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PS
Dale Eastman:
Abridged since insults don't discuss details of the topic.
--- Quote from: 25 March @ 1138 ---Here’s what I’m telling you: I know a lot about banking and central banking.
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--- Quote from: 25 March @ 1146 ---Are you going to claim banks don't use fractional reserves?
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--- Quote from: 25 March @ 1157 ---Dale, yes. They do not use “fractional reserves” in the way you think.
Your perception is widely held, and is based on a misunderstanding of many banking terms, and simply, on reading people like Griffin, rather than things like the Federal Reaerve Act.
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--- Quote from: 25 March @ 1159 ---If you ask, I will tell you, and tell you how to check what I tell you - not by suggesting you read conspiratorial books, but by showing you the laws which govern bankings, the actual policy papers and statements of central banks, and so on.
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--- Quote from: 25 March @ 1201 ---➽ Here’s what I’m telling you: I know a lot about banking and central banking.
Evidence?
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--- Quote from: 25 March @ 1208 ---➽ but by showing you the laws which govern bankings, the actual policy papers and statements of central banks, and so on.
If so, you will increase your Cred with me.
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--- Quote from: 25 March @ 1222 ---Dale, everything I tell you is checkable from authoritative sources.
For example: the claim is that banks use “fractional reserves” - that is, that they can create loans as some multiple of their reserve balances. So, if the Fed gives them more reserves, they can make more loans.
Thats false.
The Federal Reserve Act allows banks to make loans as a multiple of their CAPITAL.
Reserve balances are not “capital”, to banks.
Traditionally, “capital” is a balance sheet “right side” entry which essentially consists of assets minus liabilities, at the most basic level.
For banks, this isn’t true.
“Bank capital” has a specific meaning, which is “those liabilities which we, the Fed, allow you to count as capital”.
The definition of bank capital is generally specified by the Basel Accords, to which the US is not signatory, but which generally comply with.
Each central bank is tasked with enacting the requirements of the current Basel Accord (they are updated from time to time).
The Fed has done that.
Traditionally, capital was divided into three Tiers - starting with “paid in capital” as Tier 1 - that is, the amount of money that bank stockholders actually paid for their stock in the bank), and Tiers 2 and 3, which consisted of different levels of “risk weighted” capital - that is, bank capital holdings (securities) which have no face values, but must be valuated using GAAP standards (such as mark to market).
Since the Great Recession, the Basel III agreement restricted the definition of bank capital to Tier 1 capital, to encourage a more conservative constraint on bank lending practices.
In no case are central bank reserve balances EVER counted as “bank capital”.
In fact, the role of “reserves” is widely misunderstood (we can go through an intuitive explanation of what reserves are for, which make them quite understandable, if you want).
Banks are allowed to lend amounts of money up to a point where bank capital is a certain percentage of that amount - I’m not sure what that is now, but it has been 12% for years.
So, if a bank has $120 million in “bank capital”, as defined by the Fed’s implementation of Basel, it is allowed to make a total of $1 billion in loans.
That has nothing to do with reserves, and nothing to do with deposits (banks don’t lend deposits - and the amount of deposits held by a bank has nothing to do with the amount of money they can lend).
Banks are not “reserve constrained”, they are “capital constrained.”
I just wrote all of that, on the fly.
If you want to fact check it, we can do that.
But when I say I understand banking, I mean I understand it well enough to write something like that on the fly, and have it be accurate.
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Dale Eastman:
--- Quote from: 27 March @ 0747 ---➽ If you want to fact check it, we can do that.
I am a pedantic asshole. Especially when it come to claims on the internet.
I don't know what I don't know. This is my reminder to myself to be humble and polite.
I will be publicly archiving this discussion on my website. You will only be identified by the letters "PS"
https://www.synapticsparks.info/dialog/index.php?topic=1715.0
If you decide to post directly to the website, that is doable. Instructions to do so. Click "Reply" instead of "New Topic".
✸ ✸ ✸ ✸ ✸
If I stuffed $4000 worth of Federal Reserve Notes in my mattress ten years ago, why are they not worth as much today as when I earned them?
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--- Quote from: 27 March @ 0810 ---Dale, having said that, let’s talk about your question about federal reserve notes.
We’ve strayed from the question of inflation, so I’m not talking about theories of inflation. We can do that, but this comment isn’t that.
In the context of reserve banking, federal reserve notes (cash) are a representation of money. They are a small fraction of the money supply, and it isn’t helpful to think of money as being paper notes.
New money which enters the system never enters the system as paper notes: new money ALWAYS enters the system as bank deposit balances - that is, as accounting entries on a bank’s books.
Here’s how that happens.
We know the federal government deficit spends: that is, it spends money which it does not have.
If you receive a check from the government which is deficit spending, there’s no physical check anymore, but the basic process hasn’t changed.
The Treasury sends your bank a direct deposit notice that they are giving you money - in the amount, say, of $100.
The bank then creates a deposit balance of $100 in your account.
The bank has now increased its liabilities by $100. To balance its books, it either needs to create a $100 asset or reduce some other liability by $100, because its books no longer balance.
The bank then tells the Fed, through the clearinghouse/payments system, that it has created a deposit balance for you because the Treasury told it to - that is, it accepted a deposit of a $100 “government check”.
The Fed then created a $100 reserve balance in your bank’s reserve account. It doesn’t take that money from anywhere, it just creates that reserve balance “with the stroke of a pen”.
The bank’s books now balance, and there is $100 more in the money supply than there was before you deposited your check.
That’s how money is created: the federal government spends money it doesn’t have, which results in banks creating that money in the form of bank deposits, and the Fed batting cleanup by creating reserve balances which enable the bank to make payments on your behalf when you use your debit card.
Let’s say you want cash. You withdraw cash from the bank.
The bank will give you that cash “from their vault”.
“Vault cash” is cash which banks keep on hand for customer convenience. It is not counted in the money supply.
Banks buy pallets of vault cash using their reserve balances. Reserve balances are not counted in the money supply, either.
So when a bank buys a pallet of cash, it is not adding that cash to the money supply, and the reserve balances it pays to buy the cash doesn’t subtract money from the money supply. The books balance.
When you withdraw cash, that cash is added to the money supply, and in exchange, the bank reduces your bank deposit balance, which reduces the money supply.
So the addition of federal reserve notes to the system doesn’t change the money supply, it simply converts bank deposits into cash, both of which are counted in the money supply.
Federal reserve notes, therefore, have nothing to do with inflation.
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--- Quote from: 27 March @ 1150 ---I will be publicly archiving this discussion on my website. You will only be identified by the letters "PS"
https://www.synapticsparks.info/dialog/index.php?topic=1715.0
Repeating my reminder to myself, "This is my reminder to myself to be humble and polite."
➽ We’ve strayed from the question of inflation, so I’m not talking about theories of inflation. We can do that, but this comment isn’t that.
Your claim is noted. I do not agree.
You addressed my question and DID NOT ANSWER my question:
If I stuffed $4000 worth of Federal Reserve Notes in my mattress ten years ago, why are they not worth as much today as when I earned them?
Unpacking your following paragraph:
𝟙.➽ In the context of reserve banking, federal reserve notes (cash) are a representation of money.
𝟚.➽ They are a small fraction of the money supply, and
𝟛.➽ it isn’t helpful to think of money as being paper notes.
𝟙. What is "MONEY"?
𝟚. I REJECT this claim. "MONEY" has NOT been defined and agreed to.
𝟛. I don't. "MONEY" has NOT been defined and agreed to.
➽ New money which enters the system never enters the system as paper notes: new money ALWAYS enters the system as bank deposit balances - that is, as accounting entries on a bank’s books.
OBJECTION! "MONEY" has NOT been defined and agreed to.
➽ The Fed then created a $100 reserve balance in your bank’s reserve account. It doesn’t take that money from anywhere, it just creates that reserve balance “with the stroke of a pen”.
Yup, with the stroke of a pen currency (what you are errantly calling "money") comes into existence.
What is the value of this "bill"?
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Dale Eastman:
--- Quote from: 29 March @ 1101 ---Fecalbook is mucking up notifications.
https://www.synapticsparks.info/dialog/index.php?topic=1715.0
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--- Quote from: 30 March @ 0919 ---Fecalbook is mucking up notifications.
https://www.synapticsparks.info/dialog/index.php?topic=1715.0
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--- Quote from: 30 March @ 1237 ---Fecalbook is mucking up notifications.
https://www.synapticsparks.info/dialog/index.php?topic=1715.0
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--- Quote from: 30 March @ 1840 ---Fecalbook is mucking up notifications.
https://www.synapticsparks.info/dialog/index.php?topic=1715.0
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Dale Eastman:
--- Quote from: 31 March @ 0823 ---You:
I know a lot about banking and central banking.
You:
by showing you the laws which govern bankings, the actual policy papers and statements of central banks, and so on.
Me:
If so, you will increase your Cred with me.
Me:
If I stuffed $4000 worth of Federal Reserve Notes in my mattress ten years ago, why are they not worth as much today as when I earned them?
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--- Quote from: 1 April @ 1437 ---I know a lot about banking and central banking.
You:
by showing you the laws which govern bankings, the actual policy papers and statements of central banks, and so on.
Me:
If so, you will increase your Cred with me.
Me:
If I stuffed $4000 worth of Federal Reserve Notes in my mattress ten years ago, why are they not worth as much today as when I earned them?
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--- Quote from: 1 April @ 1438 ---Dale, a little off topic, don’t you think?
Why don’t you post an OP on the subject?[
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--- Quote from: 1 April @ 1826 ---➽ Dale, a little off topic, don’t you think?
➽ Why don’t you post an OP on the subject?
What the fuck do you think this is?
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--- Quote from: 1 April @ 1827 ---Dale, never saw it. I wasn’t tagged.
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--- Quote from: 1 April @ 1835 ---You were, but Fecalbook being Fecalbook, So looking at it now, the tag is missing.
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Dale Eastman:
--- Quote from: 1 April @ 1838 ---//If I stuffed $4000 worth of Federal Reserve Notes in my mattress ten years ago, why are they not worth as much today as when I earned them?//
That’s called inflation, and it doesn’t matter whether it’s federal reserve notes or deposit account balances.
Some inflation is a desirable thing, as long as it’s moderate and stable.
There is no such thing as money which will never vary in value.
If money appreciates in value, then it reduces the value of every good and service, and of labor, over time.
So if money appreciated in value, here’s an example of what would happen:
If deflation were 6%, then the value of a dollar would double in ten years.
Let’s say you buy a house for $100,000. In 12 years it would be worth only $50,000.
But your mortgage on the house is for a fixed percentage rate. Let’s say that it takes you a week of labor, now, to pay your mortgage. In 12 years, it would take you two weeks to pay that mortgage every month, because you have to pay the same number of dollars every month, but the value of the dollars has doubled.
The bank is making out like a bandit, and your mortgage payment goes up, in real terms, every month.
With deflation (an appreciating dollar), you have to pay back your loan with dollars that are more valuable than the dollars you borrowed.
With inflation, you are paying your loan back with dollars that are worth less than the dollars you borrowed.
Inflation encourages investment.
Under deflation, hoarding cash is the best investment, which discourages investment in everything else.
This is why deflation is associated with depressions, and inflation is associated with growing economies.
Since we have to choose between inflation and deflation, we choose inflation, for obvious reasons.
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--- Quote from: 1 April @ 1839 ---Dale, never wait to check that stuff before taking the opportunity to insult people.
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