by TerryWalstrom 72 Replies latest jw friends
I hate to say this, but a lack of understanding of finance/economics raises its ugly head here. I know that many people here who never went into advanced studies of anything have a conspiracy theory about things they don't understand.
As Simon suggested, when you finance a car, guys with fake beards are not carrying around suitcases full of crisp $100 bills.
Come on people ... come on.
Rub a Dub
Not sure how I missed this thread. I’ve gone through the thread a bit - just to be clear : we aren’t talking about the money created through fractional reserve banking, correct?
FRB does increase the money supply through loans. It, however, does not mean banks “print” money. If the bank’s loans start to fall through, they can’t just adjust the numbers. Nor can they keep loaning. If they have the minimum reserve and their loans (assets) start to evaporate, it can get really ugly for the bank.
As Simon suggested, when you finance a car, guys with fake beards are not carrying around suitcases full of crisp $100 bills.
But there ARE definitely guys with fake beards and hair on the lot.
There is no conspiracy but there is political malfeasance in relaxing the Laws which keep lending institutions under strict scrutiny.
Under President Obama, the bad legislation which led to the 2008 meltdown was addressed with stricter policies of tight regulation. Under President Trump, those stricter policies have been relaxed again and loosening of regulations. Go figure!
Remember which political figure said, "Deficits don't matter?"
https://www.vox.com/policy-and-politics/2017/9/28/16378854/mark-walker-deficit
Saying such things publicly sort of rules out a conspiracy and bolsters the idea of lunacy.
*In 2009 Dodd-Frank Bank regulation laws were passed in reaction to the crash the previous year with oversight rules which call for strict monitoring.
@Terry:
Dodd-Frank had nothing to do with fractional reserve banking or the money supply.
It was passed in response to the financial crises in much the same way leeches were applied to disease (bad blood) hundreds of years ago.
The financial crisis was caused by banks reacting to government policies - risky home loans backed by government agencies, loans that banks had to give out to appear not to “discrimate”. Add a healthy dose of fuel from the Fed, and you get a massive bubble. The air for the bubble came from the Fed, the government policies funneled it into the housing market. If the same crisis hit today, the same banks would fail - even though Dodd-Frank was recently repealed.
This thread is proof of my long-standing conviction that we desperately need economic/finance classes as a requirement in both high school and college. We end up with people that don't know how to balance their checkbooks or calculate the interest on their credit cards arguing about how the banking system works.
JeffT:
http://archive.boston.com/bostonglobe/editorial_opinion/oped/articles/2008/09/28/franks_fingerprints_are_all_over_the_financial_fiasco/
I like how the politicians talk out of both sides of their mouth knowing the public isn't keeping tabs on
anything said.
"Time and time again, Frank insisted that Fannie Mae and Freddie Mac were in good shape. Five years ago, for example, when the Bush administration proposed much tighter regulation of the two companies, Frank was adamant that "these two entities, Fannie Mae and Freddie Mac, are not facing any kind of financial crisis." When the White House warned of "systemic risk for our financial system" unless the mortgage giants were curbed, Frank complained that the administration was more concerned about financial safety than about housing.
Now that the bubble has burst and the "systemic risk" is apparent to all, Frank blithely declares: "The private sector got us into this mess."
_____
MeanMrMustard is right:
The above article points out: "The pressure to make more loans to minorities (read: to borrowers with weak credit histories) became relentless. Congress passed the Community Reinvestment Act, empowering regulators to punish banks that failed to "meet the credit needs" of "low-income, minority, and distressed neighborhoods."
_____
This quote is particularly galling:
"All this was justified as a means of increasing homeownership among minorities and the poor. Affirmative-action policies trumped sound business practices. A manual issued by the Federal Reserve Bank of Boston advised mortgage lenders to disregard financial common sense. "Lack of credit history should not be seen as a negative factor," the Fed's guidelines instructed. Lenders were directed to accept welfare payments and unemployment benefits as "valid income sources" to qualify for a mortgage. Failure to comply could mean a lawsuit."
I just read the last part of the article the OP is based on. (I skimmed the first part, its mostly a rehash of the three economic theories of banking). Put simply, the "experiment" they say they conducted proves nothing.
I'm a semi-retired accountant. They said they were going to make a credit transaction, then look to see what effect it had on the balance sheet. They couldn't find such an effect and concluded that the bank "manufactured" the money. From an accounting viewpoint it is impossible to look at one transaction and see the effect on a balance sheet without seeing what it would look like without that transaction, which they did not do.
What they did is like trying to isolate one voice in a football stadium, and when you can't hear it, claiming the person you're looking for doesn't exist.
The anwer to the question is: no banks cannot manufacture money out of thin air.
no banks cannot manufacture money out of thin air.
But they can loan money that they don't actually have deposited....
