Banker/Wall Street Governance

geoffrey · February 2, 2007

So... if banks make 100% profit on what they lend out, why do they deny certain people that don't have acceptable credit? If they just go 'zap' and money appears, then they would really not care if the person could repay the loan. Explain that one to me.

As well, I'm still waiting on your explaination for your claim that derivatives are going to cause the world to collapse.

PolyNewbie · February 2, 2007

geoffrey:So... if banks make 100% profit on what they lend out, why do they deny certain people that don't have acceptable credit? If they just go 'zap' and money appears, then they would really not care if the person could repay the loan. Explain that one to me.

It shows up on their balance sheets as a loss. If you don't pay the money back then its debt free currency thats floating around out there that isn't collecting interest.

As well, I'm still waiting on your explaination for your claim that derivatives are going to cause the world to collapse.

Same as in 1929. Printing access currency lead to stock market increases which led to speculation. The whole thing just bursts like a bubble because when the banks realize they are printing too much money they stop. Then people who can't meet their margin calls start jumping out of windows.

We are being flushed down the same toilet as the USA which is going to collapse when all those trillions of dollars that are in Iraq and Afganistan, china & other countries come back home.

PolyNewbie · February 2, 2007

kimmy:He looks at the stated goals of the SPP, and concludes that it's a plot to "usurp the authority of the U.S."

This isn't an American Union thread but of course erasing borders takes power away from governments because it erases them for corporations. Riverwinds a$$ would be able to deduce that rationally.

geoffrey · February 2, 2007

It shows up on their balance sheets as a loss. If you don't pay the money back then its debt free currency thats floating around out there that isn't collecting interest.

A loss is reflected on the income statement, not the balance sheet. Oh shit, nevermind, that was the Builderbergs who taught me that. Silly me. Your right.

Same as in 1929. Printing access currency lead to stock market increases which led to speculation. The whole thing just bursts like a bubble because when the banks realize they are printing too much money they stop. Then people who can't meet their margin calls start jumping out of windows.
We are being flushed down the same toilet as the USA which is going to collapse when all those trillions of dollars that are in Iraq and Afganistan, china & other countries come back home.

Derivatives don't increase currency, you have no idea what they are, do you? But you fear them because some hooligan tells you to. Very sad. It's you my friend that's being taken along for a ride.

Riverwind · February 2, 2007

It shows up on their balance sheets as a loss. If you don't pay the money back then its debt free currency thats floating around out there that isn't collecting interest.

Why should banks care about losses if they can make money for nothing? How can a bank go bankrupt if they can create money for nothing? If you actually took the time to think you would realize that the only rational explaination for why banks refuse to loan money to some people is because it costs them money to make loans.

PolyNewbie · February 2, 2007

Riverwind:Why should banks care about losses if they can make money for nothing? How can a bank go bankrupt if they can create money for nothing?

If they just keep printing it off and not demand it back it becomes less valuable and the fraud becomes apparent. Its value is only determined by the fact that they want it back and that you can pay your taxes with it.

Riverwind:How can a bank go bankrupt if they can create money for nothing?

In Germany during the depression it took a wheelbarrow full of cash to buy a loaf of bread. They can keep printing money but even then they have to keep reprinting it all the time while adding zeros.

Riverwind:If you actually took the time to think you would realize that the only rational explanation for why banks refuse to loan money to some people is because it costs them money to make loans.

If you would just stop pulling ideas out of your a$$ and start reading you would not be polluting my threads with your nonsense. You would maybe grow up and understand that the world is not a rational place.

geoffrey · February 2, 2007

Where do the banks keep their massive money printing operations?

PolyNewbie · February 2, 2007

geoffery:Derivatives don't increase currency, you have no idea what they are, do you? But you fear them because some hooligan tells you to. Very sad. It's you my friend that's being taken along for a ride.

Derivatives increase currency during margin calls - or at least thats what happened in 1929. As far as now I don't know why but there are trillions of dollars being invested in the futures market. The futures market is a gambling casino unless you are in need of a hedge.

PolyNewbie · February 2, 2007

CanadianBlue:Where do the banks keep their massive money printing operations?

The Canadian Mint does the actual printing for many countries.

PolyNewbie · February 2, 2007

If George Bush got on CNN and told you god created the money you would believe it.

geoffrey · February 2, 2007

Derivatives increase currency during margin calls - or at least thats what happened in 1929. As far as now I don't know why but there are trillions of dollars being invested in the futures market. The futures market is a gambling casino unless you are in need of a hedge.

Easy. Markets are unpredictable. If my manufacturing of a product requires 100 cubic metres of natural gas per hour, I certainly want to have control and predictability in the future price. So I buy my gas at fixed prices many months in advance.

Of course there is speculation, but no more so than in equity markets.

Weather futures are another interesting development, initially by Enron. Natural gas producers can buy futures that are valued by how many days of cold weather happen in a season.

This all hedges risk. Essientially derivatives are a great insurance policy... not a collapse ideology.

In fact, an option or future contract implies that the purchasers are predicting economic growth... I wouldn't want a $30.00 option on a currently $28.50 stock if I thought the financial system was about to collapse. It's only valuable if stocks increase.

If George Bush got on CNN and told you god created the money you would believe it.

Not really. I have a firm grasp on how money is created.

Riverwind · February 3, 2007

If they just keep printing it off and not demand it back it becomes less valuable and the fraud becomes apparent. Its value is only determined by the fact that they want it back and that you can pay your taxes with it.

Banks cannot print money - they can only loan money that someone else has deposited.

In Germany during the depression it took a wheelbarrow full of cash to buy a loaf of bread. They can keep printing money but even then they have to keep reprinting it all the time while adding zeros.

It was the gov't that caused the inflation by printing too much money in Germany - not banks. We would have a similar problem in Canada if the gov't started following your advice.

You would maybe grow up and understand that the world is not a rational place.

And you really think that means that people should accept any wacky theory you dream up? It does not work that way. If you expect people to believe you then you have to be willing to address the myriad of logical contradictions that exist in your theories. Banks only loan money when they believe they can make more money from the loan than it costs them to pay interest on the money they lend. If they could really create money for free then they would simply create the money and pay it directly to management and shareholders without wasting time working with the general public.

Here is an excellent tutorial on how the banking system really works. It illustrates the process of money creation and shows how the total loans outstanding never exceed the total deposits which the bank must pay interest on.

PolyNewbie · February 3, 2007

Riverwind:And you really think that means that people should accept any wacky theory you dream up? It does not work that way.

You are being an idiot on purpose.

PolyNewbie · February 3, 2007

Right off paragraph 1 in your tutorial it says "...how the banking system can create money in a fractional reserve system. ..."

PolyNewbie · February 3, 2007

geoffrey:This all hedges risk. Essientially derivatives are a great insurance policy... not a collapse ideology.

You are right about it being an insurance policy but it is also highly volatile and used in the speculative markets accessively. Money is used to by futures on an existing bought and paid for stock. What if there is only one pork belly and people have bought and sold futures on them worth 100 pork bellys ?

jefferiah · February 3, 2007

I dont know much about banking or all this stuff----but one very interesting thing about the Federal Reserve can be ascertained from the case Lewis v United States.

Riverwind · February 3, 2007

Right off paragraph 1 in your tutorial it says "...how the banking system can create money in a fractional reserve system. ..."

Try reading the entire tutorial. If you do you will see that it explains very clearly that banks do not create money from nothing. They can only lend cash that they have available. They can loan the same money again if it is redeposited, however, they have to pay interest on the same money each time it is deposited.

Bottom line: banks have to pay for money before they can loan it. A fact that is painfully obvious to everyone except you.

geoffrey · February 3, 2007

You are right about it being an insurance policy but it is also highly volatile and used in the speculative markets accessively. Money is used to by futures on an existing bought and paid for stock. What if there is only one pork belly and people have bought and sold futures on them worth 100 pork bellys ?

Ahh indeed, you've highlighted a possible area of concern. Congrats on playing in the realm of reality on this one.

Futures are generally only acceptable in terms of nearly guarnteed production... like natural gas, or oil, or gold or something like that. But take a wheat future purchased by General Mills. If that wheat isn't produced that year, there is some trouble. So highly risky? Ya, they are very risky compared to bonds or even most equity.

If GM enters into a futures agreement with Old MacDonald (OM), and OM finds that he can no longer produce enough wheat to meet the deal... he has to buy GM's contract out (generally the difference between GM's future promise and market price at time of settlement plus some sort of premium). The other possibility to get out would be to purchase another futures arrangement (at hopefully a lesser price, though unlikely in a poor crop year) that covers the demand from GM.

So it's not like if the farmer doesn't produce the market collapses, but ya, your right, a lot of people have a lot to lose in futures especially.

Now I have to say, what would you do about futures? Would you prohibit me from promising Jim Bob to pay him $500 for his 1980 VW 12 months from now? That's essientially all it is. No riskier than many private dealings between individuals.

--

I have bolded a sentence above that makes no grammatic sense to me. Could you re-word that so we can discuss it? I'm hoping it follows the rationality of the rest of your post there.

PolyNewbie · February 3, 2007

This thread isn't about futures - its about banking and how banks control our society. I don't care enough about futures to talk about them and I haven't read about futures for 20 years.

PolyNewbie · February 3, 2007

Riverwind:Try reading the entire tutorial. If you do you will see that it explains very clearly that banks do not create money from nothing. They can only lend cash that they have available. They can loan the same money again if it is redeposited, however, they have to pay interest on the same money each time it is deposited.
Bottom line: banks have to pay for money before they can loan it. A fact that is painfully obvious to everyone except you.

I'll take Greenspans, Galbraiths, Friedmans, etc word for the fact that banks create money from nothing. I was going to read this tutorial yesterday but it is very misleading from the start. I may look at it today.

Riverwind · February 3, 2007

I'll take Greenspans, Galbraiths, Friedmans, etc word for the fact that banks create money from nothing. I was going to read this tutorial yesterday but it is very misleading from the start. I may look at it today.

I doubt any of those people have ever said anything like "commerical banks make $100,000 profit when they loan $100,000". People who understand how the system really works might talk about banks creating money without explaining the exact mechanism every time. These people also might talk about publically owned central banks that do have the power to create money from nothing without explaining that commerical banks don't have the same power. For that reason out of context quotes from an economist about banks creating money do not support your view of the system.

In any case, I also provided a link in a previous post to pamphlet by the federal reserve that says the same thing as this tutorial. This is also the same information that is in my economics text books. These explainations are also quite rational because they explain why banks are picky about who they loan to and why the interest rate set by the central bank affects the interest rates they charge on loans.

PolyNewbie · February 4, 2007

Riverwind:In any case, I also provided a link in a previous post to pamphlet by the federal reserve that says the same thing as this tutorial.

I haven't read the tutorial yet because its very misleading from the start, not in what it says but what it doesn't say. You pamphlet was also very misleading and I have explained that. Governments and government like organizations do not always tell the whole truth about things.

You should try and read a whole book on the subject sometime.

Here is a paragraph that explains how bankers create money:

"A free banking system based on gold is able to extend credit and thus to create bank notes (currency) and deposits, according to the production requirements of the economy. Individual owners of gold are induced, by payments of interest, to deposit their gold in a bank (against which they can draw checks). But since it is rarely the case that all depositors want to withdraw all their gold at the same time, the banker need keep only a fraction of his total deposits in gold as reserves. This enables the banker to loan out more than the amount of his gold deposits (which means that he holds claims to gold rather than gold as security of his deposits). But the amount of loans which he can afford to make is not arbitrary: he has to gauge it in relation to his reserves and to the status of his investments.

"

Greenspan / Gold Standard

Riverwind · February 4, 2007

I haven't read the tutorial yet because its very misleading from the start, not in what it says but what it doesn't say. You pamphlet was also very misleading and I have explained that. Governments and government like organizations do not always tell the whole truth about things.

Deny, deny, deny. Once again your arguments have been shredded and start sputtering helplessly. If you think the tutorial is misleading try reading it and then explain the errors. What factual errors were made? What facts were omitted? If you cannot answer those questions then you simply prove you know nothing about the topic.

Here is a paragraph that explains how bankers create money:

This paragraph does not contradict anything said in the tutorial. What it does do is leave out all of the details.

the banker need keep only a fraction of his total deposits in gold as reserves.

This sentence clearly indicates that a the amount of bank may only lend an amount that is less than its total deposits since a fraction of its total deposits must be held as reserves.

This enables the banker to loan out more than the amount of his gold deposits

This sentance deliberately uses the word 'gold deposit' instead of 'total deposit' because they mean different things. Gold deposits refer to the real gold that is held as reserves for the bank. Once gold is loaned it can be redeposited which allows the banker to loan it again, however, that new deposit does not increase the total gold deposits for the bank. It does, however, increase the total interest bearing deposits for the bank.

In short: your Greenspan quote does not contradict anything in the tutorial and it certainly provides no support for your idea that banks make a $100,000 profit when they loan $100,000.

kimmy · February 4, 2007

Here is a paragraph that explains how bankers create money:
"...But the amount of loans which he can afford to make is not arbitrary: he has to gauge it in relation to his reserves and to the status of his investments."

Greenspan / Gold Standard

That's all, folks.

-k

PolyNewbie · February 5, 2007

Riverwind:These people also might talk about publically owned central banks that do have the power to create money from nothing without explaining that commerical banks don't have the same power. For that reason out of context quotes from an economist about banks creating money do not support your view of the system.

If there is a publically owned central bank somewhere the USA either is or will soon be dropping bombgs on them. Commercial banks have the same power wrt reserves. Commercial banks use fractional reserves when dealing with us, they central banks uses fractional reserve when dealing with the commercial banks. You make the banks create money when you use your credit card.

Why don't you participate in a thread that has a topic that you have made some effort to understand? You didn't learn about banking in school because they don't teach it and you have never read a book on the subject. Have you got experience dealing with people like Rockefeller and the central federal reserve bank - if not, how is it that you know anything about banking that you just don't pull out of your a$$ ?