On Tue, 29 Apr 2008 14:53:05 -0700, orangatang1 wrote:
> As we have discussed on this forum many times banks are allowed to
> lend more money than they actually have. In the US, for example, banks
> are allowed to lend 9 times the money they have. The amount of money a
> bank must have in reserves is called the reserve requirement.
>
> http://www.federalreserve.gov/monetarypolicy/reservereq.htm
In Canada there is no "reserve requirement". In both Canada and the USA
banks can lend a multiple of "paid in capital" such as shareholder's
equity. The "reserve requirements" are not really a limiting factor on
bank loans as much as each bank's "paid in capital".
> Clearly then, banks are not lending federal reserve notes. In banks
> are not really lending money at all. They are lending book keeping
> entries. These entries are created out of thin air and have nothing to
> back them.
Yep. And there is NOTHING wrong with that. People are willing to borrow
money at the current rates and the banks don't force anyone to borrow any
money. The Republican government, OTOH, forces people to borrow tons of
money. I will be forced to borrow $300 in a month or so as they will stuff
the money in my bank account whether I like it or not.
> Ralph hawtery, a former uk treasury secretary put it this
> way
>
> "Banks lend by creating credit. They create the means of payment, out
> of nothing."
Yes. That is correct, but in most cases the loans/credit are backed by
collateral such as a car or a boat or a house.
> The ability to create money from thin air allows banks to manipulate
> the economy. They can make credit cheap and easily available for a
> number of years. People take out loans that they can not afford to but
> rubbish they don't need. A boom is created.
The Republicans will create more than $400B this year in the form of
deficit spending. If the banking system works as the "multiplier" says
then the banks will create 4 trillion. But, of course, that is not how it
works.
> when the banks decide that people's finances are stretched to the
> limit they stop lending. credit becomes difficult to obtain. People
> default and are forced to sell their assets for pennies on the dollar.
> banks are able to buy these assets. A bust is created.
There are booms and busts and they are caused by both monetary and fiscal
policy. Most of the big ones have historically been caused by Republican
control of government.
> This mainstream media call this process 'the business cycle'. Bankers
> call it ' the periodic fleecing of the flock'.
Are bankers Republicans? Ya know.... I think yer right.
> So, the cause of this depression and just about all other recessions,
> depressions and downturns are the banks inflating and restricting
> credit.
The banks are controlled by the Fed which is controlled by the government.
Can anybody say "Republicans". The Democratic Congress of 1990, and 1992
did a pretty good job of rescuing the USA from the Reagan crap and then
Clinton did OK in warding off the Repukes until 1997. But then it all
went to crap with the capital gains cuts and the repeal of Glass Steagall
and huge increase in H1B visas.
It is primarily fiscal policy that causes the "business cycle" of late.
> Rothbard put it this way
>
> "Why do business cycles tend to be recurrent and continuous? Because
> when the banks have pretty well recovered, and are in a sounder
> condition, they are then in a confident position to proceed to their
> natural path of bank credit expansion, and the next boom proceeds on
> its way, sowing the seeds for the next inevitable bust."
>
> http://www.mises.org/tradcycl/econdepr.asp
This last part is essentially correct as far as it goes. If government
does not properly regulate the banking sector and does not practice a
rational fiscal policy then we will have major swings of boom and bust.
--
"I know no safe depository of the ultimate powers
of society but the people themselves; and
if we think them not enlightened enough to
exercise their control with a wholesome
discretion, the remedy is not to take it from
them, but to inform their discretion by
education." - Thomas Jefferson
http://GreaterVoice.org/extend
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