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Money Creation in the Modern Economy – Its a Wonderful Lie

45 点作者 tldrthelaw超过 2 年前

14 条评论

narrator超过 2 年前
&gt;&quot;So the dollar is only worth something because people agree it is.&quot;<p>The article was good, but that part is wrong. The dollar is worth something because you need it to pay taxes. You can squat in a tent in the woods and eat nuts and berries and not buy anything, but if you trade with anyone, they need dollars to pay the taxes on their income, even if it&#x27;s just barter.
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civilized超过 2 年前
&gt; So let’s look at a dollar traveling through the system. The Fed decides that $1, yes one more dollar, needs to be added to the economy and then everything will be dandy. The Fed purchases a Treasury bill from Bank X for $1, putting $1 on the deposit side of X’s ledger (remember, no physical currency is involved here). Bank X, subject to a 10% reserve requirement, is then free to lend out, that is create deposits, representing up to $10. The Fed “created” $1 but the commercial bank, X, “created” $9.<p>I&#x27;m confused. This seems to imply that commercial banks can magically credit their customers with $10 just because they happen to have $1.<p>I&#x27;m not able to do that. If I want someone else to have $10, I have to hand or wire them $10 in currency.<p>Do commercial banks really get to do this?
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sylware超过 2 年前
Isn&#x27;t there a sentence from M.Ford which summerizes the monetary system?<p>I remember when I decided to understand the monetary system: once, I pierced through its fake complexity, only disgust has been remaining since then.
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eternalban超过 2 年前
&gt; The bank has just converted a house, wood and nails and siding and dirt, into money.<p>This was a clever twist. But is it true?<p>The house existed and monies (in possession of others) also existed, so that house already had &#x27;value&#x27; and fully convertible to money via a cash sale.<p>What has happened is that the bank, using hypothetical&#x2F;projected money (i.e. mortgage payments), created money and purchased a valuable assembly of land, wood, and nails. It further has a buyer who must make regular payments of money (earned, not created, by working) until the banks hypothetical money is converted into actual money. And the buyer now is the owner of the house. This is when it works out. Here, the bank clears out its book of the fictional principle payed out, but now has interest payments as profit.)<p>When the buyer defaults, now the bank is the owner of a house, which it can sell and pocket the profit. (Remember, it only had $10k from the Fed, and say foreclosed and sold at $50k, so that&#x27;s 40k).<p>So my Q which this article did not even touch on, is whether the Federal Reserve is a public entity (so its profits go to US treasury and not some island somewhere), and if it is not, why not? Why would a country&#x27;s central bank not be owned by the people of that country? Why are these things so opaque and reluctant to have open books?<p><i>&quot;Legal cases involving the Federal Reserve Banks have concluded that they are &quot;private&quot;, but can be held or deemed as &quot;governmental&quot; depending on the particular law at issue. In United States Shipping Board Emergency Fleet Corporation v. Western Union Telegraph Co.,[5] the U.S. Supreme Court stated, &quot;Instrumentalities like the national banks or the federal reserve banks, in which there are private interests, are not departments of the government. They are private corporations in which the government has an interest.&quot;&quot;</i><p><a href="https:&#x2F;&#x2F;en.wikipedia.org&#x2F;wiki&#x2F;Federal_Reserve_Bank#Legal_status" rel="nofollow">https:&#x2F;&#x2F;en.wikipedia.org&#x2F;wiki&#x2F;Federal_Reserve_Bank#Legal_sta...</a>
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agentultra超过 2 年前
The United States Federal Reserve has a rather informative website if you’re curious about this stuff [0].<p>[0] <a href="https:&#x2F;&#x2F;www.federalreserve.gov&#x2F;aboutthefed.htm" rel="nofollow">https:&#x2F;&#x2F;www.federalreserve.gov&#x2F;aboutthefed.htm</a>
incomingpain超过 2 年前
&gt;Thus, when a bank has more liabilities than assets to a point below the required reserve percentage, 10%, it can borrow reserves from another bank and pay the interest rate set by the Fed for the benefit of doing so.<p>Where did the author get this 10% number?<p>If you look at China it&#x27;s 11%.<p>India is 4%<p>Hungary is 1%<p>Turkey is 25%<p>You might say, &#x27;oh they mean USA&#x27;<p>But USA is at 0%. <a href="https:&#x2F;&#x2F;www.federalreserve.gov&#x2F;monetarypolicy&#x2F;reservereq.htm" rel="nofollow">https:&#x2F;&#x2F;www.federalreserve.gov&#x2F;monetarypolicy&#x2F;reservereq.htm</a><p>The US banks are currently lending out infinite money. There will be limits and cycles in terms of being able to lend out but you can lend out infinite and sell the liability.
cosmojg超过 2 年前
For those who prefer a podcast format (and a bit more depth): <a href="https:&#x2F;&#x2F;www.youtube.com&#x2F;watch?v=5RB2FofPYzc&amp;t=1993s" rel="nofollow">https:&#x2F;&#x2F;www.youtube.com&#x2F;watch?v=5RB2FofPYzc&amp;t=1993s</a> (Rational Reminder #207 - What is Money?)
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slotrans超过 2 年前
Article is just an okay-quality overview of what you&#x27;d learn in the first half of any 3000-level Money &amp; Banking class.
civilized超过 2 年前
Site dead<p>&gt; Error establishing a database connection
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IntFee588超过 2 年前
Reserve requirements as of 2020: <a href="https:&#x2F;&#x2F;www.federalreserve.gov&#x2F;monetarypolicy&#x2F;reservereq.htm" rel="nofollow">https:&#x2F;&#x2F;www.federalreserve.gov&#x2F;monetarypolicy&#x2F;reservereq.htm</a><p>Remember, the balance in your account is nothing more than the bank&#x27;s record of its liability to you.
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throw0101c超过 2 年前
&gt; <i>Bank X, subject to a 10% reserve requirement, is then free to lend out, that is create deposits, representing up to $10. The Fed “created” $1 but the commercial bank, X, “created” $9.</i><p>Please stop it with the reserve requirements. Canada (amongst others) hasn&#x27;t even had them for for many, many years:<p>* <a href="https:&#x2F;&#x2F;en.wikipedia.org&#x2F;wiki&#x2F;Reserve_requirement#Canada" rel="nofollow">https:&#x2F;&#x2F;en.wikipedia.org&#x2F;wiki&#x2F;Reserve_requirement#Canada</a><p>Relending customers&#x27; money hasn&#x27;t been a thing for decades. Tobin called this the &quot;Old View&quot; <i>in 1963</i>:<p>* <a href="https:&#x2F;&#x2F;cowles.yale.edu&#x2F;sites&#x2F;default&#x2F;files&#x2F;files&#x2F;pub&#x2F;d01&#x2F;d0159.pdf" rel="nofollow">https:&#x2F;&#x2F;cowles.yale.edu&#x2F;sites&#x2F;default&#x2F;files&#x2F;files&#x2F;pub&#x2F;d01&#x2F;d0...</a><p>&gt; <i>Business schools teach that banks obtain deposits and then leverage those deposits ten times or so. This is why we call the modern banking system a fractional reserve banking system. Banks supposedly lend a portion of their reserves. There’s just one problem here: banks are never reserve constrained. Banks are always capital constrained. This can best be seen in countries such as Canada, which has no reserve requirements. Reserves are used for two purposes—to settle payments in the interbank market and to meet the Fed’s reserve requirements. Aside from this, reserves have little impact on the day-to-day lending operations of banks in the United States.</i><p>* <a href="https:&#x2F;&#x2F;www.pragcap.com&#x2F;the-basics-of-banking&#x2F;" rel="nofollow">https:&#x2F;&#x2F;www.pragcap.com&#x2F;the-basics-of-banking&#x2F;</a><p>&gt; <i>The role of reserves and money in macroeconomics has a long history. Simple textbook treatments of the money multiplier give the quantity of bank reserves a causal role in determining the quantity of money and bank lending and thus the transmission mechanism of monetary policy. This role results from the assumptions that reserve requirements generate a direct and tight linkage between money and reserves and that the central bank controls the money supply by adjusting the quantity of reserves through open market operations. Using data from recent decades, we have demonstrated that this simple textbook link is implausible in the United States for a number of reasons.</i><p>* <a href="https:&#x2F;&#x2F;www.federalreserve.gov&#x2F;pubs&#x2F;feds&#x2F;2010&#x2F;201041&#x2F;201041pap.pdf" rel="nofollow">https:&#x2F;&#x2F;www.federalreserve.gov&#x2F;pubs&#x2F;feds&#x2F;2010&#x2F;201041&#x2F;201041p...</a><p>See Cullen Roche&#x27;s 2011 paper &quot;Understanding the Modern Monetary System&quot;:<p>* <a href="https:&#x2F;&#x2F;papers.ssrn.com&#x2F;sol3&#x2F;papers.cfm?abstract_id=1905625" rel="nofollow">https:&#x2F;&#x2F;papers.ssrn.com&#x2F;sol3&#x2F;papers.cfm?abstract_id=1905625</a><p>Interview:<p>* <a href="https:&#x2F;&#x2F;rationalreminder.ca&#x2F;podcast&#x2F;132" rel="nofollow">https:&#x2F;&#x2F;rationalreminder.ca&#x2F;podcast&#x2F;132</a><p>See also the Bank of England&#x27;s 2014 paper, &quot;Money creation in the modern economy&quot;:<p>&gt; <i>The reality of how money is created today differs from the description found in some economics textbooks: Rather than banks receiving deposits when households save and then lending them out, bank lending creates deposits. In normal times, the central bank does not fix the amount of money in circulation, nor is central bank money ‘multiplied up’ into more loans and deposits.</i><p>* <a href="https:&#x2F;&#x2F;www.bankofengland.co.uk&#x2F;quarterly-bulletin&#x2F;2014&#x2F;q1&#x2F;money-creation-in-the-modern-economy" rel="nofollow">https:&#x2F;&#x2F;www.bankofengland.co.uk&#x2F;quarterly-bulletin&#x2F;2014&#x2F;q1&#x2F;m...</a>
photochemsyn超过 2 年前
The best source I&#x27;ve come across on central banking and monetary policy is Nomi Prins&#x27; Collusion - in particular, because it doesn&#x27;t just look at the Fed, but rather the top central banks of the world, from the USA to Europe to Japan to China to Brazil. They&#x27;re all linked together to some degree via currency swaps and similar mechanisms. For example:<p>&quot;&quot;On March 9, 2015, Draghi introduced yet another QE program, the Expanded Asset Purchase Programme (EAPP). This one would buy public sector securities, too. The program consisted of a third covered bond purchase program (CBPP3), an asset-backed securities purchase program (ABSPP). and a public sector purchase program (PSPP). It could have equally decided to buy scones and jam or croissants and butter - that would have spread money more directly into the real economy, at least as far as bakers and fruit farms were concerned. These purchases of public- and private-sector securities would run E60 billion per month.&quot; p226<p>That&#x27;s a fundamental point - monetary policy alone doesn&#x27;t decide outcomes, it&#x27;s who benefits from a given monetary policy - and that&#x27;s often determined by a government&#x27;s fiscal policy, which is supposedly separate from a central bank&#x27;s monetary policy: again, see Prins:<p>&gt; &quot;But in the bank&#x27;s moment of peril, the Fed unleashed a global policy of injecting fabricated money into the worldwide financial system. This flood of cheap money resulted in the subsequent issuance of trillions of dollars of debt, pushing the global level of debt to $325 trillion, more than three times global GDP. By mid 2017, the total assets held by the G3 central banks - the US Fed, the European Central Bank (ECB), and the Bank of Japan (BOJ) - through conjured-money QE programs - had hit more than $13.5 trillion. The figure was equivalent to 17 percent of currency-adjusted global GDP.&quot;<p>&gt; &quot;Specifically, the largest private banks, including JPMorganChase, DeutscheBank, and HSBC, that inhaled this cheap money were not required to increase their lending to the Main Street economy as a condition of the availability of that money. Instead, the banks hoarded the cash. US banks colluded with the Fed to get that cash by stashing their bonds as &#x27;excess reserves&#x27; (more reserves for emergencies than regulations required) on the Fed&#x27;s books. And, because of the Emergency Federal Stabilization Act of 2008, they recieved 0.25 percent interest per year from the Fed on those reserves, too. Wall Street used its easy access to cheap money to increase speculation in derivatives and other complex securities. <i>They used it to buy back their own shares, thus effectively manipulating their own stock - in broad daylight and with explicit approval from the Fed. In turn these banks dialed back their lending to small and midsized businesses, which hampered their growth potential.</i>&quot;<p><a href="https:&#x2F;&#x2F;nomiprins.com&#x2F;books&#x2F;" rel="nofollow">https:&#x2F;&#x2F;nomiprins.com&#x2F;books&#x2F;</a>
gasull超过 2 年前
This is why Bitcoin was invented with a finite supply of 21 million.
nhance超过 2 年前
Slashdotted
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