Tired of the Crookedness of the Financial System?
Q: What's the REAL underlying mechanism of Fractional Reserve Banking?
A: Preying on people's inability (or willful ignorance) to understand mathematics!
Once upon a time, Greek philosophers posed many problems which were of great interest in the day. Mathematicians now understand the literal interpretation of these questions as certain types of calculus problems. Modern-day philosophers, on the other hand, interpret each of these so-called paradoxes in metaphysical notions.
For our purposes, we will focus on the mathematical aspects of these philosophical questions, as they relate directly to the implementation of Fractional Reserve Banking.
Zeno's Paradox
A man is walking towards a destination and only moves halfway between his current location and where he's going. As such, the man must stop an infinite number of times before he proceeds to the next halfway point and, as such, will never attain his goal.
However, the distance between a man and his destination is finite. Surely, he will make it to his destination!
In fact, he does reach his goal in what is known as the limit or at infinity.
The Limit of Zeno's Paradox
Limits are notions that describe behavior in an aysmptotic sense, that is to say, in a general sense as some varying parameter approaches a particular value. The general rule is that one does not care what is happening precisely at the point that is being approached but rather is interested in the overall pattern in all possible paths that approach the destination.
I won't discuss the mathematics of limits (as one can abstract the notion further, especially when dealing with topological spaces), but the above description gives a decent picture. To reiterate: when limits are used, we do not care about the final limiting value, only in the qualitative behavior of all possible paths that approach the point of interest.
In the example where a man moves halfway from his current location to his destination, we can describe the infinite sum of all the finite distances that he moves in approaching his goal.
Infinite Sequences and Sums
(Since MathJax is not implemented, bear with me on not having decent mathematical notation.)
We describe this infinite sum by first considering the (finite) partial sum of all the first k steps.
First, we need to define the distance between the starting point and the end point to be some arbitrary value, a.
The distance that the man initially moves is a/2. The second distance is a/4, the third a/8, and so on. In fact, the distance of the k'th step of the man is a/(2^k).
Let us consider the sum of the first k distances. The first sum is a/2, the second sum 3a/4, the third sum 7a/8, and so on.
We write this as SUM(i=1..k, a/2^i) = S_k = (2^{k}-1)a/(2^k) .
If we take the limit of k as k approaches infinity, we see that the factor (2^{k}-1)/2^k approaches 1. In other words, if we say that M is a very large number, then M - 1 is also very large, and the ratio of (M - 1) / M becomes closer to 1 as M increases. Indeed, this is precisely the case when M = 2^k.
So you see, in the limit, the sum of the total distance traveled approaches a, which intuitively makes sense as that is the distance we defined between the start point and the end point.
A Picture is worth a 1000 words
Here, 100 represents 100% of a and starting on the right, we move halfway towards 0. Near 0, we have an accumulation of points near the value we are approaching. In mathematics, we also say that a limit point is an accumulation point.
Infinite Geometric Series
The above example is nothing more than an application of an infinite geometric series.
An infinite geometric series is an infinite series of numbers where each value in the series is given by a (finite) partial sum. A partial sum is the sum of a finite set of numbers in a sequence. More generally, we write that the k'th finite value in an infinite sequence is given by
a_k = a r^{k},
where r is some geometric ratio that defines the change between one number in the sequence to the next.
The partial sum of the a_k's is given by s_k = SUM( i=0..k, a_k ) = a (1-r^k)/ (1-r).
The a_k's form a sequence and the s_k's form a series.
Without going into the details, s_k converges to a finite value as k approaches to infinity under the condition that |r| < 1.
This infinite sum converges to the value a / (1 - r).
Wutz Dis Gotta Due Wit' Moneez?
The mathematics of any monetary system that uses a fractional reserve policy is based entirely on infinite geometric series.
Ever heard of the money multiplier effect?
The lower the on-hand reserve requirement, the larger the money multiplier effect. Suppose a bank has a reserve requirement as low as 2.5%. Then, this equates to 39x increase in the monetary supply by doing nothing more than lending.
We first need to understand how a fractional reserve system operates. Then, we will see if we can spot the pattern of an infinite geometric series.
Ignoring all the intricacies of how the U.S. Treasury issues bonds in exchange for Federal Reserve Notes, suffice to say that someone (Congress) is doling out money to someone. So what's happening?
Say you are on the receiving end of Congress (although, normally, when I think of that phrase, I don't think of good things), and you are a contractor and manage to obtain a bid from the government to build a new bridge in the desert. Let's call your business, Business 0, and your bank, Bank 0.
You are appropriated x amount of Federal Reserve Notes. You take these notes and deposit them into Bank 0. Bank 0, being in the business of money lending, loans your money to a new business, Business 1, keeping only the minimum reserve requirement on hand. Business 1 receives the loan and places the money in Bank 1. Bank 1 creates a loan for Business 2 which in turn deposits the money in Bank 2. This process repeats ad infinitum.
What we are going to do is consider two different pairs of columns. One pair will be the two columns that contain the total sum that is loaned out by all the previous banks and the amount loaned out by the current bank. The other pair of columns will contain the sum of all the reserve money kept in all the previous banks and the reserve money kept in the current bank.
For simplicity, we will say that there is a reserve requirement of 10% and that the amount of money awarded in the contract bid was only $100,000,000. That is to say if we go back to our partial sums and infinite geometric series, we have that a = 10,000,000 and 90,000,000 for the Money Lent and Money in Reserve columns, respectively, and that and r = .9.
| Bank Number | Sum of Money Lent | Money Lent | Money in Reserve | Sum of Money in Reserve |
|---|---|---|---|---|
| 0 | 90,000,000 | 90,000,000 | 10,000,000 | 10,000,000 |
| 1 | 171,000,000 | 81,000,000 | 9,000,000 | 19,000,000 |
| 2 | 243,900,000 | 72,900,000 | 8,100,000 | 27,100,000 |
| 3 | 309,510,000 | 65,610,000 | 7,290,000 | 34,390,000 |
| 4 | 368,559,000 | 59,049,000 | 6,561,000 | 40,951,000 |
| ... | ... | ... | ... | ... |
| k | 90,000,000*(1-.9^k)/(.1) | 90,000,000*(.9)^{k} | 10,000,000*(.9)^{k} | 10,000,000*(1-.9^k)/(.1) |
You see that the columns correspond to a two different pairs of geometric sequences and series.
Observe that the total amount of money held in reserve by all the banks as we approach infinity (and note that only after 4 iterations, we are almost halfway there) is the initial amount for the original contract, i.e. $100,000,000. But, wait, there's all that money that is loaned out to people now. There is $900,000,000 of that funny money floating around for only $100,000,000 kept in the banks.
The money multiplier effect can be calculated by taking (1 / reserve requirement %) - 1. For banks, who have a reserve requirement of 10%, we see that the money multiplier effect is 9 times.
Fun fact: Canada, the UK, New Zealand, Australia, and Sweden have no reserve requirement!
This is how a fractional reserve banking system creates money from nothing. Notice that we didn't even have to use usury (charging interest on loans!) to create new currency.
Hey @complexring, I mentioned your blog on my latest post. https://steemit.com/learntocode/@veryscience/learn-how-to-code-how-to-create-your-first-webpage-from-start-to-finish-with-html-and-css
This is fascinating!
I did not realize that fractional reserve banking could be modeled as an infinite geometric series, but it makes sense.
One Question -- "Sum of Money Lent" when k (bank number) = 4...
Shouldn't that be 368,559,000 rather than 315,414,900?
I was following along with you, and got the same numbers up until that point.
Just wondering if I went wrong somewhere.
Thanks for this eye-opening article!
What would I do without you fixing all of my math mistakes?
I'm not at your level in math, but I'm smart enough to know I can learn from you if I read your posts carefully and work through the examples you present. Thanks for taking the time to produce quality technical articles!
Who says you can't incentivize quality teachers?
This is the worst informed thread I've ever seen that's not on Facebook. The post is fine, the comments are ridiculously awful.
Are all the comments ridiculously awful, including this one (and yours)?
It is a comment isn't it? I see no reason why any comment depending on the persons perspective couldn't be viewed as ridiculously awful. It's all subjective anyways when making distinctions.
Come on, don't compare us to Facebook! I thought we were better than this ;-)
Being paid to explain the scam of money creation, with the effect of making this information being wildly disseminated, we'll only ever see this on Steemit, and that' why the dumb stream media won't survive the Steem Stream Media!
Jesus-Christ. I was sure I had upvoted this article back then. Damn. Anyway I upvoted it now. It's an important article. I love it.
Oh okay I had. It's because it's the second payout! I hope you or other people will make post about the money creation scheme. It's so central to our lives. Thank you again!
"The reserve is not needed. Once the agreement between who prints the money and who makes them real utilizing them is established, the monetary function can be based on anything virtual. The issue is that if who owns the privilege of seignorage decides to put everybody in debt, and this debt can't be paid back with the same means we've got exponential slavery."
Cit. Giacinto Auriti vs. Bank of Italy 1992,
To be fair, the economists are correcting me in my understanding of economic theory.
However, the argument that money multiplication is a myth only applies to this application of an infinite geometric series in that loans are made from deposits.
OK. But money multiplication still occurs since banks can loan any amount they want to (assuming credit-worthiness of the borrower) and if they don't have the reserves, borrow the appropriate amount from a central bank to meet reserve requirements.
The total amount of money that is lent out is still larger than the total amount that was originally borrowed from the central bank. Hence, money multiplication is not a myth.
Though i accept it (since i agreed to it), i should have corrected your earlier definitition of the money multiplication effect.
The conventional use of the term, like in old econ text books, is what you describe in your post... the notion that a fractional reserve allows for the creation of money through loans in the infinite geometric pattern you describe. This is false.
Yes, you could say that banks create money through loans. It isnt strictly accurate, because its really the fed thats creating it, just like they create all money.. but yeah, its being created. Think of it this way. Berniesansders upvoted my reply earlier itt, and that upvote made me $800 bucks (which, btw, thanks bernie). I didnt get the 800 from bernie, though. He wasn't giving me his money. You could argue that bernie created that money by voting... and i suppose you'd be partially right (as right as you are about banks creating money through lending). But really what created that money was the steem "central bank", a thing i call the Vault thats modeled off the federal reserve and i don't think anyone else has really noticed yet. Someone else created the money -- Bernie just decided who to give it to. (in that analogy SP holders are like commercial banks and the vault is like the fed, which doesnt completely work but you get the point)
But thats a good thing... Money has to be created somehow. And if its just the government pumping money into the system, the only people who will have money is government cronies. If youre talking about the types of countries that one would generally describe as "free capitalist nations" like the US, UK, western europe etc, this proccess is what does most of the work re: increasing the money supply.
The alternative -- the other way to increase the money supply that places like the soviet block and military juntas and such is political or military crony-ism. It means that most people will never have a chance to get the new money thats being put into the system... because the government gives it to politicos, then it just stays with them (instead of being used to fund loans which fund jobs, etc etc)
An economy where the money supply is not growing, is a dysfunctional economy. I know the term "inflation" and "monetary inflation" gets thrown around a lot (i dont really get it, but i know it. All these 20-somthing blockchain computer programming hashtag using github posting millennials have the economic sensibilities of 19th century austro-hungarian viscounts), but the fact is that if you live in a country with a non-growing money supply, its probably in a mud hut and you have flies landing on your eyeball every couple minutes.
My main point of contention with the article was the strongly implied notion that the creation of money in this manner was that this sort of money creation was a "hack" -- an unintended vulnerability in the economic system that banks were exploiting for their own ends, by creating infinite amounts of money, and to the detriment of others. When, in fact, it is an intended design point without which quality of life in the US would be significantly lower than it is today.
I understand that the conventional use of money multiplication is the manner in which I described it in the OP. However, I would think that the common person would agree that any amount of money that is more than the amount initially borrowed from a central bank that is in circulation would necessarily be money that had been multiplied.
I could care two hoots if MM happens through deposits being lent out in the scheme initially described or if loans are made with rational business / banking decisions and then banks borrow from the central bank (or do overnite lending from others) to meet RR. To me, MM happened, regardless.
Japan has had a deflationary monetary supply since after WWII. I don't think they are all living in huts.
So population has increased in japan since the end of WWII... but the money supply has decreased. are they all just getting poorer? Or has their economy been so closely linked to the US that much of their corporate infrastructure uses dollars instead of yen, and holds them in US banks instead of japanese banks. (its the second thing)
Japan is an interesting exception to a general rule, and it comes mostly from close ties to the US and the US economy. In reality their money supply has grown... its just that most of that supply is in dollars. China is actually moving toward the same problem with bitcoin right now, though itll be a long time before it gets that bad.
That said, the BOJ has a NIRP going for like 3 years now.... they understand its a problem. THe guy who runs the BOJ would probably kill his mom to get the kind of geometric progression youre talking about.
NIRP means negative interest reserve policy. It means that if a japanese bank has a reserve higher than the required reserve ratio, the bank actually has to pay a fee (theyre charged negative interest on the extra) The purpose is to try to encourage japanese banks to act more aggressively in the lending market, rather than let their money sit in reserve. The problem is japanese corporations keep borrowing from US banks, because everyone there takes dollars, and US banks offer more competitive terms. ...
And I never meant that money creation in and of itself is a hack or a vulnerability of the current economic system. In fact, MM / or MC still happens regardless (as mentioned in a different reply). I just wanted to discuss some math and how I understood it to relate to economics (even if I was wrong in the example, the math holds).
Which reminds me, no one ever made a guess on this.
I would have accepted payday loan stores like the money store or loansharks. Partial credit for venture capitalists, since theyre investments, not really loans.
Point being that yes, there are people that will take their very own money out of their pocket or bank account and do what banks won't -- lend it to you directly. But they're taking way more risk and, as a result, they charge 40,000% apr and have terrible terms and possibly cave your head in with a crowbar if you miss a payment.
The balance sheet of the bank always has to balance - remember the bank lends to the same people it borrows from (as for every lender there is a borrower) so that's impossible. The more money the bank makes, the more the equity holders and deposit holders get. It's a circle that balances out to 0.
https://steemit.com/finance/@gleepower/the-definition-of-a-bank
I had intended to be the first steemian to use the word 'asymptotic'. Oh well.
@complexring Nice analysis. One thing to note about modern banking is that they don't use the money multiplier effect. I know it's taught in all the econ departments in all the schools and even Austrian economists I follow describe the money multiplier effect, but that's not how banks operate. They just create money ex-nihilo. Here is the Bank of England Quarterly Bulletin: Money Creation in the Modern Economy. Yes commercial banking is corrupt and a monopoly, but the money creation process banks use actually make sense. They just create loans from asset collateral (mainly real estate) and use these loans as monetary assets for commerce. It's actually the same as how Bitshares & Steem dollars work. Instead of real estate collateral, Bitshares uses BTS and Steem Dollars use Steem. I do agree banks are monopolistic, the Federal Reserve system is unnecessary and QE is harmful, but I've come to accept money creation via loans on assets as a good way to create monetary liquidity. Took me a decade of study on and off and banging my head against a wall trying to get to the bottom of the Federal Reserve and the money system. For most of that time I considered the whole system a conspiracy and a fraud especially after reading the legal theory of deposit contracts in Jesus Huerta de Soto's book Money, Bank Credit, and Economic Cycles ... I have since changed my perspective. Anyways the Federal Reserve and modern banking is really an esoteric subject. Intentionally so it seems.
@complexring From the title of this post I assumed that you indeed thought "the whole system a conspiracy and a fraud". How would you describe the banking system now that would conflict with that?
My understanding of it basically follows the 'Money as Debt' video below.
The dollar as debt instrument is a hard concept to understand at first
Well, certain countries don't use fractional reserve banking. The UK is one. You'll note that I gave a list of countries that don't have a reserve requirement. Only when a reserve requirement is needed, does the money multiplier effect come into play. Actually, with no reserve requirement, the money multiplier effect is infinite, which is effectively the same as creating money ex nihilo.
complexring, i love your name; and I've been impressed with your stuff; I added you to my green-list of good authors and articles, here. But I'm commenting to thank you for your perspective. I recently wrote about #wealth-distribution but with much less elegant math.
you just made me 800 steem and my post go viral, thankyou
I assure you that I did nothing of the sort.
Is this supposed to be a bad thing? You get that (at least in the US) excess reserves are held at the fed, and earn interest paid for by taxes, right?
Also, the reserve requirement doesnt really effect how much a bank can loan out. At least in the US, they can simply borrow from the fed if their reserves are short. Thats why when the fed hikes the prime rate, everyones consumer rates go up.
I dont really get why youre calling money loaned out "funny money" because its not sitting in a bank. If there is a problem with fractional reserves, its not that the loaned out money is "funny money" its that the balances of the account holders are funny money.
For example, when company A deposits 100M into the bank, then the bank loans out 90m, company A has an account allegedly worth 100M, but the bank only has 10M to cover it. But the 90M in company B's pocket is completely real (until he puts it in a bank).
THis is problematic if the bank is making irresponsible loans, like during the housing bubble. Because if the recipient of the loan isnt paying the loan bank.
At the end of the day, nothing is being created though... the assets and the liabilities always zero out. It just doesn't seem that way on your chart because youre ignoring the liabilities.
Your chart is basically just the missing dollar riddle, except times 90M
Also ftr the money multiplier effect is an absurd myth
here ill fix it for you so it makes sense sum
etc etc... nothing is being created, it all zeroes out... man charts are hard, but you get the point
What do you mean that nothing is created? Where was that 90% that is loaned out to begin with? I understand that it's a record in a balance sheet. But to claim nothing is created (even ever, as you state by keeping track of assets and liabilities --- you should aggregate reserve with assets, as these are still assets being held on hand by the bank) by using accounting tools is but another way to misguide people who do not understand mathematics.
Yeah... i get that the reserve is part of assets... i seperated it out to show where the money comes from.
As to your question, "where was the 90% tht was loaned out" It was on deposit. then it was loaned out. I dont really get what youre not seeing.
private school 5 or public school 5? couldnt help myself
Ill be honest with you, i really don't know how i can explain anything to you. If you believe that balance sheets are a scam created by the international banking conspiracy and basic accounting is just a fairy tale to exploit the disenfranchised masses, i don't even know where i could start.
Its like if i was trying to explain electricity to someone from the 5th century who thought that any explanation for natural phenonema that didnt involve evil spirits was a ploy of the devil... there has to be at least some kind of common ground.
Im not trying to talk down... i just don't see how someone can be convinced if hes willing to dismiss anything that doesnt agree with his preconcieved notions as some kind of sinister conspiracy.
I could put a bunch of big numbers in a chart and jump up and down yelling conspiracy! conspiracy! that seems like the kind of argument that might win over a five year old.
And explain to me like I am 5 how there is no money multiplier effect when the total amount that is loaned out and in circulation is more than the total amount that was originally borrowed from the Federal Reserve?
I don't really get what you're not seeing about how that isn't money multiplication ...
Not in a closed system, no. But the economy isnt a closed system. Lets say im SigmaBank, instead of Sigmajin. And i run the first national bank of steemsville. In steemsville, there is a 100% reserve, so i can't lend money on my deposit account balances. I have company B in my loan office and they want a 100000 steem loan. I want to write the loan. Im fucked, right? 100% reserve. My deposits are spoken for.
FOrtunately, I know complexring. Complex is rich as all hell and he has 300K steem on deposit. He has millions of dollars in steem that he cant possibly use all of. So i say to complex, "why don't you take 100K steem out of your bank account, and give it to me. Ill write you an IOU, lend it out, and well split the interest."
You know im good for it because im a fucking bank... its not like im going to run off. If you didnt trust me, you wouldnt have 300K steem on deposit in the first place.
So you give 100K and i loan it to company B, then i write you an IOU for 100K plusinterest and pay you back as they pay me. So you get the principle payments, plus half the interest payments, and I get half the interest. Yeah, you personally might not be down, but in the wider economic world, there are absolutely a huge number of rich people that are down.
Now lets say company B isnt using the whole 100K steem they borrowed, they can make the same deal with me that you did so i can write a loan to company C. The only difference between this scenario and the one you present is that the banks liabilities are now in the form of IOUs, not in the form of deposit liabilities.
But it gets even better... because you know that IOU i wrote you, you can actually sell that IOU to someone else. Its called a debt security... and as long as sigmabank hasnt fucked up its credit, youll be able to sell it for probably nearly full face value. So lets say the 100K steem was for a house, and the 30 year mortgage repayment was slated to be around 200K steem.... your IOU is for 100% of principle, and 50% of interest, or 150K... youll be able to usually get between 110 and 125K on it. Which, if i can find another borrower, you can just lend back to me.
Like your scenario, it depends on the idea that a company would be willing to borrow a lot of money, then leave most of it in the bank, so that the bank could loan it out again..... the only difference is now they are explicitly loaning it to the bank, rather than simply leaving it on deposit.
So ... how does this all relate to loaning money to a bank and the bank loaning it out to others with respect to money multiplication, as per the definition that it is any increased supply beyond the original amount borrowed from the central bank.
also note that the primary difference here is that you would consider your Steem as already part of the money supply, even though you arent actively using it. Whereas you consider central bank money as coming in from the outside.
But all youre showing at the end of the day is that if enough people are willing to borrow money, then leave borrowed money sitting in the bank, that the bank can make a killing lending out the same borrowed money over and over. The accounting is different with a 100% reserve, but it depends on the same thing... multiple companies being willing to let the bank hold money that they borrowed.
Further side note... this is why when the fed wants to decrease money supply, they don't hike up the reserve rate, they hike up fed interest rates... that way its more expensive for banks to borrow money, so they have to be more selective about who they lend it to (or they have to charge more interest) so the demand for loans decreases.
I can't reply to sigmajin because of nesting limits, but I don't think the Federal Reserve has the interest rate set next to nothing right now because they want to. Their quantitative easing plan was to make lending money cheaply to avoid a prolonged recession (or Great Depression 2.0) but now they can't raise rates again because the US government will not be able to pay up. Think of how much interest 20 trillion dollars will rack up with a higher rate.
@theabsolute yeah, they definitely want to... I dont think its wise, but its definitely policy. They spent most of the first half of this year banging the NIRP gong. Its dead now, but if trump wins, i doubt itll stay dead (and tbh i dont think hillary would necessarily be against it either)... right now, everyone is terrified of a recession... like if politicians thought it would help, or even thought that the electorate thought it would help, i could easily imagine them sacrificing people like in the shirley jackson short story. .
The ECB and japans central bank both have NIRP right now.
Excellent post once again.
You may as well assume that all cash loaned by the bank to one contractor is effectively put into a new bank account. The reason is that the contractor pays for services, employees, goods, etc. and that these other businesses in turn put the money in their bank accounts. So, you may as well think of it in aggregate.
Now, I will say that not everyone puts money in the bank, and that diminishes the effective money multiplier rate as that amount of money cannot be used for loans in the next cycle.
Explain to me how the money multiplier effect is a myth? Are you saying math is absurd? Often it is, but I don't see how in this simple example of an infinite geometric series.
The fact remains that there is more money available than the US Treasury Notes that assure the Federal Reserve the US will pay them back. US Treasury exchanges 100M US T-Notes for 100M FRNs. Effective supply is perhaps 500M (due to not every $ going back to the bank to continue in the next cycle). At the least, the effective supply is > 100M. How is that not a multiplier effect?
I want to make sure im understanding -- your beef with the system is that there aren't enough physical currency notes to cover the companie's debt/liabilities?
You avoid my question.
Also, I never claimed to have a beef or not have a beef with any system but rather prefer an informed populace when it comes to basic mathematics and how any system uses the ignorance of the majority of a population to benefit the minority who do understand it. Part of that is the educational system that we have and doesn't incentivize teachers to make students question everything.
ALso, as to the increase in money supply based on lending being based on a math phenonemon. It is, just not the one you think. Yes, absolutely, the money supply increases because banks lend out money. But that would be true even with a full 100% reserve. Lending creates money.
Take fractional reserve out of banking, and force banks to lend entirely on capital... do you know what you get? We do have a system like that in the US. 10 Steem to the first one that can figure out what it is.
missed your reply...
anyway infinite credit market.
Lets take your MM effect to its logical conclusion. The UK. No reserve required. The MM is infinite. Or nearly so. RIght. But they do not, in fact, have an infinite money supply. Why not? Because there are not an infinite number of qualified people looking to borrow in infinite amount of money. Because the amount of money lent vs the amount of money deposited is a function of the market for credit.
In the US, there are legal requirements for who banks can lend money to and how much they can lend to those borrowers. A bank will lend exactly the amount of money for which they can find qualified borrowers. Its a market equation that has nothing whatsoever to do with the required reserve.
So your bank zero, lets say it could find qualified borrowers to lend out exactly 90M. And lets say the RR is 10% and the bank has 100M on deposit. SO they lend out the 90M, just like in your example.
Now, lets say the RR is lowered to 5%. THat does not automatically create new borrowers. The fact is that theyll still lend out the exact same amount. 90M, the amount of money they can sell. The demand for credit has not changed... theyll lend out the same 90M.
Now, lets say that that the RR is raised to 50%. You know how much money theyll lend out? Still 90M. They'll borrow enough to make their reserve. If they have qualified borrowers looking to borrow 90M, its happening. Period. You could set a 150% reserve, and its still happening.
The required reserve rate simply has no effect on money supply. You think it does because youre not getting how moneylending works. You think the system is way less complicated than it really is.
TO put it another way, imagine that your first business,, the one that gets the $100M. Imagine that the CEO picks up the cash, is on the way to bank 0, when he gets overtaken and devoured by a pack of cannibals. They eat his flesh and burn his money with his bones.
SO the 100M deposit never happens. The loan officer in bank 0 is sitting at his desk. The next company ceo comes into bank zero. What do you think happens?
Do you think CEO B walks in, and the bank officer has a bottle of lube in one hand, a porno in the other, and he says "Well, im terribly sorry, but we didnt get enough deposits today. So, although youre perfectly qualified to borrow $90M, instead of lending it to you, which is the whole way my company makes money, im just going to spend the day masturbating?"
Of course not. Hes going to lend CEO B the goddamn money. Because thats his whole purpose. And this would be true regardless of the reserve or money on deposit. Because, say it with me, banks don't use deposits to fund loans.
Before someone points it out. Yes, those legal requirements are often poorly formed, laxly enforced and if they worked properly, the banks wouldnt have needed to get bailed out. I dont think the system is perfect, or even good. I just think its not as described in this post.
As I cannot reply directly to you, due to nesting comment limitations, let me say that the purpose of the headline was to be an attention grabber. Did I ever say that I (personally) had a problem with the system -- or was I relying on the marketing of the title to entice people who do have an issue with the current paradigm -- to take a peak. If the result is that I am able to teach some basic mathematics to people and how it applies in an area of society that affects them daily and let them draw their own conclusions ... then wonderful.
Regardless, if you can agree with that definition of money multiplication, as in any increase in the monetary supply beyond the initial amount borrowed, then, I can assure you that this increase in the monetary supply can be solely attributed to a mathematical phenomena.
I don't follow your claim that I assume an infinite credit supply -- or I am ignorant of the economic terms.
Please, enlighten me.
Also re beef with the banks. Fair enough but when youre calling them crooked, youre clearly trying to make a point... and clearly trying to inject a value judgement.
THat's fine, but using that language then retreating behind "oh im completely impartial. Im just doing math." is trying to have your cake and eat it too.
Tired of Jason having sex with beagles and molesting children?..
then read this completely unbiased article about math.
Yeah, im saying something about jason, even if im not saying it... and i think you know that.
Replying here due to nesting. No. Credit unions (at least ones in the US) fall under the same "depository institutions" category as banks... they have the same reserve requirements.
I gave up on getting an answer and answered elsewhere in the thread already. I would have accepted loansharks or payday loan places like the money store.
point being that if you want to get a loan thats not based on deposits, and comes directly out of the lenders pocket, its possible. But the terms are going to be way crappy.
looks like you did alright on that post about the bankz guy
No, im not saying that math is absurd. I'm saying that the "money multiplier effect" is an absurd misinterpretation of mathemtatics. And economics. and banking. And pretty much everything. Similar to the absurd misinterpretation of mathematics that lead the poster above to pose that the sum of all positive integers is -1/12.
The model is simply flawed. You make a whole bunch of assumptions that aren't true (an infinite credit market being the most grievous). This is a popular gong to bang for the occupy wallstreet set, so numerous detailed explanations of why this model is bunk have been written time and again.
If you google "money multiplier effect idiotic sophistry" or "money multiplier effect myth" youll find quite a few of them
Being that my -1/12 comment is thrown in here, I would like to (for the sake of respectful argument) ask why is it that you think you know the correct interpretation of mathematics? Zero divided by zero is equal to what? Explain how Euler's identity (e^iπ=-1) makes sense. Hell, I even read the article you mentioned from Scientific American and it doesn't really dismiss the importance of the -1/12 answer to the sum of positive integer problem. It's kind of like Bill Clinton debating the definition of "is" is. If somehow that answer is popping up in quantum mechaics or the Casimir force, then it isn't something you should just throw out as being nonsense. Maybe it's incorrect to say that it "equals" -1/12, but it does seem to be interesting. I'm not a banker, but my argument of investing $500 vs. sitting on it is valid, and that $500 could have a ripple effect through the economy.
I think I ran into my limit of replying to replies on this thread, but I would like to add @sigmajin that yes I am still defending that solutions to infinite series are not nonsense. We all learn math like we learn science. You probably learned that atoms were the smallest thing, maybe then you learned that those were made up of smaller things, then possibly you learned about quarks and the rest of the known subatomic particles. Did you tell your science teacher that they were wrong because you previously learned that atoms were the smallest thing? Or did you accept that maybe you were given the best way to understand what you needed at the time you were learning it and now you were going a little deeper in the way the world works? The same with infinite series. How could you pass calculus without being at least a little humbled by what you think makes sense and what the numbers show don't always line up? You're basically adding an infinite number of rectangles with zero width when you integrate, but you get the right answer. Fractional reserve banking means that banks can loan out more money than deposits they take in. When the economy grows, then the bankers are happy. When people spend money, it has a positive effect on the economy. But, when people (or businesses or governments) are unable to pay their bills because they don't have enough savings and there isn't enough new money coming in, then you have a collapse. People and businesses may file for bankruptcy. Governments may try to print their way out of it, but it ultimately can make the damage much worse. Pretend I'm a bank. I loan money to my friends. I only loan the amount of money that I have in savings. I charge them 10% interest on my loans. I can only get back my $100 plus the $10 interest. Say I'm a fractional reserve Bank. I have $100. I can loan $1,000 to my friends because I can have IOU's. Money comes in different forms. There is not nearly the amount of paper (or coins) that there is in debt and 1's and 0's in the economy. Some wouldn't even call the dollar money anymore because it isn't backed by a physical commodity like gold, silver, oil, etc. It's fiat currency because the US government says that it has value.
Im actually not a huge math guy.... I took business calc and have some specialized stat knowledge from my years as a poker player, but its not like im good will hunting or anything.
But i think a good place to start is understanding that its not a matter of interpretation.
Another good place to start is not using quotes around the word equals like its subject to multiple meanings or interpretations.
OMG youre not really defending that still are you?
Yes. Its exactly like that. Thats why bill clinton looked so silly and evasive. Because he was posing that there were multiple interpretations to word with such a clear cut and obvious meaning.
So for example, if i say "The some of a series of positive rational integers is always going to be a positive rational integer"
ANd you say "that might be true, it all depends on what your definition of is is. WIth the right definition of is, the sum might be a negative fraction" then yeah total absurdity follows.
I duck duck go'ed the money multiplier effect myth. From mises.org :
This is the type of misdirection that keeps the public ignorant in understanding that any money multiplication effect, as it occurs from lending without usury, makes no difference if the reserve requirement is met a priori or a posteriori.
In other words, the effective mathematical difference is zilch, if a loan is made from deposits (as in my example) or from bankers making rational banking decisions as to creating loans and then loaning from a Central Bank to meet reserve requirements.
The money multiplier effect still exists in either scenario and is based on the mathematically sound principles of convergent series whose elements in the sequence are finite partial sums.
Now even if this is not a perfect infinite geometric ratio in the real world, the implications of how this model can be easily seen with how money is created, regardless if loans are done via rational business decisions vs. loaning of new deposits, are readily seen by any casual observer.
Well, it can't be a fringe theory, it comes from the mises institute...
The mises article is actually supporting the MM effect as a real thing... I posted a list of links that included that one for the sake of fairness, as its the best one that actually supports the money multiplier theory.
The Mises article quote is a characterization of the claims of what those who advocate the myth of MM ... my apologies for not making that abundantly clear.
Regardless, the fact of the matter is that you did not adequately address my concerns of money multiplication, due to a posteriori or a priori meeting of reserve requirements, and how this relates to a limiting value in an infinite sequence, in which there are an infinite elements of the sequence, each of which is a finite partial sum.
Let us define money multiplication to be any increase in the monetary supply that is beyond the initial amount borrowed from the Federal Reserve.
Can you agree to that definition?
If all of the money is created by making bank loans then all the money in the economy is never enough to pay back all the loans plus interest, right? It's the interest that really kills it. The bank puts a milion into the economy but expects to be paid back 1.1 million. This can never be balanced out. Thus the banks are always foreclosing on property and growing richer (thriving on booms and busts) while individuals and small businesses go bankrupt.
Yes. The interest on loans makes it so that the total sum doesn't add up to 0 and as such is not a zero-sum game. Assuming everyone is honest and pays back the banks for any loans, they always have a net gain (minus losses paid to employees).
and interest paid on deposits.
Its deeply tragic, i know. In a perfect world, banks would just operate at a loss. then again, why just banks? grocery stores could operate the same way. they could sell food for exactly the amount of money that they bought it for, pay employees and rent and other expenses out of pocket and operate at a loss too.
oh to live in such a nirvana.
No, i mistake your statement that the banking industry is crooked as an indictment of the banking industry.
You have made no observation of fact. You created a hypothetical scenario where the money supply is multiplied by FR banking that was based on a misunderstanding of how banks lend money to consumers, businesses and oneanother.
And there's no talking you out of it, because you think accounting is a scam.
Its really a shame that posts like this end up on the front page (and will be pinned there for weeks now)...
I've never seen any academic claim that asking a question is the same as making a statement.
I reject your hypothesis that I made any blanket claim about the banking industry being corrupt.
All I did was ask if others are tired of it being corrupt.
That question does not necessarily preclude the assumption that I think the institution is corrupt, but rather anyone who answers the question in the affirmative, i.e. "Yes. I am tired of the corrupt banking institutions."
I never stated such a claim.
I think you mistake my observation of facts, and how they relate in an algebraic-geometric fashion to how reserve requirements operate, as an indictment on the banking industry.
It's a way to expect yourself or future generations to pay for things now. So long as the bill is passed down (with some interest, late payments, & fees tacked on) then it grows and grows. It makes people a little uneasy, because we (or some) think America is different. We hear stories about Greece, Venezuela, Weimar Republic Germany, and think those are small countries, they aren't the United States. They had (or are having in the case of Venezuela) a financial crisis, but that can't happen here because of how strong our economy is. I certainly don't hope for financial problems for us (or any other country you might be living in) but I would remain cautious. Maybe it will happen in 10 years or maybe 500 years, but a system that is trying to be controlled by the Fed (or other centralized powers) is prone to failure just like everything else.
"At the end of the day, nothing is being created though... the assets and the liabilities always zero out."
Not true. An asset and a liability are created. During 'normal' conditions they do zero out. But if the party with liabilities defaults then the party holding the 'assets' will experience real losses.
Zenon, was also using the example: "a horse court and Achilles running a whole circle around it" :)
Yes. That, or the tortoise one. They essentially boil down to the same mathematical question, although, I am not sure if the philosophical questions are the same.
Surprisingly enough, there is an ancient Chinese saying (independent of Zeno) which states "Take a stick and each day remove half of it, and it will never be exhausted."
I love paradoxes. Zero's paradox is certainly one of the best, but something that will really blow your mind is the sum of the positive integers. 1+2+3+4+5+6+... is, you guessed it, -1/12. It goes against all rational thinking that it would be such a peculiar number, but there is some solid math behind it. On the topic of fractional reserve banking, I never heard someone put it so eloquently as to call it based on infinite geometric series, but you're right. Even when you take out a car loan, does that mean the bank actually has that money in deposits in order to provide that loan? Of course not. When things don't go well with a currency (like Venezuela currently) then things get a little worrisome for those holding the cash, because as the printing press churns out more and more, inflation skyrockets.
Yes, it does go against all rational thinking. Because it is a hoax. The people that "proved" that basically used the same kind of ridiculous shell game that is typically used to prove things like the money multiplier effect. You can google "numberphile hoax" for more info i think there was a scientific american article about it.
also from another thread
seriously? And you bought that the sum of all positive integers is a negative fraction?
That said, upvoted for proving the point about absurd logic and deficient math behind the money multiplier effect.
Yes, you do have to accept that 1-1+1-1+1-1... is =1/2 which seems a bit sketchy but there are many absurd things in math (and physics) that somehow do seem to work. In a way, of course 1+2+3+4+5.... is equal to infinity, but that doesn't mean thinking outside the box is a bad idea.
It doesn't. But there's two parts to thinking outside the box. You have to be outside the box. And you have to be thinking.
Exactly my point
Umm, yes? the bank obviously has to have the money (or borrow it from the fed) to lend it out.
Banks do not have that money in deposits, which is what the OP is talking about. They (at least in the U.S.) have a reserve requirement of 10%. I'm not advocating for the money multiplier effect or fractional reserve banking, but it is at least similar to personal savings accounts/investments. If I had $500 in cash, I could keep it in my wallet for a month. What if, instead I decided to buy and resell products and at the end of the month I bought gas for my car, food from the store, movie tickets, etc. with the profits? I wouldn't have spent that money if I just held on to the $500 in my wallet. Those businesses (gas station, grocery store, movie theater) all had a little more income because of that. Isn't that what the money multiplier effect is talking about? It is dangerous to not have a something in savings, and too much debt can wreak havoc when the money stops coming in, but I can at least understand the concept of leveraging. Does everyone who buys a house pay cash? Does everyone pay cash for their car? Credit card bills paid off in full each month? No, we rack up debt, which is what the government wants us to do. As long as things keep growing (on the income side as well) then the system works. The problem, as you know, is that there are limits to how long that seems to work.
youre confusing deposits and loans. The 10% reserve requirement applies to deposits. So no, if I have 10K in my bank account, the bank won't have that full 10K in currency at the bank.
But if i go for a loan, and the bank gives me $10K to buy a car. then yeah, they absolutely do have that 10K on hand. Otherwise, they wouldnt be able to give it to me.
Not exactly. You are thinking that it just has to have 10% of deposits in cash on hand at the bank, but it means that they can actually loan out more money than what it has in cash on hand. It's like if you had $1000 in savings, you might be comfortable having a $10,000 car loan because it doesn't seem too risky.
Ya .. I'm sorry, I can't get behind the idea that the sum of an infinite positive numbers with addends that are monotonically increasing with a modulus bigger than 1 adds to -1/12.
I'm not sure if the claim that this sum is negative or finite frightens me more ...
Ha. I know it is kind of crazy. That's part of the fun of math though. I think a lot of people think in terms of basic arithmetic, so even the concept of infinity is understood in a certain way. Maybe my interest in theoretical physics makes me a little too open to these ideas, but it wasn't too long ago (in the scope of human existence) that people didn't even know about infinite series, calculus, or computers. How can we really say that we completely understand infinite series? Ask someone from 2000 years ago what they know about cryptography (if possible of course) and you see what I mean. There is something to it, but what it is, is not yet known.
No. I'm not saying that your claim is crazy. I'm saying that it is flat-out wrong . . .
I even stated why in my response.
There's a lot that we do understand about infinite series, sequences, partial sums, etc.
I suggest a first year graduate course on real analysis.
Okay. I'll concede that I am by no means trying to debate you on the subject, but you do understand that there are some pretty smart people who disagree with you, right? I have a lot of respect for your posts. I think you know a lot about math, but I'm just saying don't cast it aside so quickly. People thought the square root of -1 was wrong logic too, but you see where that went. My field is physics. I need to keep an open mind, because there are some weird things that don't make sense (or are false as you claim) that end up leading to new things that most certainly are not false. Sometimes debating what you hold as truth is where you become the most enlightened.
NOt that im a math guy, but AFAIK, people thought (and still think) that the root of negative one does not exist. And theyre correct.
They use "i" to represent the square root of negative numbers because its useful for figuring certain things out. But that doesnt make it real. Thats why "i" isnt a real number. Its an imaginary number. which is probably why they call it "i".
For example, unicrons aren't real. But the notion of a unicorn in a model might be able to help me solve some sort of problem or answer some sort of question... who knows about what maybe somehting about horse behavior.
THe point is that just because we can represent something thats imaginary and even use that representation to answer a question or solve a problem doesnt mean that suddenly its freaky friday and the rules don't apply anymore.
@theabsolute, I'm sorry. I don't know the people who are disagreeing with me.
It appeared as if I was interacting with someone who had a more innate knowledge about economics than myself and had a legitimate concern about something that I wrote (which, I, admittedly, hold no real knowledge, beyond that of a passing mathematician). You should've seen that at the end of the day (via the course of the dialogue that went on for several hours, if you were following), when we were both able to obtain an agreed upon definition what is money multiplication that we were able to better ascertain the nature of how it is caused.
My initial assumption that it only happens through the lending of deposits, which I conceded to be false in evidence to the contrary, modeled the growth as an infinite geometric series.
Even though my initial assumption was wrong, the same mathematical analysis and model can be applied to fractional reserve banking at large, assuming everything is fixed.
I was presented with a well-laid out real-world example that described the process in such a way that both my intellectual adversary (adversary -- is that the proper word? probably not) agreed.
I understand your field is physics, and you are right that you (or anyone) should keep an open mind.
There is a lot that doesn't make sense. I agree. And intuition can lead one astray.
But if you do the math (and also listen to those who have experience in their disciplines and experts in their field, or don't listen if you do not believe them...) you can tackle the situation with a bit more clarity.
In response to the imaginary number comment ...
Imaginary numbers are a HORRIBLE term.
There is nothing imaginary about the square root of -1. It exists. And is necessary element in what is known as an algebraically closed field.
That is to say, all polynomials (which by definition are finite) which are defined over an algebraically closed field (complex numbers being one such example) have roots in that algebraically closed field. And if one "imaginary" number is a solution, so is its conjugate.
Basically, the complex numbers are a different beast than real numbers, although, under an appropriate isomorphism, R^2 is the same as C.
You can take this a bit further.... How does a bank know if a loan is going to get paid back and how are defaults taken into account?
...Are the chances really more than 50/50? If it's 50/50, how will they make up for the money they lost- and that didn't get paid back?
You all should know about the Martingdale betting strategy and how you can use it to win at Roulette... unless you get things wrong a few times too many in a row. Then you have to do "Quantitive Easing." Eventually all banks and governments increase their money supply to make up for their mistakes... but that's also only a part of the whole story.
This story has several more chapters.
As a side note, this has been going on for about 100 years.
The very first time this happened (at least in the US) was 7 years before the federal reserve existed. Almost 100 years to the day before the start of the housing crisis.
The first time it happened was called "the panic of 1907" or the knickerbocker crisis and it was by far the most interesting and dramatic iteration of the cycle... I don't have a list with me, but theres a few good books on it that ill post later. The wikipedia entry for it isn't terrible either. The panic of '07 is why we created the fed in the first place.
the early 20th century was pretty much awesome in every way. If you think economics is dry, but you want to learn the basics of it, the economic history of the early part of this century is the place to go.
As a further sidenote: JP Morgan is the hero of this particular story (though i think his bank is shitty now)
He pretty much singlehandedly stopped the US from becoming a third world nation. The financial system was falling apart, and he basically stepped up and said "im going to be the LOLR", 7 years before there was a federal reserve.
I encourage you to continue with this! I'm not entirely sure where it would go.
Incidentally, and this is the last ill intrude on this thread.
If youre reading this thread, you should know, if only to make sure your don't look silly, that pinned to the front page or not, complexring is advocating a theory that has been long since debunked, and isnt taken seriously by anyone of standing in economics, banking, business or finance.
banking is not a terribly exciting subject for me, and if i was going to write something, i would actually research it. And I don't get paid 4K per article I write.
Point being, its not really worth the effort for me on a subject i don't really find that interesting. The same way it wouldnt be worth the effort for me to debunk a claim that the earth is flat.
But here are some articles about FR banking and the MM effect. Its really really easy to buy into a crackpot theory, but IMO its worthwhile to do the reasearch and educate yourself. The last one is actually an OK defense of the MM effect as a real, if overstated force.
j
http://ommekeer-nederland.nl/documents/standard-poors-rating-services-lending-creating-deposits.pdf
http://www.realclearmarkets.com/articles/2016/06
http://positivemoney.org/how-money-works/advanced/the-money-multiplier-and-other-myths-about-banking//29/banking_and_the_laughable_money_multiplier_myth_102248.html
https://www.federalreserve.gov/pubs/feds/2010/201041/201041pap.pdf
https://mises.org/library/money-multiplier-myth-or-reality
I direct you to my reply on the money multiplier effect I duck duck go'ed and came across the mises page.
Probably best to respond here ... silly nesting rules on comments.
You obviously just figured this out recently. I'm looking forward to your next post when you explain the other half of the story, the one that explains why society hasn't collapsed yet and why this works.
Money is just a communication medium. A token. It's a bit like oil in an engine. It's a bit like water in a fertile field... too little water and everything dies. Too much and everything dies... the jackpot question is - how much do you need? How much is enough?
Of course - all this is difficult to grasp when you were born thirsty, and have been walking around thirsty all your life, only to find out that people who came before you invented the water you're so desperately craving.
Cryptocurrency blurs the lines between "real money" and "toy money". It makes it easier to see that all money is toy money, but that toy money can be useful... as long as everyone knows what it is, and use it as such.
I realize I'm a bit late to the party, but awesome explanation. I have heard the half the distance to an object idea before and understand limits, but never thought of explaining it in the way you did - that will be an awesome kinesthetic way to show it. So thanks for that. As for the fractional banking - I got it enough to follow along, but can't offer you any insightful comments. p.s. I just used that same Jackie Chan pic on a post! Without the mind blown part and I swear I didn't see it here first even though I posted a week after you. He is awesome.
It's what we all dream for. To be trending in less than 27 minutes :)
It's only partly true that they create money from nothing. They create money from us
Oh, so true.
It's so difficult for my(
Did you guys know that Federal Reserve is not owned by the Fed nor People. It is owned by PRIVATE BANKS -- it has shareholders.
No its not. Theyre not that kind of shareholder.
There are different kinds of ownerships......the Fed and all central banks are controlled by offshore bankers. They set policy etc and they are not accountable to any government. That is ownership. And through the central bank scam, they can dictate policies in behind the scenes through their network of cronies they have in government, corporations etc. Take that to the global level with the IMF and you have the makings of global control. Central banks should belong to the people and have the power to print their own money, not borrow it with compounded interest attached. That purely a scam and a power grab. "Give me control of a nation's money and I care not who makes it's laws" — Mayer Amschel Bauer Rothschild.
ummm well yeah i guess.... so is it the illuminati controlling them or the bilderbergs... or skull and bones.
The fed is controlled by a board of governors appointed by the president. And congress has oversight over them.
What i believe Jasonmcz was talking about wasnt the trilateral commission or any of that kind of craziness, but the notion that all banks are required to own stock in the fed in order to be banks (at least, all banks in the US)... however, ownership of that stock does not give them any kind of control or ownership of the fed. Its just non transferable, restricted stock that theyre required to buy in order to participate in the system. Sound familiar?
Rather than make me watch the whole 9 minute video, you wanna just direct me to the quote that youre taking out of context or misinterpreting?
I will let Alan Greenspan explain how much control the government has over the fed......zero
I don't care about the stock and neither do the people running the scam. Its about control.
Very good post, thank you for the information. Namaste :)
Holy shit, my vote just shot this post up by $40.
How did I do that? I need to do this to my own posts, haha!
Vote latency.
Ah damn. Lol. I thought I was on to something here.
how can i did same thing too
nice post @complexring
vote done
Oh god, these sums are just outrageous!!!!!
Spot on! That's the entire problem with the system. There should be no virtual money created out of thin air. When the lenders want there money back - and that happens when people panic - it's going to be a catastrophic crash.
wow, incredible article. cant believe i missed this one.
appreciate your vote on my post here:
https://steemit.com/food/@knozaki2015/i-travel-the-world-part-10-tokyo-tenmasa-ozashiki-tempura-maranouchi-building
started following you, and will give an upvote once my voting power is back to 90% so you get a couple of bugs from my vote.
I'll just upvote and pretend I understand what you wrote!...
Thank you my brother. Could you please do the same for me?
Blowing my mind - math part I admire to no end. I wish I had been better at math. It's a language that would be good to understand. Your article has sparked my interest in trying to figure it out.
Follow me in my introduction to cryptography which will lead to some of the underlying mechanics of cryptotokens. Going slow. We're starting out with group theory first! Maybe doing groups first is a bit fast ...
complexring yes I Am very tired of the crooked banksters being allowed to make our money out of thin air.And dam mad at of government for allowing this.Oh and I just made you 212 dollars with my upvote I dont know how but it did and your welcome
check out my latest blog here
https://steemit.com/trading/@me-tarzan/the-steem-bull-when-will-he-return
That is mathmatic proof. Money can not creat out from thin air. Very solid math backup. Thanks
I think the best solution to end this fractional reserve and federal reserve banking system is to enact Article 5 of the US Constitution and to create a new economy based on crypto-currencies. It is the only way to legally over throw the financial powers that be and take back the economy from central bankers. After reading this article, I would be interested if you would give it a read? https://steemit.com/money/@titusfrost/how-to-end-the-federal-reserve-using-article-5-of-the-u-s-constitution-and-crypto-currencies
owhh
The biggest problem is that offshore bankers, who basically own our central banks, print our OWN money and then lend it back to us with compounded interest attached to it. Combine that with fractional banking and you get the nightmare financial system we currently have all over the world. The power to print money needs to return to the people and their governments. They would be able to print money and spend it into existence with no interest attached. Giving the power to print a nations money to private individuals is a recipe for tyranny and destruction.
I love that right when I start asking myself "what's this got to do with money?" I scroll a hair down and see that asked lol. Well done.... Compelled me forward
just 3 hours,,you have $3,962.32
it's very fantastic...please give me tutorial get the $ in steemit like you
thank u
Its not about the money man. Share something that is valuable to you
I had those words in there just for you, @clevecross.
Welcome to the strange reality of my world. These things happen so often I don't bother keeping track anymore.
I can tell was for me (speling gayve it way)
Fraction reserve literally gives bank ability to make money out of no where.
Keep up the great work @complexring Upvoted
I also want MONEY!
Great post. I suggest everyone should watch The Money Masters by Bill Still that goes over the history of the global central banking system and america own banking history. Can be found at MoneyLie.com
Nice write up fractional reserve banking is the ultimate ponzu scheme.
wow nice post, the banks never lose.
excelent post
Excuse me while I change my pants.
You just blow up my brain with math. ^^
Great post. Monetary systems are broken.
Interesting how reserves of $100,000,000 is "backing" 9 times of the funny money floating around.....
This is my favorite post of your mathematics series, btw!
Speaking of fun facts in regards to the Bank of Canada - there is an ongoing lawsuit against it which is of course suppressed by mainstream media - I have blogged about this quite a while back: http://empower2inspire.com/the-underlying-goal-of-the-bank-of-canada-lawsuit
Yes, but this case will fly like a lead balloon. Trudeau is in power and his DAD is the one who gave the bank away. You would think that would be one of the first things he fixed. Not a chance, won't even discuss it.
This become even more interesting when time comes to repay all this chain back.