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TradIsGood
Chalkless climber
the Gunks end of the country
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Topic Author's Original Post - Oct 3, 2008 - 11:26pm PT
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The focus in the other thread - on money - shows that there is a tremendous confusion about what a bank is, does, etc.
What are banks not?
 Silos for cash deposits. If they were just supposed to store your money and keep it safe, they would charge you!
Risk free place to "invest" money. If one uses Karl's definition they create money. In reality, banks can't print money, so they are not risk free. Banks fail, precisely because they can't create money, at least not money that they own. If you want to invest money, principal-risk free, Treasury Bonds bought at par or lower, and Treasury Bills, both held to maturity will do it.
What is a bank?
A bank is simply a financial intermediary. What the heck does that mean? It means simply that it matches up borrowers needs and lenders needs.
Why do we need banks or any financial intermediaries?
Money is just a mechanism for storing value. It would be a difficult world if one always had to barter, since a service or product would require equality on both sides. If you are working, but do not need to make equivalent purchases, you would need to be idle in a straight barter system. So money serves a role for storage of (a standard) value.
Now at any point in time, there are people and businesses with a surplus of value, and others with a deficit. That car you want, or the house. Do you want to wait until you have amassed the necessary cash? How would a business with very high start-up costs open?
The answer is simple. Each needs to reach out to someone who is currently in a surplus situation (lender or equity investor).
Imagine that you need money. Or imagine you have a surplus. How would you find someone trustworthy enough to pay it back if you are a lender? If a borrower, how would you find a lender? Don't forget, in each case, you need a specific amount or are capable of lending a specific amount.
Not only can a bank find borrowers and lenders, but they underwrite borrowers (judge whether they will be able to repay), but they can also pool borrowings to match up with lenders needs.
How does a bank make money?
Even Karl will concede that they do not print it. I said they were a financial intermediary. But they are not like e-bay or a real estate agent. They have to handle transactions that do not match.
Banks borrow
Borrowing includes, checking accounts, savings accounts, and certificates of deposits. These are at least partially insured, if they are a member of FDIC. Checking accounts are demand deposits. If someone presents your check, it must me honored immediately. Normally, but perhaps not legally, savings accounts get the same treatment. Each of those may pay interest at rates that are reset at the banks pleasure. CDs are different. They are term borrowing - fixed rate and fixed term. If you want to take the money out early (technically a call) you receive less than would be due if you left it in to maturity.
Banks also have non-FDIC insured borrowing. This includes selling bonds which may be secured by assets (collateral) or unsecured. They often borrow from other banks (normally, if not today). In an unusual situation, they might even borrow from a Federal Reserve bank.
Banks Lend
Banks lend in any number of ways - Commercial loans, construction loans, lines of credit, credit cards, mortgages.
How do they make money?
For the most part, banks make money by lending at higher rates than the rates at which they borrow.
Does this always work?
What if all of their depositors take out their money and deposit it somewhere else? (Remember that faux pas Paulson and Bernanke came up with guaranteeing mutual funds?!)
No, there is a lot more to it than just borrowing at low rates and lending at high rates.
Ending now. This is already too long for most to read.
weschrist - I hope you get this far, if you really were interested.
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Karl Baba
Trad climber
Yosemite, Ca
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Thanks TIG, the was as simplistic Pollyanna explanation that I think is below you. It's like saying babies are created when mommy and daddy love each other very much and rub their bodies together and 9 months later babies come out.
The thread that TIG is referring to is here
http://www.supertopo.com/climbing/thread.html?topic_id=687637
So really, TIG, to accompany this, explain to us how money is created. Where in are the places where money is born and dies? How much of the money supply is currency order to be printed by the treasury by the fed for a few pennies of printing cost?
Peace
Karl
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Karl Baba
Trad climber
Yosemite, Ca
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Such a simple and inncocent system depicted above! You have to ask yourself why the following prominent persons would dream of the following quotes
"The international bankers swept statesmen, politicians, journalists and jurists all to one side and issued their order with the imperiousness of absolute monarchs.” Lloyd George, Former British Prime Minster
"Give me the right to issue and control a nation’s money and I care not who governs the country.” Meyer Amschal Rothschild, International banker
"Those that create and issue the money and credit, direct the policies of government and hold in their hands the destiny of the people." Richard McKenna, former president of the Midlands Bank of England
"The governor of the Bank of England…dictates the terms upon which alone the government can obtain borrowed money." Sir Drummond Fraser, vice president of The Institute of Bankers, England
"Powerful individuals and forces are making enormous fortunes out of the ruin of Australia." B. A. Santamaria
"We have in this country one of the most corrupt institutions the world has ever known. I refer to the Federal Reserve Board and the Federal Reserve Banks. Some people think the Federal Reserve Banks are U.S. government institutions. They are private credit monopolies; domestic swindlers, rich and predatory money lenders which prey upon the people of the United States for the benefit of themselves and their foreign customers. The Federal Reserve banks are the agents of the foreign central banks. The truth is the Federal Reserve Board has usurped the Government of the United States by the arrogant credit monopoly which operates the Federal Reserve Board.” Congressman Louis T. McFadden, Chairman of the House Banking and Currency Committee, addressed the House on June 10, 1932. 75 Congressional Record 12595-12603
"The Federal Reserve banks are privately owned, locally controlled, separate corporations." Who says so? In Lewis v. United States, the Ninth Circuit Court says so. (June 24, 1982)
“...bank records are not the depositor’s private papers and having given the information to the bank, the depositor has no legitimate expectation of continued privacy...” United States Supreme Court in U.S. v. Miller
“...100% of what is collected is absorbed solely by interest on the Federal Debt...all individual income tax revenues are gone before one nickel is spent on the services taxpayers expect from government.” 1984 Grace Commission report submitted to President Ronald Regan
"All the perplexities, confusion and distress in America arise, not from the defects of the Constitution or confederation, not from want of honour or virtue, so much as from the downright ignorance of the nation, of coin, credit and circulation." John Adams 2nd President of the USA
"The money power preys upon the nation in times of peace and conspires against it in times of adversity. It is more despotic than monarchy, more insolent than the aristocracy, more selfish than the bureaucracy. It denounces, as public enemies, all who question its methods or throw light upon its crimes." Abraham Lincoln 16th president of the USA
“If all bank loans were paid...there would not be a dollar of coin or currency in circulation. Someone has to borrow every dollar we have in circulation. We are absolutely without a permanent money system.” Robert Hemphill, Federal Reserve Bank in Atlanta, in foreword to “100% Money” by Irving Fisher
“Democracy is a form of government that cannot long survive, for as soon as the people learn that they have a voice in the fiscal policies of the government, they will move to vote for themselves all the money in the treasury, and bankrupt the nation.” Karl Marx, 1848 author of “The Communist Manifesto”
“Capital must protect itself in every possible way, both by combination and legislation. Debts must be collected, mortgages foreclosed as rapidly as possible. When through the process of law the common people lose their homes, they will become more docile and more easily governed through the strong arm of government applied by a central power of wealth under leading financiers. These truths are well known among our principal men who are now engaged in forming an imperialism to govern the world. By dividing the voter through the political party system we can get them to expend their energies in fighting for questions of no importance. It is thus by discreet action we can secure for ourselves that which has been so well planned and so successfully accomplished." - 1924 US Banker’s Association Magazine
"When Rothschild said, "Let me issue and control a nation’s money and I care not who writes its laws", it was the beginning of the modern era’s financial, political, social, commercial, and military strife and subversion." - perfecteconomy.com
"The financial system has been turned over to the Federal Reserve Board. That board administers a finance system by authority of a purely profiteering group. That system is private, conducted for the sole purpose of obtaining the greatest possible profits from the use of other people’s money.
This (Federal Reserve) Act establishes the most gigantic trust on earth. When the president signs this bill, the invisible government by the monetary power will be legalized. The people may not know it immediately but the day of reckoning is only a few years removed, the worst legislative crime of the ages perpetrated by this banking bill." - Charles A. Lindbergh, R-MN
"We have in this country one of the most corrupt institutions the world has ever known. I refer to the Federal Reserve Board. This institution has impoverished the people of the United States and has practically bankrupted our government. It has done this through the corrupt practices of the money vultures who control it. A superstate controlled by international bankers and international industrialists acting together to enslave the world for their own pleasure." - Louis McFadden, D-PA
"Most Americans have no real understanding of the operation of the international money lenders. The accounts of the Federal Reserve system have never been audited. It operates outside the control of Congress and manipulates the credit of the United States." - Barry Goldwater, R-AZ
“The whole aim of practical politics is to keep the populace in a continual state of alarm (and hence clamorous to be led to safety) by menacing them with an endless series of hobgoblins, all of them imaginary." - H. L. Mencken
"I have unwittingly ruined my country." - W. Wilson, upon passage of Federal Reserve Act, 1913
"If one understands that Socialism is not a “share the wealth” program but is in reality a method to consolidate and control the wealth, then the seeming paradox of super rich men promoting Socialism becomes no paradox at all. Instead it becomes logical, even the perfect tool of power-seeking megalomaniacs. Communism, or more accurately Socialism, is not a movement of the down-trodden masses but of the economic elite." - Gary Allen
"History records that the money changers have used every form of abuse, intrigue, deceit, and violent means possible to maintain their control over governments by controlling the money and its issuance." - James Madison
"It (the Great Depression) was not accidental; it was a carefully contrived occurrence. The international Bankers sought to bring about a condition of despair here so that they might emerge as rulers of us all." - Louis McFadden
“It is well enough that the people of this nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning." - Henry Ford
"You have to choose between trusting to the natural stability of gold and the natural stability of the honesty and intelligence of the members of the government. And, with due respect to these gentlemen, I advise you to vote for gold." George Bernard Shaw
Presidents, bankers, captains of industry, even the bible forbidding usuary! What's the catch you might ask. Seems pretty straightforward to TIG!
peace
Karl
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WBraun
climber
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There's a huge reservoir of deep knowledge in the above quotes, and if one has the greater knowledge of why the world is so, then the summit has been achieved.
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Jaybro
Social climber
wuz real!
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So, it's been the storks all along?
I though Karl was on to something.
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Clint Cummins
Trad climber
SF Bay area, CA
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Karl,
> So really, TIG, to accompany this, explain to us how money is created. Where in are the places where money is born and dies? How much of the money supply is currency order to be printed by the treasury by the fed for a few pennies of printing cost?
In the USA:
Paper money (currency) is printed by the US Treasury, and distributed by the Federal Reserve System to the regional Federal Reserve Banks (like the L on your $1 which is for San Francisco). The regional FR banks send it out to the local banks, in exchange for old worn out paper money, and also for electronic deposits.
The "money supply" (say, M1) includes "electronic" stuff like deposits in various institution.
The US Gov't interacts with the money supply in several ways:
1. When it purchases something from the private sector, like one of those famous toilet seats. Or when it pays the salary of a gov't employee.
2. When it sells T-bills.
3. When it collects taxes.
(there are other ways, also).
Karl, I'm not sure what all those quotes are for. Would you care to explain the significance of each one? :-)
It looks like one of Locker's posts, except the white space is filled in with something pasted from some website?
Like TiG explained, banks do not "create money out of nothing".
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Karl Baba
Trad climber
Yosemite, Ca
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Clint, I'm sorry but I think you're post is quite wrong. All money is based on debt and is created by the Federal Reserve and the commercial banks. I think I have great evidence for in the other thread. No one has posted a thing except to state a contrary opinion which documents otherwise.
Check it out.
I'm sure you're aware that paper money and coins are a tiny fraction of the money supply.
Those quotes mostly point to the danger of the policies of a central bank (which many founding fathers bitterly opposed) in controlling government and the economy, and to the dangers of Fiat money take accompany a debt based fiat monetary system. How many people know the central bank was already done away with twice in our history.
Many people believe the feds control over interest rates keeps us in bust-boom cycles (like the dot com bubble followed by this housing bubble) It seems pretty apparent that anyone with financial wisdom knew there was a severe housing bubble going on and the feds policies just perpetuated it? Why? We drove ourselves right to the brink of financial ruin, and the smartest people in the room were well aware of it. I was even aware of it, and yet here we are, suddening pledging 700 billion to the same government that managed to lose 2.3 TRILLION in the defense department and can't account for it.
everything is not simple, honest, nor straightforward in this system.
Peace
Karl
If somebody want's to read one page that covers the Fed and the banks in creating money see
http://landru.i-link-2.net/monques/monques.html
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Clint Cummins
Trad climber
SF Bay area, CA
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Karl,
I'm not wrong, and I think we even agree about what money is.
I will check your other post.
Probably what you mean is that the federal gov't "creates money" by deficit spending. This is absolutely correct, and it is a big problem. T-bills are sold as the mechanism to do this.
Banks have nothing to do with the mechanics of deficit spending, though.
-
[Edit to add:]
I checked the link, and I think the main controversy is in this part:
> Commercial banks do not lend out money that has been deposited with them as is commonly believed. In reality, banks create the money, lend it, and accept it as additional deposits. Modern Money Mechanics, published by the Federal Reserve Bank of Chicago, explains on page six, "Of course, they [commercial banks] do not really pay out loans from the money they receive as deposits. If they did this, no additional money would be created. What they do when they make loans is to accept promissory notes in exchange for credits to the borrowers’ transaction accounts." Remember that no corporeal thing has been created at all. It is entirely numbers transferred by checks. The fractional reserve requirement limits how much money commercial banks can create. It is the Fed’s most powerful regulatory method. Changes made in reserves whip-crack through the banking system with an approximate 12 times effect.
Yes, in this way, commercial banks do "create money". However they do not "create money out of nothing". They have to have some deposits. If their reserve requirement is 10% (1/10), then then can lend out 10 times the amount in their deposits. I.e. Joe deposits $100, and the bank can lend out $100 to each of 10 different people.
[edit to add:] Here is a more correct (and non-opiniated) explanation of the 10 times multiplier in the US:
http://en.wikipedia.org/wiki/Reserve_requirement
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Karl Baba
Trad climber
Yosemite, Ca
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Hi Clint, it will be a tough road we travel together but let's both keep an open mind.
I'm saying that all our money supply is created by debt from the fed and the banks. Money is no longer based on any commodity or asset except the faith of the government.
Banks further create money through fractional reserve lending. TIG seems bent on either misunderstanding or obfuscating this principle.
Otherwise how does money exist? Does the government just print it and then what? It's ALL borrowed and if every debt, public and private were repaid, no money would exist.
Kinda blew my mind but try to prove otherwise.
Peace
Karl
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Clint Cummins
Trad climber
SF Bay area, CA
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> Otherwise how does money exist? Does the government just print it and then what? It's ALL borrowed and if every debt, public and private were repaid, no money would exist.
You can have money without debts. And without banks. Cash, gold, whatever. The ancient Greeks and Romans had it. Even those Yap islanders had it with their big stone wheel money!
If you change your statement from "ALL money" to "money other than currency", then I might agree.
It's true that our paper money is "fiat money". It is worth what it will buy. Similarly, gold is mainly worth what it will buy, although you can also make jewelry out of it, and it's useful for electrical contacts.
The main risk in countries with unstable governments is extreme inflation and sometimes demonitization. Fortunately we are not in that situation in that situation here in the US. We've never demonitized; you can still spend paper money issued in the 1860s (not the Confederate stuff, though!). Ditto for the coins from 1796, although you'd be a fool to spend those for face value.
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Karl Baba
Trad climber
Yosemite, Ca
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Clint wrote
"You can have money without debts. And without banks. Cash, gold, whatever. The ancient Greeks and Romans had it. Even those Yap islanders had it with their big stone wheel money!
If you change your statement from "ALL money" to "money other than currency", then I might agree. "
I'm not talking about historical periods or in theory. I'm saying all US dollars in the money supply originate and have their substance in debt. Actual paper dollars and coins I'm not 100% sure of, but how do they enter the system? The Fed orders them from the Treasury at the cost of printing (currency is Federal Reserve Notes right?) and inject them into the commerical banks via debt no?
I've been reading some very telling data correlating money and war. Seems the way the government plays with it's money in closely linked with killing folks.
And an interesting observation from July O7
from
http://blogs.telegraph.co.uk/ambrose_evans-pritchard/blog/2007/07/16/is_m3_money_warning_of_an_inflationary_blowoff_in_the_us
"I would add the Swiss, Scandinavians, and of the course the Bank of Japan. In truth, the Fed is now completely out of line with the central banks across the world and is perilously close to losing credibility. The others are all fretting that unbridled expansion of the money supply is leading to liquidity driven asset bubble.
Japan lived through this in the 1980s when it allowed property and stocks to mushroom out of control, mistakenly thinking the effects would be benign because retail price inflation was low. (The US did much the same in the 1920s but the collective mind in Washington and New York seems to forgotten that).
Capital Economics makes a different argument. Mr Ashworth said his group at first supported the Fed's decision, agreeing that (narrower) M2 was good enough on its own.
"Recent evidence has made us reconsider that position. It appears that broad money and consumer prices have begun to move in tandem once again. Over the past two years M3 growth may even have been leading core inflation by a few months," he said.
Implication: inflation is about to jump up again.
Now there are broadly two schools of thought on this:
a) we get old-fashioned inflation
b) we get the Japan treatment ( ie a deflationary bust when the bubble bursts)
Albert Edwards, global strategist at Dresdner Kleinwort, a fan of the Austrian School, is opting for the deflationary bust.
"The Fed has been blowing after bubble and it's become a Ponzi Scheme: it has to keep going just to stop toppling over. We're now at the end of the game. The risk is that the US will topple into deep recession, and if that happens equity prices have a long way to fall, perhaps 45pc," he said.
Coward that I am, I can't decide which way this is going to break. But I do feel sure that the Fed has created massive imbalances by holding interest rates below their natural level. This Greenspan strategy steals prosperity from the future. Eventually the future arrives. Like now? "
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WBraun
climber
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Gold has many other properties that make it superior and worth so much more than just "money, jewlery, and electronics".
Ayurvedic gold preparations (e.g., Swarna Bhasma) have antioxidant and restorative effects for the nervous system. Long forgotten by modern medicine with their dependency on their stupid drugs and machines.
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TradIsGood
Chalkless climber
the Gunks end of the country
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Topic Author's Reply - Oct 4, 2008 - 01:56pm PT
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Getting back on topic...
Let's look at some typical questions.
What is a run on a bank?
First let's realized that "deposit" is a bit misleading. "Depositors" should think of themselves as lenders or investors. The idea of deposit makes it sound too much like you can just leave something and pick it up later, which connotes a risk-free transaction. If instead, we think "lend", then we probably quickly wonder, "Will we get repaid?", and "Will we be suitably rewarded for our investment or loan?"
A run occurs when too many of a banks lenders exercise a call option on their loan nearly simultaneously. That is they notify the bank that they want the loan redeemed immediately at face value, plus accrued interest.
When that happens, the reserves of the bank get depleted too rapidly to be replaced. If assets can't be sold to replace reserves, it gets shut by regulators.
What would cause a run on a bank?
There are a number of reasons that this has occurred historically. One cause is nearly simultaneous demand for cash, as happened for example after the stock market crash in 1929. Remember that money is a store of value. When people lost jobs, they needed to use their previously acquired surplus.
Another is loss of confidence in the safety of the loans. See recent headlines for examples. Though not a bank, this is what brought down Lehman Brothers. A number of lenders decided not to renew expiring loans and Lehman was unable to find new financing. Same with AIG.
The Savings and Loan crisis is an example of another reason. Remember that for an intermediary to make money, it must make more on its investments or loans, than it pays for its borrowing. The standard mode for making money at a savings and loan was to lend deposits to people buying homes. They might for example have paid 3% for "deposits" and purchased mortgages that paid 8%. What could go wrong. If a depositor pulled money out, they just stopped buying mortgages until more money came in. Until market forces disrupted this business plan. Interest rate levels rose generally and fairly rapidly. Depositors found that they could get a much higher return in money market funds. Rapidly money was withdrawn from the thrifts and reinvested elsewhere. Why didn't the thrifts just raise their rates on "deposits"? Some tried, but the problem is that the old mortgages were not callable. Lenders could not say to mortgagors, that rates had gone up and they needed to pay a higher rate. And paying for money at a higher rate than these loans caused losses which depleted capital.
So what looked like an easy way to make money, borrow at low rates and lend at high rates failed - because the maturity of the assets and liabilities was different.
So FDIC insurance coverage was raised to $250,000
Starting yesterday and extending to December 31, 2009, certain types of "deposits" are now insured to a much higher level. Why? The answer here is simply that it was a fairly easy way to try to address the confidence issue above.
Why didn't they make it permanent?
Hard to say why. But if they did, it offers higher rate alternatives to purchasing Treasury debt. It also tends to make "depositors" less cautious about who they trust with their money. It also has the potential if the FDIC insurance fund, which is financed by banks, to be depleted and likely require funding by taxpayers.
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Clint Cummins
Trad climber
SF Bay area, CA
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navblk4,
> This is where we disagree.
>> Silos for cash deposits. If they were just supposed to
store your money and keep it safe, they would charge you!
> The fact of the matter they had huge storage amounts of cash
in coins and bills stacked on pallots, and many banks today
do charge for storage of cash with penalties also if you do
not keep a daily balance for them to loan.
Actually I think TiG would agree with you. Banks certainly maintain a stockpile of cash. (Some also charge you to deposit coins, since there is a cost involved in counting them). But the key difference in TiG's statement here is just. Because besides holding some cash, they also make loans, and that is the difference.
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Clint Cummins
Trad climber
SF Bay area, CA
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Karl,
> I'm not talking about historical periods or in theory. I'm saying all US dollars in the money supply originate and have their substance in debt. Actual paper dollars and coins I'm not 100% sure of, but how do they enter the system? The Fed orders them from the Treasury at the cost of printing (currency is Federal Reserve Notes right?) and inject them into the commerical banks via debt no?
The mechanism by which paper money and coins enter the system is not particularly interesting to me. It is kind of a technical point about whether you define that as debt-based or not.
What I am saying is that money in general does not have to be based on debt. You can have a local economy, say in some isolated rural town. People create value by working, say by growing food on their farm, catching fish, building houses, etc. They trade goods, and can use paper money or gold or whatever they want to make it easier. It doesn't matter how/where that currency was delivered. Debt is not necessary to have a way to exchange goods. And the basic definition of money is a system which makes it easier to exchange goods.
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Karl Baba
Trad climber
Yosemite, Ca
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Hi Clint
I agree that money doesn't have to be based on debt. What I'm saying is, that in this country (and most) it absolutely IS based on debt. I'd just like folks to be aware of that.
You wrote
"Yes, in this way, commercial banks do "create money". However they do not "create money out of nothing". They have to have some deposits. If their reserve requirement is 10% (1/10), then then can lend out 10 times the amount in their deposits. I.e. Joe deposits $100, and the bank can lend out $100 to each of 10 different people."
Yes, Clint, because those deposits they received were at some point created out of debt from somebody. And, unlike TIG, you admit they can loan out 10x as much as they have on deposit, even by your definition, they are creating most of the money.
All the money originates by being created from nothing and then owed to somebody. It's unreal. Nobody has showed me a lick of evidence to the contrary.
And TIG, your bank run example is simplistic because it doesn't explain how fractional reserve lending leverage makes a bank run so much more possible. There was just a run on WAMU. It didn't take 30% or more of their customers to take their money out to run the bank. It doesn't take much because of that leverage.
Peace
Karl
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raymond phule
climber
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" And, unlike TIG, you admit they can loan out 10x as much as they have on deposit"
You wrote in one of your posts that this was true for a central bank and not commercial banks. I believe much talk here is about commercial banks.
I don't care either that the money is not "real", based or gold or whatever. Assume the central bank "print" out to much money. This is going to result in inflation and we don't want that. Assume a country don't produce any thing except printed money. This is going to result in that the money from that country is going to be worthless in other countries so that don't work either.
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Karl Baba
Trad climber
Yosemite, Ca
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ramond wrote
"You wrote in one of your posts that this was true for a central bank and not commercial banks. I believe much talk here is about commercial banks"
Hi Raymond
Both the central banks and commercial banks create 10x money. They just use different mechanisms. Here's the explanation.
""No, you're confusing two fundamentally different types of reserve ratios. The one which allows a bank to multiply $100 by 10 to create $1000 only applies to central banks. The commercial banks however are only allowed to loan out 90% of their money, so on $100 deposited they can only lend out $90. Once this money is once again deposited, $81 is lent out, and so on as the amount approaches $0. So central banks multiply by the ratio (in this case 10) while commercial banks divide by it. This is also why onbooks it appears as though commercial banks always have 10% mroe deposits than loans, creating the myth that they actually loan out their deposits.
In effect, if a central bank has $1000, with a reserve ratio of 10:1, the central bank can create and lend out $10,000. This 10,000 isthen re-deposited in a commercial bank which lends out $9,000, then $8,100, etc. In the end money initially owned by the central bank is multiplied by 100 times, giving us $100,000. That is if the cycle isn't interrupted (by hoarding). Of course, if the reserve ratio is larger, and in some countries such as the UK and Canada it is no longer present at all, then a lot more money can be created." "
Funny how TIG's tutorial ignore this whole process but also doesn't refute it.
Peace
karl
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raymond phule
climber
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A commercial bank is only allowed to loan out an amount equal to say 90 % of the money it has at the time.
I don't see the importance of the other money that just exist in checkbooks.
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