Did you know Banks create money out of thin air?

by TerryWalstrom 72 Replies latest jw friends

  • atomant

    yes terry lm surprised you posted this nonsense.lm very disappointed .

  • just fine
    just fine

    I was once Vice President of a Bank and was responsible for managing our liquidity. Banks can’t just make money out of thin air. There is a balance between how much of your deposits on hand you can loan out, how much are kept in overnight funds (invested overnight), how much is in short term investments. Also you have to manage the loan terms and your deposit terms. If a bank makes too many long term fixed rate loans but doesn’t match that up with long term fixed rate deposits it can be disastrous. In this scenario your deposits would reprice faster than your loans resulting in greater costs(interest paid to customers on deposits) than income ( interest paid to the bank on loans.)

    The interest charged on loans vs the interest paid out on deposits is the spread which a bank pays its operating costs from. If the bank doesn’t have the loan volume needed then they invest the extra deposits to bring in more income. Obviously this is the simplified version, but at no point does the bank make money out of thin air.

    There are regulations that limit what types of investments the bank can use in order to protect deposits. Banks are always trying to push the envelope on what investments qualify to increase their profits.

  • Nathan Natas
    Nathan Natas

    I believe that there is little, quite possibly NO gold in Fort Knox.

    I defy the Federal Reserve Bank - the Monster of Jekyll Island - to submit to an audit and prove me wrong.

  • Nathan Natas
    Nathan Natas

    The question we should be asking is "How can I be more like a bank and less like a schmuck?"

  • caves

    Nathan-The question we should be asking is "How can I be more like a bank and less like a schmuck?"

    Had a friend that during the recession pull a magnificent stunt. She decided to stop paying her mortgage. This was in an area no one was buying , at all.The bank called and threatened. They sent people out to work with her. She just played like she was on board with the bank , never signed anything and then backed out each time. Finally the bank said that they were going to take her house away. She said "Go ahead but Im still going to live here and squat in my own house F off".

    During that time she saved each of her payments to the final tune of 25,000 dollars. Enough for a down payment on another house easily.

    She called the bank and said that they could come take it ( her husband gutted it, they were planning on a remodel anyway) and then the bank didn't want it after they saw it gutted. Absolutely nothing was moving in the area. So she tried (planned and fake) to force it back on the bank. lol. The bank jumped though hoops, forgave the missed payments and rearranged a new mortgage 2/3 less than what she was paying monthly with a lower interest rate. She made 25,000. The remodel cost 8,000. She always said that she was going to do her part to make the bank pay since taxpayers are the ones who bailed them out.

    Off the topic but reminded me of the story.

  • smiddy3

    I`m with stillin I`m learning something also, economics not being my strong point.

  • _Morpheus

    Nathan- who cares. Given that the usa is no longer on the gold standard, what does it matter?

    @caves- my next door neighbor did the exact same thing. He squated in his house for ten years and was just recently forced to move. The kicker? They paid him. Literally, they gave him 5k to move out of his own house after living there rent free for 10 years. And the market is not depressed here by any means. It made me feel like a fool.

  • StarTrekAngel


    I think there is mostly a misinterpretation of the concept. Banks do print money money out of thin air, just not all the time. However, that's not to say your local branch or even the entire corporation is doing so. They don't have the power to just add it there. Banks means just that, the banking system on itself does it, not a particular bank whom may be borrowing money from each other.

    The simple side of it is that you can't make things out of nothing. You don't grow a crop without seeds just like you can't have money without something. That something used to be gold or other tangible goods.

    Someone please show me what that is now and I will believe money doesn't get generated out of thin air.

    Everything in the financial world is binary. you can't buy bitcoin if you don't sell your dollars. True, inflation is not only a consequence of increased money supply. It can also come from devaluation. But both play a role. Just like I said, it's a balance between two things. Just like a dollar can devaluate not because of the American economy itself but because may be other economies are changing.

    Supply and Demand.... repeat that to yourself. Supply and Demand is the ultimate regulator of markets. Money is no different. The balance between the money supply (the printing of money) and money demand (which can be trigger by devaluation among other things) can cause inflation to fluctuate. That is the reason the federal reserve banks of every country try to reign in the balance of both by doing things like regulating interest rates.

    By the way... making money out of thing air does not necessarily equal money the bank can pocket as profit. It means they can loan money they don't have and basically put it out on the street by means of the borrower.

  • Vidiot
    Terry - "Did you know Banks create money out of thin air?"

    Damn, I should have been a banker.

  • TerryWalstrom

    This is where I got my source information:


    The only conspiracy theory I ever fell for was the one promulgated by the Watchtower.
    I married into a Jewish family and 3 of my kids are Jewish. So, the idea that I buy into anti-Jew theories is a non-starter. My in-laws are about the best people I know. My sister-in-law is orthodox and I find her a bit ditzy--but--she'd be ditzy even if she were a WASP.

    If the article I read (above) is just dead wrong, then I apologize for reporting it as though it were a well-researched bit of discovery. I'm more interested in the essential facts about how financial institutions get away with what they do. Paying a million dollar fine, for a company bringing in billions, just seems so crooked it's unbelievable unless Congress is lining its pockets with legal bribery.
    I'm not a political person. I've never voted. But I certainly do see $$ and malfeasance all over the place.

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