The Monetary System

>>139488431

Unsustainable

>>139488431
liberal say these are fake news

>>139488431
Just a thought, is the picture which I've posted in the OP an oversimplification? I feel like there's a lack of distinction between money and actual cash.

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>>139488431

The irony is that economies have always functioned in this way. The problem as I understand it was with deregulation in America and the investment banks creating financial products that speculators were able to bet against with insurance policies designed to pay out when the financial products failed.

The financial products themselves consisted of mortgages given to people with no income that they knew would be defaulted on and then placing these mortgages in the financial products.

Fractional reserve banking is *how* money is created. An economy grows because the amount of money in the system increases and the amount of money increases because fiat money is lent to businesses to generate more revenue for the business. There's nothing particularly wrong with FRB but it has to be regulated, which America didn't fail to do, it willfully disregarded regulation to get rich quick.

best movie is The Big Short but it still doesn't make it crystal clear what happened. What no one seems to talk about was the part that Insurance companies played and the big Credit rating agencies which were competing for business and granting high values on financial products they *knew* were dogshit.

>>139489117

>money and actual cash

all money, unless it has inherent values like Gold or Silver etc. is simply a token which people using *believe* to have value.

>>139489846
Wait, is that a red pill for the gold standard or a blue pill pointing out that I shouldn't worry about the "fake money" made by fractional-reserve banking because it's no more real than actual cash?

>>139490155

What is "actual cash"? Banknotes are just pieces of paper with a promise written on them.

Fractional reserve banking is fine as long as reserve requirements are high enough and the FDIC is adequately funded. We don't really know if the FDIC is adequately funding itself because there hasn't been a real run on the banks since it was created.

Quantitative easing isn't fine because it smooths short term volatility but can't alter long term volatility, so it creates the boom and bust cycle we've seen ever since the idea was implemented in the late 1980s. It also discourages saving and makes things hard on retirees because low interest rates make it hard to get a good return on safe investments. We started it in response to the 1987 micro crash and kept it around because increased spending drives short term growth and our monetary policy was (is?) set by Keynesians who didn't know any better.

>>139490791
That's my point.

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>>139490155

I'm not an economist so I don't know but it looks like the whole traditional currency system may be in jeopardy. Governments around the world are propping it up while Bitcoins have recently been valued at around $5000 each. The real power brokers around the world don't care about people stamping their liddle feet about FRB or quantative easing. The damage is done and we're moving to an entirely different paradigm.

The most significant thing said by a politician regarding this issues so far as I know is Putin saying America wants a major conflict because it *resets* debt. This I take to mean that National Debt is wiped out, why this happens I don't know but him saying it causes me to think it's an authentic possibility.

http://www.usdebtclock.org/

>>139488431
https://www.youtube.com/watch?v=iFDe5kUUyT0

>>139491056
In it's simplest form

>>139491052
>The most significant thing said by a politician regarding this issues so far as I know is Putin saying America wants a major conflict because it *resets* debt. This I take to mean that National Debt is wiped out, why this happens I don't know but him saying it causes me to think it's an authentic possibility.
Someone explain this.

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>>139491056

I can't fucking stand those slickly produced documentaries. Movies do a well better job, I haven't seen anything that better explains what happened than the big short and even that needed some interpretation.

>>139491056

https://youtu.be/NCx5Ph7EAxg?t=2m9s

>>139491056
Rewatching this now. 6 minutes in and I don't see a problem, they're just shilling the gold standard.

>>139492249

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international currency when the dollar pops

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>>139491056
>>139492249
Pic related is where I start to have problems.

You've given the bank $100, they've kept $10 of it and loaned out $90, which before interest means that they're owed $90 back. The video then claims that there's $190 in existence, but as far as I can see there isn't, there's $100, $90 of which is loaned out and $10 is kept.

>>139490917
Fiat currency is representative of the value in the in the underlying economy. We value currencies comparatively in pairs. So for example if the GBP/USD falls, the underlying assumption is that the value of the British economy has fallen in relation to the value of the US economy.

The "gold standard is real money" retards fail to understand that precious metals valuations are not based solely on their values as commodities. All a return to the gold standard would do is cripple our ability to respond to foreign currency manipulators.

>>139488431
>deposit $1000
>there is now $1900 in the system

n-nani!?

>>139493031

A depositor places $100 dollars in the bank. The bank lends $90 of that money at interest. The borrower repays the money + interest. The original depositor's money is returned to the bank and the bank takes the interest earned on the loan.

It works because of savers.

Savers put money in the bank to keep it safe *and* to accumulate a little interest. The *don't* withdraw it so while the bank doesn't actually have the *whole* deposit anymore, they can still regard it as an asset and, theoretically and in actuality, it's still available for withdraw by the original depositor.

A run on the bank is when depositors, fearing their money is no longer safe in the bank, all try at once to withdraw their money (which in *reality* the banks don't actually have because they've lent as much of as they can to make money on it).

>quantitative easing
https://www.youtube.com/watch?v=PTUY16CkS-k

>>139488431
Fractional could work without Fiat currency and government bailouts, the free market would find a more stable balance than "lend to every nigger even if they can't pay" also I'm sure there would be banks that would offer just safekeeping and don't play with your money with a fractional system for a price but the advantage of a frational system is that it helps entrepreneurs and costs less for the consumer who instead of having to pay fees on his banks account can grow some money. Quantitative easing is just another failed government program though, sounds like fraud if someone else did it.

>>139493882
People rarely take their money out of the bank, whether it was paper currency then or digital stuff now so the bank can safely lend that money to businesses while you aren't using the money, you only use the currency representing the money, the problem is when they lend too much and loans fail or if there's a crisis and people all go take out their money which isn't there.

>>139488431
(((((((((((((((((())))))))))))))))

>>139493757

I think the Gold Standard is an anachronysm but it makes morons who don't know anything about it feel good.

The thing is though that time moves inexorably forward, there is NO GOING BACK. This is why I think BitCoins are the future in terms of international currency. But why wouldn't a currency backed by *real* assets be vulnerable to currency speculators? I thought only fiat currency could be blown up and deflated.

I'm going to try to unpack this later, but here's the summary of >>139491056

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>>139495002
Fuck, forgot pic.

Fractional reserve banking is the definition of normalized unethical behavior. If I pay you store my pile of steamy shit then I expect access to that steamy shit when I need it. But if you only keep 10% of my steamy shit and loaned out the rest then that's fraud.

If I wanted to invest my shit I would have. But a bank holding means I want access to my steamy shit whenever I want and I pay a fee for that.

But I come along to get my steaming shit back and you don't have it. What the fuck? Thankfully there's the federal shit storage insurance corporation to cover all the shit storers that also loaned out their piles of shit. Basically saying that if they failed to provide a service for me then my own tax dollars can reimburse me my steaming shit.

All the while the bank gets insanely rich on returns and they pity me with a less than one percent shit increase all while the shit printers are shitting out more than that anyway. Making my own shitpile, carefully accumulated through my hard shitty work, worth less and less everyday.

Fuck that I'm buying shitcoin

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>>139495081
>>139495002
>>139491056
I tried. Did I succeed?

>>139496383
>and I pay a fee for that.
You do?

>Basically saying that if they failed to provide a service for me then my own tax dollars can reimburse me my steaming shit.
It's called a lender of last resort for a reason.

>Making my own shitpile, carefully accumulated through my hard shitty work, worth less and less everyday.
Inflation is a necessary evil.

>>139496457
For the lazy
https://rationalwiki.org/wiki/Fractional-reserve_banking

>>139491052
In a weird way you are right. QE & CB interventions are no lose proposition if the current environment stays the same. I.e. if you are still not allowed any alternatives. If you are, it fails, and it fails utterly and completely. Zimbabwe style failure. It the same shit the US government is doing. They bet it all on being right 100% of the time. So when they fail, they drag everything they bet it all on as well. It will not end as well as Rome did. We are maybe a decade away from a total annihilation financially, maybe sooner.

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But fractional reserve banking causes so much prosperity goy

>>139494367
We don't have free markets, we have another form of controlled markets, and the participants are rent seeking. You have to invest in some government intervention or suffer subpar returns. So everyone misallocates investment money. That's why the drugs are not priced on market rates, and defense and other government related expenditures. If the defense companies weren't such frauds, investors would be making a killing on the too. They are a meh investment now because of a huge amount of money going under the radar into the pockets of a few people who run the racket.

At some point this all becomes very Soviet style economy, and people will not value the money that can buy shit. This is the end game.

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>>139488431
Excellent thread OP, saved.

Wealth begets power. The system has empowered the globalist banking elite, who use their incredible wealth to establish systems of control on government and corporations, and ultimately the people. Look into the families who drafted the Federal Reserve system in the United States to understand these people.

The greatest trick in modern history was convincing the world that paper currencies are no different than the tangible wealth they represent, such as precious metals. You cannot print gold and silver.

https://www.youtube.com/watch?v=RrwbgdtbdXE
https://www.youtube.com/watch?v=1x_qPPTRR80&list=PLD31E34390C5017E8

There is literally nothing wrong with banks utilizing credit to lend other than the fact that they make a ton of shit bets because it's popular today

>>139488431
Is that how loans work in America?

>have $100
>loan $50
>still have $100
>person pays back $50
>now have $150

>>139498526
>Excellent thread OP, saved.
Well, that's me satisfied. What did we do to deserve that?

>>139492519
Gold is more stable

>>139493031
Oh boy, you're in for some serious red pill.

>>139499081
please redpill me

>>139488431

not one country in the world uses fractional reserve banking since 1970's

libertarianism, neoliberalism, keyensianism... all those doctrines describe systems based on hard currency, gold backed economies, or primitive barter societies

today all sovereign nations have fiat currencies, elastic monetary supply that can expand or contract

all money = all debt
no debt = no money

money is just an accounting identity, based on on double accounting bookkeeping

fractional reserve banking describes a system where money is tangible, gold backed, and its a fraud, because it's basically the rehypothecation of one and the same asset multiple times, that is many savers own the same gold coin, and if they show up at the bank to take it all at the same time the bank has not enough money for everyone, and it all ends in a collapse

today's system is superior

https://en.wikipedia.org/wiki/Monetary_circuit_theory

https://en.wikipedia.org/wiki/Chartalism

https://en.wikipedia.org/wiki/Post-Keynesian_economics

https://en.wikipedia.org/wiki/Endogenous_money

https://www.ecb.europa.eu/explainers/tell-me-more/html/what_is_money.en.html

http://www.bankofengland.co.uk/publications/Pages/quarterlybulletin/2014/qb14q1prereleasearticlemoney.aspx

https://www.bundesbank.de/Redaktion/EN/Topics/2017/2017_04_25_how_money_is_created.html

>>139494437
>The thing is though that time moves inexorably forward, there is NO GOING BACK.
Literally the current year argument.

>>139493031
>charging 100% interest
Drug dealer tier

>>139499081
With a reserve at 10%, I give the bank $100.
Bank keeps $10 and loans out $90 to person A.
A then has $90 and if I ask the bank they'll say that I have $100, so there's $190 in existence.

I get that that's what the video means, but that seems to fail to account for the debt.

>>139494437
Vulnerable to currency manipulators not speculators. Currency manipulators are central banks that drive the value of their own currencies down in order to increase exports (if currency b loses value then companies who transact in currency a can buy more goods valued in currency b at the same price). So if the US uses the gold standard and China uses fiat currency the. China can devalue its CNY and the Us can't because its USD is fixed to gold.

Bitcoin is the most interesting thing in foreign exchange since fiat currency, I'll try to talk on it more below.

>>139493031
There is $190 in existence, because the loans have value, and assuming no credit risk, they are worth $90. So bank still has $100 in assets. Whoever borrowed $90 can spend $90, but they have $90 liability. Because $90 is spent on something, those people put $90 in the bank, and the process starts all over again. It's not the $190, but the multiplier effect that creates extra deposits after the money is spent that creates more money.

>>139499688
I'd agree, but the problem is that the video shows you what I screenshotted prior to explaining the multiplier effect.

>>139499527

no, there is not 190$ in existence

there exists only 100$

you, as the 1st saver own 100$, the next person the bank gave money owns 90$

but you both own one and the same banknotes

so if you both show up at the bank and demand your money, the bank can't deliver it

imagine if you would mortgage your house to multiple banks for multiple loans

fractional reserve banking is fraud

>>139499527
The debt doesn't have to have a deposit corresponding to it. In practice they can "expand" on what has been deposited.
But even if the bank was merely loaning what it has been entrusted with, they are still scamming all the goyim that think of banks as a warehouse and not as a casino.
Also the banks are practically immune to liabilities, as we have seen in 2008 in particular and in many other instances. At worst a particular bank may be bought by another and a symbolical figurehead may go to jail but in the grand scheme bank debt is a joke.

>>139488431
(((((((((((((((((((((((((($)))))))))))))))))))))))))))))))))))

>>139500433

that doesn't make sense. person 2 owes the bank money not the other way around.

>>139501466

and the bank owes the money to person 1 thad deposited it as his savings

but both persons own basically the same banknotes / gold coins

2nd person buys form a 3rd something, the 3rd deposits his earnings in the bank, the bank loans it out to the 4th person...

there is no new money, but existing money is loaned out to new borrowers

if there is a bank run, if all savers show up at the same time, 1st person and 3rd person, 5th..., there is not enough money in the bank to pay them all, there is only 100$ that existed at the start of the credit cycle, so most savers will end with no savings when the bank goes bancrupt

in a fractional reserve system the currency is gold backed, there is a fixed exchange rate between gold and bank notes, that means there is an fixed amount of money that is limited by the amount of gold

today not one country uses fractional reserve banking

because its a fraud

today all money is book money, created by enterin digits in double bookkeeping acounting system

in fiat money based systems

all money = all debt

GDP + savings = private debt + goverment debt

no debt = no money

>>139499656
You're a just an other dumb fuck who can only think within the parameters that are necessary for this scam to go on and your non-empirically backed social science to apply. If the US had a gold backed currency today, no one would fuck with their own money the way you describe because that would be too big risk in an international market where everyone can get USDs. Just look at the massive surge of bitcoins in China, now imagine if bitcoins was as mainstream as the USD and the USD had a safe&tangible value like bitcoins. It would be a fucking disaster for them and they wouldn't be able to pull this shit off. This isn't 1940 anymore you dumb fuck.

>>139502753
Except the 2nd person will have to pay back his loan eventually

>>139503246

he can't pay, person 2 will get foreclosed on

it is mathematically impossible for all debtors to repay their debts in a fractional reserve banking system

that's why it was abandoned

the greatest USA president of all times Nixon shut it all down

Nixon abolished fractional reserve banking and freed the world form juice fraud

that's why they sacked, and defamed him

learn from Europeans how money works

not from juice fraudsters like Friedman, Keynes or whatever

https://en.wikipedia.org/wiki/Chartalism

https://en.wikipedia.org/wiki/Monetary_circuit_theory

https://en.wikipedia.org/wiki/Endogenous_money

>>139489669

Yours isn't a bad explanation but this part is key:

>The financial products themselves consisted of mortgages given to people with no income...

This is in part due to Freddie Mac and Fannie Mae, two government schemes to aid the poor buy homes that continued to expand to create the facade of economic growth. I don't think it's the government's role to help people buy homes, but the people like it as do the bankers. Politicians loved appealing to both these groups simultaneously because its votes and money.

To keep people buying homes the government lowered the lending requirements, such as no down payment, and it guaranteed the loans. Recipe for disaster. Working people with no savings, who hadn't demonstrated the ability to save, and had poor credit histories now had an easy path to money. The banks are off the hook since there's no moral hazard; the government is backing the loans.

The construction industry is happy because they're building. Homeowners are happy because their home valuations, which is almost all their wealth, keep increasing.

With easy money and growing demand then people started flipping homes, which was a massive Ponzi scheme. The banks are still writing loans, so they're making money. To get rid of this risk it sold the loans in bundles whose riskiness was incorrectly assessed, either deliberately or incompetently, or both. The buyers then sought to cover their risk with derivatives, which is basically an insurance policy plus speculation.

The economy tanks; people lose their jobs and they have no savings to pay their mortgages; the housing market was over built, supply greatly exceeds real demand, so all these construction workers lose their jobs; the flippers can't offload, and when the bank forecloses it can't recoup what it lent; those holding derivatives requiring they pay off the value of the underlying asset are unable to do so.

Government steps in to fix a problem it in large part created.

>>139504808

https://en.wikipedia.org/wiki/Modern_Monetary_Theory

>>139502963
Tfw you have absolutely no idea how foreign exchange markets work but you're really really angry about them

>>139502963

bitcoins are not money, they are commodities

like copper, steel, oil, wheat... BTC is a virtual commodity, not money

>>139492519
THIS, no one see's it coming but Bitcoin is the mark of the beast. It will transfer us into the one world cashless currency. You can't hide bitcoin even if it is "anonymous"

>>139505397
Here's my take on bitcoin: bitcoin is definitely a currency. It has no commercial use and it can be exchanged for goods and other currencies.

My guess is that what will eventually happen is that bitcoin and a group of other unregulated cryptocurrencies will eventually stabilize and maintain values that exist in semi constant ratios to one another. Speculators will keep these currencies in sync by bidding any currency that breaks away back towards its "true" value. I would expect these global currencies to exist alongside the traditional regional.

>>139504931
Fannie and Freddie didn't give out those loans. Those loans were all private loans. It wasn't even specifically to give bad loans out, but investors were buying any loan, and banks thought the property values will cover defaults. GSE's are really conventional loans. There was a propaganda campaign to smear the GSE's for whatever reason. Could be US Treasury was afraid of treasury competition from agency debt or the banks wanted conventional loans business. But conventional loans generate very little losses even during the 2008 crash. The GSE's "losses" was the biggest accounting fraud ever perpetrated on the US public.

The easy self check is how can insurance companies lose multiples of their lifetime earnings only to recover and make money in 2 years. That my friend is a tell tale sign of fraud.