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Fractional-Reserve Banking is Pure Fraud, Part II

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Fractional-Reserve Banking is Pure Fraud, Part II

Written by Jeff Nielson (CLICK FOR ORIGINAL)

 

Part I of this series brought to attention several facts about our banking “industry.” Notably, that even the most accepted activities of this financial crime syndicate are inherently illegal and fraudulent. When the Big Banks simply lend out “their” deposits (i.e., our money), conduct that would be illegal for any other entity, it is the crime of conversion.

Banks are given the privilege of immunity from this crime, as it is deemed to be in “the public interest” that they be allowed to engage in such lending. But the banks have gone far beyond this initial premise of illegality. They have also been granted the privilege to practice what they euphemistically call fractional-reserve banking, or “lending” what does not even exist – naked fraud.

 

Fractional-Reserve Banking is Pure Fraud, Part II - Jeff Nielson

 

This, too, is somehow deemed to be in “the public interest,” despite the fact that, as explained/demonstrated in Part I, fractional-reserve fraud automatically transforms the monetary system of that jurisdiction into a leveraged Ponzi scheme. The banks have been granted the privilege to destroy our monetary system, slowly, and for their own profit.

However, even this extraordinary privilege (i.e., license to commit fraud) has not been enough for the Big Bank crime syndicate, which regular readers know as “the One Bank.” It chose to destroy our system relatively quickly, and it did so by first bribing or deceiving its political stooges in government to gut all banking regulation. Then, relieved of any legal requirements to operate on a prudent (or even sane) basis, it embarked upon a spree of the most reckless and fraudulent gambling that the world has ever seen.

The result of this gambling, fraud, and insanity was the Crash of ’08, when the One Bank’s gambling/fraud imploded. It then bullied and threatened the corrupt governments of the West into endorsing what was (euphemistically) called “too big to fail.” This is a special status, reserved exclusively for the Big Bank tentacles of the One Bank, which allows those tentacles to engage in permanent, institutionalized extortion against our governments: “pay off all of our bad debts (forever), or else.”

“Too big to fail” is the antithesis of anything and everything that falls under the doctrine of capitalism. In what we call “capitalism,” there can never be an entity that is too big to fail. Insolvent entities are supposed to be put out of their misery – and as quickly as possible. In real capitalism, there can only be too big to exist.

It is with this context in mind that our corrupt governments promised us “never again.” The Big Banks would never again be allowed to engage in such reckless gambling, naked fraud, and institutionalized extortion, they told us, because there would be “tough, new rules” to rein in the reckless criminality of the One Bank.

From the U.S. government, we got the “Dodd/Frank” law: page after page of meaningless window-dressing. The one new regulation that would have actually impinged upon this crime syndicate (slightly), “position limits” in commodity markets, was never put into place (in the form in which it was written).

Meanwhile, many bankers themselves also promised “new regulations” because (incredibly) the banking crime syndicate is allowed to self-regulate most facets of its criminal operations. These regulations were to be specifically aimed at reducing the insane leverage (i.e., fraud-ratio) practiced by these Big Banks, which was the direct cause of the implosion of our financial system.

As noted in Part I, in the original model of fractional-reserve fraud, the fraud ratio was fixed at 10:1. This alone enabled these banks to lend/spend ten times more (of other people’s money) than they even possessed. It allowed these banks to conjure 90% of our “money” out of thin air and into their own vaults. But those days are long behind us.

When the Big Banks, and primarily the Big Banks of Wall Street, imploded our financial system with their reckless gambling, their “leverage ratio” (fraud ratio) averaged over 30:1. Only 3% of our money supply was created by the central banks, and 97% of this funny money was conjured out of thin air by this crime syndicate.

In the Crash of ’08, the mere $100s of billions in extortion payments that the Big Banks called their “bail outs” were only the tip of the iceberg. The actual cost of the bail outs of ’08 was in the $10s of TRILLIONS once all of the hidden “tax breaks” and “loss guarantees” for the Wall Street banks were fully priced. This was what was supposed to happen “never again.”

The previous rules that were in place were known as the “Basel II” regulations. These banking protocols are named after the city in Switzerland in which they were drafted. While New York and London are the centres for the One Bank’s empire of crime, it is Switzerland that is its home.

Under Basel II , the “capital cushion” of the Big Banks (and thus their leverage) was defined in two ways. Under one definition of capital, the Big Banks were required to maintain a microscopic 2% capital cushion, meaning a fraud ratio of 50:1. Under the slightly more rigorous definition of capital, the Big Banks were required to maintain a tiny 4% capital cushion, a fraud ratio of a mere 25:1.

With “Basel III,” the bankers promised us they would reduce their fraud ratio back to acceptable levels, but still nowhere near the original (and still insane) 10:1 fraud ratio upon which fractional-reserve “banking” is based. In the new Basel III rules, this is what we are supposed to believe. According to the broadest definition of leverage, Big Bank capital cushion is supposedly being raised from a microscopic 2% level to a still absurd 4.5% ratio, going from 50:1 leverage to leverage still in excess of 20:1.

Under the more stringent definition, the Big Bank capital cushion is supposedly being raised from 4% to 6%. In other words, the fraud ratio is supposedly being reduced from 25:1 to a ratio still in excess of 16:1. The problem is that this is not what these banksters actually did.

How did they lie to us? What did they actually do?

They lied to us through more of their “definitions.” In this case, it is one particular definition, and arguably the most-important definition of all: “Calculation of Derivative Liability Amounts.”

19. Derivative liabilities are calculated first based on the replacement cost for derivative contracts (obtained by marking to market) where the contract has a negative value. When an eligible bilateral netting contract is in place that meets the conditions as specified in paragraphs 8 and 9 of the annex of Basel III leverage ratio framework and disclosure requirements, 5 the replacement cost for the set of derivative exposures covered by the contract will be the net replacement cost. [emphasis mine]

First, some translation of the text above. Banks are required to hold a capital cushion to (supposedly) cover any potential liabilities. But this doesn’t mean their total potential liabilities. Rather, they are only required to hold sufficient assets to cover some of their potential liabilities (a “fractional reserve”).

But even this extreme latitude was not sufficient for this crime syndicate, so it “re-defined” its liabilities, specifically its derivatives liabilities. Instead of being required to hold assets in relation to their actual derivatives liabilities, the Big Banks are only required to hold assets in relation to “the replacement cost” of the contract, a near-zero amount in comparison to their derivatives liabilities.

Understand that the so-called derivatives market is not some obscure side business of this banking crime syndicate. It is an unregulated, totally fraudulent book-making operation, where this mountain of fraudulent gambling is somewhere around twenty times larger than the entire global economy. We’re no longer sure how big, because five years ago the Big Banks changed more of their “definitions,” and overnight, the derivatives market shrank by 50%.

The banks hold “fractional reserves” not to cover a small portion of their derivatives liabilities but rather to cover a small portion of the cost of writing up new contracts. This is what is directly implied by such capital requirements: when the banking crime syndicate suffers a loss on one of their derivatives bets, instead of paying off on that bet/liability, all they do is tear up the contract and write a new one.

In fact, this is precisely what the One Bank is allowed to do. The salient example is when the Big Bank crime syndicate simply refused to pay off on their “credit default swap” liabilities when the government of Greece defaulted on its debts in 2011.

What is a credit default swap? It is one of the largest forms of derivatives fraud. This is supposed to be insurance against the risk of default on debts, most notably sovereign debts (i.e., bond debt). But in reality, it is only pretend insurance – more naked fraud.

At the time Greece defaulted, its sovereign debt exceeded $400 billion. It simply erased 75% of those debts, meaning pay-outs (by the Big Banks) on roughly $300 billion of insured losses. However, the bankers’ losses would have been many multiples of that $300 billion.

Because the risk of default (of these hopelessly insolvent regimes) is deemed to be “small,” the pay-outs on these contracts are at huge odds, running as high as 300:1. Yet despite these extreme odds, the Big Banks are allowed to write up this insurance while holding virtually zero collateral for claims against this “insurance.” More fraud.

The Big Banks were facing countless trillions in losses in connection with Greece’s default. They had virtually zero assets backing that insurance. Indeed, their total assets (from all their operations) were insignificant to make good on this one pay-out, so the banking crime syndicate simply refused to pay. It is a Crooked Casino, where “the House” won’t pay when it loses.

This is the new, Basel III framework, which has been created by the banking crime syndicate. More than 90% of the Big Banks’ potential liabilities are tied to their derivatives Casino. Yet under Basel III, we have gone from a microscopic “fractional reserve” to cover those liabilities, to (effectively) no reserves at all.

We can look at this systemic fraud in only one of two ways. One way is to view 90% of the bankers’ “business” as a rigged casino, where they fleece the Chumps when they win and refuse to pay when they lose. Heads I win, tails you lose.

Alternatively, we can regard the derivatives market at face value, accepting the Big Banks’ version of what this “market” represents. Under this scenario, facing massive, potential liabilities in the $10s of trillions (if not more), this fraudulent crime syndicate is required to carry essentially zero reserves. Our “fractional-reserve” fraud has become no-reserve fraud.

Even despite the saturation criminality that readers have already seen, many will still argue that we “need” these Big Banks, and that we even “need” fractional-reserve (no reserve) fraud. Part III will address this preposterous mythology.

 

LOOK OUT FOR PART 3 TOMORROW OR GO TO SPROTTMONEY.COM TO SEE FIRST 

 

Please email with any questions about this article or precious metals HERE

 

 

 

Fractional-Reserve Banking is Pure Fraud, Part II

Written by Jeff Nielson (CLICK FOR ORIGINAL)


 

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Thu, 12/03/2015 - 17:20 | 6862865 Radical Marijuana
Radical Marijuana's picture

Money is measurement backed by murder.

Governments enforce frauds by the banks.

The first comment posted under this article stated why it it is politically impossible to fix the vicious feedback spirals of POLITICAL FUNDING ENFORCING FRAUDS:

99 out of 100 sheeple would start reading this article and never finish. They simply refuse to accept the magnitude of fraud which exists in the system

Money operates as a human symbol, primarily as a matter of law. However, the only connection between human laws and natural laws is ability to back up lies with violence. The original concept of money as metal coins developed inside the context of paying for soldiers. Various monetary systems, such as some of those in ancient Greece, as well as the early American, provided the death penalty for anyone who debased the value of that kind of metal money.

A lot of people like to indulge in the old-fashioned notions that money backed by commodities, such as gold and silver, is less subject to fraud, because there is a "ring of truth" inherent in that form of money, due the principle of the conservation of matter, in that neither gold, nor silver, etc., can be made out of nothing, nor disappear back to nothing, which seems to be the case for the MAD Money As Debt issued by privately controlled banks, that everyone is forced to use by governments which demand payment of taxes with that form of money, as well as deem that form of money to be legal tender.

Basically, the full faith and credit of the government is based upon its police and armed forces being able to kill anyone who does not agree to accept, and use to pay taxes, with the MAD Money As Debt being issued by privately controlled banks, which banks also effectively control governments. The same as "99 out of 100 sheeple" do not understand the banking systems, because they have been successfully conditioned to feel that they do not want to understand, "99 out of 100" politicians are the political puppets of the banksters, who are voted for by enough of the masses of muppets, in order to keep that monetary system going as the growing vicious spirals of  POLITICAL FUNDING ENFORCING FRAUDS.

There are no good grounds to doubt that those established systems, that were based the excessive successes of applying the principles and methods of organized crime to the the political processes, are surely going to drive civilization to automatically become more and more criminally insane in the foreseeable future. Natural selection pressures drove the development of human intelligence, manifesting through artificial selection systems, whose social successfulness became based on backing up deceits with destruction, and enforcing frauds, which also resulted in the set of consistent contradictions that those who were the best at doing those things are also the best about lying about what they were really doing. Hence, for generation after generation, social successfulness has become more and more based upon being able to live as professional hypocrites, taking personal advantages from participating in the surrounded systems based upon ENFORCING FRAUDS.

THE MOST IMPORTANT THING IS NOT THE SOCIAL POLARIZATION DRIVEN BY GOVERNMENTS ENFORCING FRAUDS BY PRIVATE BANKS, BUT RATHER, THAT THOSE DEBT ENGINE TREADMILLS HAVE BEEN "PAYING" TO STRIP-MINE THE NATURAL RESOURCES OF THE PLANET!

The fundamentally fraudulent financial accounting systems can NOT be stopped by anything within civilization, because there is nobody who can effectively overcome the already entrenched vicious spirals of POLITICAL FUNDING ENFORCING FRAUDS. There is nobody who is in the same league as the international banksters, who are collectively a group of trillionaire mass murderers. There is nobody else who can compete with people who already enjoy the supreme achievement of organized crime, which is legalized counterfeiting of the public money supplies, which triumphant frauds, as symbolic robberies, are enforced by governments, the political funding of which is totally trapped within the vicious spirals of POLITICAL FUNDING ENFORCING FRAUDS.

The only thing that happens when one learns more about that is that the more one learns, the worse it gets. The ONLY way that established systems are going to be stopped is by their own MAD self-destruction. The superficial problems will appear due to the extreme degrees of growing social polarization that exist because of the longer term effects of governments ENFORCING FRAUDS by privately controlled banks. However, the deeper problems will be due to the problems of diminishing returns from being able to strip-mine the natural resources of a finite planet showing up first and foremost through the effects of those limits within the fundamentally fraudulent financial accounting systems, that enabled that strip-mining to be done at exponential accelerating rates, due to the action of the debt engine treadmills that everyone was forced to be running on by bankster controlled governments.

By the time that the MAD Money As Debt systems are forced to change, because they were always based upon being able to continue to exponentially strip-mine the natural resources of a fresh planet (BUT, it is NOT possible for such exponential growth to be endless), it will be very probably be way too late for those systems to cope with having reached those limits, showing up as increasingly severe diminishing returns, other than by the mass murders of the majority of the human population, since runaway debt slavery becoming debt insanities always developed due to that the debt controls were always backed by the death controls. The international banksters were able to capture control over governments because the basic social pyramid systems were always based on being able to back up lies with violence, that became more and more integrated and sophisticated systems of legalized lies, backed by legalized violence. Private property was always based on backing up claims with coercions. There was never any private property outside of some system of public violence. Money became the most abstract form of that, since MONEY IS MEASUREMENT BACKED BY MURDER. Therefore, the most probably events that will be provoked by debt insanities' exponential growth overshooting the limits of natural resources will be provoking death insanities.

The history of warfare was the history of organized crime on larger and larger scales. The history of warfare made civilization. The surviving War Kings made the powers of sovereign states, particularly the power to rob called taxation, and the power to kill those who resisted being thereby robbed called the rule of law. The international bankers, as the biggest gangsters, the banksters, were able to apply the principles and methods of organized crime through the political processes, in order to become the Fraud Kings, who effectively privatized the powers of governments, so that those governments backed up those banks' frauds. HOWEVER, at no time does being able to enforce frauds stop those frauds from still being false.

MAKING MORE MONEY OUT OF NOTHING DOES NOT ACTUALLY MAKE ANYTHING, RATHER THAT IS SIMPLY MORE FRAUD. The series of social successes based upon the vicious spirals of POLITICAL FUNDING ENFORCING FRAUDS actually result in civilization as a whole becoming increasingly psychotic ... especially since the best available professional hypocrites, whose personal careers developed within that context, are both unwilling and unable to admit and address the deeper issues regarding the degree to which they actually are professional hypocrites.

The American Federal Reserve Board is the American King of Fraud, which is the single most salient of those kinds of national central banks. However, the King of Kings of Fraud is the Bank of International Settlements. The vast majority of people do not understand anything about that, because they feel that they do not want to understand. That is especially the case because they would have to come to terms with suffering through astronomically amplified levels of cognitive dissonance, in order to cope with discovering how and why it is necessarily the case that governments are the biggest forms of organized crime and terrorism, which are controlled by the best organized forms of organized crime and terrorism.

By and large, in my opinion, practically none of the content on Zero Hedge is based on being able and willing to go more completely through thinking about how and why MONEY IS MEASUREMENT BACKED BY MURDER. There tends to be nothing more, at best, than relatively superficial notions that the bogus "solutions" would be somehow kill and/or otherwise punish the banksters for being the biggest gangsters, that have captured control over the powers of governments. However, the existing systems are no longer merely paper frauds, backed by gunpowder weapons, but rather, have become globalized electronic frauds, backed by the threat of force from atomic bombs. I.e., the MAD Money As Debt systems are backed by the MAD Mutual Assured Destruction systems.

After one comes more fully to terms with how and why MONEY IS MEASUREMENT BACKED BY MURDER, the realistic resolutions of the real problems, that are manifesting within the context of the existing combined money/murder systems, are ultimately nothing less than how to operate the human murder systems after the development of weapons of mass destruction. The debt controls were always NECESSARILY backed by the death controls, and thus, there is no way to have any different monetary system, unless that is backed up by some different murder system.

However, the magnitude of the current problems are that the combined money/murder systems which now dominate the world are already based upon the maximum possible frauds/deceits, and those entrenched systems are already being operated by the best professional hypocrites, whose personal career successes depend upon them continuing to be the best professional hypocrites that they can be. Furthermore, in the case of the USA, the supposedly public money supply has already been about 99% privatized, while the supposedly public murder systems has become about 75% privatized.

AGAIN, I REPEAT THAT THE MOST IMPORTANT BACKGROUND FACTS ARE THAT "MONEY" MADE OUT OF NOTHING AS DEBTS WAS "PAYING" TO STRIP-MINE THE NATURAL RESOURCES  OF A FINITE PLANET. (Even if it was possible to continue to expand to strip-mine the natural resources of the solar system, the same basic evolutionary ecology problems would continue to exist, and actually only then become even more intense, rather than actually be resolved.) Human beings and civilization live as entropic pumps of environmental energy flows. Those systems have developed to become most socially successful for those who were the best at being dishonest and backing that up with violence, because those systems were always necessarily manifestations of the dynamic equilibria between different systems of organized lies operating robberies. Along the way that those combined money/murder systems were developing as systems based upon frauds/deceits, the biggest bullies' bullshit world views became the most dominate social stories, which were built into the structure of the dominate natural languages, as well as into the philosophy of science.

The currently dominate forms of the biggest bullies' bullshit are the banksters' bullshit social stories regarding how the political economy operates. That is presented in the most absurdly backward ways possible, resulting in us collectively living inside of a Wonderland Matrix Bizarro World. Almost everyone thinks about economics using the dualities of false fundamental dichotomies, and the related impossible ideals. However, actually, everything operates through unitary mechanisms, through the same basic energy in general energy systems, and so, the human general energy systems are necessarily entropic pumps of environmental energy flows, or systems of organized lies, operating robberies, which most closely match the principles and methods of organized crime, because the death controls are necessarily the central controls, with the human murder systems being the most extreme forms of those.

Monetary systems actually manifest through information theory and thermodynamics, in ways whereby both tend to be as deliberately ignored and misunderstood by almost everyone, as much as human possible, due to the intense paradoxes that flow from social successfulness based upon military success through backing up deceits with destruction, morphing to become financial success through enforcing frauds. What already necessarily exists is that MONEY IS MEASUREMENT BACKED BY MURDER. That is currently able to operate through the maximum possible frauds/deceits, since the ways that the debt controls are being backed by the death controls are something that about 99% of the people, as well as about 99% of the politicians, do not understand, because they do not want to understand.

Indeed, even the content on Zero Hedge routinely tends to only superficially engage in the analysis of the problems with the political economy due to there being bankster controlled governments, which situations have become worse at an exponential rate, and more and more blatantly obvious since the financial crises of 2008, after which the central banks had to up their game by taking over more and more of the roles of creating the public money supply out of nothing as debts, from the previously more distributed ways that lesser banking institutions were doing that. Many of the articles published on Zero Hedge focus upon the problems due to more and more central bank intervention. However, there generally fails to be any deeper historical and evolutionary analysis regarding how and why the original situation developed in the first place, that the international bankers could become the supreme gangsters, that were able to issue the public money supplies, which theoretically should have been under public control.

In my opinion, most of the content on Zero Hedge tends to continue to take for granted using false fundamental dichotomies, and therefore, proposes bogus "solutions" based on impossible ideals. The closest one gets to slightly more radical truths are those comments which recommend, in various ways, killing the banksters. Those at least superficially recognize that MONEY IS MEASUREMENT BACKED BY MURDER. However, those tend to never get remotely close to developing radically different ways of perceiving the death controls systems, which indeed actually back up the debt control systems.

In my opinion, anyone who bothers to do the research will discover that the basic social facts stated in the article above were CORRECT. Anyone who takes the time to watch enough of the freely available Excellent Videos on Money Systems will learn that the currently established MAD Money As Debt systems are runaway triumphs of fraud by privately controlled banks, which are being enforced by governments. Furthermore, one will also discover those related social facts that about 99% of the people and the politicians tend to deliberately ignore and/or misunderstand those social facts.

Overall, I can somewhat sympathize with those attitudes, since to not do so leads one to have to consider the problems of electronic frauds backed by atomic bombs, and hence, I repeat that the the deeper levels of those problems are how to operate the human murder systems after the development of weapons of mass destruction ??? There are no good grounds to believe that the best available professional hypocrites which are actually operating the already established and entrenched combined money/murder systems are able and willing to face the facts regarding what they are really doing, rather than continue to lie to themselves and everyone else as much as possible.

The most probable foreseeable futures are for the exponential strip-mining of the planet's natural resources, done through fundamentally fraudulent financial accounting systems, whereby both the debts and deaths were postponed and transferred onto future generations, will become past due in ways that the majority of the human population will end up being miserably mass murdered. The only genuine alternatives to such nightmare horror story futures would be to develop better death control systems, in order to back up better debt controls. However, at the present time, it surely looks like about 99% of the people and the politicians do not want to think about that, and indeed, given the ways that they now think, they can not even begin to think any better about that.

MONEY AS MEASUREMENT,

BACKED UP WITH MURDER,

BECAME ELECTRONIC FRAUDS,

BACKED UP BY ATOMIC BOMBS.

Realistic resolutions to those real problems
would require admitting and addressing that
THOSE ARE THE EXISTING REAL PROBLEMS!

Tue, 12/01/2015 - 16:21 | 6862207 stopthejunk1
stopthejunk1's picture

Yawn.

I remember being fascinated by money creation in... around 11th grade, and thinking, hey! Creating something from nothing? Isn't that "fraud!?"

Then I grew up and realized that just because most people are uneducated about how something works, doesn't mean that it's "fraud."

If everyone knows about something and agrees to it, then is it fraud?

If everyone *ought* to know about something, but because they don't pay attention in class or aren't observative or don't read books they don't understand it... does that make it fraud?

Or does it just mean that most people are dunces?

Tue, 12/01/2015 - 19:01 | 6862979 Radical Marijuana
Radical Marijuana's picture

Bribery, intimidation, as well as assassination of those who otherwise could not be bribed or intimidated, persistently applied for generations, is why most people agree to the banksters' frauds being enforced by governments. Any politicians that did not agree to be the banksters' puppets did not have successful political careers, with the most extreme cases being that those who did have somewhat successful careers opposing the banksters were usually assassinated. (The only significant exception in American history was President Andrew Jackson, who had to almost miraculously survive assassination attempts in order to be able to kill the international banksters second significant attempt to recapture control over the American public money supply.)

Since the establishment of the Federal Reserve Board, and the income tax, in 1913, the profits from frauds have been reinvested in more frauds, as well as the funding of all sociopolitical institutions, such as the public schools and mass media, more and more enabling the banksters and their buddies to apply the most scientific brainwashing that money to could by to the vast majority of the American people. The current monetary systems are due to a long history of the biggest gangsters offering a deal that people could not refuse.

The same basic methods of organized crime have been applied for thousands of years to build the civilization that now is dominated by the international banksters controlling governments. There were much deeper reasons for how and why it was possible to transform the vast majority of people into being sufficient muppets that would vote for the banksters' political puppets. People who are born into those already established systems tend to become most personally successful by adapting to take advantage of those systems, by becoming the best available professional hypocrites, with careers inside of those systems.

It is only slowly that the socialized losses eventually exceed the privatized profits. Society as a whole slowly becomes more and more psychotic due to being controlled by systems whereby POLITICAL FUNDING ENFORCES FRAUDS ... However, at what point in the history of triumphant organized crime is anyone supposed to actually and effectively oppose that, other than through better organized crime? For most people, most of the time, they adapted to being ruled over. Despite the longer consequences of that getting worse and worse (perhaps finally resulting in the extinction of the human species), in each short to medium term increment, most people were more personally successful by agreeing to believe in bullshit, and by working within taking for granted their lives were circumscribed by systems based upon the ruling classes being able to back up their lies with violence.

Tue, 12/01/2015 - 15:21 | 6861885 Seasmoke
Seasmoke's picture

1. How did depositor #1 get original $1000 to deposit ??

2. What if depositor #1 withdraws his $1000 in one month ???

Tue, 12/01/2015 - 17:32 | 6862615 hendrik1730
hendrik1730's picture

He worked for it. Dug up some gold. Grew wheat. Mined coal. Did something carrying value. Fractional banking started 500 years ago - when a "bank" was somebody with a strong box keeping YOUR gold. And lending it out ( with your permission ) at a 25% interest rate. Until the banker found out that not everyone was recalling his gold simultaniously. That's when the Ponzi scheme started, and that's where the word "bankrupt" and "bankrun" come from - when the depositors understood the banker had overplayed his cards and they wanted their gold back. Now, when the "gold" ( ass wiping paper they call US$ ) has gone, the Jeckill Island guys just print some more. Problem solved.

Tue, 12/01/2015 - 14:17 | 6861618 Lucky Leprachaun
Lucky Leprachaun's picture

I'm no expert but the inference seems to be that the bank gets to keep the fractional reserve amount - the amount 'created' - (90% in the example above) for each transaction once it gets paid back by the borrower. Surely this cannot be correct? Or is it just the interest on interest?

Tue, 12/01/2015 - 15:03 | 6861806 Kayman
Kayman's picture

Lucky

In the example provided, it shows the money going back to the same bank.  In fact, the money goes back to the banking system- any bank.  In other words, every fractional reserve dollar/credit created is contained within the banking system. The numbers are still the same.

There is "leakage" in physical money (the paper money in your wallet that you have not yet spent), and there is money effectively not in the real economy.  The money used in the banking casino- derivatives, paper commodities, trading shares, effectively are outside the real economy. 

Tue, 12/01/2015 - 17:37 | 6862651 hendrik1730
hendrik1730's picture

I agree. And that's why the bankers are really afraid of somebody paying cash. Or buy gold. Because for every one $ YOU take out of their Ponzi scheme, they face 50 $ of uncovered debt. We, the citizens, have the ability to bring down this scheme overnight : reclaim "en masse" your savings and convert them to precious metals. Within 1 week, the whole system comes crashing down.

Tue, 12/01/2015 - 14:14 | 6861610 VWAndy
VWAndy's picture

Fractional slavery is what it is. You trade your labor for worthless paper printed by your masters.

Tue, 12/01/2015 - 16:26 | 6862229 stopthejunk1
stopthejunk1's picture

Dunce alert.

Paper money is not "worthless" as long as it is legal tender for all debts, public and private.

That makes it valuable... doh.

I suppose you think that if you were paid in gold, you wouldn't be a slave?

And yet gold is also inherently worthless. If you doubt this, take your gold to a desert island and try to survive on it. You'll soon starve.

Most forms of exchange are "worthless outside of the systems in which they operate as money. It is impractical to use commodities as money because they have limited shelf life, aren't fungible, etc.

Also, anyone that thinks you can operate an economy without expansion of credit needs to stop masturbating to Ayn Rand posters and go back to school.

Wed, 12/02/2015 - 15:30 | 6866838 VWAndy
VWAndy's picture

Yep you are a dunce.

 The point about a desert island can be used on that paper too. Barter on the other hand would work on that island provided there was someone to trade with.

 Every line of your post is BS.

 Letmeguess you went to the kugsters school of economnomics?

 

 PS upvoting your own post is only cool if you are taking a straw poll. Twat!

Tue, 12/01/2015 - 16:35 | 6862286 Raymond_K._Hessel
Raymond_K._Hessel's picture

For An 'economy' to exist there must be a perpetual expansion of credit (ergo debt owed) you say?

Ok - can you prove that?

Bankers cant print gold, can they?

Im not even a gold bug, but how is it that banks loaning you money that they (mostly) create by the act of lending not a fraud permitted by allowing only banks to create the public currency?

You apply for a loan, the bank simply creates 90% of it, and sham-lends depositors' cash as reserve, meaning no labor was involved.

But you work 30 years and pay, from whatever remains after taxes, around 3 times face value.

And this is the best of all possible worlds and ineluctable?

Says who?

Tue, 12/01/2015 - 13:33 | 6861378 Dre4dwolf
Dre4dwolf's picture

There is only one way to have real money that can maintain a modern economy without fraud and abuse by central powers.

-Crypto-Currency.

 

Gold can be diluted, naked shorted.

Encryption can prevent Fractional Lending and force honest transactions.

The problem is in order for encrypted currency to work, everyone has to use it as the main store of value so that its "price" is weighed in products, goods/services not "dollars".

 

So crypto currency only works if its the main store of value in the economy (a governement has to accept it as payment for taxes) and government would have to shrink to only spending what it takes in from donations (taxes) since all taxes under a crypto system would become voluntary (as governments can not force someone to give them money when the encryption key exists only in their head) they would have to waterboard you to get the taxes out of you.

 

A voluntary society is the only future where humans dont destroy themselves and endup in slavery.

A voluntary currency can only exist in an encrypted cyber-system.

Gold was encrypted by its scarcity , once man discovered they can debase the gold or lie about how much they have with paper contracts the Gold-Standard failed (the encryption was cracked) because there was no "check" system in place to ensure the gold was actually there.

Dollars could be "fixed" if a system of checks and balances (audits) were conducted on banks to ensure they stuck to strict reserve ratios (a system of checks and a layer of encryption added to the dollar) to track all digital dollars and make sure they were created through legitemate lending and spending practices.

All dollars in existance are currently like a crypto currency without encryption, the dollars in digital bank accounts to not exist and they dont have serial numbers there is no way to check if they are "real" because the block chain is not seccure.

A bank FDIC insured could simply make up Accounts for dead people using their social security number and deposit 9trillion dollars ino the account and say its real... then slowly spend from that account until the accounts are drained and inflation in the economy destroys the world there is nothing stopping JP Morgan Chase from printing 9999999trillion dollars they can doit right now, the only difference is that after they spend it America would fall and revolt and kill them.

 

Your local Chase Bank has just as much accounting magic power as the Fed.

All the books Chase provides to audits could be cooked, it doesn't mean anything.... financial reports provided by "instutions" are done only for tradition they have no practical value in preventing fraud.

You cant rob a bank under fractional systems, the bank can only rob you.

Tue, 12/01/2015 - 16:29 | 6862250 stopthejunk1
stopthejunk1's picture

Crypto currency will remain impractical unless and until it can accommodate credit expansion.

And credit expansion requires someone or something to decide when to expand credit. So you need a central authority... and so you're right back where you started.

Bitcoin was written to avoid the trust issues with central clearing houses like banks. However, it doesn't address credit, and so is an incomplete money system. The slow and regular growth of bitcoin over time won't work, because it is insensitive to actual economic activity. Bottom line: crypto currency was written by geeks, not economists, and because of its flaws can work only in conjunction with another money system that compensates for what it lacks -- i.e., a fiat money system.

Tue, 12/01/2015 - 12:00 | 6860944 Dre4dwolf
Dre4dwolf's picture

Long Story short :

Banks make loans by naked shorting their deposits.

 

Short Story Shorter:

Banks Counterfeit

 

Shorter Story even shorter (not really shorter but FUCK IM MAD):

Banks = Satans Vagina

 

 

Tue, 12/01/2015 - 13:41 | 6861457 SILVERGEDDON
SILVERGEDDON's picture

Money is a physical commodity in your hand that has recognized universal value as a medium of exchange.

It cannot be re-hypothecated, fractional reserve banked, or otherwise misrepresented.

Why ? Because you have it in your possession.

We ran the greatest country in the world that way, until the lying fucks in banking started up the FED, and stole the monetary system from it's legitimate owners, the people of the USA.

Funny, it still stands by law, written into the Constitution.

The FED is a lie. They have no legitimacy.

Everything else is a lie - including your fucking unicorn fart crypto currency bullshit.

Tue, 12/01/2015 - 16:48 | 6862312 stopthejunk1
stopthejunk1's picture

The Fed is not a "lie," it was created by the Federal Reserve Act, an act of Congress, which also is the source of it's "legitimacy."

Also, fractional reserve banking IS rehypothecation of money. That is the entire point! Multiple borrowers borrow the same reserve funds... this concurrent use of the same asset (money) by multiple borrowers is the very essence of the the transaction that is called "rehypothecation" when it is carried out with other assets.

Like everything else in the world, rehypothecation and fractional reserve banking are not problematic unless improperly managed. Lots of people seem to think that the solution to mismanagement of complicated systems (and resulting problems or catastrophes like the 2008 crisis) is to "make everything simple."

But that's dumb. Yes, you could prevent financial bubbles by outlawing all lending and borrowing. But you would at the same time prevent most economic activity and economic growth.

If you want to have a money system without credit, you must dream up an economic system that does not require growth, yet somehow still employs everyone (or at least feeds them.) Good luck with that. Most people do not want to go back to being hunter-gatherers.

Wed, 12/02/2015 - 15:45 | 6866959 VWAndy
VWAndy's picture

Here is the problem with this line of thought. Nobody could or should be trusted to coin money out of thin air and back it up with force. Its has ended badly every time.

 If the concept was good? Then they would not need to lie about every aspect of it?

Tue, 12/01/2015 - 13:43 | 6861456 SILVERGEDDON
SILVERGEDDON's picture

You aren't the reincarnation of FONESTAR, ARE YOU ?

Tue, 12/01/2015 - 11:48 | 6860837 withglee
withglee's picture

They have also been granted the privilege to practice what they euphemistically call fractional-reserve banking, or “lending” what does not even exist – naked fraud.

You obviously don't know what money really is. Money is "a promise to complete a trade". This is obvious from examination of trade: (1) Negotiation; (2) Promise to deliver; (3) Delivery.

In simple barter, (2) and (3) happen simultaneously on-the-spot. Money allows (2) and (3) to happen over time and space. Thus money is "obviously" just a certificate of a promise to complete a trade. It is created by traders making trading promises and getting them certified. It is destroyed by traders delivering on those promises and returning the certificates. In the mean time, the certificates are exchanged as the most valued object in simple barter exchange.

If the trader defaults, interest collections of equal amount reclaim and destroy the orphaned certificates, thus guaranteeing zero inflation ... all the time and everywhere. The governing relation is INFLATION = DEFAULT - INTEREST = zero for any properly managed Medium of Exchange (MOE).

Banks claim to be the keepers and managers of the money. It doesn't have to be that way. Capitalists claim to be the originators of money. It has never really been that way.

Since trading promises are all "created out of thin air", money is created out of thin air ... always has been ... always will be. Making a trading promise is certainly not "naked fraud". We all do it every single day.

The fraud is "capitalists" claiming we must engage them in all trades that span time and space. That gives them a claim on a piece of all these trades. It also gives them the mechanism to throttle trades ... the method they use in engaging in their farming operation they like to call "the business cycle".

Tue, 12/01/2015 - 16:43 | 6862329 stopthejunk1
stopthejunk1's picture

"Money is "a promise to complete a trade"."

Really? So if I have a bunch of money stuffed in my mattress, which trade am I promising to complete?

Money is anything that serves as a means of exchange. It's that simple. Don't let the fine print on Federal Reserve notes (which are money) confuse you.

The old FRNs used to say "pay to the bearer on demand." They removed that language because of confused conspirologists like yourself.

A FRN is money. A dollar (if you can find one) is money. People use them as means of exchange. That makes them money.

Wed, 12/02/2015 - 10:36 | 6862877 withglee
withglee's picture

Really? So if I have a bunch of money stuffed in my mattress, which trade am I promising to complete?

You've likely met your trading obligations and that is surplus. You may have exchanged labor or goods for it directly and thus are not the actual creator of it. If it is from a properly managed MOE, it will never lose its value.

Money is anything that serves as a means of exchange. It's that simple. Don't let the fine print on Federal Reserve notes (which are money) confuse you.

I'm not. Something serves as a means of exchange if it's universally accepted in exchange and freely available. It's that simple. A process that creates certificates that are universally accepted in exchange is thus money. The process of creating it with a promise to complete a trade, and destroying it with delivery on that trade, and reclaimed by interest collection in the event of default, results in an exchange object the never loses its value. That leads to its universal acceptance.

The old FRNs used to say "pay to the bearer on demand." They removed that language because of confused conspirologists like yourself.

Fine. They also used to say "silver certificate" and were supposedly exchangeable for actual silver. That almost never happened but some feel it gave the certificate more credibility. Turns out it didn't. The corrupt managers simply replace the silver certificates with FRNs and destroyed them.

A FRN is money. A dollar (if you can find one) is money. People use them as means of exchange. That makes them money.

Correct. But all money is not equally robust. I have certificates for 380 1974 Mexican pesos. During my one week trip to Mexico they held their value. But the process of their creation was obviously totally corrupt ... not a process at all. So they are now worthless.

That doesn't mean a properly managed process must come to the same fate. Any one (or country) that adopts a properly managed MOE process that I describe will, in time, manage the world's reserve currency. No process can outperform it as a MOE and a store of value. We will know it is properly managed when it is obvious this status brings the manager no superiority (or inferiority) whatever. It is the MOE itself that becomes superior.

The process we have now gives the managers great advantage in the marketplace ... which they are now quickly squandering by accelerating their counterfeiting with QE programs.

Tue, 12/01/2015 - 16:37 | 6862304 Raymond_K._Hessel
Raymond_K._Hessel's picture

Not even wrong... To borrow the term from physics.

Tue, 12/01/2015 - 14:53 | 6861762 Kayman
Kayman's picture

withglee

Try printing up some" promises to complete a trade". 

Money purportedly is also a "store of value". 

What is called money today is a monopoly via government edict backed by "full faith and credit". In other words, it is a government promise that their cronies will make good your medium of transaction or else the government will step in and make it good.

It is a shell game, whether it buys a hamburger or not.  It relies entirely upon belief that that medium holds the same value to both sides of the  transaction. 

Hyperinflation happens when no one wants to hold the medium and deflation occurs when excess money is squandered and disappears back into the nothing that it came from.


Tue, 12/01/2015 - 19:00 | 6862959 withglee
withglee's picture

Try printing up some" promises to complete a trade".

I have done it many times. Every mortgage contract I made created MOE. Every car loan contract I made created MOE. I once made a trading promise for a computer and created MOE. In all cases I returned the certificates as agreed and they are no longer in circulation. They have been returned and destroyed. Actually they never existed as anything but records in a ledger.

What is called money today is a monopoly via government edict backed by "full faith and credit". In other words, it is a government promise that their cronies will make good your medium of transaction or else the government will step in and make it good.

All money I know of (with the exception of BitCoins) is monopolized by government. They can claim it is backed by full faith and credit ... but what does that say? It's backed by a lie. What faith and credit does the world's largest counterfeiter exhibit? The government not only does not promise to make my transaction good, they want it to leak by 2% a year and have only been able to limit the leak to 4% per year.

It is a shell game, whether it buys a hamburger or not.  It relies entirely upon belief that that medium holds the same value to both sides of the  transaction.

The FRN we now use does hold its value for a limited period of time. As I've noted, the leak experienced is 4% per year. It's not because it's a shell game. It's because our government is financed through inflation, begotten by the self claimed privilege to counterfeit at will. Now that leak is quickly growing with each expansion of the counterfeiting they like to call "Quantitative Easing". We used to call it debt monetization ... or more appropriately ... straight out DEFAULT (which they've called a rollover).

Hyperinflation happens when no one wants to hold the medium and deflation occurs when excess money is squandered and disappears back into the nothing that it came from.

Hyperinflation happens when an improper MOE process is so faulty that it runs away with itself ... like an engine with a failed governor. We've tolerated a 4% flaw my whole career. We won't tolerage a 100% flaw ... or a 1,000% flaw, but they will try it anyway. Deflation only occurs in this instance for a short time as the system collapses, killing demand resulting in excess inventory which must be sold at (hopefully) cost to meet its financing obligations. And then we reset.

When it all comes crashing down, we must not replace the MOE process with some commodity backed system which is DEFLATIONary on its face and has no way of balancing supply of the MOE with demand for it.

Tue, 12/01/2015 - 16:46 | 6862340 stopthejunk1
stopthejunk1's picture

FRNs are not a "monopoly." They are the most popular form of money, but that's because they are the safest. The rule of law is still the best bet going.

Alternatives to FRNs include metals, cryptocurrencies, and even alternative notes used by many individuals and communities. The reason most of these fail to seriously compete with FRNs is because people don't trust them.

And as well they shouldn't, because there isn't any authority managing them to prevent fraud. Whereas the entire U.S. government operates to prevent fraud with FRNs.

Tue, 12/01/2015 - 19:05 | 6863012 withglee
withglee's picture

The reason most of these fail to seriously compete with FRNs is because people don't trust them.

And they shouldn't be trusted. Examples like Ithaca Hours and Baltimore Green are openly mismanaged processes. This is obvious with their claim to fund socially desireable initiatives with the process (i.e. without any expectation of return of the MOE)

And as well they shouldn't, because there isn't any authority managing them to prevent fraud. Whereas the entire U.S. government operates to prevent fraud with FRNs.

Except the authority itself which allows counterfeiting and rollovers (which are DEFAULTS). Governments never deliver on their trading promises. Most people call open failure to deliver fraud.

Tue, 12/01/2015 - 14:31 | 6861258 Anasteus
Anasteus's picture

Wrong, withglee.

Money is not a certificate promise but an exchange medium with a stable intrinsic value without any counter-party risk. Only arbitrary created fiat serves as a certificate of a promise but even that just indirectly - the fiat declared face value is still valid even when promises have not been fulfilled and it takes some time until such unfulfilled promises start devaluing the declared value as a consequence of stagnating economy. Its obligation duty is evenly distributed among all the people (or better to say 99%) and after then the debt is repaid through inflation. Without inflation the system would collapse.

If the trader defaults, the newly issued amount is not destroyed, hence the orphaned certificates continue circulating as real currency with declared face value. This is possible because of a trivial fact that the promise bill has no any ties to the debt upon which it was originally issued and is thus immediately decoupled from its initial conditions and obligations. In fact, those conditions just serve as a 'reason for issuance' but after the issuance they formally disappear making the currency bill anonymous, retaining its full face value as a deposit sitting somewhere overseas. The only remaining trace can be found in banking books in form of ephemeral numbers.

While making a trading promise is certainly not a naked fraud, declaring a specific targeted obligation bill to be a generic valuable exchange medium certainly is.

Tue, 12/01/2015 - 15:21 | 6861889 withglee
withglee's picture

Wrong Anasteus.

Management of any Medium of Exchange (MOE) is a process. Proper management entails a guaranteed perfect balance between supply and demand for the MOE itself. This is automatic with creation (recording) by a trader's promise to deliver and destruction (recording) of the trader's delivery. Leaks (defaults) are mitigated by interest collections of equal amount. This is the "proper" process for MOE management. It "guarantees" zero inflation all the time everywhere.

That fact that the process we are forced to use targets 2% inflation (and delivers 4% on average) is proof, we are working under an improper process. If your premises support that process, your comments are useless.

Money is not a certificate promise but an exchange medium with a stable intrinsic value without any counter-party risk.

Enter into any contract to purchase over time and you exchange a promise for certificates. You then return those certificates over time. The flaw is the capitalist that claims he must be involved in (and take a piece of) the transaction. He may claim to absorb counterparty risk but even perfunctory examination reveals he takes no risk whatever. "You" pay premiums to insure him against risk.

Only arbitrary created fiat serves as a certificate of a promise but even that just indirectly - the fiat declared face value is still valid even when promises have not been fulfilled and it takes some time until such unfulfilled promises start devaluing the declared value as a consequence of stagnating economy.

There is noting "arbitrary" about a trading promise. It is "always" explicit. The face value of the "certificate" is immaterial. It is whatever the trading parties agree it to be. It is certificates, not their value, that must be returned. Our certificates are called "dollars". The major flaw in our MOE management process is that government is free to counterfeit at will. The result is non-zero inflation. The time for that inflation to show up is "immediate". But the marketplace acts as an accumulator with a time-constant so the effect appears to be gradual. Further, the effect cannot be measured ... only estimated ... and lied about. The only value of inflation that can be guaranteed is zero. Zero inflation is not guaranteed by measurement ... it's guaranteed by process. An economy stagnates when traders can "not" see clear to preform on new delivery promises ... so they don't make them. This would be the case when their unreliable tendencies bring large interest collection loads on their transactions. It also is the case when they are up against unfair competitors (like governments counterfeiting the MOE).

Without inflation the system would collapse.

Wrong. Without inflation, traders thrive. It removes an unnecessary and unpredictable variable from their trading decisions. But without inflation, governments would collapse. Without inflation, our current finance industry would collapse from removal of their source of sustenance and manipulative power. It is their only real source of sustenance. Inflation and arbitrary interest pay the capitalist money changers who demand to be part of the process.

If the trader defaults, the newly issued amount is not destroyed, hence the orphaned certificates continue circulating as real currency with declared face value.

You are not paying attention. Defaults are recognized and mitigated as soon as they are detected (i.e when it is obvious the trader has failed to deliver e.g. misses a payment). The very next trader certifying a trading promise (actually all traders in his risk class) experience an immediate ... albeit tiny ... increase in interest load exactly equal to the delivery default. Thus, the orphaned certificates are immediately recovered. Since this happens very responsively and creates immediate negative feedback, the process is responsive and inherently stable in delivering its zero inflation guarantee. DEFAULT - INTEREST is the error term it is perpetually driving to zero.

This is possible because of a trivial fact that the promise bill has no any ties to the debt upon which it was originally issued and is thus immediately decoupled from its initial conditions and obligations.

Coupling is not the issue. Delivery is the issue. Consider a pipeline. Many sources put product into the pipeline. Many recipients take it out. The product is indistinguishable. The delivery "is" distinguishable.

In fact, those conditions just serve as a 'reason for issuance' but after the issuance they formally disappear making the currency bill anonymous, retaining its full face value as a deposit sitting somewhere overseas.

As I said (and is obvious), the value of the MOE is whatever the traders agree it to be. This agreement is greatly simplified with a process that guarantees zero inflation of the MOE itself.

as a deposit sitting somewhere overseas.

This is nonsense. The certificate may never leave the town in which it is created. It may never be deposited ... it may perpetually circulate until it is returned with delivery on the promise. In reality, that vast majority of these certificates are simply ledger entries. It's a score keeping exercise.

While making a trading promise is certainly not a naked fraud, declaring a specific targeted obligation bill to be a generic valuable exchange medium certainly is.

Wrong. Corrupting the process with arbitrary interest collections and arbitrary certification (denial) of trading promises by capitalists "is" the fraud. Open counterfeiting by government "is" the fraud. Both can be easily mitigated, but not if people believe in the myth of capitalists and government creation of money.

 

 

 

 

 

 

 

 

 

 

 

Tue, 12/01/2015 - 18:34 | 6862811 Anasteus
Anasteus's picture

Withglee, we're mixing two different things; your view is based on balanced contract purchase-delivery process, sort of micro-economy, while mine is based on currency creation where balanced process is not achieved because of very nature of fiat system, including all the (nasty) strategic and political tactics having influence on the monetary base, that is, macro-economy. The latter is the only attitude I'm addressing with respect to the fractional banking. Fiat currency (let alone money) is much more than just the three-phase promise to complete a trade you mentioned earlier. I find your definition of currency/money quite narrow even when compared to the commonly accepted one.

As regards money; when I'm saying about the intrinsic value of money not bearing counter-party risk I mean exactly what I'm saying; I don't need any insurance or premium to mitigate the risk as this is by definition guaranteed by the money itself. Which, of course, is not applicable for fiat currency.

What you're talking about is how things should look like, such as your remark "Without inflation, traders thrive.", which I heartily agree with. But I'm addressing the reality of the existing system and its mechanics in the current distorted setup. And there, with the fractional system in mind, the inflation is necessary.

Hope this will change some day.

Tue, 12/01/2015 - 19:40 | 6863128 withglee
withglee's picture

while mine is based on currency creation where balanced process is not achieved because of very nature of fiat system, including all the (nasty) strategic and political tactics having influence on the monetary base, that is, macro-economy.

You're just deluding yourself. I've shown what money "obviously" is by describing the steps of a trade and showing how it simply extends simple barter exchange over time and space. No money exists before the promise nor after delivery, for that transaction. There are no nasty tactics of any kind to worry about. The macro-economy is just the "rolled up" micro economy. It is governed by traders and their propensity to trade and deliver. Not on managers and their propensity to manipulate.

Fiat currency (let alone money) is much more than just the three-phase promise to complete a trade you mentioned earlier.

Under a properly managed MOE process it is just the 2nd and 3rd step of every trade. If it is not, that indicates a mismanaged MOE process.

I find your definition of currency/money quite narrow even when compared to the commonly accepted one.

You would have probably found Copernicus description of things narrow as well. It was much simpler than all that epicycle and religious junk it exposed as incorrect.

The money I describe is a precise definition. How would you intend to widen it without corrupting it and leading to the mismanaged MOE processes we have always used? Don't you think 0 inflation is a good thing? Don't you think a 0% interest load on responsible traders is a good thing? Don't you think elimination of government counterfeiting is a good thing? Don't you think elimination of the myriad collections of complicated financing instruments and hedges is a good thing?

As regards money; when I'm saying about the intrinsic value of money not bearing counter-party risk I mean exactly what I'm saying; I don't need any insurance or premium to mitigate the risk as this is by definition guaranteed by the money itself.

But then it isn't money at all. I remember a transaction Caterpillar once had to make with Russia. Money couldn't be used. So they did an intermediary trade in wheat and other commodities. That's the kind of nonsense you have to go though when you don't have a properly managed MOE. There is "no" risk in using a properly managed MOE as long as counterfeiting (government or otherwise) can assuredly be eliminated ... or totally mitigated.

Which, of course, is not applicable for fiat currency.

The term fiat the way you use it is simply a derogatory term. As I've illustrated, money is "a promise to complete a trade" and all promises are "fiat". Fiat, in the sense you use it, we call counterfeiting. No corresponding trade exists whatever.

What you're talking about is how things should look like, such as your remark "Without inflation, traders thrive.", which I heartily agree with.

Actually, it's exactly how things are. When you start to get manipulations and distortions (like QE, counterfeiting, purposeful inflation, economic throttling, employment throttling, arbitrary interest rates, etc.), that's when we get what we see. But you and I mere mortals have always traded directly for the money we use ... or we have created and destroyed it through loan contract obligations ... "always"! Unfortunately we have always had to submit to unjust interest colletions ... an purchase of insurance protection of the so-called capitalist who is said "to back" our trade. What absolute nonsense!

But I'm addressing the reality of the existing system and its mechanics in the current distorted setup. And there, with the fractional system in mind, the inflation is necessary.

You can only take that view by misunderstanding the purpose of money ... which is to enable simple barter trade over time and space. What you have come to accept is the "con". You think a "capitalist" injected into the process actually brings some value. You think the system is about finance. It is not. It is about trade.

You think the abnormal concept of "time value of money" actually brings some purpose. It does ... but not to the traders. It's purpose is for the manipulators. Install a system that guarantees zero inflation (which is a trivial exercise as I describe), and the money changers (10% of our economy) will have to find some useful existence.

 

Tue, 12/01/2015 - 12:08 | 6860956 Maestro Maestro
Maestro Maestro's picture

withglee,

You are a scumbag.

You are lying and trying to confuse people.

You must be a banker.

Most likely one of the Freegolder filthy animals out there.

No.

Money is not what you say it is.

Money is not what anybody says it is.

We don't determine what money is.

It's a given.

We can simply observe that it is a store of value, a unit of account and a medium of exchange. It is logically IMPOSSIBLE to speak of the latter two attributes in the absence of the first attribute, namely, its quality of being a store of value.

For one cannot measure nor trade valuable goods and services against indeterminate pieces of paper or dubious grouping of electrons in a banker's computer.

Unless one is a fool

indoctrinated by scum

like

this insidious animal above

with the handle

withgleee

Fuck you.

Tue, 12/01/2015 - 13:15 | 6861334 withglee
withglee's picture

Money is not what you say it is.

Money is not what anybody says it is.

We don't determine what money is.

It's a given.

Ah. In the beginning there was money? Laughable.

Money is an efficient invention to allow simple barter trade over time and space. The process for implementing that invention has been corrupt through all of history ... but there is a "proper" process. Give evidence and/or arguments in dispute of that (as I give evidence and arguments in support of that). Do not just make assertions ... support them. Use as many four letter words as you think elucidates and brings strength to your case.

Tue, 12/01/2015 - 18:26 | 6862846 Maestro Maestro
Maestro Maestro's picture

When was the last time you decided to decide something? The answer is NEVER. Nothing that you think or do is determined by you, including your concept of money and even your own fucking life, mon petit. We can know what things are but never WHY they are. Do you choose on your own how to interpret what you are reading right now or do you only interpret and react to my words without knowing why you do so? Right. You are not even nothing yet you think you are God. You deserve the "money" you get.

Money, like everything else, is a given.

 

Tue, 12/01/2015 - 20:09 | 6863289 withglee
withglee's picture

You are not even nothing yet you think you are God. You deserve the "money" you get.

Money, like everything else, is a given.

Ah. god. She is the myth of all myths.

Tue, 12/01/2015 - 13:00 | 6861272 Bay of Pigs
Bay of Pigs's picture

Thank you for smashing him in the face, so I didn't have to.

 

Tue, 12/01/2015 - 11:31 | 6860791 Still Losing Money
Still Losing Money's picture

and if we go to 1:1 lending, the economy will have to shrink by what 80 percent because instead of making 7 or 8 loans, the bank will only be able to make one. so only one car will be bought instead of 7 or 8 so the car company will only make one at a time instead of 7 or 8. and what will that do to unemployment?

And guess what: the banker can still make that loan a NINJA loan and slip it to his buddy and commit fraud, so his buddy cn default on it so the bank can be bailed out.

The problem we have is FRAUD not fractional reserve lending. My local credit unoin is usig FRL just fine thank you very much.

End the fed, buy gold and bury it inyour back yard, evil FRl - simple platitude sound bites for the simple minded

Tue, 12/01/2015 - 13:30 | 6861399 Kayman
Kayman's picture

Still Losing Money

Fractional Reserve Banking is based solely on robbing from the future.  Economic growth of say 10% plus comes only from taking an agrarian economy like China was, and turning it into an industrial economy.

That means all money/credit created beyond the "natural" growth rate (1-3% ?) can only go into paper assets- that's the large air bag we've been blowing (up) for more than a generation. 

Tue, 12/01/2015 - 11:26 | 6860770 medicalstudent
medicalstudent's picture

shit jeff, of course its fraud

 

but humans die; why wouldnt we fleece future generations with 50 year ponzi schemes to live a better today

 

who cares if the world burns after we do.

 

 

Tue, 12/01/2015 - 10:58 | 6860657 Hubbs
Hubbs's picture

Wait a minute. I thought at the top of the chart, the initial deposit of $ 1000 allows the bank to loan out $9,000!, or is it that the depositor deposits only 100, not 1000 and this is a misprint?

Tue, 12/01/2015 - 10:26 | 6860523 InnVestuhrr
InnVestuhrr's picture

"Fractional-Reserve Banking is Pure Fraud"

Sure is, BUT it is the ONLY system that the regimes give us and the only system that we will have for the rest of our lives.

Now on to the only practical issue that matters, ie

How does the individual earn and keep enough money to live a high-quality life.

Tue, 12/01/2015 - 13:18 | 6861350 Kayman
Kayman's picture

"How does the individual earn and keep enough money to live a high-quality life."

Well... for those close to the conjuring, that is a pretty easy proposition-you always have the new dough before anyone else.

But for those a long way down the food chain, your low-quality of life becomes lower as the criminals at the top front-run you, and you lose your job as mergers-and-acquisitions depend on control of markets (higher prices) and job-losses (more bottom line).

The average citizen hasn't got clue one how the amoral criminals at the top of the money chain rape and plunder, all the while telling their victims it is for their own good.


Tue, 12/01/2015 - 20:44 | 6863454 withglee
withglee's picture

You are absolutely correct.

If you're going to seed society with money (which i would never condone), put the money in at the bottom and let it bubble up. You'll get way more bang for your fake buck than putting it in at the top and expecting it to trickle down.

I guarantee you, it will eventually bubble all the way to the top. I also guarantee you, it will "never" trickle all the way to the bottom.

Tue, 12/01/2015 - 10:02 | 6860433 Graph
Graph's picture

And, if it was not for an internet we would have never known this.

That's why it went so deep and as it did whitout anybody noticing.

Tue, 12/01/2015 - 09:21 | 6860264 Raymond_K._Hessel
Raymond_K._Hessel's picture

Not sure its conversion but it is certainly a massive fraud.

You deposit cash, its not deemed a bailment of property, you are essentially loaning your cash to the bank in exchange for interest. Since money is fungible, there's no act of conversion when not a bailment and so long as they return your cash when you ask for it.

Not sure and I suppose it really doesnt matter - when banks can create money out of debt and profit from interest on same, you'll always have more debt, growing faster, than the currency available to pay it.

it's perhaps inchoate fraud - a bank run away from breaking a promise to return princupal plus interest to depositors.

Unfortunately it seems like the courts have helped to define out of fraud the act of lending out more than held in reserve, so the law itself has become a fraud. Letting private bankers grow fat creating money out of thin air as people must labor to repay it is letting capital rob productive labor.

As the rich get richer by dint of interest on passive capital, the banks can only sustain their paper wealth by making more and more loans which means increasing risk to promises made to all depositors.
That is dangerous, dishonest and unfair - irrespective of any legal fictions that declare fraud isnt fraud when it comes to debt-money creation

Tue, 12/01/2015 - 11:43 | 6860863 withglee
withglee's picture

when banks can create money out of debt and profit from interest on same, you'll always have more debt, growing faster, than the currency available to pay it.

This is the Ellen Brown "Web of Debt" thesis. It's absolute nonsense.

Tue, 12/01/2015 - 13:02 | 6861284 Bay of Pigs
Bay of Pigs's picture

Back trolling again are you?

Tue, 12/01/2015 - 20:10 | 6863296 withglee
withglee's picture

Back trolling again are you?

Merely calling a spade a spade.

Tue, 12/01/2015 - 09:20 | 6860261 Seasmoke
Seasmoke's picture

Hmmm. Are you trying to tell us the end game of the cartoon,  is the bank has the original $1000 in reserves and $9000 loaned out in made up money (and also at 19.99% !!!!)

Tue, 12/01/2015 - 08:31 | 6860113 luckylongshot
luckylongshot's picture

The basic fractional reserve lending cycle  referred to in this article is incorrect and the process is much more fraudulent than this article suggests.The reality of how money is created today differs from the description found in some economics textbooks: Rather than banks receiving deposits when households save and then lending them out, bank lending creates deposits (Bank of England, 2014). The Chicago Fed said the same thing a few years ago.

 The reality of how money is created today differs from the description found in some economics textbooks: Rather than banks receiving deposits when households save and then lending them out, bank lending creates deposits (Bank of England, 2014)”

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