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The Hidden Secrets Of Money Part 4: The Biggest Scam In The History Of Mankind (In 7 Easy Steps)

Tyler Durden's picture


From the seven stages of empire to the dollar crisis (and golden opportunity) Mike Maloney moves on to expose the system that is ultimately responsible for most of the inequality in the world today. As Mike explains, most people can feel deep down that something isn't quite right with the world economy, but few know what it is. Gone are the days where a family can survive on just one paycheck...every day it seems that things are more and more out of control, yet only one in a million understand why.

The powers that be DO NOT want you to know about this, as this system is what has kept them at the top of the financial food-chain for the last 100 years...

Learning this will change your life, because it will change the choices that you make. If enough people learn it, it will change the world...because it will change the system . For this is the biggest Hidden Secret Of Money. Never in human history have so many been plundered by so few, and it's all accomplished through this...The Biggest Scam In The History Of Mankind.



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Thu, 10/17/2013 - 20:25 | 4067260 threeputting
threeputting's picture

By far the best episode of the series.

Thu, 10/17/2013 - 20:51 | 4067325 Anusocracy
Anusocracy's picture

Government is the biggest con in history.

It has always existed by stealing and killing.

Thu, 10/17/2013 - 20:53 | 4067334 margaris
margaris's picture



Thu, 10/17/2013 - 21:13 | 4067350 Cult_of_Reason
Cult_of_Reason's picture

The video is a bit inaccurate.

Banks do not lend 90% of deposited money, but they create and lend 900% using the deposited money as the required reserve.

$100 deposit becomes the required 10% reserve and allows the bank to create and lend $900 (or 900% of initial $100 deposit).

The system is even more corrupt than Mike realizes, 10X more corrupt.


Thu, 10/17/2013 - 21:19 | 4067411 NotApplicable
NotApplicable's picture

Not only that, but reserve requirements have been marched down to nearly zero for most deposits.

Thu, 10/17/2013 - 22:19 | 4067585 economics9698
economics9698's picture

T = $20 billion * (1/0.2 - 1) = $80 billion.

Fri, 10/18/2013 - 01:05 | 4067898 flacon
flacon's picture

This is the most important video on youtube. Bar none! 

Fri, 10/18/2013 - 02:27 | 4067948 Oracle 911
Oracle 911's picture

Actually he said in one bonus video he can't put everything into the original presentation because after that the avarage folks wouldn't get it after a 2 hour presentation.


And another thing, 10% reserve was used as example.

Fri, 10/18/2013 - 03:03 | 4067971 Fish Gone Bad
Fish Gone Bad's picture

The only way to win is not to play.  Hopefully people will be able to figure this out for themselves.  For those who don't there is always natural selection.

Fri, 10/18/2013 - 06:17 | 4068052 fockewulf190
fockewulf190's picture

Since 2008, a lot of people have already refused to play anymore in the rigged casinos. I am one of them, and don't reget it at all. Continuing Phyzz accumulation, slapping 10kw worth of solar panels on the roof, as well as paying the house off, leaves me with nothing but hard assets...and that is just the way I like it.

Thu, 11/07/2013 - 19:00 | 4132825 Professorlocknload
Professorlocknload's picture

Besides, what's a "Reserve Requirement" in comparison to a $Trillion a year in QE....that we know about?

Thu, 10/17/2013 - 21:20 | 4067417 Australian Economist
Australian Economist's picture

Yes, and everytime I'm reminded of this 'system' I get angry.


What to do?

Thu, 10/17/2013 - 21:23 | 4067422 NotApplicable
NotApplicable's picture


Thu, 10/17/2013 - 21:27 | 4067430 Australian Economist
Australian Economist's picture

That's always an option, it's not as if the punch bowl will be taken away.



Fri, 10/18/2013 - 02:33 | 4067952 Mobius Poop
Mobius Poop's picture

Dont forget your Percoset on top of that.

Go back to sleeeeeeeep.....

Fri, 10/18/2013 - 03:08 | 4067978 Fish Gone Bad
Fish Gone Bad's picture

As long as one knows how to make alcohol one can make a fair living.

For all those who did not take biology in school:

Sugar + water + yeast = alcohol

There is a little bit more to what I have written.  I will leave that as a homework problem for any new entrepreneur who might be reading this.

Like the fish?  Google: cursing fish cafepress

Fri, 10/18/2013 - 10:44 | 4068694 fockewulf190
fockewulf190's picture

What to do? Get your hands on as much phyzz as you can buy. Silver and gold. Don't worry about the price, just buy and bunker it in a secure place. You will sleep easier knowing you have some hard assets. Then Identify what your dependant on, and work on ways to reduce or eliminate that dependance. Power, food, security, water, heat, medical, and so on.

When the Great Reset happens, you'll have assets to fall back on to help you get through the chaos. The way things look, the world economic system could implode at any time, so get moving.

Thu, 10/17/2013 - 21:39 | 4067431 Cult_of_Reason
Cult_of_Reason's picture

Re: What to do?

There is absolutely nothing you can do. You're a slave. We're all slaves.

A Roman Slave Market

Fri, 10/18/2013 - 02:28 | 4067949 Oracle 911
Oracle 911's picture

We can still revolt.

Thu, 10/17/2013 - 22:00 | 4067523 Teddy Tenpole
Teddy Tenpole's picture



At the risk of sounding like an asshole -- borrow cheap money and plow it into the stock market?

you doomer douche bags truly are funny people



Fri, 10/18/2013 - 06:20 | 4068054 fockewulf190
fockewulf190's picture

Hopefully you have hedged your risk.

Fri, 10/18/2013 - 08:59 | 4068321 SWRichmond
SWRichmond's picture

+1.  If I was on the "Friends and family plan" and knew when to get out, I would do just exactly that.  But alas, I am not.

Thu, 10/17/2013 - 21:39 | 4067454 orez65
orez65's picture

The currency created is, approximately, the inverse of the reserve requirement times the initial currency deposit.

For example, if there is a 1% reserve requirement and $100 is deposited:

1 / 0.01 X $100 = $10,000

For 5% reserve:

1 / 0.05 X $100 = $5,000

For 10% reserve:

1 / 0.1 X $100 = $1,000

If no reserve is required, as in the case of "investment" banks, you can create infinite amounts of currency:

1 / 0.00 X $100 = Infinity 

Thu, 10/17/2013 - 21:40 | 4067462 threeputting
threeputting's picture

Can someone confirm that we have to run deficits (to create more money) forever because there's more interest owed than money in existence?


I've heard this claim a few times but I've never been able to wrap my head around it.

Thu, 10/17/2013 - 22:15 | 4067549 Cult_of_Reason
Cult_of_Reason's picture

"We have to run deficits" because "we" are broke and "we" are spending more than what "we" are earning (collecting via taxes).

It has nothing to do with "money in existence".

Thu, 10/17/2013 - 22:21 | 4067590 threeputting
threeputting's picture

Well, that's not the argument made in the video -- this video says that we need government deficits because they spend the money into existence -- and because of how fractional reserve banking works, there is interest owed on every single dollar in existence, but not enough money in existence to pay all the interest.

Thu, 10/17/2013 - 22:54 | 4067638 SWCroaker
SWCroaker's picture

As much as it may boggle the mind, it is correct.  Mike's example of sticking to just a single dollar shows the physics of the problem.   The distractions of currencies from other countries, numbers in the trillions, 14 types of various forms of money etc all just serve to distract from the facts:

  1. *You* are expected to pay back every dollar ever borrowed, PLUS SOME INTEREST.
  2. *You* had zip to say in the original loan; the gov and lender just did it, and both agreed *you* would pay the bill.
  3. What sane moral rational exists for charging interest on money that was whipped up out of thin air?   If we were borrowing someone else's *savings*, then it might make sense.   But how can anyone justify the need to pay interest to the magician Fed and their miracle computer that spews money into existence?

When you look at the design of the system, it eventually becomes apparent that the Fed/Gov don't actually *care* about the interest; after all, they both have access to a money spewing computer.  What the interest *does* do is provide a vehicle of *obligation* and leverage of power.  Both the government and the Fed exploit those levers.   They retain the reins of power because we are indebted, and therefore we need managers at the top to collect taxes and decided who get government spending.     There is no rational for why our government can't just get a computer of their own and create money, debt free, at will.  The "interest" due on our Fed issued money doesn't' legitimize the process *if* you understand what is really going on in the first place.


Physics has concepts of conservation of mass, energy, momentum, flow.  They all work the same way:  Draw a containing line around an area or object.  What comes out of that object over time, *must* be balanced by what enters it, plus what is created (or minus destroyed) within it.    Closed system.   If you think of the Earth as the closed system, there *is* no money leaving or entering it; that leaves creation and destruction.   Money is created as an obligation when new Treasuries are issued.   And money is destroyed when Treasuries (and the interest due on them) is paid back and the Treasury IOU is retired.    The cost of retiring each and every single bill is *always* more than the money that was created when the IOU bill was first issued.       The *only* way to stay ahead of terminal collapse in the system is to borrow even larger amounts of debt to pay off yesteryear's IOUs, but that will of course necessitate borrowing at some point in the future to cover the cost of today's borrowing....    Rinse repeat, and over time the debt grows to astronomical levels, and the value of a unit of currency buys less and less.  This expected outcome is exactly what we are seeing first hand.

Thu, 10/17/2013 - 23:04 | 4067711 hootowl
hootowl's picture

What could be more simple than for the federal government to simply create/print money into existence and spend it into circulation...........unfortunately rather than central banksters destroying the process with usury on top of fractional reserve fraud, we would be dealing with political demons, despots, and Demoncraps (probably redundant) who would debase the currency to buy themselves eternal careers.

One term per lifetime for all humans at all levels of government.

Thu, 10/17/2013 - 23:13 | 4067729 SWCroaker
SWCroaker's picture

Absolutely.  While I felt compelled to point out the gov *could* just issue money as needed (debt free), *that* power in *those* hands is ... almost certainly doomed to be abused.  Much better to have a currency that nature controls the quantity of, not some fallible man.

Thu, 10/17/2013 - 23:05 | 4067713 threeputting
threeputting's picture

Thanks, this finally makes sense!

Fri, 10/18/2013 - 06:13 | 4068049 Ghordius
Ghordius's picture

perhaps this looks like it makes sense, but there is one little thing left out: defaults

so the initial assumption: "there must be deficits, there must be growth, there must be printing" is missing the little addendum: "otherwise we'll have some defaults, from time to time"

lo and behold: the TooWhateverToFail paradigm


further, all this "bank" credit is always supposed to be based on privately held collateral. subject to valuation. at the end, it's not the bank creating credit, it's the customer

and this might be the bitterest pill to swallow

Sun, 11/10/2013 - 12:08 | 4140395 USGrant
USGrant's picture

There is actually a rationale for the government to create debt rather than just print. The debt provides both a hysteresis and a possible partition between base money and circulating currency. The hysteresis arises from the difference between currency which is a zero time duration debt and a bond which has a finite time duration. The partition is the wall between bank reserves held at the FED and circulating currency. That the partition is effective in delaying price inflation is easily seen by the ratio of M2/M0 for instance which has now fallen to about 3 which is the lowest value since M2, M0 values have been available. The partition can be made permeable at the discretion of the FED/TBTF (tautology). As a side note, this observation also seriously calls into question the concept and the calculation for "money velocity". Certainly during a hyperinflation, currency is spent as rapidly as possible but before that velocity is ill defined.

The analogy of economics and physics is well made. In thermo one must define one's "universe" carefully. Likewise the two economic universes on respective sides of the partition can behave quite differently with vast differences in the price of goods behavior. The price of art and stocks can skyrocket while the kitsch for the masses plummets in price.


Thu, 10/17/2013 - 22:39 | 4067646 socalbeach
socalbeach's picture

As a practical matter it could be true. But as stated,

"we have to run deficits (to create more money) forever because there's more interest owed than money in existence"

it's not correct.  For example, a bank could spend their interest income as fast they receive it.  That interest money could then be used again to pay future interest.

G Edward Griffin makes a similar point in his book, The Creature From Jekyll Island.

Fri, 10/18/2013 - 10:13 | 4068540 LongBallsShortBrains
LongBallsShortBrains's picture

That's a tough point to get into people's head.
You are correct. There will be enough money to pay the interest. It is the interest collected previously, traded into the real economy for real goods. But only once the banks spend it all.

In other words, monetary expansion must bring bankers profits higher or the system is starved of money to repay interest.
It makes circular logic arguments redundant.

Fri, 10/18/2013 - 12:19 | 4069137 robobbob
robobbob's picture

problem. the interest payments to the banks are drawn from the same debt encumbered currency pool. the banks could clear their debts, by shifting the obligation unto some one else. every dollar pulled out of the pool to pay one loan, is still interest encumbered to some other loan. it is impossible to pay 110% of a pie.

that is the end game. when the debt system collapses, the banks will call all of their loans or systematically phase them out. with the printing presses shut off, the currency pool will dry up, leaving the debtors unable to pay, and the banks will take possesion of all of the collateral. it will happen haphazard and unevenly. some will escape, some will make out, most will lose everything, and the bankers will own the world. its musical chairs with debt slaves running around looking for a seat. the bankers are the ones standing safety off to the side controlling the music......protected by the ever growing police state.

Thu, 10/17/2013 - 21:44 | 4067474 CuriousPasserby
CuriousPasserby's picture

That doesn't make any sense. Please explain how they loan more money than they have. 

They take in $100,000 in deposits and with a 10% reserve they loan out $90,000, but they can't loan out money they don't have. They can't create money. Only the fed can do that.

Whoever think a bank can loan out more than the deposits they have PLEASE explain!

Thu, 10/17/2013 - 21:53 | 4067479 Cult_of_Reason
Cult_of_Reason's picture

Re: Please explain how they loan more money than they have.

Banks create money out of thin air by creating credit, but there is a limit on how much they can create (due to reserve requirement).

Your $100,000 deposit allows the bank to create and lend $900,000 (9 times of your deposit, if the reserve requirement is 10%).


Thu, 10/17/2013 - 21:53 | 4067498 Attitude_Check
Attitude_Check's picture

Only the Fed can PRINT Federal Reserve Notes.  Banks can loan credit.  If you get a signature loan rarely di you get bills but a check that you use to pay a bill, or credit deposited in your bank account.  No Fed involvement required.

Thu, 10/17/2013 - 22:29 | 4067618 CuriousPasserby
CuriousPasserby's picture

I can see how Lowes or Sears can create credit by issuing a credit card and letting me buy something like a washer, so there is now $500 money in the economy since I could buy something for $500, having no money.

But if I use my bank credit card to buy the washer, then my bank has to give Lowes the $500. They can't create the $500 out of the air, they have to take another customer's deposit, pay him 1% interest and charge me $18%. But I don't see how banks can create money out of the air???

Thu, 10/17/2013 - 23:20 | 4067749 ToucanSam
ToucanSam's picture

Don't confuse loans with revolving credit like a credit card.  Loans are backed by deposits through fractional lending.  Debit cards are backed by your bank account.  I have no idea how a credit card issuer backs their card member debts, except maybe insurance.  But because it's revolving credit, there's no collateral, and thus higher interest.  But the credit card issuer gets a processing and transaction fee so perhaps that covers any default liability?

In any case, revolving credit is money out of thin air because it's only based on your credit worthiness and not collateral.

Fri, 10/18/2013 - 11:10 | 4068532 Urban Redneck
Urban Redneck's picture

Unbelievably wrong.

If Shamu motors her whale tail off to Wally World and pays with her Capital One card instead of her EBT, then when she swipes her credit card at the register- Capital One's account at the Fed is debited and WalMart's Bank (the Bank, not Walmart, has the account with the FED) receives the offsetting credit- then it is up to the two banks to sort out the correct allotment of the Bank's digital digits amongst their customers- the KEY point being there are TWO BANKS involved, and the BANKS are the lawful owners of the digital money supply (Capital One's reports to Fed on how THEY would like their "share" of the private money supply divided is what determines how much money a customer actually has- ask Jon Corzine for additional clarification if you missed my point). Strictly speaking no money is actually created until Capital One reconciles with the local Federal Reserve and in the several hour interim Capital One's excess cash at the local Fed takes a ding, but that's a minor detail.

If you look at Capital One's 2012 10-K they have 312 billion in assets (money people owe them e.g. outstanding credit card debt) and on the other side of the ledger it is broken down into 212 billion in "DEPOSITS" 50 billion in "borrowings" and 40 billion shareholder equity with a tier 1 capital ratio of 11% and a net interest margin of 6.5%.

See my lengthy post below for a more complete definition of "DEPOSIT"- because it's NOT Shamu and her brethren who have deposited 212 billion in greenbacks or even EBT benefits at Capital One earning 0%, it's wholesale instead of retail banking (with a helping of shadow banking on the side). However, Capital One is a BANK and subject to the same regulations and capital requirements as Angelo Mozilo was while he was printing dollars out of NINJA loans.

Issued Bank credit, regardless of whether it is revolving or not is most certainly collateralized.

BTW - to all those people who think they understand what a 10% reserve requirement is- what is Capital One's maximum direct money creation against 212 billion in deposits, and if it is what you think it is, and bankers are actually greedy as hell (which I certainly agree with), then how do you explain that Capital One has only 312 billion in loans against 212 in deposits when they could be so much richer collecting 20% on their increased loans?

Fri, 10/18/2013 - 00:18 | 4067843 Cast Iron Skillet
Cast Iron Skillet's picture

Peter Schiff in his book "How an Economy Grows and Why it Crashes" provides a basic explanation of how money gets created, if you're looking for an easy to understand introduction.

Thu, 10/17/2013 - 21:54 | 4067501 socalbeach
socalbeach's picture

With a 10% reserve requirement, an individual bank can loan out 90% of its deposits.

But if that loan is redeposited, 90% of that 90%, or 81%, can be loaned again.

Repeating the process and starting with $1,000, you get:

$1,000 + 0.9 * $1,000 + 0.9 * 0.9 * $1,000 + ...

which equals $10,000 if you go on forever.

So you're right, an individual bank can only loan out 90% of its deposits, but the system as a whole could loan out 9 times that amt.


Thu, 10/17/2013 - 22:00 | 4067508 Cult_of_Reason
Cult_of_Reason's picture

Re: So you're right, an individual bank can only loan out 90% of its deposits, but the system as a whole could loan out 9 times that amt.




The bank can loan 9 times. The system can theoretically loan infinity (in reality it is never infinity because the system collapses; boom and bust cycles).


Thu, 10/17/2013 - 22:25 | 4067595 socalbeach
socalbeach's picture

With a 10% reserve ratio (RR), a bank can only loan 90% of its deposits in the general case (if there's more than one bank). To make it more realistic I'd have to include equity but I'm simplifying. Example:


(1) cash = $100; deposits = $100.  RR = 1

(2) cash = $100, note = $90; deposits = $190. RR = 0.53

Now let's say the person who takes the loan buys something and it gets deposited in another bank...

(3) cash = $10, note = $90; deposits = $100.  RR= 0.1

If this bank loans out anymore, the reserve ratio would be less than 0.1  For example, same step (1) as above:


(2) cash = $100, note = $95; deposits = $195.  RR = 0.52

Same as before, person who takes out the loan buys something and it gets deposited in another bank...

(3) cash = $5, note = $95; deposits = $100.  RR = 0.05 < 0.1


Your statement that the system can theoretically loan to infinity isn't correct.  Again with a 10% reserve ratio, the initial deposit plus the loans added up would be:

$1,000 + 0.9*1,000 + 0.92*$1,000 + ... + 0.9n*$1,000 = $1,000 * (1 - 0.9n+1) / (1 - 0.9) = $10,000 as n approaches infinity.

Thu, 10/17/2013 - 22:43 | 4067656 Cult_of_Reason
Cult_of_Reason's picture

Watch the video again (I don't have time explaining it). The system can theoretically loan to infinity.


P.S. Sigh... Rothschild was a genius. So many intelligent people cannot fully understand the system he invented.

Thu, 10/17/2013 - 22:48 | 4067664 socalbeach
socalbeach's picture

The system with a reserve requirement of say 10%, can not loan an infinite amt of money.  I just wrote the equation for you in my previous post.

Thu, 10/17/2013 - 22:58 | 4067695 Cult_of_Reason
Cult_of_Reason's picture

Your equation does not reflect reality.


Why do you think we had 2008 crises?

Fri, 10/18/2013 - 10:26 | 4068601 Tall Tom
Tall Tom's picture

Well there is a little problem with your thesis. One cannot sustain Exponential Growth in an environment with limits. Thus you are not a member of the 2% whom can think in terms of exponents.


Exponential Growth leads to Exponential Collapse. Actually "Ponzi Schemes" are a misnomer. Thehy needed to be called Rothschild Schemes.


By the way Rothschild was not a genius. He was a FRAUDULENT CRIMINAL. Criminals are not Geniuses as they are destructive rather than creative. Creativity is the true mark of Genius.

Fri, 10/18/2013 - 05:34 | 4068038 falak pema
falak pema's picture

so you think he is as good as Einstein and relativity theory?

Not very wrong as fractional reserve makes infinite money creation feel like the velocity of light; the ultimate barrier, when matter just disappears! 

Gone with the wind !

Fri, 10/18/2013 - 10:39 | 4068663 Tall Tom
Tall Tom's picture

It is IMPOSSIBLE for Matter to travel at Light Speed. 


m = m0(1 - v2/c2)-1/2


Taking the limit and allowing 'v' to approach 'c' one can easily demonstrate that mass grows exponetially and approaches Infinity.


Since E = mc2  and m becomes Infinite as 'v' approaches 'c' then it takes an Infinite amount of Energy to accomplish the task. Since Mass is a property of Matter, then your premise that Matter is annihilated at Light Speed is fallacious. 


Your hypothesis is actually moot as it is impossible to observe and validate.

Fri, 10/18/2013 - 12:43 | 4069223 robobbob
robobbob's picture

theres nothing genius about sneaking up on little old ladies in the dark of night while wearing a mask and wacking them in the head from behind. roth copied a system that came from medieval venice, itself copied from rome, and perhaps even going as far back as babylon.

roth just took it to unimaginable scale and corruption

Thu, 10/17/2013 - 23:48 | 4067773 ToucanSam
ToucanSam's picture

Actually, I believe cult is correct.

I always viewed fractional reserve lending as meaning the amount on deposit is the reserve requirement necessary to create credit.  But it also makes sense that banks only lend out 90% of deposits in reserve.

So if you deposit $100, you can lend out $900 because you have a 10% reserve requirement.  I don't remember if the video said banks lend out 90% of the deposit, but I do believe banks actually create credit based on having a 10% reserve interpretation.  It does seem less likely that a bank with $100 would lend out $900, but it also doesn't make sense for a bank to lend out only 90% of deposits on hand as there is only a finite amount of money in the system.  That means with the 90% lent on deposit interpretation has a maximum amount available to lend and I don't see that in the real world.  That bank would die because it could not continue to lend if the deposited amount was limited as socalbeach's math demonstrates.  I guess it's a legal question on whose interpretation of the reserve requirement is correct.  If I was a bank, I'd take the 10% on reserve interpretation rather than the 90% of deposit interpretation.

In either case, because credit is created out of thin air, it cannot be paid back with simply money available.

Fri, 10/18/2013 - 01:27 | 4067797 socalbeach
socalbeach's picture

If there's only one bank and nobody withdraws cash, then yes a bank could loan out 10 times its excess reserves with a reserve ratio (RR) of 10%.  But as a practical matter that couldn't happen because there is more than one bank.  So as soon as bank #1 makes a loan, it can't assume that that loan money will stay in its bank. It would be short of reserves if it loaned the maximum amount and the people with the loans took their money elsewhere (see my example above between steps (2) and (3)). If the bank runs low on reserves, it could borrow more from the Fed, but the reserves / deposit ratio still can't go below 0.1 if the RR is 10%.

As for his statement that the system can "loan to infinity", that's ridiculous unless he means central banks create an infinite amt of reserves, or the RR is zero.  Even if the RR for all banks were only 1%, the maximum amt of new commercial bank loans that could be created would be 100 * amt of excess reserves.  I wrote down the equation above, and Wikipedia gives the same result (see NoDebt's post below).

Thu, 10/17/2013 - 22:22 | 4067596 NoDebt
NoDebt's picture

Cult, I'm sorry but that simply isn't correct.  The individual bank can loan out only a FRACTION of the deposits they hold, not a MULTIPLE.  The entire banking SYSTEM can create a multiple that is the inverse of the reserve ratio, but not an individual bank.

Also see my reply to your top post, below.


Thu, 10/17/2013 - 22:35 | 4067627 Cult_of_Reason
Cult_of_Reason's picture

Re: The entire banking SYSTEM can create a multiple that is the inverse of the reserve ratio, but not an individual bank.


There is no reserve requirement for the system (watch the video, it shows how the initial $100 deposit in one bank creates infinite amount of money in the system).

Thu, 10/17/2013 - 22:50 | 4067666 NoDebt
NoDebt's picture

Yelling "NO" at the top of your lungs does not make it so.

You are factually incorrect.  That isn't how it works.  Nor does the video show or support what you describe.

I am willing to entertain all manner of errant nonsense when it comes to issues based on opinion (we can all have different opinions).  But this is not one of those things.  This one is easily verified as to how the math of it functions.

From a simple on-line repository like Wikipedia, the basic math is described about 1/3 of the way down the page here:

Thu, 10/17/2013 - 22:55 | 4067687 socalbeach
socalbeach's picture

Thank you.

Thu, 10/17/2013 - 23:21 | 4067753 Cult_of_Reason
Cult_of_Reason's picture

Maybe this will help.

Apples = your $100 deposit

Oranges = Central bank $100 deposit

Thu, 10/17/2013 - 23:33 | 4067737 Cult_of_Reason
Cult_of_Reason's picture

The example in wiki illustrates how "an initial deposit of $100 of central bank money" creates "$500 of commercial bank money" with reserve of 20%.

It is not the same as money creation by the banking system from an initial deposit of $100 by YOU (unless you are Ben Bernanke, are you?).


Fri, 10/18/2013 - 05:53 | 4068044 Rock Sniffer
Rock Sniffer's picture

Wikipedia is wrong.  So wrong.  The reserve multiplier is a fallacy that's been repeated in textbooks for the last sixty years or so; reserves are not lent out, unless it is to another bank.  Banks use reserves for settling payments on interbank transfers.  

Banks are not reserve constrained on the amount of lending, though they are capital and liquidity constrained and liquidity is by far the most critical.

The fact that economists don't understand the plumbing behind the monetary system and effectively abstract the whole idea of money and credit is exactly why we've got all these problems.

Not an opinion, BTW.  Economics of Money & Banking, Columbia U, NY.

Fri, 10/18/2013 - 02:46 | 4067963 ich1baN
ich1baN's picture

But NoDebt, you and Cult are both right. 

You are forgetting one scenario which happens quite often. The person that gets a loan from Bank A then takes that money and buys something with it.... the person he purchased whatever product or good from may end up depositing that money that was loaned from Bank A in to the same bank......

This is exactly why the big banks love having their concentrated regions! It increases their chance that the same people will deposit the same money into the same bank over and over again! 

Thu, 10/17/2013 - 22:13 | 4067567 El Vaquero
El Vaquero's picture

You have to realize that what is counted as money includes more than just physical federal reserve notes.  Most of what is considered money is actually an entry in ledgers on computers saying things like "so-and-so has XXX dollars."  These ledgers represent claims to FRNs, which makes them interchangeable with FRNs.  So, if somebody deposits $100 FRNs with a bank, it can lend 90 of them out to you, but that person who deposited $100 still has a claim on $100 FRNs.  So long as everything is going well, and especially so long as people write checks and use their debit cards, it all works fine.  But, when people start demanding the cold, hard cash all at once, you've got a bank run. 

Fri, 10/18/2013 - 00:07 | 4067823 Jimbodude
Jimbodude's picture

A bank doesn't need to have $20,000 on deposit to give you a credit card with a $20,000 limit. If you walk in to a store and spend $100 on your credit card, you have created $100 out of thin air. The store now has the $100, you have a liability for $100 + interest and the bank has an asset of $100 + interest (if you owe money to the bank, that is an asset for the bank). The bank also has a liability for $100 to the store. The $100 will continue to exist in the economy until you pay it down. The $100 you eventually use to pay down the debt will have been created in a similar way. The banks profit will come from the interest payments on the $100 you borrowed and card use charges levied on the store.

Fri, 10/18/2013 - 09:04 | 4068335 CuriousPasserby
CuriousPasserby's picture

Giving you a credit card with a $20,000 limit doesn't create money, it says you can borrow that much money. So if you buy something for $100, then the bank has to send the merchant $100 in real money. Banks can't create money that they don't have on deposit.

Fri, 10/18/2013 - 09:12 | 4068361 El Vaquero
El Vaquero's picture

I don't know what they're doing right now, but at least leading up to 2008, much of their profit with credit cards came from fees generated by servicing accounts, shoving the receivables in a bankrupcy remote mastertrust, which then issued a certificate backed by those receivables to a trust that was owned by the bank, then issuing notes/bonds/whatevers backed by that certificate and selling them to investors.  They got around the reserve requirements not by ignoring them, but pushing the risk off to investors and/or by transforming the receivables into "assets."

Fri, 10/18/2013 - 11:28 | 4068871 Rock Sniffer
Rock Sniffer's picture

Because they don't lend money.  They do not intermediate.  Forget the idea of fractional reserve banking, forget the video (it's so wrong it's a joke). Forget the idea of money in a bank; it's not.  It's a deposit - a simple balance sheet entry that in effect is an IOU.  They owe you currency to the amount of the balance of your deposit.  You are an unsecured creditor.

When a loan is created, there is quite simply a balance sheet expansion.  On the asset side a loan is created and on the liability side a deposit is created (ex-nihilo). If you transfer that amount to someone in the same bank, it is debited from your account and credited to their acount.  

If it is transferred to an account holder at another bank, then reserves come into play.  Reserves transfer between banks for settlement of the transaction.  If they don't have the reserves, then they go to repo, fed funds or the fed to borrow them.  Reserves are not lent out, multiplied or anyway feature in loan/deposit creation.

The problem with unconstrained credit creation is the bank run - you've created far more promises to pay (deposits) than existing currency.

Ultimate lesson is:  if you're concerned about your bank's (in)solvency, you'll want to get your money before anyone else tries to.

Michael Kumhof gives a longer presentation than I can here:

I'll probably have GCHQ and the NSA tapping my phone now...

Thu, 10/17/2013 - 22:13 | 4067566 NoDebt
NoDebt's picture

Cult- No.  I see where you're going, but the video is correct.  Each hop through a bank they have less to lend out than the previous hop.

What you are describing would result in INFINITE currency multiplication in the banking system, in theory.  That isn't how it works.  The basic math on how fractional reserve banking can be found many places, including Wikipedia, etc.  Do a search for "Fractional Reserve Banking"

The real problem isn't fractional reserve banking (which predates pure fiat currency).  The problem IS fiat currency.

Thu, 10/17/2013 - 22:24 | 4067605 El Vaquero
El Vaquero's picture

I think that both fractional reserve banking and fiat currency are problems, but that's a discussion that you and I can have when this whole shitshow finally ends when figuring out what the new world will look like ;)


But yeah, were Cult right, not long after the gold standard were dropped, what the banks would have done would make the Fed look like a bunch of Pikers and we would have already experienced hyperinflation. 

Thu, 10/17/2013 - 22:38 | 4067644 NoDebt
NoDebt's picture

Fractional reserve banking used to get in trouble LONG before fiat currency (ancient Rome, for instance).  Even with the "limits" placed on it's multiplier by using an hard asset like gold, they were still creating more claims on gold than there was actual gold in existence to fulfill them.

What pure fiat currecy does is introduce the possibility of undermining the foundation on which an already inherently unstable structure is built.  

Then again, modern stealth fighter jets would never be able to fly in a controlled manner without computers making constant minute corrections well beyond the capability of a human being.  And bumble bees still shouldn't be able to fly at all, of course.

So, who knows?  Maybe it'll all turn out just fine in the end.


Fri, 10/18/2013 - 08:48 | 4068277 Tall Tom
Tall Tom's picture

If you LISTENED Mike said that 10% was being used as an EXAMPLE. Mike said that it can be as low as 1% AND in SOME INSTANCES that RESERVE REQUIREMENTS ARE at ZERO PERCENT. (And he did not even begin to cover the ABANDONMENT of Mark to Market Accounting of Assets for Bank Solvency evaluation.)

Please listen to the video again so that the message sinks in. Please. You must be BETTER GROUNDED in order to be of a USEFUL AFFECT FOR YOURSELF.

REPEAT WATCHING IT until it is Second Nature. Watch it until you can DRAW OUT THE DIAGRAM. Every word was important and YOU MISSED THOSE WORDS. That tells me that you missed OTHER WORDS and corresponding concepts.


IT WAS VERY ACCURATE. It is simplified for EASE OF UNDERSTANDING. We need to expose this FRAUD. Then, maybe, enough people will OPT OUT of being frauded as to affect a Real Change.


Fri, 10/18/2013 - 09:36 | 4068438 ChaosEquilibrium
ChaosEquilibrium's picture

What is left out of this simple monetary model is : FINANCIALIZATION of LOANS-bundling,tranching, Risk REMOVAL/TRANSFER, Rehypothecation.  In a PERFECT knowledge risk-weighted model of bank operation--Assets,Liabilites, Capital, Equity would balance seemlessly and efficiently.  The collateral is that the system CANNOT fail(human labor, future cash flows, confidence).

Fri, 10/18/2013 - 11:46 | 4068960 Thisson
Thisson's picture

The bank doesn't need any reserves to make loans.  You want a loan from a bank?  If they approve, they open an account at the bank in your name and write down, in their computer, that is has a balance of $X.  They go and obtain reserves from the Fed, as needed, after they give you the credit.,d.dmg

Fri, 10/18/2013 - 01:20 | 4067908 pkea
pkea's picture

so why here is no case against it all if it is all unconstitutional....who and what are we all waiting for

Fri, 10/18/2013 - 08:55 | 4068306 Tall Tom
Tall Tom's picture

The Politicians are Paid Off by the Banks to look the other way.


Do you really believe that there is a Political Solution? After Mitch McConnel sold the USA down the River for $2 Billion do you really think that the REPUKES are going to Impeach Obama?




You? As for you? You are getting screwed and are getting to pay for it.


Most do not know this. EDUCATE THEM.


WHEN THEY FIND OUT THEY WILL REVOLT. There will be a Slave Uprising.



Tue, 10/22/2013 - 23:12 | 4081722 diesheepledie
diesheepledie's picture

The bankers are benign. At any time they could cut it off and unleash the FSA - the monkey orcs wouldn't leave a blade of grass alive if you cut off their free shit for even a week. Yet the bankers print and type furiously to make sure the orcs are fed and sedated. 

Thu, 10/17/2013 - 20:25 | 4067263 polo007
polo007's picture

According to Deutsche Bank:

October 8, 2013

Bretton Woods III and the Global Savings Glut


History suggests that periods of global economic expansion are characterized by symbiotic imbalances rather than balanced arrangements that satisfy theoretical ideals. Therefore, it is important to understand the factors that drive the imbalances in each period as well as the resulting distortions. In our view, demographics will have a significant impact on the future trajectory of the world economy. In this report we specifically focus on the implications on savings and current accounts.

Population trends imply that we are entering a phase where rapid aging will cause many countries to generate persistent current account surpluses. This raises the question – who will generate the world’s deficits?

World demographics is not neatly spaced out such that some countries generate surplus savings exactly when others need to fund deficits. Moreover, there are many factors that may prevent surplus countries from funding deficit countries. Thus, we have a situation where countries like India, Brazil and Indonesia may attempt to tame their deficits before old countries like Japan and Germany enter their dissaving phase. The resulting savings glut could be further exacerbated by a likely increase in China’s current account surplus.

Thus, the emerging international economic system, dubbed by us as Bretton Woods III, will yet again depend on the United States to act as the demand source of last resort. Meanwhile, demographics will hold down the real cost of international capital whether or not the US decides to absorb part of it. In turn, the ability of world’s financial system to allocate excess savings will be tested again. Young emerging markets with the ability to sensibly deploy cheap capital could benefit disproportionately from this environment.

Thu, 10/17/2013 - 21:22 | 4067420 NotApplicable
NotApplicable's picture

A lot of fancy words to describe utter bullshit.

Fri, 10/18/2013 - 00:33 | 4067868 Chuck Walla
Chuck Walla's picture

That would be the 100% Soros sponsored event where nearly everyone speaking Drew a Soros paycheck.


Fri, 10/18/2013 - 11:49 | 4068971 Thisson
Thisson's picture

Agreed.  Amazingly, when all of the economies of the world are put together, there is neither a surplus or deficit.

Thu, 10/17/2013 - 21:30 | 4067436 orez65
orez65's picture

"According to Deutsche Bank ..."

Blah, blah, blah, blah ...

What's all their demographics bull shit have to do with the scam that they are running.

Thu, 10/17/2013 - 21:56 | 4067509 Attitude_Check
Attitude_Check's picture

So economies with more retirees will generate surplusses with less priducers and more consumers?  Retirees will be liquidating savings to pay for retirement.  They have it exactly backwards.

Thu, 10/17/2013 - 20:28 | 4067269 Cacete de Ouro
Cacete de Ouro's picture

BIS are the culprits

Thu, 10/17/2013 - 20:29 | 4067273 LetThemEatRand
LetThemEatRand's picture

I realize it sounds crazy, but anyone who thinks this is not intentional (see debt ceiling predictably raised over the objection of a few objector actors who were funded by bankers) is fucking delusional.

Thu, 10/17/2013 - 20:38 | 4067292 Bay of Pigs
Bay of Pigs's picture

Of course it's intentional, but many of the politicians don't know that.

They are simply useful idiots.

Thu, 10/17/2013 - 20:46 | 4067304 Zero Point
Zero Point's picture

Yeah, I watched this last night and I reckon Mike did his best to get that point across.



OH and LTER.. PS:

Congrats on not having to eat your own asshole, that sounded pretty unhygenic.

Thu, 10/17/2013 - 20:52 | 4067328 DownByTheRiver
DownByTheRiver's picture

Are you sure it was raised and not just entirely lifted til feb 7 or whenever?

What was it raised to?

Hasn't been reported on for 150+ plus days....anyone actually know what the debt even is at this point (let's pretend it still matters)?

Thu, 10/17/2013 - 21:25 | 4067426 Australian Economist
Australian Economist's picture

Last I heard it was 17 TRILLION (17,000,000,000,000) Federal Reserve Notes (whatever they are).


Does it even matter how much it is? The ride will only stop when people lose faith in the dollar and realise something made from nothing is actually nothing.

Fri, 10/18/2013 - 04:43 | 4068012 Urban Redneck
Urban Redneck's picture

No the FRN supply is (ironically) about 10% of that... and it's also the part of the money supply that the Federal Reserve does not really even care about since (absent a literal printing press) they only indirectly control it versus their ability to manipulate electronic/bank money.

Digital Digitz Bitchez.

Edit: and it is an ironic relationship NOT a causal one.

Thu, 10/17/2013 - 21:11 | 4067390 Everybodys All ...
Everybodys All American's picture


Thu, 10/17/2013 - 20:38 | 4067290 blindman
blindman's picture


Thu, 10/17/2013 - 20:41 | 4067297 PaperBear
PaperBear's picture

Never in the field of human endeavour has so much been transferred from so many to so few.

Thu, 10/17/2013 - 20:48 | 4067313 Squeezedshorts
Squeezedshorts's picture

Too much truth.

Thu, 10/17/2013 - 20:48 | 4067315 JailBanksters
JailBanksters's picture

So what would happen if you could convert any base metel into gold, and at a very low cost using solar power. Would you have a bunch of Secret Service Agents banging down your door at 3AM. It's not fraud, you are performing a Manufacting Operation just like Mines and Founderies and the end result would be Identical to Gold created by Exploding Suns. So you can create your own money, is this any different to the Rothschilds.



Thu, 10/17/2013 - 21:50 | 4067487 orez65
orez65's picture

"So what would happen if you could convert any base metel into gold ..."

Well, then you would be called an "alchemist".

Many have tried it, including Issac Newton, and none have succeded.

Your problem is that you don't understand what money is.

In today's world only gold and silver are money.

If alchemists could create gold and silver, for a pittence at will, then gold and silver would not be money.

Currency is not money, it's a note typically signed by two bureaucrats with some fancy drawings on them.

Fri, 10/18/2013 - 10:04 | 4068504 JailBanksters
JailBanksters's picture

I'm very aware that Gold and Silver are Money and Notes are just Paper with Numbers printed on them.

Actually, there was somebody that did claim to  "create" gold,  but it so small amount and cost several times more than digging it out the Gound, not feasible.

This was purely htpotherical, and as Bernake has said publically that Gold is NOT money, and they only keep it as Tradition. Only money not even printed on is Money. So if it's NOT money then would they stop you.




Thu, 10/17/2013 - 20:50 | 4067320 blindman
blindman's picture
The Who - Who Are You?

Thu, 10/17/2013 - 20:53 | 4067331 emersonreturn
emersonreturn's picture

what wil it take to end the fed?

Thu, 10/17/2013 - 20:56 | 4067344 blindman
blindman's picture

dedication of superior commitment
by many.

Thu, 10/17/2013 - 20:57 | 4067349 ghengis86
ghengis86's picture


Fri, 10/18/2013 - 00:12 | 4067832 emersonreturn
emersonreturn's picture

ghengis86 LOL

Fri, 10/18/2013 - 05:24 | 4068032 falak pema
falak pema's picture

the Mongols, via the chinese, invented gunpowder but the Arabs stole it from them by learning how to distill saltpeter, allowing them to make more concentrated gunpowder, and used it for the first time as modern weapon at Ain Jalut. Big defeat for the Mongols. 

So "lead" is a song that the sons of Ghengis sing as they learned it the hard way. We never forget the hard lessons of life! 

Thu, 10/17/2013 - 20:55 | 4067341 Australian Economist
Australian Economist's picture

So you're telling me the whole thing is a scam??!??!

Thu, 10/17/2013 - 21:26 | 4067429 blindman
blindman's picture

yes, that is uniquely the domain of
"the whole thing", a scam;
a beneficent image and projection
of consciousness
is that.
*, fishing.
an art and refined
survival past time also
called civilization
or fishing for civilization.
anyway poems *t

Thu, 10/17/2013 - 21:31 | 4067439 Australian Economist
Australian Economist's picture

scam (skæm)

n., v. scammed, scam•ming. n.

1. a fraudulent scheme; swindle.


2. to cheat; defraud.


3. scam on, Slang.
a. to kiss and caress; make out with. b. to have sexual intercourse with.

I always knew they were fucking me...

Thu, 10/17/2013 - 22:37 | 4067640 Keyser
Keyser's picture

I loved the bit about the 6% dividend that the "owners" of the fed collect on transactions created out of thin air. 


Fri, 10/18/2013 - 09:06 | 4068340 Tall Tom
Tall Tom's picture

What is 6% of $890 Billion? Can it be $53.4 Billion? The Bankers got one hell of a Payday on Wednesday Night.


That will pay for some Christmas Bonuses...


Isn't it nice of you, the Taxpayers, the actual Taxpayers, to give up that kind of Cash to your Federal Reserve Stock Holders? They are just so deserving.

Thu, 10/17/2013 - 20:56 | 4067342 A Lunatic
A Lunatic's picture

Here it is in one step: The love of money is the root of all evil.

Thu, 10/17/2013 - 21:52 | 4067497 orez65
orez65's picture

"The love of money is the root of all evil ..."

NO, NO, NO ...!!, "The love of FIAT money is the root of all evil"

Fri, 10/18/2013 - 13:10 | 4069352 tony1787
tony1787's picture

This verse found in the Bible was poorly translated; it is better translated "The love of money is the root of all kinds of evil."

If I kill a guy for making fun of me, I am evil ...with no money involved. QED.

Thu, 10/17/2013 - 21:09 | 4067381 no more banksters
no more banksters's picture

"The spiraling debt of the Federal Government to "Federal" Reserve, is due to repeated quantitative easing policies, i.e. primarily "printing" new money, supposedly made to stimulate the economy. Instead, however, the money went solely to bailout biggest banks, some of which participate in the "Federal" Reserve! Which means that, money returned to the banks through a circle, while uploaded US government with more debt, which will be passed on to future generations!"

Thu, 10/17/2013 - 21:15 | 4067402 Spastica Rex
Spastica Rex's picture

Gone are the days where a family can survive on just one paycheck.

There's that entitlement, again.

Some of the problem is the creeping definition of "survival." An iPhone is not a requirement for survival.

My family of four survives just fine on one $40K income - No EBT, no free and reduced lunch, no etc.

Thu, 10/17/2013 - 22:02 | 4067526 Attitude_Check
Attitude_Check's picture

You couldnt even pay your taxes and 2 bedroom apartment for that money in some cities.  

Fri, 10/18/2013 - 13:12 | 4069357 tony1787
tony1787's picture

Then LEAVE that city! ...and find one where that's not the case. that's what I did and everyone can do with a bus ticket.

Fri, 10/18/2013 - 03:23 | 4067990 Amagnonx
Amagnonx's picture

While the idea of an entitlement to a particular lifestyle is indefensible, the right to fair division of wealth between labor and capital is not.


The wealth of the US was built on a couple of extraordinary conditions which no longer persist, that being an expansion of credit, and the monopoly on manufacturing that existed after WWII (where other nations productive infrastructure was destroyed).  So it is unreasonable in general terms to expect that US citizens might enjoy the same levels of relative wealth as in the past, however they should enjoy the full benefit of the value of their labor and the right to retain all of that wealth without confiscation through taxation, fraud, inflation, direct theft and regulation that skews the relative value of capital and labor.


Capital by definition should be deferred savings, that is money that has been earned but not consumed.  The great evil perpetrated by the modern system of currency is that the definition is no longer true, but rather capital has become something conjured into existence and the cost of that capital has been distorted lower by the interest rate monopoly of the central banking system.


When access to that magically created capital is carefully restricted to a certain group, then capital becomes more competitive than labor and the value of labor is pushed lower.  The other problem is of course that the entities controlling this magical capital buy regulations that push out small businesses, or marginal capitalists.  The marginal capitalist has the most direct effect on salaries and wages of any group - this is the guy who decides it is more worthwhile to run a small low capital business than it is to work, he removes himself from the labor pool and very likely creates one or more jobs - which raises salaries and wages. His profits come from discretionary spending which is taken DIRECTLY out of the pockets of the corporate monopolies (which would force them to more competitive).


No-one is entitled to a particular lifestyle, but we are entitled to a lawful society and an even playing field.

Fri, 10/18/2013 - 17:08 | 4070220 ncdirtdigger
ncdirtdigger's picture

Could be a typo, but capital is savings. Savings are defferred consumption.


Fri, 10/18/2013 - 09:20 | 4068386 Tall Tom
Tall Tom's picture

Another Fucking Socialist?


It is not about survival. It is about LIVING. It is NOT about NEEDS. It is about WANTS. If I want something and I am willing to WORK FOR IT then why should someone else have the legal right to steal it from me? (Because YOU DETERMINE that I do not NEED IT?


Try LIVING on $40K in San Diego, California. Try SURVIVING.


Fuck your arrogant attitude. Reading this kind of crap makes me think of Rocket Propelled Grenades and Oil Refineries.


If only Chris Dorner had a brain...Yeah...Who needs Gasoline?

Thu, 10/17/2013 - 21:28 | 4067405 NoDebt
NoDebt's picture

As a primer for the uninitiated, it's a good piece.  I can't say I learned any new revelations, but it's nice to have something you can put in front of somebody who is open minded and reasonably intelligent to explain it.

Best sound-bite:  If you borrow the first dollar into existance out of thin air and promise to pay it back with interest, what do you pay the interest with?  You have to create another dollar.  Therefore, debt will ALWAYS be greater than the currency in existence.

If you can wrap your brain around that, you're well on your way to understanding it.  

Fri, 10/18/2013 - 11:55 | 4069015 Thisson
Thisson's picture

Indeed, because when you can't pay back your debt in currency, you have to make a payment in the form of servitude:  "Well, I can't pay you back the $106, but I can mow your lawn...."

Thu, 10/17/2013 - 21:17 | 4067406 Atomizer
Atomizer's picture

Chaos Theory


We are instinctually programed by our DNA….Shhhh. When the time comes.

Thu, 10/17/2013 - 21:31 | 4067440 reTARD
reTARD's picture

This is why the state (governments) must come to an end. Without the force (enforcement) of the governments (obeying their bankster masters), the banksters have nothing. "Legal tender" is completely the opposite. If there were allowed free market competitive currencies as tender, no one person or group could abuse that currency.

Fri, 10/18/2013 - 08:18 | 4068031 falak pema
falak pema's picture

This is why the state (governments) must come to an end. ...

you mean you want to throw the likes of Washington, Jefferson and Madison into the bonfire of fiat vanities. 

Then you will make sure that the Old Monarchs, the likes of Georgie III,  rule the word as they will not only have divine rights but serfs under the gun to carry them out.

Out of the cauldron into the fire. 

To regulate "free markets", to avoid that the T REXs take over the world you need people's representative government.

And, the strength of that government has to match the appetite of the aristocratic T-Rexs.

That's reality. Utopia is for the birds. 

PS : ANd the retards should read the "Conference of the Birds". 

Thu, 10/17/2013 - 22:01 | 4067524 Wave-Tech
Wave-Tech's picture

The secret revealed in part-4 is that we’ve all been PUNK’D.


Thu, 10/17/2013 - 22:22 | 4067599 Handful of Dust
Handful of Dust's picture

I like Mike Maloney. He writes clear and concise.

Thu, 10/17/2013 - 22:25 | 4067608 monger
monger's picture

nice try but it will never happen that you get enough people to understand or care. sometimes the only way to get rid of evil is to cut off its head.

Fri, 10/18/2013 - 00:11 | 4067831 Seize Mars
Seize Mars's picture

This is a really well done video.

I would suggest that he does a focused special on so-called "shadow banking" and the games that banks play including repo finance.

Fri, 10/18/2013 - 01:13 | 4067905 Sizzurp
Sizzurp's picture

Debt based negative value currency is the problem.  You cannot infinitely grow debt to purchase finite goods, nor can you expect to reap enough taxes to pay infinite interest.  The math breaks down as exponential growth hits the limit of a finite world.  In the meantime, the bankers have secured, or dare I say stolen, the vast majority of real assets.  This system is evil.  We need a system of sound money.  Fekete is correct.  We need to bring back gold money and real bills.

Fri, 10/18/2013 - 01:44 | 4067916 zipit
zipit's picture

Well done. Now if he (or someone) could make an even shorter, simpler, more viral version, please.

Fri, 10/18/2013 - 05:28 | 4068030 falak pema
falak pema's picture

great lesson on the essence of modern monetary capitalism. Oh the Venetians, such modest beginnings such a huge consequence.

The greatest monetary sin of the West...its already been said.

Fri, 10/18/2013 - 05:49 | 4068041 Urban Redneck
Urban Redneck's picture

Mike Maloney makes a valiant effort to simplify the modern banking system so that the average person can understand it, but because of some of his rhetorical devices and definitions used in previous episodes-- he is over-simplifying, and thus MIKE MALONEY IS WRONG (as a bunch of people who should understand better and are posting in this thread).

So let me elucidate and illuminate-

Forget his distinction between between money and currency and ignore all the little green graphics- in the actual banking system they are not greenbacks or even money or currency as he defines them they debits and credits between the central bank and its member/owner banks.

The otherwise sophisticated here run off the rails into tinfoil hat lunatic land with their "infinite money" creation calculation. The stricter definition is correct, and Mike Maloney is flat out wrong.

If you want to understand HOW the "infinite" expansion occurs you need to first define BANK DEPOSIT correctly. There are many things one can DEPOSIT at a bank... for a detailed list look up RISK BASED CAPITAL CALCULATION. - Physical greenbacks, digital dollars, and Treasury Securities all are basically taken at face value and the bank can turn around and loan 90% of that value into existence. But municipal securities, rated corporate bonds, and a whole bunch of OTHER THINGS which are not traditionally viewed as money can be used as capital by a bank to create MOAR MONEY (at varying haircuts to that 90%). So your subprime NINJA loan which actually did create money gets securitized into an MBS and passed off to a muppet who then deposits it into a bank which now has more capital from which to create new debt money. VOILA!

Furthermore, not all debt creation results in money creation. Interest the broadest example, but stepping outside of the BANKing system- if you take out a title loan on your car, that debt is real (and the interest expense is real) but no money is created, unless some enterprising banker securitizes the obligation so that it becomes "eligible collateral" i.e. DEPOSITS or "collateral transformation" in shadow banking parlance (which is a slightly different process to achieve the same end - MOAR bank capital). And since the shadow banking industry is much larger than the cotton-linen blend money supply it is mathematically more important to system stability than all those little green graphics in the video.

There are also unfunded liabilities and contingent debt- (i.e. derivatives) but that's moving a little beyond Banking 101, but if YOU trade futures or options- recognize that you live in glass house since if you exercise that instrument you are transforming a contingent or notional debt into an actual debt without creating any money.

The end result is the same as Mike describes it - infinite "money" creation by a private banking monopoly in cahoots with corrupt and irresponsible political leaders- but the video is a gross and incorrect over-simplification, which is a shame since banking is nothing more than an applied spread arithmetic and a license to legally "print" money. If he hadn't boxed himself in with craptastic definitions and explained it as the "liability" getting redeposited instead of the money or currency being redeposited- he would actually be fundamentally correct in describing the seemingly infinite money supply created from a finite amount of debt.

Edit: Almost forgot, once a bank has met its required capital reserves, there is nothing to stop it from taking its excess reserves (including your deposits) and leveraging it up and doing sickening things involving other banks (but that's banking 103).

Fri, 10/18/2013 - 06:32 | 4068062 Ace Ventura
Ace Ventura's picture

UR, I think Maloney is aware of the particulars you describe in your post. But remember who this production is targeted for. I thank him for that, because I consider myself a reasonably intelligent guy, and this demonic hellspawn of a system....while simple in overall objective ('legalized' or 'chartered' counterfeiting of money, upon which real interest is 'charged') still nevertheless wrapped in so many branched and tranched onion-layers of financial crapspeak. So much so, even I have to keep stepping back and wrapping my head around it.

So yeah, he may have taken some artistic license with the accuracy of his definitions, but in the end the concept behind what he is describing remains pretty straightforward. Were he to have employed terms like 'applied spread artithmetic, municipal securities, and rated corporate bonds'....the average boobus amerikanus would have quickly started drooling and thinking about that ham & cheese sandwich in the fridge.

Fri, 10/18/2013 - 07:04 | 4068087 Urban Redneck
Urban Redneck's picture

Since I'm predisposed towards iconoclasm, I conducted a brief mental debate on the morality of throwing a turd in the punchbowl before I decided to write that. There were key two points that swayed my opinion 1) for those who do have the opportunity to corner financial leaders in public forum- if they phrase a question in a manner which can accurately and factually (truth is a different quest) be dismissed then the few people who have that luxury will be LEGITIMATELY ridiculed and set back the cause of reform; and 2) The Law of Unintended Consequences as it applies to poorly thought reforms that actually see the light of day. The Monetary, Banking, and Financial systems are not independent of each other. One could actually implement a full convertibility gold standard and without addressing how debt and other competing demands for money are created, transmitted and multiplied through the systems- the result would be the rich getting richer and the poor left holding bag while the system collapses prematurely. If the video and comments were on HuffPo or FauxNews- you can't teach a camel to drink or a retard to think, but this is a slightly more sophisticated crowd even if we regularly demonstrate some really low brow humor.

Fri, 10/18/2013 - 07:18 | 4068102 falak pema
falak pema's picture

I thought the iconoclast on this post was Mike Maloney the Jack-knife destroying the myth of the FED and crony capitalism gone fractional reserve to infinity.

But I'll grant you that your iconoclasmic rant nailing his oversimplification of FED's iconic sleight of hand deserves three cheers. Hip hip Yellen! 

Oups...another Icon on the horizon! 

Fri, 10/18/2013 - 08:41 | 4068255 Urban Redneck
Urban Redneck's picture

Thanks, but to rephrase the 6th rule of Fight Club-
No Shirt. No Shoes, No Sacred Cows - leave them at the door.

Now if someone could just lock Yellen or the bearded one in a Pay-Per-View cage/death match with the average ZH intellect opponent and force her defend the Fed's actions or her understanding of how the real economy functions... the muppets might pay good bread to actually learn about bread and circuses while enjoying the latter, they could even replace the traditional thumbs up/down with American Idol style voting.

Fri, 10/18/2013 - 07:50 | 4068158 Ace Ventura
Ace Ventura's picture

Funny you mention a full-convertibility gold standard. I believe I recall a similar production of Maloney's where he stipulates that he is NOT in favor of such a standard, because we could essentially end up back in the same boat (TPTB overrepresent the amount of actual gold and print 'gold-backed' notes or whatever). Again I have to keep reminding myself that this could in theory happen, although I'm not sure how it could ever reach the rampant levels of 'printing' we see today. If such instruments were truly convertible, that alone should at least function as a braking system to keep the inflationary corruption somewhat in check.

I can't recall offhand, but it seems the solution was to implement a gold/silver standard, wherein silver's attributes would somehow make it more difficult for TPTB to consolidate by allowing Joe Public to transact with the actual real money. Personally, I like the idea of competing forms of money. Seems TPTB would have a more difficult time ass-wrangling us if we had a choice to use X for money in lieu of Y at any given moment.

P.S. F**K you, Non-Federal Non-Reserve. May the fleas of a thousand camels infest the hair under your armpits.

Fri, 10/18/2013 - 08:21 | 4068208 Urban Redneck
Urban Redneck's picture

There are a number of reasons why I myself am against a gold standard, but they actually distract from the larger problem- the private for-profit monopoly on the nation's money supply. The Federal Reserve was intentionally designed to prosper in an environment of a FULLY CONVERTIBLE gold standard so a gold standard, in and of itself, is certainly NOT going to fix the Fed (or the economy), both the US government and certain US banks made out like bandits when the Great Depression got rolling in Europe - warfare by other means, before they ran out Au and switched to Pb. Right now the banks nominally have notional assets is gross excess of real global output - if you give them the means to convert their funny money into hard money they certainly will, which will leave a MUCH smaller pie of real money to be divided amongst the non-bankster classes.

Fri, 10/18/2013 - 10:07 | 4068508 Tall Tom
Tall Tom's picture

Central Banks are not the primary owners of most Physical Gold. The bulk of the 170,000 Metric Tons is held by individuals. The USA is reportedly believed to hold 8,000 Tons and officially has the largest reserve. Of course we can consider that it has been leased out. Buteven if it hasn't it only holds 4% of the World's Gold. It is the institution that holds the largest amount in percentage.


While I realize and understand that a Gold Standard will be detrimental for the citizens of the United States the public in India will flourish as a result of a Gold Standard.


A Gold Standard will not work using Paper Promises as it will degenerate into the current fraudulent system. However there is enough Gold for 7 Billion people. There is 3/4 Troy Ounce for every single Man, Woman, and Child who walks on the surface of the Earth. Furthermore the rate of production of Gold, at 2% per year, is equivalent to population growth rates.


A Paper Gold system will not work. But holding the actual metal will. And after the Banks implode, which they will, hopefully the 7 Billion Souls will have learned to not ever, even once in their lifetime, or their childrens' lifetime, EVER TRUST ANY BANKER AGAIN. After this meltdown the Paper receipt system will be over for at least two generations.


A Gold Standard is coming whether you like it or not. The US Government will become irrelevant as it slips into insolvency.


The Debt Ceiling Debate was the final straw. It has damaged American Credibility irreparably. China just made a deal with the ECB for Yuan-Euro Direct Trade. The US will lose World Reserve Currency status. This has now been accelerated due to the political debacle in Washington DC. When that happens the $12 Trillion come back to American Shores. That will definitely impact Monetary Velocity. Can you spell H-Y-P-E-R-I-N-F-L-A-T-I-O-N? 


What we need to do in the United States, to prepare for this, is OWN GOLD.


Even the Chinese can see the writing on the wall and is responsibly ENCOURAGING PEOPLE, using Mass Media, to purchase Gold. Even Iran, upon the threat of imminent American invasion, divested the Gold Holdings from the their Central Bank to their population. And India...did I forget to mention India?


I know that a Gold Standard will impoverish Americans. That is very sad as the Public has lost all connection and understanding about what money is. But it is coming. Take heed and prepare.

Fri, 10/18/2013 - 08:58 | 4068316 lynnybee
lynnybee's picture

yup.   after watching this video, methinks it is best to get started early & swap out those pieces of colored paper with numbers printed on them for the real money, the GOLD&SILVER, in anticipation of the future upheaval & new system.   by the way, isn't that bank bankrupt?  you know, that PRIVATE BANK, the FEDERAL RESERVE BANK, isn't that bank insolvent ?   oh oh ..... this isn't gonna end well for anyone, especially those with no metal.    looks like we have a monetary system to rebuild.

Fri, 10/18/2013 - 09:59 | 4068490 GreatUncle
GreatUncle's picture

Good vid. One part  the video could extend is how those by putting there money in a bank, generating the inflation of money creation but thern subsequently denied to ever borrow the money to ever put it into an asset class like a house etc. your life will only ever be based on PURE SUFFERING AND TORMENT! Before anybody shouts, you can't afford it?

You cannot afford not too and seeing as the economic system is rigged as it is explained in the video the DENIAL OF A BANKER OF A LOAN FOR SUCH A REASON ACTUALLY STICKS THE KNIFE IN FOR A LIFETIME.


Fri, 10/18/2013 - 10:24 | 4068595 Greater Fool Theory
Greater Fool Theory's picture

How does one opt-out of this system exactly?

I see the most common answer is to get out of debt and convert your fiat to gold and silver.

Is there anything else one can do?  Are there any other safe assets?

Fri, 10/18/2013 - 18:47 | 4070560 neverfiat
neverfiat's picture

This is the question to expound upon.

Fri, 10/18/2013 - 12:37 | 4069203 Vin
Vin's picture

All,  Be very careful.  This sytem was created and is supported by men that have the means to create wars.  They have collectively 100's of trillions in wealth and can control anything and anyone they choose including the CIA.  They created the War of 1812, WW1, & WW2.  President Kennedy was shot in the head after he sign an executive order requiring the US Treasury to create it's own currency rather than take from the Federal Reserve, as this video suggests we should.  If enough people in the country tried to change the system we'd find ourselves deep in WW3 very quickly.  How do we get ourselves out of this mess, I'm not sure, just be careful.

Fri, 10/18/2013 - 20:31 | 4070846 Shigure
Shigure's picture

But Vin, they can't shoot us all...oh wait

Actually, I think that it is more dangerous to do nothing.  The system depends on fear and ignorance, so lose your fear and educate yourself.

"When bad men combine, the good must associate; else they will fall one by one, an unpitied sacrifice in a contemptible struggle." Burke

I first found out about the money scam when I went to a public showing of "Money as Debt", which was organised by a local guy - anyone can do this.  We had a group discussion afterwards and followed this up with a public showing of Chris Martensons "Crash Course".  It is important to share the information and get people to talk about it, it can be a shock to people and it helps to have a supportive network.

Out of these meetings our local currency was born.

Sat, 10/19/2013 - 10:06 | 4071610 wrongsideof30
wrongsideof30's picture

I read this comment (on Reddit, by kahirsch ) and I was wondering if his information is correct.


"This video has many misconceptions.

First, it states that banks buy U.S. bonds and then turn around and sell the bonds to the Federal Reserve. This is highly misleading. Anybody can buy U.S. Treasury bonds at the auction (sign up at this website to participate). Banks actually don't buy many U.S. bonds. They only own 2% of the national debt.

The video states that banks then turn around and sell the bonds to the Federal Reserve. What actually happens is that U.S. bonds (and other Treasury securities) are traded on the open market, with many buyers and sellers all over the world, of which banks are a tiny fraction and the Federal Reserve a larger fraction. The sellers don't know who is going to buy their bonds and the buyers don't know who they're going to buy them from until after the transaction is completed.

The Federal Reserve buys a portion of the bonds. Currently it owns about 12% of the national debt.

So, most of the debt is owned by parties other than the Federal Reserve, such as pension funds, the government of China, and wealthy individuals. Consequently, most of the interest is paid to these other parties.

On top of that, the Federal Reserve gives all of its profits to the government, after a dividend paid to member banks. Almost none of the net interest paid on Treasury bonds goes to the Federal Reserve!

For example, from 1995 to 2012, the total amount paid in interest on the debt was $5.3 trillion. About 10% of that, $534 billion, went to the Federal Reserve. However, during the same period, the Federal Reserve paid the U.S. government $638 billion. That's right, the Federal Reserve has paid the government over $100 billion more than the government has paid the Federal Reserve. Before 2008, that wasn't usually the case, but the Federal Reserve has been paying all profits back to the Treasury since 1947, and it has never gotten much of the net interest.

Sources for interest payments and reimbursements to the Treasury:



Wed, 10/23/2013 - 01:49 | 4081927 BlobbyBlueBland
BlobbyBlueBland's picture

I'd love to hear a response to this as well. Anybody?

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