Is the US national "debt" an illusion?

[Paul Or Nothing II]

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..

Ok, let's take this issue bit by bit - So, can we agree that no money is created by fractional-reserve-banking but what in fact is created is a promise to pay a certain amount of money?

 

[Paul Or Nothing II]

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

90,81,72..... IS, in fact, reality according to Austrian as well as mainstream economists; if you can prove otherwise, you'd likely get a Nobel in Economics.

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.

I've already acknowledged & shown what ACTUALLY happens in that situation. Checking-accounts aren't "filled" with anything, they are just liabilities on the books of the banks that CAN BE converted to money, they are NOT money by themselves, even if people thought they were.

As I've shown with illustration, banks don't "fill" checking-accounts with any money, & they can only redeem as much money as they have, they can't clear checks for the money they don't have because in order to clear checks, the money/reserves held with Fed have to be moved to the other bank's reserves.

Sorry but none of what you've said so far proves that the banks can immediately lend $900, the moment someone deposits $100 with them; WITHOUT going through 90, 81, 72....process.

I was also going to show banks' Balance Sheets in my previous post but I thought that the whole thing might become confusing & lengthy. Anyway, let me post Bank A's Balance Sheet now :

Initially, Person A has deposited $100

[B]Liabilities[/B]                                 [B]Assets[/B]
Checking Account of Person A - $100                 Reserves held with Fed - $100

Person B gets a Loan.

[B]Liabilities[/B]                                 [B]Assets[/B]
Checking Account of Person A - $100                 Reserves held with Fed - $100
Checking Account of Person B - $90                   Loan to Person B - $90

Person B buys stuff from Person C, who banks with a different bank.

[B]Liabilities[/B]                                 [B]Assets[/B]
Checking Account of Person A - $100                Reserves held with Fed - $10
Checking Account of Person B - $0                    Laon to Person B - $90

Obviously, Bank A isn't actually in a position to redeem $100 to Person A because they have only $10, which is the "problem" that Austrians talk about - non-availability of demand-deposits on demand! I mean this has been the raison d'etre for central-banking, to minimize bankruns by issuing new money when banks are unable to redeem demand-deposits because they have lent out the money in demand-deposits. But again, the new money comes from the central-bank, not from FRB itself.

 

[helmuth_hubener]

Well, in the end, the entire discussion has distilled down into nothing but tedious and tiresome differences in usage and semantics. I'll go ahead and address each of these purely semantic misunderstandings. There aren't any actual disagreements.

I've already acknowledged & shown what ACTUALLY happens in that situation. Checking-accounts aren't "filled" with anything, they are just liabilities on the books of the banks that CAN BE converted to money, they are NOT money by themselves, even if people thought they were.

Right. Absolutely true, according to what you're meaning by "filling". Your usage is more literal and better. My apologies for sloppy language use. True, there are no things that it is being filled with. I just meant there's a bunch of funds being put on the books. I shouldn't have used the word "filled".

And you at least tacitly have agreed with what I'm saying (by not contradicting it), so that's the very first time anyone has acknowledged the truth of this simple point to me (I think). If I'm not misunderstanding you, that is.

As I've shown with illustration, banks don't "fill" checking-accounts with any money, & they can only redeem as much money as they have

Yes, wonderful, you have proved through far over-technical illustrations what is obvious to any infant who has learned to grasp the "persistence of objects" concept. You don't need to go into finance, Paul II, it's just physics. If a bank has 12 objects, it can only hand up to 12 objects out to others.

Sorry but none of what you've said so far proves that the banks can immediately lend $900, the moment someone deposits $100 with them; WITHOUT going through 90, 81, 72....process.

Just another semantic/usage misunderstanding, but this time one I actually thought I had preemptively headed off. Multiple times! Paul II, kindly scour my posts in this thread and find where I have said the words "banks can immediately lend $900, the moment someone deposits $100 with them". Or anything with the same meaning. Find the word "loan/lend" occurring together with "$900".

The problem word in the first misunderstanding was "filled". In this case it is "loan". What I have very carefully said, over and over, is not that banks can loan out $900 when $100 comes in. Rather, I have very carefully said, over and over, that banks can create up to $900 in checking account balances when $100 of cash reserves come in.

In your usage, "create up to $900 in checking account balances" is not, absolutely not, the same thing as "loan out". And I already anticipated that, having learned from my previous disastrous failures to communicate these ideas in previous threads. So, it is confusing to me why even with my very careful word choices, this misunderstanding still came up!

Let me explain as explicitly as I think possible. In your usage, "create up to $900 in checking account balances" is not, absolutely not, the same thing as "loan out". For one thing, the checking account balances aren't even money in your construction, and secondly and even more importantly, there is no "out" -- the $900 doesn't go anywhere! It's just entries in a ledger. It's just liabilities the bank has invented for itself. There is no "thing", there is no "money", there is no "fill", there is no "out, and there is no "loan". I really do get it. I'm on your page, man, even if you're not on mine.

So, the bank can't loan out $900. You're absolutely right. Good job! Why? Physics! The $900 doesn't freaking exist!! There's only $100, and the bank can only loan out $100, due to immutable and really, really rudimentary laws of physics. And they can only legally loan out $90, because there has to be at least $1 sitting in their reserve for every $10 of checking account balances.

At the same time, and not contradicting any of the above paragraph, when a man deposits $100 of cash into a bank, the bank can create up to $900 in checking account balances. They can do this according to physics, because physics imposes no limits upon what numbers can be written on ledger books. And they can do this legally according to US legislation, because, again, there need be only $1 sitting in their reserve for every $10 of checking account balances.

I hope that sheds additional light on my perspective. Not that anyone probably cares.

 

[Zippyjuan]

At the same time, and not contradicting any of the above paragraph, when a man deposits $100 of cash into a bank, the bank can create up to $900 in checking account balances. They can do this according to physics, because physics imposes no limits upon what numbers can be written on ledger books. And they can do this legally according to US legislation, because, again, there need be only $1 sitting in their reserve for every $10 of checking account balances.

The catch here is that the $100 is a deposit- not reserves. If $100 was reserves, there must be $1000 deposited from which your $900 can be lent out.

True a bank can keep $100 reserves on a $100 deposit but that mean that total loans off that deposit would be zero ($100 deposit minus zero dollars in loans = $100 in reserves).

They cannot declare a deposit to be reserves and then loan out nine times the amount of that deposit.

 

[Paul Or Nothing II]

Paul II, kindly scour my posts in this thread and find where I have said the words "banks can immediately lend $900, the moment someone deposits $100 with them". Or anything with the same meaning.

Zippy & I have repeatedly pointed out the 90, 81, 72..... process & you have repeatedly disagreed with it as if to say "but that's not how it actually works". Neither of us have argued against the fact that a bank having $1000 in checking-accounts will have $100 in money & $900 in loans; so why would you keep disagreeing with 90, 81, 72.....process? You have constantly argued against 90, 81, 72.....process, here's one of latest examples :

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 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

Also obvious from the above quote is that you seem to have a belief that cash-withdrawal & the use of check/debit-card have a different effect on the amount of "money" held by the bank in question. Which is totally incorrect. And, as a result of this erroneous belief, you think that all the checking-accountholders can spend the money "simultaneously" by way of check or debit-card, which is also incorrect. The fact is that when there's a cash-withdrawal, notes/coins leave the bank, & when a checking-accountholder spends money by way of check or debit-card, bank's reserves held with the Fed leave the bank; either way, the effect on the bank is the same, that is, the amount of money withdrawn/spent by the accountholder leaves the bank.

Rather, I have very carefully said, over and over, that banks can create up to $900 in checking account balances when $100 of cash reserves come in.

IF that has been your position all along then why even have an argument about it? Why disagree with 90, 81, 72..... process? Of course, 10% reserve requirement means the bank may only be holding 10% of the money for the checking-accounts it has, it's not a revelation of any kind, I've never argued with that; the argument has always been about the PROCESS because you have repeatedly disagreed with the process & how it occurs.

 

[H. E. Panqui]

Paul or Nothing 111 strike$ out $winging: Ok, let's take this issue bit by bit - So, can we agree that no money is created by fractional-reserve-banking but what in fact is created is a promise to pay a certain amount of money?



YIKES!!...WHAT IS CREATED IS "LEGAL TENDER"...THOSE DIGIT$ THE BANKSTER$ ENTER INTO ACCOUNT$ AFTER 'A LOAN IS MADE' ARE/CAN BE USED TO 'BID IN THE MARKETPLACE'!!..TO PAY TAXES, ETC. AD NAUSEAM!!..

...sorry for yelling but i sense some awful republicrat ignorance/confusion about 'money'...check out 'the truth in money book' by thoren and warner...'out of debt, out of danger' by jerry voorhis...

...as jk galbraith writes in Money: Whence It Came, Where It Went (1975)

• The study of money, above all other fields in economics, is the one in which complexity is used to disguise truth or to evade truth, not to reveal it. Chapter I, Money, p. 5

• The process by which banks create money is so simple that the mind is repelled. Chapter III, Banks, p. 18

 

[Paul Or Nothing II]

YIKES!!...WHAT IS CREATED IS "LEGAL TENDER"...

So do you agree that whatever it is that banks create with FRB is not "money", right? Yes or no?

 

[H. E. Panqui]

Paul or Nothing deflects: 'So do you agree that whatever it is that banks create with FRB is not "money", right? Yes or no?'




(i believe you will find that the term 'money' is not defined in law..so you can call it whatever you want...what i'm talking about are those number$ in computerized bankster ledgers and/or the little green ragcloth rectangles emblazoned with numbers and the images of dead republicrats and assorted occult symbols which can be easily acquired if you have a positive balance in your account with said banksters...

...THESE CREATION$ ARE READILY 'ACCEPTED FOR VALUE' and can be/are used by you, me and anyone else in the vast marketplace IMMEDIATELY AFTER THEY ENTER THE BORROWER'S ACCOUNT...(surely you understand this!)

...now you could, of course, resort to some tedious argument/quibble based on some 'terms of art'...'money' vs. 'fiduciary media' etc. fluff and hogwash ad gd nauseam... ...but that would be gd foolish...

 

[Paul Or Nothing II]

i believe you will find that the term 'money' is not defined in law..

I'm not talking about the "law", I'm talking about YOU......

So, under a gold-standard, if a person deposits 100 ounces in a bank & the bank lends out 90 ounces; in such a case, would YOU say that the bank has created "money"? I don't think it did because under a gold-standard, gold (Monetary Base) is money, & the act of fractional lending didn't create more gold.

 

[H. E. Panqui]

So, under a gold-standard, if a person deposits 100 ounces in a bank & the bank lends out 90 ounces; in such a case, would YOU say that the bank has created "money"?




(...if the balance of the person who deposited the 100 ounces is reduced to 10 ounces..then no...)

(good grief!...do you dig YET?!)

 

[Paul Or Nothing II]

So, under a gold-standard, if a person deposits 100 ounces in a bank & the bank lends out 90 ounces; in such a case, would YOU say that the bank has created "money"?




(...if the balance of the person who deposited the 100 ounces is reduced to 10 ounces..then no...)

(good grief!...do you dig YET?!)

What if the balance on the depositor's checking-account doesn't change even after the borrower has spent the 90 ounces that were lent to him.......in that case, would YOU say that the money was created, even though no new gold was actually created in the process?

 

[H. E. Panqui]

What if the balance on the depositor's checking-account doesn't change even after the borrower has spent the 90 ounces that were lent to him.......in that case, would YOU say that the money was created, even though no new gold was actually created in the process?



...what you have described above is CLEARLY fraud/the creation of 'counterfeit money' (today made 'legal' by ?your stinking republicrats...DIG YET?!...good grief!

 

[Paul Or Nothing II]

What if the balance on the depositor's checking-account doesn't change even after the borrower has spent the 90 ounces that were lent to him.......in that case, would YOU say that the money was created, even though no new gold was actually created in the process?



...what you have described above is CLEARLY fraud/the creation of 'counterfeit money' (today made 'legal' by ?your stinking republicrats...DIG YET?!...good grief!

Yes, it would be fraud if the bank has said in its contract with the depositor that they'd redeem all checking-accounts in full without any caveats & then renege on their contract BUT if the contract has a caveat that the bank may temporarily be unable to redeem checking-accounts under exceptional circumstances then it's not fraud because the terms of the contract had already been made clear & agreed upon by the parties to the contract.

Nonetheless, that is beside the point, the original point was whether FRB creates money considering gold (Monetary Base) is money under a gold-standard, would YOU still say FRB creates money even though no new gold is created by FRB itself?

 

[H. E. Panqui]

Nonetheless, that is beside the point, the original point was whether FRB creates money considering gold (Monetary Base) is money under a gold-standard, would YOU still say FRB creates money even though no new gold is created by FRB itself?



...if, AFTER THE 'LOAN,' the depositor still has '100 ounces/units' available to use/spend and the borrower has '90 ounces/units' to use/spend... THEN YES, OF COURSE!!, '90 OUNCES/UNITS' of 'MONEY' HAS BEEN FRAUDULENTLY COUNTERFEITED/CREATED...

 

[Paul Or Nothing II]

Nonetheless, that is beside the point, the original point was whether FRB creates money considering gold (Monetary Base) is money under a gold-standard, would YOU still say FRB creates money even though no new gold is created by FRB itself?



...if, AFTER THE 'LOAN,' the depositor still has '100 ounces/units' available to use/spend and the borrower has '90 ounces/units' to use/spend... THEN YES, OF COURSE!!, '90 OUNCES/UNITS' of 'MONEY' HAS BEEN FRAUDULENTLY COUNTERFEITED/CREATED...

If neither the depositor nor the borrower has spent anything then it goes without saying that the 100 ounces would be available to be used/spent to both of them.........

Ok, so gold (Monetary Base) is money, fractional banking didn't create any new gold, & yet you think money was created. So, you basically believe that a counterfeit should be considered money as well?

(Creation of a checking-account isn't really counterfeiting but I'll leave that aside for the moment for the sake of arguing one point at a time........)

 

[H. E. Panqui]

Ok, so gold (Monetary Base) is money, fractional banking didn't create any new gold, & yet you think money was created.



...semantics, stinking republicrat word-play AGAIN..in any stinking gold system i'm aware of, the banksters created many more book entries, tokens, etc., bearing 'promises/claims to redeem in gold' than the actual gold they held....AND ALL THESE BANKSTER CREATION$ WERE/ARE ACCEPTED AS MONEY..ESPECIALLY ACCEPTED IN PAYMENTS OF DUES TO GOVERNMENT!!!...SEARCH "GOLDSMITH FRAUD FRACTIONAL RESERVE LENDING SCHEME' FOR A BRIEF INTRODUCTION TO MONETARY HISTORY/REALITY...rather than your 'gold money system' fantasies...Hint: less theory/fiction, more REALITY, republicrats! ...turn off the glenn beck and read steve zarlenga, the world's foremost monetary historian..(if you know of a better one, name the name)




So, you basically believe that a counterfeit should be considered money as well?



...wrong again, republicrat breath!...I DON'T BELIEVE THIS BANKSTER-CREATED 'COUNTERFEIT' SHOULD BE CONSIDERED MONEY...BUT REALITY REVEALS THIS BANKSTER-CREATED MONEY IS CONSIDERED 'MONEY'...AND HAS BEEN FOR A LONG GD TIME!!!...

...GET REAL, MAN...sheesh!

 

[Paul Or Nothing II]

...I DON'T BELIEVE THIS BANKSTER-CREATED 'COUNTERFEIT' SHOULD BE CONSIDERED MONEY...

Then there's no reason to say that fractional banking creates money.

BUT REALITY REVEALS THIS BANKSTER-CREATED MONEY IS CONSIDERED 'MONEY'...AND HAS BEEN FOR A LONG GD TIME!!!...

The banks create claims for money by creating additional checking-accounts (which are backed by money & loans held by the banks), such claims are not money by themselves, those are merely assets for the checking-accountholder that can be converted to money (Monetary Base).

Even under the gold-standard, the notes that bore promises to redeem them in gold, were claims which could be converted to gold (Monetary Base), the notes weren't money by themselves irrespective of what anyone thought of them, they were just assets that could be converted to money.

Even shares, bonds & a wide range of assets can be converted to money but that doesn't mean all of these are money by themselves.

 

[H. E. Panqui]

^^ ...less theory, more REALITY, republicrats!!

http://lisgi1.engr.ccny.cuny.edu/~makse/Modern_Money_Mechanics.pdf

"...Who Creates Money? Changes in the quantity of money may originate with actions of the Federal Reserve System (the central bank), depository institutions (principally commercial banks), or the public. The major control, however, rests with the central bank.The actual process of money creation takes place primarily in banks.(1) As noted earlier, checkable liabilities of banks are money. These liabilities are customers' accounts. They increase when customers deposit currency and checks and when the proceeds of loans made by the banks are credited to borrowers' accounts.In the absence of legal reserve requirements, banks can build up deposits by increasing loans and investments so long as they keep enough currency on hand to redeem whatever amounts the holders of deposits want to convert into currency. This unique attribute of the banking business was discovered many centuries ago.It started with goldsmiths. As early bankers, they initially provided safekeeping services,making a profit from vault storage fees for gold and coins deposited with them. People would redeem their "deposit receipts" whenever they needed gold or coins to purchase something, and physically take the gold or coins to the seller who, in turn, would deposit them for safekeeping, often with the same banker. Everyone soon found that it was a lot easier simply to use the deposit receipts directly as a means of payment. These receipts, which became known as notes, were acceptable as money since whoever held them could go to the banker and exchange them for metallic money.Then, bankers discovered that they could make loans merely by giving their promises to pay, or bank notes, to borrowers. In this way, banks began to create money. More notes could be issued than the gold and coin on hand because only a portion of the notes outstanding would be presented for payment at any one time. Enough metallic money had to be kept on hand, of course, to redeem whatever volume of notes was presented for payment.Transaction deposits are the modern counterpart of bank notes. It was a small step from printing notes to making book entries crediting deposits of borrowers, which the borrowers in turn could "spend" by writing checks, thereby "printing" their own money..."

 

[H. E. Panqui]

Paul Or Nothing 11 and other newbies to monetary realism, etc. assorted monetary false theorists, etc. here, I've tried (and will continue to try as long as allowed by the ?republicrat censors here at rpf) to explain the hideous, fraudulent process by which the stinking banksters control us all through their control of money, its issuance/creation, volume, etc...you apparently don't agree with me and maybe some others here with some honest knowledge/understanding...

...it begs the question, "HOW, THEN, IS 'OUR' 'MONEY' CREATED?!"..please concisely explain the process by which 'dollars' are created...(and destroyed, btw)

(lol!..i doubt these republicrat hallucinator$ will engage h.e....but if they do, this could be great fun...a swift, clean intellectual slaughter/exposing of republicrat monetary ignoramusses!...

 

[Paul Or Nothing II]

Paul Or Nothing 11

Look, you're not arguing in a coherent manner.

First, you claim that fractional-banking creates money, when I point out that fractional-banking doesn't actually create new gold by itself in a gold-standard, you say they "counterfeit" money, so it's not money, right? So it follows that fractional-banking doesn't create money.

You're not sticking to the points being argued.