Federal reserve debunkers I need alittle help

[JonnyFive]

At last, your dishonesty becomes clearly evident. Asking someone if they "made up" an attributed quote is an insulting accusation with the implicit idea that the person is a liar, because only liars make up quotes and attribute them falsely.

If you read that much into what I said, that is your problem, not mine.

What could the fourty-year age of the paper possibly have to do with the value of its content? You're a "skeptic", I'm sure you can find some sort of fallacy there. I suppose the Declaration of Independence and the US Bill of Rights are substantially less helpful, since they're older still.

No, the use of a fourty-year old paper to claim that a prominent and skilled economist supports a position that he doesn't makes the age of the paper, and the actions and statements of the person since, relevant.

How do you know Alan Greenspan renounced his position taken in Gold and Economic Freedom? Did you just make that up that seemingly blatant lie? I'm not accusing you of lying, just asking for a source.

Ah, very clever of you, you use the same kind of verbal twist you associate incorrectly with my original question to question me. Very cutting edge.

But I will answer you seriously: I know he renounced his position in the paper (de facto, anyway, I don't know if he actually came out and said "I don't feel that way anymore") from reading his later conversations and noting his actions with regards to monetary policy.

He had a series of exchanges with Ron Paul over various financial issues before the House of Represenatives that show a clearly tempered position on the gold standard specifically, and monetary policy in general. If you're interested in reading the exchange, it's available on the web, including on a number of pro-gold websites: http://www.usagold.com/gildedopinion/greenspan-gold.html

Ron Paul didn't seem to think much of Greenspan's new position on the gold standard either: http://www.ronpaul2008.com/articles/255/the-maestro-changes-his-tune/

That, along with Greenspan's economic stance as head of the Fed (including such actions as the Fed-sponsored bailout of the financial institutions in 1987), make it clear that he either does not endorse the same positions he did in 1966 or disconnects his current actions, speeches, stated beliefs, and decisions so much from whatever deep beliefs he holds internally as to render those beliefs utterly meaningless.

I read what you wrote. If you asked me whether I "made something up" I would have taken offense to it. Why don't you look it up yourself, and be a little less obnoxious next time?

I don't really care how you feel about what I do.

 

[ZenFountain]

Well obviously the NWO / Illuminati / CFR etc. got Greenspan on the soylent greenbacks between then and his tenure as fed chief.

 

[Abbyas]

Savings accounts would be offered, you might have to pay the bank to store your money, just like you pay public storage to store your furniture.

What a horrible analogy. My money takes up no space, therefore, I don't need to store it in a bin that would take up room in my apartment. Also, I was never offered interest on that mattress I put in Manhattan storage. Nor is there any market for the loan of my old highschool yearbooks. People don't have savings accounts for the sole reason of storing money... they have them for returns on investments. Returns that are assured. Are you the one who claims they have an MBA from wharton? Try running the 100 percent reserve ration by some people from there.

I didn't say velocity is constant, I said it's more or less stable. The flaw in your reasoning is that you assume the turnover rate of money is more variable than M, the actual supply of money. Price inflation is a monetary phenomenon (prices are after all, defined in terms of money, right?), and since the tendency of fiat money regimes is to constantly inflate the money supply, we have corresponding price inflation to the extent it is not offset by productivity growth.

Nope, I never said velocity was more changing than the money supply... but guess what? You keep M constant and increase nominal GDP... guess what happens? And really? The fed tends to increase the supply? Tell me, what's the ratio of times the Fed increased interest rates to the times that they decreased them? During the dotcom boom, the Fed increased the discount rate six times. Funny for a group determined only to increase the money supply.

Ah, so the real culprits of price inflation are *drum roll please* those greedy wage earners! Forgive me if I'm disappointed that someone of your intelligence actually buys this tripe.

Do you really believe that there is no phillips curve whatsoever? That wage earners in productive markets don't and shouldn't ask for higher wages? Do you have any idea why the inflation rate for college education is higher than the inflation rate for computers? Or is that because of the Fed as well?

I understand coming to grips with the idea that your $150,000 education was worth substantially less than that is painful, but lets not let that distort the truth, shall we?

You assume that econ classes over the past few decades are purely keynesian based? This tells me that you haven't taken a macro class. At least since 1975.

The Constitution authorizes gold and silver coin as money. I favor letting the market determine what our money is. I'm confident that the market will choose what it has chosen throughout history.

How many times can you dodge the question? What congress decides to accept as taxes will become what the market "chooses" to accept. If congress accepts only barrels of salt, that will be what the market chooses. What would you have congress accept?

The idea that the control of money shouldn't be a political issue and thus be left in the hands of bankers is dangerous.

You think that the money supply in the hands of politicians is okay? Again, tell me what sort of power that an individual bank has over the fed. What sort of votes are they allowed. If bankers control the Fed, than why does the Fed act against bankers? Why did they raise rates in the late nineties over and over?

 

[Tippit]

Why would a bank offer a liquid savings account if it is by your law required to keep on hand 100% of all cash on hand? They would not be able lend out the money for interest and therefore would not give me any cut of that interest. Obversely why would I put my money in a bank if they made me pay to put it there? I cannot use my money to make money and still keep it liquid under your plan.

Because there is value in storing money so that it doesn't get stolen, or destroyed. If you use a bank you're going to pay for this anyway, whether it's subsidized by interest rate spreads, or whether you pay directly.

The Great depression was a perfect storm of bad monetary policy, reduction in international trade (after WWI), bad tariff law, bad weather, the gold standard... such a coming together of crappy situations and simple human stupidity. You can control some factors but you cannot control stupidity. I think that it is fine to criticize the job the the Fed is doing. I think that they should let the pain be quick and over with instead of prolonging it and hoping the banks will borrow their way out of it. I also don't like that the Gov't is going to bail out the idiots who made the bad investments. But do I think we should get rid of fractional reserve banking? I think that that is a little extreme.

If you're looking for the primary cause of the Great Depression, look no further than the Federal Reserve System. In economist Milton Friedman's own words:

“The Federal Reserve definitely caused the Great Depression by contracting the amount of money in circulation by one-third from 1929 to 1933.”

-Milton Friedman NPR 1996

Just sixteen years after its inception, the Fed either at best failed to prevent what it was ostensibly designed to, or caused the worst depression in US history. It pumped vast amounts of liquidity into the system during the roaring twenties, causing unprecedented stock speculation, and then put the turd in the punch bowl when Ben Strong raised rates and reserve requirements while simultaneously selling treasuries in early 1929.

Sorry it isn't.
Article I, Sec 10
"Section 10. No state shall enter into any treaty, alliance, or confederation; grant letters of marque and reprisal; coin money; emit bills of credit; make anything but gold and silver coin a tender in payment of debts; pass any bill of attainder, ex post facto law, or law impairing the obligation of contracts, or grant any title of nobility."

The only mention of gold and silver in the Constitution is on the limits of the power of the states.

The Congress is charged with in Article I Sec 8 "To coin money, regulate the value thereof, and of foreign coin, and fix the standard of weights and measures;" but it says nothing of Gold and Silver.

The States of course can use Federal money instead of Gold and Silver.

What part of the definition of "coin" don't you understand? How can you honestly assume the founders really meant "print" when they chose the word coin, especially in the context of the reference to gold and silver in Article 1 Section 10? Why do you so dutifully argue in favor of the debasement of your own currency?

I wish the Congress and the President would obey the constitution when it comes to keeping my privacy rights. We all want different things from our government. If you argue a gold standard from a constitutional stance though you first need to check if it is there.

I would suggest that if you want the Constitution upheld, then you employ the same standard to interpret those parts of it which you may not be in favor of, or may not have a complete understanding of.

I would also not trust Congress in the least bit to control the money supply. In the hands of bankers who by law have to give up profits after operations are paid for to the Treasury (around 90% of what they make), have to report to congress, and make their business open to the public (http://federalreserve.gov/boarddocs/rptcongress/)

In an imperfect world, it isn't the worst solution.

And yet, the Fed is one of the most opaque institutions in the world, with perhaps the most important responsibility in the world, which is owned and controlled by private banks and whose operations are far larger in scope than its mere profits.

The Federal Reserve System is a creature preying on the ignorant American public, and the world at large.

 

[Tippit]

Question for Tippit

What was the effect on the Spanish Empire's economy of large amounts of gold and silver coming into their holdings during the 15th-18th century?

It was inflationary, as one would expect. No currency is immune from inflation or deflation. According to Paul Van Eeden, gold has an inflation rate of 1.73%. The difference between gold and paper or electronic currencies, is that there are physical constraints on the former.

They didn't have fractional banking

The Medici family in Italy were using Fractional Reserve Banking as early as the 15th century, it was used in Spain as early as the 16th century, and the creation of the Bank of England in 1694 marked the birth of the modern central bank.

They had a gold and silver money basis

By your comments this should be economic bliss....was it?

I've contended all along that bank panics and the business cycle are the products of fractional reserve banking, not gold standards, for what should be obvious reasons that I've explained earlier in this thread.

 

[Terral]

America Deserves The Coming 'Loyal Bushie' Fascism For Being So Very Stupid . . .

Hi Proxywar:

PW >> Federal reserve debunkers I need alittle help

What in the heck is a “Federal Reserve Debunker?” :0) The Federal Reserve is a private central bank created by the likes of people with names like Rothschild and Warburg (European bankers) with J.P. Morgan and Rockefeller (American) counterparts. The best source of information on the cause of America’s financial problems is Gary Allen’s book “None Dare Call It Conspiracy” you can read for free here.

PW >> So I was on my site today and a truther is passing this off:

"If the purpose of the Federal Reserve was to prevent depressions, then what about the Great Depression of 1929, which was directly related to the Federal Reserve. The Federal Reserve was created in 1913."

My uncle handed me a copy of Gary Allen’s book in the mid 1970’s and I have been watching this band of thieves robbing We The People blind ever since. Just where do you think all the money goes, when the central bank raises the interest rate from 1 to 5 percent? :0) Do you envision some kind of a cash reserve where all the money is piling up? Heh . . . How many people here are old enough to remember the old Silver Certificate US Treasury Bills? Look at the gold-backed US Dollar on the top and compare that to the worthless TRASH you see down below based upon nothing at all. This is a Conspiracy that makes 9/11 look like Junior stealing cookies from mom’s cookie jar.

PW >> It seems like his explanation is rather too suggestive to be true.

No sir. Your partner’s explanations are very accurate, but Americans are among the most gullible people on the face of God’s green earth. The FED raises rates to cause inflation, then raises the rates more to fight inflation. :0) Get rid of the FED and give the power to print US money back to the US Treasury and let the USA charge us interest on OUR MONEY to pay down the national debt! These same Federal Reserve International Bankers lend us back our OWN MONEY at even higher interest rates for managing Senor Bushie’s out-of-control national debt, which finds We The People getting screwed from both ends. The reason a 10,000 dollar home in 1960 costs 300,000 dollars today has nothing to do with the price of bricks and mortar. That has everything to do with the declining purchasing power of the US dollar, because each time the money circulates through the system, then the FED takes out their interest rate AND must print more to make up the difference. :0)

PW >> followed by: "The REAL purpose of the Federal Reserve was to hand the country's remaining wealth over to the internationalist bankers who own the PRIVATE Federal Reserve, which is not federal nor a reserve. This gave the bankers the power to print worthless paper money out of nothing, causing inflation and thus giving them the power to break the currency at their own will, for their own nefarious purposes. This is why the dollar is worth so little today. This is happening by design and to usher in a new form of totalitarian control."

I always thought it was both private and public. Any thoughts?

The USA deserves to be destroyed out of existence, because you allow these international bankers/power brokers to rob you blind. You allow Global Corporate Elites to ‘lobby’ up and down the halls of Congress and ‘buy off’ your representatives using money they effectively took from you. :0) You allow 20 million illegal aliens to run around loose and steal US identities and jobs ‘and’ Senor Bushie wants to reward them with US citizenship to boot! Senator McCain wants to give them Social Security, before Bushie even makes them citizens! And yet, 25 real US citizens are killed every day by illegals. Senor Bushie is sneaking in his version of “CanAmeriMexico,” with the coming “North American Super-State,” but you sit like a frog in the pot of warming water waiting for something good to happen. :0) Our elected officials serving Global Elites = Fascism and that is exactly what We The People deserves for being so naive, gullible and down right stupid . . .

GL,

Terral

 

[Abbyas]

If you're looking for the primary cause of the Great Depression, look no further than the Federal Reserve System. In economist Milton Friedman's own words:

You do know that Friedman was criticising the actions of the Fed... not the idea of the Fed. Friedman actually went further in his paper with Anna Schwartz, suggesting that if the contractionary money policy were true, than countries tied to a gold standard would have had a larger depression... and he was right. Those who were not tied to the gold standard, or were tied only briefly were hit the least.

Another summary:

Third were countries that remained on gold but had ample reserves or were attracting gold inflows. The key example was France (see p. 362), the leader of the Gold Bloc. After its stabilization in 1928, France attracted gold reserves well out of proportion to the size of its economy. France's gold inflows allowed it to maintain its money supply and avoid a serious downturn until 1932. However, at that point, France's liquidation of non-gold foreign exchange reserves and its banking problems began to offset the continuing gold inflows, reducing the French money stock. A serious deflation and declines in output began in France, which, as Friedman and Schwartz pointed out, did not reach its trough until April 1935, much later than Great Britain and other countries that left gold early.

Fourth, and perhaps the worst hit, were countries that rejoined the gold standard but had very low gold reserves and banking systems seriously weakened by World War I and the ensuing hyperinflations. Friedman and Schwartz mention Austria, Germany, Hungary, and Romania as examples of this category (p. 361). These countries suffered not only deflation but also extensive banking and financial crises, making their plunge into depression particularly precipitous.

Another quote from Milton you may have missed regarding the second group of countries, those that were on the gold standard and left in the beginning of the depression:

"[t]he trough of the depression in Britain and the other countries that accompanied Britain in leaving gold was reached in the third quarter of 1932. [In contrast, i]n the countries that remained on the gold standard or, like Canada, that went only part way with Britain, the Depression dragged on."

 

[Belz...]

Damn, this is becoming a text-heavy thread !!

 

[jezcoe]

Because there is value in storing money so that it doesn't get stolen, or destroyed. If you use a bank you're going to pay for this anyway, whether it's subsidized by interest rate spreads, or whether you pay directly.

I guess you will not admit that 100% reserve on deposits to banks is a bad and unworkable idea. I guess you see banks as Scrooge McDuck money vaults that hold huge quantities of cash for the benifit.... of well no one since they can't lend it out to make money. Sorry CD's and bank fees would not be enough.

If you're looking for the primary cause of the Great Depression, look no further than the Federal Reserve System.

The exact cause of the Depression is still debated today. I prefer to believe in a less simplistic confluence of bad situations handled poorly.

What part of the definition of "coin" don't you understand? How can you honestly assume the founders really meant "print" when they chose the word coin, especially in the context of the reference to gold and silver in Article 1 Section 10? Why do you so dutifully argue in favor of the debasement of your own currency?

Why would the money PRINTED by the First Bank of the United States be paper?

Are you to have me believe that the same men who signed the Constitution did not understand or chose to ignore the same overarching LAw of the land that they themselves put into place?

I would suggest that if you want the Constitution upheld, then you employ the same standard to interpret those parts of it which you may not be in favor of, or may not have a complete understanding of.

Same to ya.

And yet, the Fed is one of the most opaque institutions in the world, with perhaps the most important responsibility in the world, which is owned and controlled by private banks and whose operations are far larger in scope than its mere profits.

The Federal Reserve System is a creature preying on the ignorant American public, and the world at large.

Quasi private with Government oversight and all profits after operations going to the U.S. Treasury.

 

[proxywar]

What in the heck is a “Federal Reserve Debunker?”

Someone who debunks the myths surrounding the Fedaral reserve. I asked the question and got answers. Differing on economy is one thing, CT nonsense is quite another. This thread is about the latter.

The Federal Reserve is a private central bank created by the likes of people with names like Rothschild and Warburg (European bankers) with J.P. Morgan and Rockefeller (American) counterparts.

The Federal Reserve banks are privately owned, but they are controlled by the publically appointed Board of Governors.

No foreigners own any part of the Fed. Each Federal Reserve bank is owned exclusively by the participating commercial banks and S&Ls operating within the Federal Reserve bank's district. Individuals and nonbank firms, be they foreign or domestic, are not permitted by law to own any shares of a Federal Reserve bank. Moreover, monetary policy is controlled by the publically appointed Board of Governors, not by the Federal Reserve banks.

According to the N.Y. Fed itself, The following are the real top eight shareholders...

"Chase Manhatten Bank, Citibank, Morgan Guaranty Trust Company, Fleet Bank, Bankers Trust, Bank of New York, Marine Midland Bank, Summit Bank."


All of the major shareholders seen here and all of the banks on the complete list are either nationally or state chartered banks. All of them are U.S. owned.

Just where do you think all the money goes, when the central bank raises the interest rate from 1 to 5 percent?

The Treasury Department prints Federal Reserve Notes and then sells it to the Federal Reserve system for an average cost of about 4 cents per bill. However, the Fed must present as collateral for the currency an amount of Treasury securities that is equivalent in value to the currency purchased. The Federal Reserve collects interest on all the Treasury securities it owns, including the ones held as collateral. what CTist don't tell us is nearly all the Federal Reserve's net earnings are repaid to the Treasury. This is done per an agreement between the Board of Governors and the Treasury.

How many people here are old enough to remember the old Silver Certificate US Treasury Bills? Look at the gold-backed US Dollar on the top and compare that to the worthless TRASH you see down below based upon nothing at all.

Any currency, be it paper dollars, gold, or Indian beads, depends upon public consensus. Gold is only valuable because people perceive it to be valuable. This is no different, fundamentally, than paper currency backed by the overall value of goods and services in the economy. So long as people recognize that a Federal Reserve Note has value, and accept it in exchange for goods and services, it is viable as a currency.

If the federal reserve note is worthless trash, You should send me all your worthless trash.

The FED raises rates to cause inflation, then raises the rates more to fight inflation. let the USA charge us interest on OUR MONEY to pay down the national debt!

The Federal Reserve banks have only a small share of the total national debt (about 7%). Therefore, only a small share of the interest on the debt goes to the Fed. Regardless, the Fed rebates that interest to the Treasury every year, so the debt held by the Fed carries no net interest obligation for the government. In addition, it is Congress, not the Federal Reserve, who is responsible for the federal budget and the national debt.

the FED takes out their interest rate AND must print more to make up the difference.

Source: "Annual Report, 1997, Board of Governors of the Federal Reserve System. For the four years combined the Federal Reserve collected $92.6 billion in interest on its portfolio of Treasury securities and other government bonds. The Fed also rebated $84.6 billion to the Treasury, which amounted to about 92.5% of its profits. From 1980-97 the Fed has collected about $329billion in interest from the Treasury. It has also rebated about $327 billion during that period. It seems pretty clear that Federal Reserve profits really are returned to the Treasury. What this means is that Federal Reserve Notes do not cost the Treasury any net interest."

Some CTist even argue United States Note rather than federal reserve notes would be an "interest-free" form of currency. However, Neither impose a net interest burden on the Treasury. The key difference between the two currencies is who controls the issuance. The publicly appointed Board of Governors now controls the emissions of Federal Reserve Notes and can make monetary policy decisions largely independent of political pressure. The issuance of U.S. Notes, on the other hand, would be controlled by the Treasury Department, an arm of the executive branch and a purely political entity. Monetary policy, ought to be based on the needs of the economy, not on the needs of current incumbent political party.

FYI: The Fed doesn't print money.

The USA deserves to be destroyed out of existence, because you allow these international bankers/power brokers to rob you blind.

If you're going to talk like that then this conversation is over.
I don't talk with demagogues.

Our elected officials serving Global Elites = Fascism and that is exactly what We The People deserves for being so naive, gullible and down right stupid.

See - Godwins law.


http://www.publiceye.org/conspire/flaherty/Federal_Reserve.html

 

[AlanGreenspan]

The FED raises rates to cause inflation, then raises the rates more to fight inflation.

Raising the interest rates does not cause inflation; on the contrary, it contracts the money supply which, at the very least, keeps inflation constant. In theory that might cause the price level to go down (see IS-LM).

If you are going to criticize The Fed, the least you can do is get a minimum of education on the subject.

Get rid of the FED and give the power to print US money back to the US Treasury

Can this be nominated to the stundies?

Terral, a quick question: who prints the money right now? Quick answer: Not the Fed but the U.S. treasury through the bureau of printing and engraving.

For the rest of your ill informed statements, Proxywar did a great job correcting them.

 

[AlanGreenspan]

Because there is value in storing money so that it doesn't get stolen, or destroyed.

Another great suggestion by Tippit. First he suggests a model where an increment in labor productivity is met by lower wages. Now he suggests we go back to those times were gold was stored in temples and castles. Basically he's suggesting that banks change their business model and switch their source of revenues from financial services to storage services. Great idea!

So let's quickly describe Tippit's utopia: As population grows salaries will be pushed down, even when workers are becoming more productive. On top of this investment will be discouraged since there is no incentive to invest while prices are going down (example, real state). On top of this, banks won't be lending money ... instead you will pay them to keep all of your deposits in their vaults.

A true champion of the people. Now go grab a monetary theory book and have a good laugh at yourself Tippit.

 

[AlanGreenspan]

I've contended all along that bank panics and the business cycle are the products of fractional reserve banking,

Tippit can you explain how does fractional reserve banking causes a bank panic? We'll move to the business cycle after you answer this one. I'm asking for the specific mechanics, not just a copy/paste of an unrelated issue in an attempt to give the impression that you answered the question.

 

[Gazpacho]

The word "coin"

'[Appellants] claim that the clause which conferred upon Congress power "to coin money, regulate the value thereof, and of foreign coin," contains an implication that nothing but that which is the subject of coinage, nothing but the precious metals can ever be declared by law to be money, or to have the uses of money. If by this is meant that because certain powers over the currency are expressly given to Congress, all other powers relating to the same subject arc impliedly forbidden, we need only remark that such is not the manner in which the Constitution has always been construed. On the contrary it has been ruled that power over a particular subject may be exercised as auxiliary to an express power, though there is another express power relating to the same subject, less comprehensive.'
-- Legal Tender Cases, 1871

You'd do well, as would all strict constructionalists, to actually study early interpretation of the constitution, and not merely assume that it was as strict-construction commentators wish it had been.

Some other cases relevant to the subject:

Martin v. Hunter's Lessee, 1816

McCulloch v. Maryland, 1819
('It is not for this court to decide, whether a bank, or such a bank as this, be the best possible means to aid these purposes of government. Such topics must be left to that discussion which belongs to them, in the two houses of congress. Here, the only question is, whether a bank, in its known and ordinary operations, is capable of being so connected with the finances and revenues of the government, as to be fairly within the discretion of congress, when selecting means and instruments to execute its powers and perform its duties.')

 

[MisterBigg]

In light of all the recent commotion regarding the economy, I have been doing my own studying of the Federal Reserve and our fractional reserve banking system. It seems fairly clear to me that the private banks do in fact have the ability to create money out of thin air (based on reserves), loan it out, collect interest on the created money, and when the loan is paid off the newly created money is destroyed. I hope this fact is not even a subject for debate in this forum. In case anyone is not convinced, I direct you to Section 19 "Bank Reserves" in the text of the Federal Reserve act:
//www dot federalreserve dot gov/GeneralInfo/fract/sect19.htm

Now that we have gotten that out of the way, what is the moral justification for this system? How is it ethical for a hedge fund manager to get access to 20 : 1 leverage (i.e. created money in the form of loans from investment banks)? Ordinary investors cannot compete with that.

There are claims that money creation is necessary for a well running economy. But it seems to me this is merely a system for transferring wealth from the many to the few.

Banks get the ability to create money out of nothing but what do they offer in return? They do not create any product or good. The only service they provide is to 'hold' your money and give you checking/ATM card abilities. But they charge for this service (in the spread of the interest rate versus the return on loans).

You can't even argue that banks are risking anything because they get bailed out by the government if anything goes wrong. When a bailout occurs, the Fed steps in and creates the money out of thin air.

How is it morally justifiable that a small group gets to create money out of thin air, decide who gets it, charge interest on the nothing, and all the while the purchasing power of the dollars that we the people have rightfully earned, goes down through dilution?

Is anyone here really arguing that our current system is OK? I find it incredulous.

 

[Max Photon]

Tippit can you explain how does fractional reserve banking causes a bank panic?

The Crash of the Bank of United States

Antal Fekete


One bad apple can spoil the whole wide world...

 

[volatile]

Why are there so many economic conspiracy loons here this week?

 

[BenBurch]

Why are there so many economic conspiracy loons here this week?

Because of all the "issues" the economy is having, I think.

 

[volatile]

Because of all the "issues" the economy is having, I think.

Yay! Inherently deflationary hard currency will cure all our ills!

Seriously, I spotted, what, four new ones since Monday? Where are they all coming from all of a sudden?

 

[AlanGreenspan]

It seems fairly clear to me that the private banks do in fact have the ability to create money out of thin air (based on reserves), loan it out, collect interest on the created money, and when the loan is paid off the newly created money is destroyed.

Then you should revise the reference that made you reach such a silly conclusion. Banks do not "create money out of thin air" to "loan it out". The money they lend to their clients comes from their reserves or loans from the Central Bank ... how come you claim they "create money out of thin air" and then explicitly say they do this "based on reserves" ? You should have seen the contradiction right there. When the client pays the loan the "newly create money" is not destroyed ... where did you get this idea from?

Let me illustrate the process for you using a simple example. Let's assume that in Twooferland the law requires that banks keep 10% of their reserves in the Central Bank. TwooferBank opens its doors today with a $100,000 capital which we'll treat as a deposit from the owner of the bank (who's not jew btw). Alex goes to the bank and buys a $10,000 CD at a 8% annual rate. Twooferbank can now lend $99,000 and has to keep $11,000 in its reserves, and when TwooferCo. (a firm that makes "documentaries") comes asking for a $10,000 loan they give it to them at a 10% annual rate to be paid in a single payment (to simplify the example). Business is good and in a year TwooferCo. comes to the bank and pays back the loan, plus interest. The bank now has $11,000 plus the $89,000 it had on reserves (ignoring the legal reserves). In about the same time Alex's CD reaches maturity and he goes to the bank to get his money, he walks out with $10,800. So the bank is left with 89200 plus the legal reserves ... which is $100,200.

As you can see no money was destroyed nor created "out of thin air".

I hope this fact is not even a subject for debate in this forum. In case anyone is not convinced, I direct you to Section 19 "Bank Reserves" in the text of the Federal Reserve act

Can you quote the exact part of that publication that led you to believe that banks "do in fact have the ability to create money out of thin air" ?

Now that we have gotten that out of the way,

So far, the only thing we got out of the way is your lack of knowledge on this subject.

How is it ethical for a hedge fund manager to get access to 20 : 1 leverage (i.e. created money in the form of loans from investment banks)?

I don't get this question, can you expand it a whole lot more?

There are claims that money creation is necessary for a well running economy. But it seems to me this is merely a system for transferring wealth from the many to the few.

It might seem that way to those who don't get up their asses and grab a monetary theory book.

Banks get the ability to create money out of nothing but what do they offer in return? They do not create any product or good.

As it was already demonstrated at the beginning of this post, banks do not have this ability. It is true that banks don't create a physical product or good, they create a service; banks give you the service of transferring money between periods of time, the cost of this service (transferring the money) is the interest rate you pay them.

The only service they provide is to 'hold' your money and give you checking/ATM card abilities. But they charge for this service (in the spread of the interest rate versus the return on loans).

Those are not the only services they provide. You can buy deposit certificates from a bank that give you much more than "checking/ATM abilities", they pay you interest on those deposits. Banks also lend you money to allow you to finance your consumption or investment. There also a whole array of services like escrow, differed payments, wage management ... etc.

When you deposit your money in a bank the bank does not "charge" you for this service. The difference between the rate the banks pays you and the rate it loans your money to its clients is paid the debtors, not the depositors.

You can't even argue that banks are risking anything because they get bailed out by the government if anything goes wrong.

Can you name a single example of this?

How is it morally justifiable that a small group gets to create money out of thin air, decide who gets it, charge interest on the nothing, and all the while the purchasing power of the dollars that we the people have rightfully earned, goes down through dilution?

It's not "morally justifiable" ... but since it's only happening on your imagination, we can rest assured.

In light of all the recent commotion regarding the economy, I have been doing my own studying of the Federal Reserve and our fractional reserve banking system.

Seems like by "your own studying" you mean regurgitating the same old "arguments" you usually hear from the average conspiracy loon who knows almost nothing about economics and finance.