Fiat currency and fractional reserve banking
- Thread starter Renegen
- Start date
Quote from Haroki:
Must be an omen...
Sorry about the other thing too. Brain fade trying to follow the ES.
LOL, if it was anyone but you I'd have cared alot more....
But hey, I didn't know you were wandering these parts, must have been a shock to you to find out I'm a "conspiracy theorist", eh?
lol!
TNG
Ahhhhh, it's no big deal, you guys are basically harmless.
Because conspiracy theories lack readily verifiable evidence, they are not taken seriously by most people.
Many people tend to respond to events or situations which have had an emotional impact upon them by trying to make sense of those events, typically in spiritual, moral, political, or scientific terms.
Events which seem to resist such interpretationâfor example, because they are, in fact, unexplainableâmay provoke the inquirer to look harder for a meaning, until one is reached that is capable of offering the inquirer the required emotional satisfaction.
At other times, the unfolding of complex sequences of events such as political phenomena are explainable, but not in simple terms. Conspiracy theories are often preferred by individuals as a way to understand what is happening around them without having to grasp the complexities of history and political interaction.
Conspiratorial accounts can be emotionally satisfying when they place events in a readily-understandable, moral context. The subscriber to the theory is able to assign moral responsibility for an emotionally troubling event or situation to a clearly-conceived group of individuals. Crucially, that group does not include the believer. The believer may then feel excused of any moral or political responsibility for remedying whatever institutional or societal flaw might be the actual source of the dissonance.
In the late 20th century, falling election participation and declines in other key metrics of social engagement were noted by several observers. For a prominent example, see Robert D. Putnam's Bowling Alone thesis. Those who were most influenced by this period, the so-called "Generation X," are characterized by their cynicism towards traditional institutions and authorities, offering a case example of the context of political dis-empowerment detailed above.
In that context, a typical individual will tend to be more isolated from the kinds of peer networks that grant access to broad sources of information, and may instinctively distrust any statement or claim made by certain people, media, and other authority-bearing institutions. For some individuals, the consequence may be a tendency to attribute anything bad that happens to the distrusted authority.
For relatively rare individuals, an obsessive compulsion to believe, prove or re-tell a conspiracy theory may indicate one or more of several well-understood psychological conditions, and other hypothetical ones: paranoia, denial, schizophrenia, mean world syndrome.
Quote from Haroki:
Ahhhhh, it's no big deal, you guys are basically harmless.
Because conspiracy theories lack readily verifiable evidence, they are not taken seriously by most people.
Many people tend to respond to events or situations which have had an emotional impact upon them by trying to make sense of those events, typically in spiritual, moral, political, or scientific terms.
Events which seem to resist such interpretationâfor example, because they are, in fact, unexplainableâmay provoke the inquirer to look harder for a meaning, until one is reached that is capable of offering the inquirer the required emotional satisfaction.
At other times, the unfolding of complex sequences of events such as political phenomena are explainable, but not in simple terms. Conspiracy theories are often preferred by individuals as a way to understand what is happening around them without having to grasp the complexities of history and political interaction.
Conspiratorial accounts can be emotionally satisfying when they place events in a readily-understandable, moral context. The subscriber to the theory is able to assign moral responsibility for an emotionally troubling event or situation to a clearly-conceived group of individuals. Crucially, that group does not include the believer. The believer may then feel excused of any moral or political responsibility for remedying whatever institutional or societal flaw might be the actual source of the dissonance.
In the late 20th century, falling election participation and declines in other key metrics of social engagement were noted by several observers. For a prominent example, see Robert D. Putnam's Bowling Alone thesis. Those who were most influenced by this period, the so-called "Generation X," are characterized by their cynicism towards traditional institutions and authorities, offering a case example of the context of political dis-empowerment detailed above.
In that context, a typical individual will tend to be more isolated from the kinds of peer networks that grant access to broad sources of information, and may instinctively distrust any statement or claim made by certain people, media, and other authority-bearing institutions. For some individuals, the consequence may be a tendency to attribute anything bad that happens to the distrusted authority.
For relatively rare individuals, an obsessive compulsion to believe, prove or re-tell a conspiracy theory may indicate one or more of several well-understood psychological conditions, and other hypothetical ones: paranoia, denial, schizophrenia, mean world syndrome.
LOLOL, good golly, I shouldn't have said anything. I am certainly NOT a conspiracy theorist, but I DO believe that people who are wealthly like to stay that way, just as companies who do well like to stay doing well... etc etc etc...
At any rate, what did you think about my comments above regarding your question?
I honestly can't figure out how you think you're "cheating" the bank. You get charged %6 a year on what ever the loan amount is remaining, and you're essentially saying that inflation is %3, right?
I know I'm missing something....
TNG
I must be too, because if the bank is making 6% on its loaned out money and inflation is at 3%, then more than likely the 10 year will be sitting at somewhere around 5.5% or so, and the 2 year will be maybe at 5. So they can borrow short, lend long, pocket the diff. Especially if they can get deposits in for free or even charge for them (checking accounts) or at the very least pay wee amounts of interest to the depositor, while lending the money out at 6 on a mortgage and 19 on a credit card.
It's what banking is all about. I don't see how they're losing.
It's what banking is all about. I don't see how they're losing.
Well, that's what I'm asking. I'm in agreement that the bank gets their 6%. But what I'm saying is if the dollar is devalued through inflation, what happens in real life?
Cuz check this - say you invest in a cd that gets 5%, and inflation/devaluation of your dollar is 3%. To me, you make a net of 2%, cuz that interest you earned is worth 3% less. BUT, you're still ahead....
But the reverse is not true for a 30 yr loan, cuz like in the post I put up a few pages ago, as my salary goes up to match inflation, my house payment represents less and less of my wage. So the initial $515 payment is a signicicant amount of my $3333/mo take home. But in 10 yrs, my take home is $4349/mo, in 20 is $5845/mo, and in 30 is $7855/mo. So my $515 is nothing to me, and realistically, worth nothing to the bank either.
It's the power of copounding...
Cuz check this - say you invest in a cd that gets 5%, and inflation/devaluation of your dollar is 3%. To me, you make a net of 2%, cuz that interest you earned is worth 3% less. BUT, you're still ahead....
But the reverse is not true for a 30 yr loan, cuz like in the post I put up a few pages ago, as my salary goes up to match inflation, my house payment represents less and less of my wage. So the initial $515 payment is a signicicant amount of my $3333/mo take home. But in 10 yrs, my take home is $4349/mo, in 20 is $5845/mo, and in 30 is $7855/mo. So my $515 is nothing to me, and realistically, worth nothing to the bank either.
It's the power of copounding...
Depending on the reserve ratio, banks create upwards of 11 dollars for every 1 dollar of currency they have on deposit.
It doesn't matter what assets those 11 dollars ultimately control. Those assets were bought from money created out of thin air.
This is legal counterfeiting and immensely profitable for banks.
This is a bit of a red herring. Where does the bank get the money to buy the house in the first place?
It creates it out of thin air via fractional reserve banking.
The bank gets 11 houses free for every 1 house it 'buys' with its own reserves.
In the end, what does it matter if the bank only gets 65% of the real value of the house it bought with free money to start with?
Thats 65% of say 400K it never had on deposit. Which the bank turns around and pyramids again by a factor of 11.
Thats why inflation is largely irrelevant. Its free money to begin with. So whatever the bank gets back, its nearly all profit.
No, because its free money on deposit the bank they never had.
Assuming a home owner pays more than 1/11th of a homes real value (or whatever the reserve ratio is for the bank), the bank wins.
Even if a borrower defaulted after having paid nothing and the bank sold the home for half its value, the bank still wins.
Now the bank has far more on deposit than its initial risk it can pyramid out accordingly.
Inflation matters not to a banks profit (contextually speaking). Which is why they keep making 30 year mortgages that constantly look like a paper loss after inflation.