax. At the end of the day, it really is the government's fault. In this case, I blame the SBA.


Isn't the widespread corporate consolidation really just a result of the difference between the cost of capital for small and big business? Big business borrows at a 2.5% interest rate, paying only interest for the term of the loan. Small business borrows at 5-7%, amortizing (paid off in full) over 5-10 years.


The debt constant (annual payment/total loan) of small business can be upwards of 25%-30% vs 2.5% for big business. Small business loan payments are typically TEN TIMES MORE EXPENSIVE than big business loan payments.


Additionally, small business loans are capped at $2-5 million. Big business loans have no limit. Also, small businesses loans restrict passive and "rent extracting" activities. Big business loans encourage them. These economic realities make small business investment nearly imposible and big business consolidation inevitable.


If America cares about small business and the middle class, we must lower interest rates on government-guaranteed small business loans (through SBA reform), offer more "interest only" options to keep small and big business borrowing costs competitive, increase small business loan limits, and widen the scope of small business loans to include financial and rent extracting activity. These moves would strengthen the small businesses that currently exist, stimulate the formation of new small businesses, and enrich American business owners and small business employees alike.


Otherwise we all be working at Wal-Mart for the rest of our lives. F- that. Let them eat my cake.

 

[acptulsa]

It was a widespread problem under gold-standard & caused frequent bankruns; it isn't anymore because the bank can borrow from Fed but I didn't mention that to demonstrate what would happen if it didn't, to make the point that banks can't honor checks for more money than what they have.

It ceased to be a problem long before we went completely off the gold standard in 1971, which was long before every bank became part of a nationwide chain. This was done through deposit insurance, which I believe was a private industry before Washington nationalized and socialized it with the FDIC.

Isn't the widespread corporate consolidation really just a result of the difference between the cost of capital for small and big business?

No, though that's an important piece of the puzzle. There is also, just to name one major thing, regulation. If it takes three lawyers and five CPAs just to keep any business in compliance in any state, is that going to be more of a drain on Wal Mart or Mom and Pop's Shop?

Back when we actually honored the Ninth and Tenth Amendments, one reason small business could compete was the big corporations had to comply with the laws of all the states they traded in, while small business was unlikely to trade in more than one or two. The New Federal Tyranny has eliminated that, further tilting the playing field in the favor of those corporations huge enough to make bigger brib--er, I mean campaign contributions.

 

[Zippyjuan]

FDIC was created in 1933- during the Great Depression by the Glass- Steagall Act. Yes- there were bank runs under a gold standard. http://banking.about.com/od/securityandsafety/a/What-Is-The-Fdic.htm

The FDIC was created as a result of thousands of bank failures in the 1920s and 1930s. In those failures, bank customers lost staggering sums of money -- if you didn’t get your cash out before the bank went under, you were out of luck. From time to time, individual states attempted to insure deposits, but none of those programs survived.

Amid chaos and fear about continuing bank failures, the Banking Act of 1933 created the FDIC as a temporary measure to restore order (signed into law by President Franklin D. Roosevelt). Bank failures and bank runs quickly declined, suggesting that FDIC insurance helped to bolster confidence in the banking system. The FDIC was initially funded by the US Treasury with $289 million; that funding was repaid to the Treasury in 1948.

The Banking Act of 1935 made the FDIC a permanent agency and refined how the organization works (for example, funded by banks instead of by the US Treasury). Since that time, the FDIC notes that “no depositor has lost a single cent of insured funds as a result of a failure.”

 

[acptulsa]

FDIC was created in 1933- during the Great Depression by the Glass- Steagall Act. Yes- there were bank runs under a gold standard. http://banking.about.com/od/securityandsafety/a/What-Is-The-Fdic.htm

Yes?

Who asked?

And who ever said there wasn't a bank run under the gold standard?

Lots of primitive things happened while we were under a gold standard. For example, a lot of fools set up central banks and watched their new currency get inflated away to complete worthlessness while we happily grew to rival the world's superpower while we were on the gold standard.

Why don't you dig up information on which female the Fed is going to use as an excuse to kick that heroic Central Bank Killer Andy Jackson off the twenty? You would have more inside information on that than any of the rest of us.

Twenty FRN's say it won't be Lady Liberty.

 

[Zippyjuan]

Why don't you dig up information on which female the Fed is going to use as an excuse to kick that heroic Central Bank Killer Andy Jackson off the twenty? You would have more inside information on that than any of the rest of us.

The Fed has nothing to do with printing up currency- that is the US Bureau of Engraving and Printing at the US Treasury. (There are no official plans to change the note).

 

[acptulsa]

The Fed has nothing to do with printing up currency- that is the US Bureau of Engraving and Printing at the US Treasury. (There are no official plans to change the note).

No?

I'll repeat myself. Twenty FRN's says they're going to kick the Central Bank Killer off of the twenty dollar bill and replace him with a female whose identity has yet to be announced. And she won't be Lady Liberty.

If you don't want to bet FRN's I'll bet you a six month vacation from the forums. The loser takes it.

 

[Danke]

The Fed has nothing to do with printing up currency- that is the US Bureau of Engraving and Printing at the US Treasury. (There are no official plans to change the note).

 

[devil21]

No?

I'll repeat myself. Twenty FRN's says they're going to kick the Central Bank Killer off of the twenty dollar bill and replace him with a female whose identity has yet to be announced. And she won't be Lady Liberty.

If you don't want to bet FRN's I'll bet you a six month vacation from the forums. The loser takes it.

I'm pretty sure it'll be the new $20 US Note that gets the facelift, not the FRN, so be careful of the exact bet you make. You know Zippy is all about word play, like a good Keynesian shill.

No, the Fed doesn't print 'currency'. It enters numbers into computers and calls it 'money'.

 

[H. E. Panqui]

“The [private] banks do create money. They have been doing it for a long time, but they didn’t realise it, and they did not admit it. Very few did. You will find it in all sorts of documents, financial textbooks, etc. But in the intervening years, and we must be perfectly frank about these things, there has been a development of thought, until today I doubt very much whether you would get many prominent bankers to attempt to deny that banks create it.” H W White, Chairman of the Associated Banks of New Zealand, to the New Zealand Monetary Commission, 1955.

(wow! sounds like a giant fraud has been perpetrated!..you'd think that any honest knowledgeable political and/or media apparatchik would be screaming about thi$ gd filth..but not a stinking peep from any of them..

...btw, some of you throw around an awful lot of number$, fa$t and loo$e, obtained from apparatchik$ who've NEVER been honestly scrutinized/audited..number$ promulgated by the same folks who feed you a CONSTANT stinking diet of circuses and gmo bread...

 

[Zippyjuan]

No?

I'll repeat myself. Twenty FRN's says they're going to kick the Central Bank Killer off of the twenty dollar bill and replace him with a female whose identity has yet to be announced. And she won't be Lady Liberty.

If you don't want to bet FRN's I'll bet you a six month vacation from the forums. The loser takes it.

http://www.boston.com/news/odd/2015...n-face-bill/5NYLNmJQQwm0fI2GWep1DL/story.html

The secretary of the U.S. Department of the Treasury is in charge of the designs and portraits that appear on paper currency, and by law only a deceased person can appear on U.S. currency or securities.

Maybe the image will get changed in the future, maybe it won't. But it isn't the Fed which decides.

Right now, it is only a suggestion on a White House Petition form (and those rarely lead to any actual changes but don't rule out pandering to female voters if the President or other representatives decide to promote the issue as well).

 

[acptulsa]

The secretary of the U.S. Department of the Treasury is in charge of the designs and portraits that appear on paper currency, and by law only a deceased person can appear on U.S. currency or securities.

So maybe it'll be Lady Liberty after all. Perhaps you should have bet...?

 

[Zippyjuan]

She is not a real person so does fit the requirement of not being a living person. Also she has been on our money before. Theoretically possible.

 

[Paul Or Nothing II]

And so, fundamentally, I think that stocks and bonds could be counted as money. Certainly T-bills could be.

Irrespective of what anyone thinks "money" is, it doesn't change the fact (which is very obvious under a gold-standard) that MB constitutes "money" & spending of MB is what drives price-inflation. Of course, people are free to think of stocks, bonds & T-bills as "money" if they so desire but such a "perception" of theirs will have no direct effect on general price-inflation because these things don't constitute MB (neither do checking account balances)

But what they absolutely do do is stack $1,000 of checking account balances on that $100; or in other words juggle $1,000 of balls with only $100 in hand at any time.

Nobody will disagree with that but a lot of people (even Austrian scholars & economists) will disagree with your claim that the moment someone deposits $100 in a bank, the bank can immediately lend $900; it can't. The only way the bank will end up in the situation you've described is through 90, 81, 72,...process, which is different from claiming that the bank immediately lent $900.

Well again, going back to practical reality: for all practical purposes when I swipe my debit card for $100, as far as I'm concerned I just used that. I made use of it. I don't know what better word we could employ than "used". Now that's just my "perception of money" that I'm using, but meanwhile many other people are using their "perception of monies" which are based on the very same "real" money. And meanwhile our bank is using a certain amount of money to back all of that "perception of money". It's using it, to make possible something that it wants to do (have a bunch of checking account balances). Once again, I don't know what better word we could employ than "used".

Of course, you're "using" the "money" when you swipe a debit-card but only you are "using" that money at that moment, that is, it's not being used simultaneously by several people, as you have stated.

 

[Paul Or Nothing II]

we must lower interest rates on government-guaranteed small business loans (through SBA reform)

Do you realize that most people on these forums support free(r) markets, & as such, government meddling with interest-rates isn't something that is looked upon favorably......Do you know what caused the Housing Bubble?

 

[Paul Or Nothing II]

“The [private] banks do create money. They have been doing it for a long time, but they didn’t realise it, and they did not admit it. Very few did. You will find it in all sorts of documents, financial textbooks, etc. But in the intervening years, and we must be perfectly frank about these things, there has been a development of thought, until today I doubt very much whether you would get many prominent bankers to attempt to deny that banks create it.” H W White, Chairman of the Associated Banks of New Zealand, to the New Zealand Monetary Commission, 1955.

(wow! sounds like a giant fraud has been perpetrated!..you'd think that any honest knowledgeable political and/or media apparatchik would be screaming about thi$ gd filth..but not a stinking peep from any of them..

...btw, some of you throw around an awful lot of number$, fa$t and loo$e, obtained from apparatchik$ who've NEVER been honestly scrutinized/audited..number$ promulgated by the same folks who feed you a CONSTANT stinking diet of circuses and gmo bread...

Under a gold-standard, if a person deposits 100 ounces of gold into a bank & the bank lends out 90 ounces, is the bank "creating money" (considering that gold is "money")? I don't think so.
Whatever constitutes Monetary Base is "money", under any given system. Under a gold-standard, gold constitutes MB/money; under a paper-standard, credits created by central-banks constitute MB/money.

 

[helmuth_hubener]

Nobody will disagree with that but a lot of people (even Austrian scholars & economists) will disagree with your claim that the moment someone deposits $100 in a bank, the bank can immediately lend $900; it can't. The only way the bank will end up in the situation you've described is through 90, 81, 72,...process, which is different from claiming that the bank immediately lent $900.

90, 81, 72,... only describes reality if people are yanking out cash each step of the way. In each iteration in that little pedagogical exercise, cash is being yanked out -- actual dollar bills are leaving the bank and entering the hands of whomever it was "loaned out" to. That is not, however, the reality we live in. There is no "out" in the "loaned out" process.

When was the last time you deposited tons of cash into a bank? I dare say a while. It is not very common. But if someone did bring in and deposit a million dollars into his savings account, yes, in fairly short order, the bank would be able to make additional loans totaling up to 9 million. They would not have to wait around for some kind of iterative process to come floating back to them over who knows how much time like bread on the water. Nope: the funds are safely vaulted, the legal requirements are met to a "T", and the practical realities mean that it will work just fine.

Of course, you're "using" the "money" when you swipe a debit-card but only you are "using" that money at that moment, that is, it's not being used simultaneously by several people, as you have stated.

Of course it's being used simultaneously by several people. Me and ten other people can all get together and swipe our cards at the same moment, charging $100 each for a total of $1,000, even though there's only $100 backing up our accounts, and you know what will happen? Nothing! No problem! The balls are in the air. They're all flying. Only a very few of them touch down at any moment. As long as all the banks are synchronized, inflating at the same rate, the system is stable (ish). The juggling can go on and on.

 

[Zippyjuan]

Me and ten other people can all get together and swipe our cards at the same moment, charging $100 each for a total of $1,000, even though there's only $100 backing up our accounts, and you know what will happen? Nothing! No problem!

Then the bank has to draw from other accounts temporarily to cover the withdrawls. There is a constant flow of deposits in and loans or withdrawls out. They can use money from that account Tim opened today to cover your withdrawl instead of using it to make new loans. (when you withdrew money, it reduced their deposits on hand so their deposits to loans ration (one to nine normally) was temporarily out of balance).

Pyramiding a $100 deposit to $900 in loans (the 90, 81, 72 series) assumes that each loaned amount is re-deposited back into the bank. If money is taken out of the bank, the pyramid stops and more loans can not be made on top of what is already issued until they get in more deposits again.

 

[Paul Or Nothing II]

90, 81, 72,... only describes reality if people are yanking out cash each step of the way. In each iteration in that little pedagogical exercise, cash is being yanked out -- actual dollar bills are leaving the bank and entering the hands of whomever it was "loaned out" to. That is not, however, the reality we live in. There is no "out" in the "loaned out" process.

You can go back & look at the process I've described, I've been very clear in that there's absolutely no need for people to "yank out cash"; it works the same way irrespective of whether it's "yanked out" by way of cash, check, debit-card or whatever, from one bank & then put into another bank - the reserves of the first bank held with Fed have to be transferred to the reserves of the other bank.

Again, you seem to believe that those who talk about 90, 81, 72 are "overlooking" something, something that you know & the rest of the people don't; sorry but it isn't so.

 

[H. E. Panqui]

Paul or Nothing 11 asserts: Under a gold-standard, if a person deposits 100 ounces of gold into a bank & the bank lends out 90 ounces, is the bank "creating money" (considering that gold is "money")? I don't think so.



...if the bank loans the actual gold, no...but what the banks did was lend a promise to redeem in gold..so they kept the actual 100 ounces of real gold and "CREATED" and 'lent out'--collateralized and at interest- 90 new 'gold ounce promises'..i.e. counterfeit bank deposits credited to the account of the borrower...NOW THERE IS 190 GOLD OUNCES OF PROMISES/BANK DEPOSITS FLOATING AROUND AND STILL ONLY 100 OUNCES WITH WHICH TO HONESTLY REDEEM...ONLY A REPUBLICRAT COULD/WOULD TRY TO DEFEND THIS STINKING FRAUD!..

(btw, when considering 'fractional reserve banking' and 'money creation' one must consider the banking system (cartel) as a whole..

 

[helmuth_hubener]

Pyramiding a $100 deposit to $900 in loans (the 90, 81, 72 series) assumes that each loaned amount is re-deposited back into the bank.

Assuming what is, in fact, reality, does not seem a problem to me. Go figure.

But actually, minor correction: there is no "re". Loans are made by filling up a checking account for the borrower. No one ever seems to acknowledge the truth of this simple reality. It's like you're off in la-la land.