How banks can give out loans without ever giving out gold.
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Your example leaves implicit the introduction of gold necessary to base the two loans. Makes it seem like the gold magically appears, when it really doesn’t.
Difference between checking and saving accounts is usually determined by the institution but generally a checking account (or current account in the UK) is intended for frequent transactions (getting your salary in, drawing some cash out, or paying for Modern Warfare II at the store with a debit card).
Savings accounts are intended for – well – savings! They usually have restrictions over how much you can draw per month and offer a higher interest rate for your money.
An asset simply is any economic resource you own.
Capital or Equity are the same thing, they are the economic resources you actually own if you pay all your dues (liabilities).
Capital (Equity) = Assets – Liabilities
[what you actually own] = [what you own] – [what you owe]
So you would rather go to a mine and work hard and dangerous hours to create money, when you could just sit at a computer and do the same thing but much easier?
All I’m saying it that it’s utter nonsense to allow private banks in such a monetary system. They bring nothing to the table and collect all the interests. Even worse, they imply ownership of 96% of the money supply (debt presumably owed to them). Credit should be public and debt-free.
the bank is acting as a conduit here. As every loan has a depositor and creditor, the “work” the bank does is to manage the risk and pay the depositor.
But taking a loan is just giving a promisory note (with our signature) in exchange of promisory notes from the bank, aka bank notes. The bank doesn’t have to work to gain those notes. Why should you have to work to repay them? You’re just buying back your promise to pay (the asset security) with other promises to pay (new bank notes) so the bank can discharge the liability on its book. Wether you repay or discharge the liability the bank contracted for your signature, it’s the same.
Yes, but his solution that we should literally be using physical gold is simply impractical. People would barter with everything if that was the case. It’s the same thing as saying there should be no such thing as currency because to do otherwise is immoral.
In fairness to nemnaisa; his got a point and he is trying to critique the bad side of the system. Remember a system is only effective if the rest of its parts are working properly.
I understand what Sal is trying to do: to justify the current fractional reserve banking system. The point why gold should be money is that it takes effort and human energy to extract gold from the ground hence it is precious and cannot be manipulated. While digital dollar can be manufactured by the bank anytime. The point is that banks are enjoying the spread by essentially doing nothing in the money creation process. Now, they try to keep all the profit while socializing the lost.
Lol, I can see that this is going to get juicier and juicier and how the banks basically neglected their requirements of keeping enough assets to cover the loans that were outstanding. I often wonder what the bank examiners were doing? Visions of “It’s a Wonderful Life” keep popping in my brain, and the massive run on the bank. Y’know I think Hollywood should make a movie about this. It’s a Wonderful Life 2008.
January 31st, 2010 at 5:04 pm
sorry,
what happens to the cash when it is used to pay back loans?? does the bank keep that cash for itself??
February 1st, 2010 at 5:20 am
watch the first video..
February 3rd, 2010 at 9:02 am
Your example leaves implicit the introduction of gold necessary to base the two loans. Makes it seem like the gold magically appears, when it really doesn’t.
February 3rd, 2010 at 2:59 pm
Difference between checking and saving accounts is usually determined by the institution but generally a checking account (or current account in the UK) is intended for frequent transactions (getting your salary in, drawing some cash out, or paying for Modern Warfare II at the store with a debit card).
Savings accounts are intended for – well – savings! They usually have restrictions over how much you can draw per month and offer a higher interest rate for your money.
February 3rd, 2010 at 8:10 pm
An asset simply is any economic resource you own.
Capital or Equity are the same thing, they are the economic resources you actually own if you pay all your dues (liabilities).
Capital (Equity) = Assets – Liabilities
[what you actually own] = [what you own] – [what you owe]
February 6th, 2010 at 4:41 pm
whats an asset?
whats the difference between capital and equity?
whats the difference between saving account and checking account?
February 7th, 2010 at 8:28 am
So you would rather go to a mine and work hard and dangerous hours to create money, when you could just sit at a computer and do the same thing but much easier?
February 9th, 2010 at 4:51 am
No no, banks are charging interest because of the risk, and as manager.
If you fail to repay the loan, the bank will be in trouble.
February 11th, 2010 at 6:51 pm
All I’m saying it that it’s utter nonsense to allow private banks in such a monetary system. They bring nothing to the table and collect all the interests. Even worse, they imply ownership of 96% of the money supply (debt presumably owed to them). Credit should be public and debt-free.
February 12th, 2010 at 5:44 pm
the bank is acting as a conduit here. As every loan has a depositor and creditor, the “work” the bank does is to manage the risk and pay the depositor.
February 15th, 2010 at 8:42 pm
But taking a loan is just giving a promisory note (with our signature) in exchange of promisory notes from the bank, aka bank notes. The bank doesn’t have to work to gain those notes. Why should you have to work to repay them? You’re just buying back your promise to pay (the asset security) with other promises to pay (new bank notes) so the bank can discharge the liability on its book. Wether you repay or discharge the liability the bank contracted for your signature, it’s the same.
February 18th, 2010 at 1:44 pm
wow u guys r just nerds that read from the book and never studied in real life
February 20th, 2010 at 7:34 am
Yes, but his solution that we should literally be using physical gold is simply impractical. People would barter with everything if that was the case. It’s the same thing as saying there should be no such thing as currency because to do otherwise is immoral.
February 22nd, 2010 at 1:03 am
In fairness to nemnaisa; his got a point and he is trying to critique the bad side of the system. Remember a system is only effective if the rest of its parts are working properly.
February 23rd, 2010 at 7:56 pm
You obviously have no idea what you are talking about and probably never went to college. Or if you did, you did not pay attention.
February 25th, 2010 at 12:18 am
I understand what Sal is trying to do: to justify the current fractional reserve banking system. The point why gold should be money is that it takes effort and human energy to extract gold from the ground hence it is precious and cannot be manipulated. While digital dollar can be manufactured by the bank anytime. The point is that banks are enjoying the spread by essentially doing nothing in the money creation process. Now, they try to keep all the profit while socializing the lost.
February 27th, 2010 at 6:46 am
Thanks to the FAILOUT, they are not required to have anything in reserve
March 2nd, 2010 at 7:49 am
Whats the maximum the bank can loan out in this vid, assuming money is not redeposited and there is no sort of multipier? cheers
March 4th, 2010 at 7:00 pm
Lol, I can see that this is going to get juicier and juicier and how the banks basically neglected their requirements of keeping enough assets to cover the loans that were outstanding. I often wonder what the bank examiners were doing? Visions of “It’s a Wonderful Life” keep popping in my brain, and the massive run on the bank. Y’know I think Hollywood should make a movie about this. It’s a Wonderful Life 2008.
March 5th, 2010 at 10:44 pm
your voice sounds cool