The Money Masters

Quote from Hydroblunt:

They can cover up the bottom line by financiall engineering but the basics are still there and so is the problem. Debt is debt, you can spice it up by various terms, agreements, conversions, tranchees,repayment terms, derivatives, exotics, etc. but it's still debt. Just because you can complicate a mezzanine investment by taking 4 or 7 or even 12 combinations of secured, unsecured & subordinated debt and common & preferred shares, spin em around, add some covenants and funky agreements, it does not change the bottom line that it is just debt and equity.
Financial engineering is nothing more than financial BS that spices up the sales. If it looks creative and funky and innovative, well it will sell. Happened with junk bonds, ppl ate them up like the next hot investment when they were essentially sh*ty debt. That's just one example, I've studied a couple more 5 years ago.

Either way you put it, fractional reserve banking allows the member banks of the Fed to "print" money and then lend it out at interest. The same is done with credit cards, a promise to pay by the consumer is taken and turn into a credit line that is not backed by a deposit of any sort.

If the system is really that transparent and honorable, then how about making it open game. If I were to safekeep someone's money and then start lending it through fractional reserve banking, I would be taken to court for FRAUD on more than one count.
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agree with your 1st para above, but again, financial 'innovation' & 'engineering' is not the fact of the Fed... for the most part, the Fed has no choice but to deal with it, makes their life way more difficult than in the 80s... but hey, as regards investors, buyer beware, nobody who doesn't understand them is obliged to touch any of those instruments... greed is no excuse...

re credit cards, perhaps its out of control in the US, dunno, but don't the issuing institutions perform a measure of credit rating assessment?? and if they don't, a default risk assessment vs higher rates?? and if they get it wrong, well, they fail... and they and their shareholders know that... whats your point? whats that got to do with the Fed????

as for FRB, money and banking in general, honestly you should have a quiet read of, for instance:
http://en.wikipedia.org/wiki/Money
http://en.wikipedia.org/wiki/Bank
http://en.wikipedia.org/wiki/Fractional-reserve_banking
in that order...

personally, i can see only 2 other alternatives to the modern banking system:
http://en.wikipedia.org/wiki/Usury (a.k.a. the good old days)
http://en.wikipedia.org/wiki/Islamic_economics (full-reserve banking)

not for me thanks...
 
Quote from 2cents:

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I think a number of us have read the wikipedia entries on FRB and the Fed. I, for one, did not use selective reading, the entry clearly outlines many of the problems of FRB, such the license to literally print money. I dunno if you missed the notation that in Canada an individual is taking the banking system to court.

See, I never understood it fully back when I learned how credit cards were issued. One thing I did understand is that whenever major bank issues a credit card line, it is at minimal risk because there is no deposit backing it and by LAW, they cannot use someone else's deposit to back it. The only thing backing the CC is the individual's promise to pay. That's printing money. That's how the major banks can afford to give out CCs to high credit risk individuals, it's never really a loss, just a write off at the worst case.

"Keep it simple, stupid" is something that should always be referred to when talking about the world of finance. In traditional banking (full reserve), the bank makes its money by the spread between deposits and loans. That's not exactly easy business. But through FRB, one deposit creates multiple credit lines. Where does that money come from, just ask yourself that. Those loans do get turned into cash, one way or another, so where exactly does it come from?

FRB is a key reason why when a business gets a credit line with a bank, they often almost require that the business employees and the entity itself use that bank exclusively.for their primary bank accounts. Not fees, the client usually get special terms where their checking accounts have no fees and even gets an interest rate. I hope you can see the tactic.
 
Quote from Hydroblunt:

I think a number of us have read the wikipedia entries on FRB and the Fed. I, for one, did not use selective reading, the entry clearly outlines many of the problems of FRB, such the license to literally print money. I dunno if you missed the notation that in Canada an individual is taking the banking system to court.
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wow, thats a very strong point... i must have been selective in my reading then, thks for pointing that out...

i suppose that's the section u are alluding to in the fractional reserve banking wiki a number of you you think have read:
"Influence of central banks
Central banks are government owned and/or sponsored banks that issue notes and typically receive special privileges in the form of exemption from restrictions or taxes on note issue, or whose notes are made legal tender by government fiat (hence the term fiat currency -- the notes are current (legal tender) by government fiat (law).

Central banks also operate as fractional-reserve banks, and the reserve ratio policies of the central bank influence specie flows and credit conditions, making the control of fractional-reserve banking a political issue, with financial and economic impacts. Also involved with reserve ratios is the interest rate, because the primary method of attracting reserves of specie from within a country and from abroad into the central bank treasury, or stemming their outflow, is to offer higher interest rates on deposits (central banks take deposits as well as issue notes).

Some political libertarians and some supporters of a gold standard use the term fractional-reserve banking in reference to fractional-reserve banking by central banks in particular, where the nation's central bank holds fractional reserves of gold bullion or specie (gold coin). This occurred before the adoption of irredeemable fiat money in most developed countries in 1971 with the collapse of the Bretton Woods system, when the US government ended the convertibility of the US dollar into gold. This usage is superficially similar to the standard usage in economics, in that the ability of a country to redeem only part of its currency in gold can be seen as analogous to the ability of a bank to redeem only part of its deposits in cash, but referring to partly-reserved currencies as a form of fractional-reserve banking may create more confusion than it alleviates. Mainstream economists do not generally make this analogy.


Criticisms
Although fractional-reserve banking is near universal, it is not without criticism. The primary criticisms relate to the financial risk note holders and depositors bear, and the impact bank notes and demand deposits have on the stock of money, and allegedly thereby, its exchange rate. Fractional reserve banking started with reserve of gold and silver, but still continues in current fiat-money based banking, where money is no longer backed by precious metals and therefore has no inherent value.

In New Westminster, B.C., Canada, April 15, 2005, John Ruiz Dempsey BSCr, LL.B, a criminologist and forensic litigation specialist filed a class action suit on behalf of the People of Canada alleging that financial institutions are engaged in illegal creation of money. The complaint filed Friday April 15, 2005 in the Supreme Court of British Columbia at New Westminster, alleges that all financial institutions who are in the business of lending money have engaged in a deliberate scheme to defraud the borrowers by lending non-existent money which are illegally created by the financial institutions out of gthin air."


then, you have also read that, as para 3 above notes: "Some political libertarians and some supporters of a gold standard use the term fractional-reserve banking in reference to fractional-reserve banking by central banks in particular... referring to partly-reserved currencies as a form of fractional-reserve banking may create more confusion than it alleviates. ..."


in any case, if you don't understand credit cards, there is no chance you're gonna understand 'fiat' either... i am sorry mate, there's no cure for you, get in line with the dinosaurs
 
Quote from Hydroblunt:

"Keep it simple, stupid" is something that should always be referred to when talking about the world of finance. In traditional banking (full reserve), the bank makes its money by the spread between deposits and loans. That's not exactly easy business.
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its not, particularly since the spread needs to cover for risks of early / large withdrawal from callable deposits, loan principal default, interest rate term structure changes etc etc... that's why its done by professionals actually... re the deposit creation multiplier mechanism, here's a good description fyi http://en.wikipedia.org/wiki/Deposit_creation_multiplier ... but yeah in traditional islamic full-reserve banking, its simpler: there are no interest-bearing loans.

dude, this is not for u, stop hurting yrself...
 
there is one point where i'll agree with u though, seriously... it serves no one to allow such a huge gap in understanding to develop, between citizens of a country and a system that, ultimately, is meant to SERVE them. it only breeds defiance, and rightly so. you are correct that not enough is done to clearly explain the existing 'infrastructure' in broad but representative / accurate enough terms, where the real waterproof safeguards / protections etc are, and the real risks for the general public, and why we are there, and where we think the real problems are etc. and then everybody is free to disagree, counter-propose etc of course, but at least there is less in the way of misinformation, misrepresentation etc...

pretty tough one... the UK as an example has brought all its financial regulators under a single umbrella, the FSA http://www.fsa.gov.uk/ , and taking measures in that direction... am not familiar enough with Can's evolution of regulatory systems / authorities to comment, but the US one's still very much a dog's breakfast, thats for sure...

having said that, i believe the REAL problems are elsewhere: pension system, SS, energy, GW and not mentioning foreign policy... but thats not unique to the US... only the confrontational me me me approach is... but hey, its only 4 long years innit?
 
Quote from Hydroblunt:

That's how the major banks can afford to give out CCs to high credit risk individuals, it's never really a loss, just a write off at the worst case.
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and i take it that this was a joke, right?
 
Quote from 2cents:

and i take it that this was a joke, right?
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No it's not a joke, but I doubt you will ever do the research behind how CCs in america are REALLY issued. You are in Japan, after all, so you will never have first hand experience with what happens here. But apprently some high end experience allows you to talk down to others, even though you are talking about an institution across the globe from you. You also fail to see the disparaties between the government econ reports that the Central Banks, IBs, Major Funds, Mass Media accept as the facts, and what really goes on in the world. I know it may surprise you, but I used to keep a little notebook keeping tabs on the real world inflation, particularly the vital goods. I'm sure you have read the CPI and job reports but have you REALLY read them. It's laughable, yet a bit clever. So when Greenspan starts citing CPI and Job data as the fundamental data upon which the Fed will make its key decisions, to someone like me he is doing nothing more but admitting how full of sh*t the system is with all its integrity, honor & supposed complexity.

One more thing regarding the CC comments I made. There are a dozen or so cases (mostly arbitration), where some individuals were able to get the major CCs (such as Citi, American Express & discover) to cancel the 30-50k outstanding debt because they were able to prove that the CC debt creation and lending process is Fraud & Usury. It's not common at all, few are willing to do the work, preparation and time but it's very doable. It's all part of the FRB game.

Ok I'm done discussing this in the thread, if you want, send me a PM cause you're starting to dominate the thread with the wikipedia recitements you're making.
 
Quote from Avid_Consumer:

ok, so i vote for one of 2 presidents, my vote probably gets counted but ultimately arbitrated by an appointed supreme court, the 'winner' then appoints a fed governor ... and i'm somehow represented in money creation?
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Applause
 
Quote from 2cents:

wow, thats a very strong point... i must have been selective in my reading then, thks for pointing that out...

i suppose that's the section u are alluding to in the fractional reserve banking wiki a number of you you think have read:
"Influence of central banks
Central banks are government owned and/or sponsored banks that issue notes and typically receive special privileges in the form of exemption from restrictions or taxes on note issue, or whose notes are made legal tender by government fiat (hence the term fiat currency -- the notes are current (legal tender) by government fiat (law).

Central banks also operate as fractional-reserve banks, and the reserve ratio policies of the central bank influence specie flows and credit conditions, making the control of fractional-reserve banking a political issue, with financial and economic impacts. Also involved with reserve ratios is the interest rate, because the primary method of attracting reserves of specie from within a country and from abroad into the central bank treasury, or stemming their outflow, is to offer higher interest rates on deposits (central banks take deposits as well as issue notes).

Some political libertarians and some supporters of a gold standard use the term fractional-reserve banking in reference to fractional-reserve banking by central banks in particular, where the nation's central bank holds fractional reserves of gold bullion or specie (gold coin). This occurred before the adoption of irredeemable fiat money in most developed countries in 1971 with the collapse of the Bretton Woods system, when the US government ended the convertibility of the US dollar into gold. This usage is superficially similar to the standard usage in economics, in that the ability of a country to redeem only part of its currency in gold can be seen as analogous to the ability of a bank to redeem only part of its deposits in cash, but referring to partly-reserved currencies as a form of fractional-reserve banking may create more confusion than it alleviates. Mainstream economists do not generally make this analogy.


Criticisms
Although fractional-reserve banking is near universal, it is not without criticism. The primary criticisms relate to the financial risk note holders and depositors bear, and the impact bank notes and demand deposits have on the stock of money, and allegedly thereby, its exchange rate. Fractional reserve banking started with reserve of gold and silver, but still continues in current fiat-money based banking, where money is no longer backed by precious metals and therefore has no inherent value.

In New Westminster, B.C., Canada, April 15, 2005, John Ruiz Dempsey BSCr, LL.B, a criminologist and forensic litigation specialist filed a class action suit on behalf of the People of Canada alleging that financial institutions are engaged in illegal creation of money. The complaint filed Friday April 15, 2005 in the Supreme Court of British Columbia at New Westminster, alleges that all financial institutions who are in the business of lending money have engaged in a deliberate scheme to defraud the borrowers by lending non-existent money which are illegally created by the financial institutions out of gthin air."


then, you have also read that, as para 3 above notes: "Some political libertarians and some supporters of a gold standard use the term fractional-reserve banking in reference to fractional-reserve banking by central banks in particular... referring to partly-reserved currencies as a form of fractional-reserve banking may create more confusion than it alleviates. ..."


in any case, if you don't understand credit cards, there is no chance you're gonna understand 'fiat' either... i am sorry mate, there's no cure for you, get in line with the dinosaurs
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It sounds like you've bought into the system and regard anyone with criticisms as someone who doesn't understand it. We understand it. Consider Hydro's point about the CPI. There is constant manipulation of the numbers within government reports. They fudge the numbers to suit their needs. Inflation "excluding food and energy" That's a fcking joke. The unemployment rate? They basically add and subtract large parts of the population at will.

Fiat currency and inflation are very basic concepts. You can choose to muddle them with the myriad details concerning their administration and mechanics, but the bottom line is a fiat currency is backed by nothing "and has no inherent value" (took that from your post). Inflation is (among other things) the steady devaluation of currency. What happens if you inflate for infinity? Then you have a currency that is completely worthless. What's going on in Zimbabwe right now? The same thing that's happened all over the world throughout modern history.

What recently happened to Iceland, Turkey, etc may happen to the US. Look at the deficit, look at the long term dollar charts (dollar vs yen, euro, franc, etc). It's going to happen. The rich/elite don't care - they don't play by the same rules. We're the ones who will be left holding the bag (dollars). Well, not me...

In case you haven't realized by now, America is a business. America is a business. Think about it - you're a smart guy.

President - CEO
Congress/Senate - Board
Ruling elite - Shareholders. These people? Rothschilds, Rockefellers, and other ultra powerful families.
 
Quote from Hydroblunt:

No it's not a joke, but I doubt you will ever do the research behind how CCs in america are REALLY issued... blah
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dude that has nothing to do with your statement that write-offs are no real loss... get a brain... u can rant all u want, all i am pointing out is that its all BS...
 
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