Zeitgeist: Addendum (money, banks, etc) - Page 2

On October 05 2008 17:48 fight_or_flight wrote:


This man later changed his mind. (see first link in the OP for the discussion)

Anyways, money is only created if you buy that food on a credit card. The only way money is created is if its borrowed. This is because the bank loans out money based by backing the loan with someone else's deposits.

I deposit $100, the bank loans out $90. Someone else deposits $90, the bank loans out $81, so on and so forth. This is a geometric sum, which adds up the the money multiplier from the wiki entry.

edit:

The problem is that they collect interest on that money. Just increasing the money supply isn't necessarily a bad thing. But, since the money supply is actually based on loans, it must be paid back with interest. But how do you pay the entire money supply back with interest? It is all the money in existence after all......the answer is that more people must take out loans to increase the money supply. So the money supply increases exponentially, which is unsustainable. See graph below for real data. Note: only currency is not debt-money.
http://en.wikipedia.org/wiki/Money_supply#Fractional-reserve_banking



The fed stopped publishing M3 in 2006.

What happens when it stops increasing exponentially? That means people are defaulting on their loans.

On October 06 2008 00:56 Hawk wrote:
Oh goody! More whacko bullshit!

Im surprised this crap didnt get closed yet

On October 05 2008 18:30 mahnini wrote:

you are SUCH an idiot.

by your definition anybody doing any kind of service is creating money. i knew a guy in elementary school who at bugs and shit for money. he didn't even have starting capital, he ate bugs and people gave him money. did he create money?

the guy who bags your groceries, did he create money? indian IT guy on the phone? guy who mows lawns? mailman? teachers?

THESE ARE ALL SERVICES, YOU PAY AN AMOUNT OF MONEY BUT GET NOTHING TANGIBLE IN RETURN. OMFG EVERYONE IS CREATING MONEY.

On October 06 2008 01:39 ahrara_ wrote:

for the record tho, this is not just *whacko bullshit*. it's presented in a terribly retarded and ghastly way, but the ideas backing fight's critique of the modern banking system are quite sophisticated to the point I don't think anyone has a really good grasp of them in this thread. and i mean ANYONE.

On October 06 2008 01:54 mahnini wrote:

No. It is COMPLETELY WRONG. DID YOU SEE MY FIRST POST? HAVE ANY OF YOU READ THE MODERN MONEY MECHANICS TEXT THAT I LINK? OF ARE ALL OF YOU PULLING SHIT OUT OF YOUR ASSES. I'M NOT ARGUING THE FACT THAT THE FED INJECTION CAUSES MORE MONEY TO BE PUT INTO CIRCULATION BUT IT IS NOT MONEY CREATION. IT IS A TRICKLE DOWN EFFECT OF INITIAL FED CREDIT (THIS IS ACCOUNTING CREDIT AND I'M NOT EXPLAINING TO YOU TARDS ANYMORE) -> LOAN -> DEPOSIT -> LOAN -> DEPOSIT-> ETC

THE MONEY IS TRICKLING DOWN DUE TO THE FRACTIONAL RESERVE SYSTEM OF HOLDING 10% PER TRANSACTION ACCOUNT. QUITE SOPHISTICATED? YOU MEAN MY REBUTTAL IN THE FIRST POST WHICH NO ONE ADDRESS AND NO ONE CURRENT IN THIS THREAD EVEN UNDERSTANDS IS INCORRECT? LOL?

MONEY IS "CREATED" WHEN THE FED BUYS US BONDS AND INJECTS MONEY INTO THE SYSTEM, THIS IS HOW MONEY SUPPLY IS MANAGED. MONEY IS NOT CREATED THROUGH INTEREST WHICH IS ESSENTIALLY A FEE FOR SERVICE.

I'M NOT CLAIMING TO BE THE KNOW ALL TELL ALL BUT I KNOW ENOUGH TO SEE BULLSHIT AND RETARDS WHEN I SEE THEM.

On October 06 2008 01:54 mahnini wrote:
MONEY IS "CREATED" WHEN THE FED BUYS US BONDS AND INJECTS MONEY INTO THE SYSTEM, THIS IS HOW MONEY SUPPLY IS MANAGED.

On October 06 2008 01:54 mahnini wrote:
IT IS NOT MONEY CREATION. IT IS A TRICKLE DOWN EFFECT OF INITIAL FED CREDIT (THIS IS ACCOUNTING CREDIT AND I'M NOT EXPLAINING TO YOU TARDS ANYMORE) -> LOAN -> DEPOSIT -> LOAN -> DEPOSIT-> ETC

THE MONEY IS TRICKLING DOWN DUE TO THE FRACTIONAL RESERVE SYSTEM OF HOLDING 10% PER TRANSACTION ACCOUNT. QUITE SOPHISTICATED?

Money creation is the process by which money is produced or issued. There are two different ways to create money:

* manufacturing a new monetary unit, such as paper currency or metal coins (money creation)
* loaning out a physical monetary unit multiple times through fractional-reserve lending (credit creation)

Coins are produced by manufacturing metal in a factory called a mint.

Banknotes and bank account balances are financial securities issued by a bank.

Similarly, money destruction, i.e., the reverse of money creation, can occur in two different ways, depending on how the money was created. The destruction of physically created money occurs when coins are scrapped to recover their precious metal content, or when the issuer redeems the securities. The destruction of money created through loans occurs as the loans are paid back.

The practices and regulation of production, issue and redemption of money is of central concern to monetary economics (e.g. monetarism), and affect the operation of financial markets and the purchasing power of money.

In modern economies, relatively little of the money supply is in currency (i.e. coins and banknotes); most is created through lending.

On October 06 2008 05:39 fight_or_flight wrote:

The money supply is actually managed by the fed changing interest rates....thats why you hear about them all the time. The interest rates control the ability of banks to make loans, which controls the money supply.

But you are missing the trick. Since interest is collected on all that money, it is not simply a trickle-down, or constant money multiplier. Because all that trickled down money must be paid back with interest.

So if more new money isn't created, perpetually, people default on their loans. If it was just a constant multiplier (or lets say, a multiplier with no side effects) that would be entirely different.

On October 06 2008 06:43 mahnini wrote:
Look at interest as a static profit and see how little sense this makes.

On October 06 2008 07:09 fight_or_flight wrote:

Lets say it is the bank's profit. Interest can be used for operating costs/profit/making more loans.

However, the same problem still exists. The banks collect interest on the money supply, and to pay it even more money must be borrowed. Thats how the M1/M2/M3 can be so insanely high.

What happens in a system like this is that eventually everyone is in debt to the banks. Sure, its used as their "static" (ever increasing) profit, but what that means is that eventually, in this closed system, banks will eventually end up owning everything. Its not that they're greedy (which they are), its simply the end result.

This is why Thomas Jefferson said this:
"I believe that banking institutions are more dangerous to our liberties than standing armies. If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around [the banks] will deprive the people of all property until their children wake-up homeless on the continent their fathers conquered. The issuing power should be taken from the banks and restored to the people, to whom it properly belongs."

The founding fathers understood this simple concept. The rebellion against Britain was in large part about gaining freedom from their banks. That is why Andrew Jackson fought so hard against the Central Bank, and destroyed it.

Its this simple process of collecting interest on the money supply, which creates debt that can never be paid off (that causes the cycle which is inflation). The banks gain ever more collateral for that debt, until people can't repay (thats the deflation).

The current economic crisis is largely about people not being able to absorb new debt. When people can't absorb new debt, money creation stops, the interest cannot be repaid, and thats how it happens. Americans are maxed out on their credit cards, loans, mortgages, etc. No one can take anymore...we are reaching our maximum borrowing potential.

edit: another way to see why banks will end up owning everything is that when you take out a loan, you must put up collateral. The bank doesn't have to put up anything, only give you money which is actually based on someone else's deposits. So this is a disequilibrium, you give the bank real value, and they write something on their balance sheets.

While they may only be collecting interest as you say (which always increases in the overall system), when you default (inevitable deflation happens), the bank takes ownership of your property. Thats when they really own everything, the interest profit isn't the main focus.

On October 06 2008 07:45 babypo0 wrote:
great chart, mahnini. once you understand the tools and tricks, it's not hard to figure out how it works. i don't know what stops people from putting 2 and 2 together. they're more apt to believe things if the mainstream media resounds it with barely any substantiating facts, than being shows a plethora of history, facts, mechanisms, and charts.

one comment about interest rates controlling the money supply. while that is true, it would be a grave mistake to only point to interest rates. the real culprit is fractional reserve banking. if you hold 100, you can loan out 900 out of thin air, created. if there was no fractional reserve banking and 100 meant you can loan out 100, then no money would be created other than printing, counterfeiting, or if more stuff to back the dollar was found. thus with fractional reserve banking, interest rates control the rate of money supply expansion by simply affecting the amount of loans - meaning the amount that is created. it's not super complicated. you don't need to be a financial guru to understand the basics.

On October 06 2008 07:47 mahnini wrote:

This is simply untrue. We do not need to borrow more money to pay off interest. We can generate value through assets/services and sell them (just like the bank is doing).

On October 06 2008 07:50 mahnini wrote:

This is untrue and was exactly what the video wanted to implicate.

On October 06 2008 07:51 fight_or_flight wrote:

But you have to pay off your debt in their money, greenbacks. They hold the monopoly on greenbacks.

On October 06 2008 07:51 fight_or_flight wrote:

Well not in a single transaction, but the banking system as a whole.

On October 06 2008 07:54 c wrote:

I understand that you pay off debt with money, I don't understand your point.

On October 06 2008 07:55 mahnini wrote:

That is still untrue.