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Simple Fractional Reserve/loan Default Question


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the trouble with using the fractional reserve model is that it gets people saying things like:

"the bank takes in 10 pounds and lends out 9 etc."

it makes no distinction between capital and ledger balances, and in modern banking there is a huge difference.

capital reserve requirements that we use today say that if you have 100 in Capital, you can make 1000 in ledger loans (on average) PERIOD.

they aren't limited to making 90 loans until they get up to 1000 through re-deposits etc.

reserves are a fraction of what it has taken in. it doesn't mean they can lend out multiple times that amount.

if they could, the wiki page would not say 2 ways it would say 3 and then give an example of a bank creating multiple times its capital or multiple times its deposits. but it doesn't because they can't do that, the whole idea of it is ridiculous, it would be free money that they wouldn't even need back.

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for the purposes of the credit bubble mess we're in you dont have to define money, you just need to understand why its happening.

its not just the banks who've increased the 'money supply' but also the store cards and 'pay next year' schemes, etc, etc. take it to an extreme level and you could sell sofas and say "pay me when you want", youll sell loads of sofas/tvs and as long as you can find investors dumb enough you could securites the future receivable cashflows to finance the business.

so you dont even have to be a bank to increase the 'money supply'.

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reserves are a fraction of what it has taken in. it doesn't mean they can lend out multiple times that amount.

if they could, the wiki page would not say 2 ways it would say 3 and then give an example of a bank creating multiple times its capital or multiple times its deposits. but it doesn't because they can't do that, the whole idea of it is ridiculous, it would be free money that they wouldn't even need back.

That's right.

They don't want money, they want your labour, time and assets, which they acquire through bankrupcies and repo's.

I mean..why the ****** would a man with a money printing press want any? :lol:

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just out of interest.........what did they say?

Not a chance.....but could I still repay them?

I respionded by saying I was happy to repay them, providing they gave me a copy of the accounting, showing where the money came from.

We went back and forth for a while with me asking various question until eventually I was deleted from their system.

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Not a chance.....but could I still repay them?

I respionded by saying I was happy to repay them, providing they gave me a copy of the accounting, showing where the money came from.

We went back and forth for a while with me asking various question until eventually I was deleted from their system.

i dont think youd find the answer at your local branch somehow. not even if they had an emergency staff meeting would they be able to work it out. it would be a case of "Computer says so".

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Not a chance.....but could I still repay them?

I respionded by saying I was happy to repay them, providing they gave me a copy of the accounting, showing where the money came from.

We went back and forth for a while with me asking various question until eventually I was deleted from their system.

I think that's just a lie. If you could provide some proof of it, I'll gladly apologise. But I don't believe it for a minute.

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reserves are a fraction of what it has taken in. it doesn't mean they can lend out multiple times that amount.

if they could, the wiki page would not say 2 ways it would say 3 and then give an example of a bank creating multiple times its capital or multiple times its deposits. but it doesn't because they can't do that, the whole idea of it is ridiculous, it would be free money that they wouldn't even need back.

but WE DON'T USE FRACTIONAL RESERVE BANKING.

we use CAPITAL ASSET RATIOs.

its like you are saying "we are bankrupt because we sold all of our gold"

and we say, "we aren't on the gold standard anymore so that's not relevant"

and you come back with "but we sold all of our gold so wee are bankrupt!!" ad nauseum.

google the basel/basle accords, capital asset ratios etc.

nothing will make sense until you are actually dealing with today's banking system.

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You deposit £100 in the bank. Good for you. it just sits in "your account."

I take a loan out of a bank for say £100 - they monetize my promissory note and call it an asset for £100 so at that point their books have £200 on them.

Then they hand me £100

I have £100

They still have the £100 deposit.

In effect, everyone who borrows from a bank funds their own loan. no depositors money is ever used.

(I shouldnt be getting into this just after midnight) but explain,

although the bank still has the £100 deposit, it also has a corresponding debit of £100 (ie the liability owed to the original customer) so net effect = nil.

deposits proper, or loans made on the basis of 'promises' (what you call 'money creation') creates a corresponding liability on the balance sheet, being the loan/money/credit/promise/digits on a screen/call it what you will, given to the borrower.

the difference is found in the income - the differential between the 'promises' received (in the form of interest payments) and 'promises' paid out to depositers.

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but WE DON'T USE FRACTIONAL RESERVE BANKING.

we use CAPITAL ASSET RATIOs.

its like you are saying "we are bankrupt because we sold all of our gold"

and we say, "we aren't on the gold standard anymore so that's not relevant"

and you come back with "but we sold all of our gold so wee are bankrupt!!" ad nauseum.

google the basel/basle accords, capital asset ratios etc.

nothing will make sense until you are actually dealing with today's banking system.

it's the same principle, it is not creating multiples of them it is lending out a part of them.

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in fact, since they were able to create the level 3 assets, then use them as capital to make more loans against, which were turned into more level 3 assets, etc., they were creating money by all senses of the word.

Loopy lending, round and round

Money and credit, all unsound

What is created?

We could argue forever

Just balanced numbers

Those bankers are clever

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I think that's just a lie. If you could provide some proof of it, I'll gladly apologise. But I don't believe it for a minute.

This is fair comment and as I am not going to provide any such proof i'll have to take the liar thing on the chin with good grace.

I did say ask for yourself though, so please don't take my word for it. DYOR, FEPO and all that.

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This is fair comment and as I am not going to provide any such proof i'll have to take the liar thing on the chin with good grace.

I did say ask for yourself though, so please don't take my word for it. DYOR, FEPO and all that.

I have done my own and never come across anything like that.

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it's the same principle, it is not creating multiples of them it is lending out a part of them.

no, it isn't, it's the total opposite of what you are saying.

it should be easy for you to prove what you are saying though, any quality link with a definition of CARs like you are describing should sew it up for you.

unfortunately you arent likely to find one.

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no, it isn't, it's the total opposite of what you are saying.

it should be easy for you to prove what you are saying though, any quality link with a definition of CARs like you are describing should sew it up for you.

unfortunately you arent likely to find one.

yes it is, first one I came to, showing the same in its example

http://en.wikipedia.org/wiki/Capital_adequacy_ratio

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