Why we will ultimately nationalize the banking system

Quote from Thalamus09:

Under our fractional reserve system the money supply is equal to debt. To increase money in the system more debt has to be issued. To allow for interest to be paid on the debt (back to the bankers), the debt issued every year has to be equal to the principle issued plus interest, otherwise the system will be short the interest portion to pay the debt. So the Fed has a target of say 3% money growth to cover the interest portion.

The average bank uses 11 to 1 leverage (for discussion sake). For every 1 million in equity they can loan out 11 million in deposits. A 10% decline in their portfolio’s results in a 110% (11 X .10 = %110) decline in their equity. Most banks require money down for a loan or the borrower to have “skin” in the game so small decreases in collateral value aren’t ruinous to the bank; but when that margin is exceeded, like is currently the case with most housing loans and commercial real estate, then banks have to raise equity to compensate or reduce loans, or both.

Most, if not all, banks are bankrupt in the U.S. and probably abroad as well. Through accounting rule changes and more liberal enforcement policies, the appearance of a healthy banking system is foisted upon society by the government and the media. This policy does buy time for things to heal, but if they don’t, and they aren’t it appears this time (see money growth statistics), then the risk of system collapse is imminent.

If the above is true, which it is, then how does the Fed (which is a private entity by the way) and the US government counter the imminent collapse of the fractional reserve banking system that will occur in the next couple years? My opinion is that there are only two moves left if we are to maintain this banking system: 1) nationalize the banks and remove the fear of collapse from the people, and 2) remove hard currency from the money supply and force it into electronic “credits” which must be stored at a participating US bank to transact business on the “Fed” system.

I hypothesize nationalization will happen first and removal of the hard currency second. Down the road (but soon) we’ll go from smart cards to embedded chips or bar codes embedded or affixed on our bodies. Eventually you won’t be able to buy or sell without being on this system and it will spread worldwide. The governments will treat like criminals those that setup bartering in goods or try to work outside the system.
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Haha, this is one funny post...

How in God's name do you "loan out deposits"? Why does having "electronic credits" help? How do money growth statistics tell you that things "aren't healing"?

And, finally, the most burning question of all: why do you love to make statements like "if the above is true, and it is,..." or "if they don't, and they aren't,..."? Actually, if I am right, and I am, you're mostly wrong.
 
If banks don't loan deposits what do they loan _______?

Electronic credits would prevent people from withdrawing their cash if the credits were required to be kept in a US bank (eliminate bank runs on the Fed system as a whole). No money under the mattress or cash only society possible under this scenario.

Money growth is negative still so debt is decreasing not increasing, therefore the economy is still contracting not expanding. Of course government debt is expanding to make up for the contraction x 10, but it isn't hitting the real economy.

Quote from Martinghoul:

Haha, this is one funny post...

How in God's name do you "loan out deposits"? Why does having "electronic credits" help? How do money growth statistics tell you that things "aren't healing"?

And, finally, the most burning question of all: why do you love to make statements like "if the above is true, and it is,..." or "if they don't, and they aren't,..."? Actually, if I am right, and I am, you're mostly wrong.
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Quote from ddefina:

If banks don't loan deposits what do they loan _______?

Electronic credits would prevent people from withdrawing their cash if the credits were required to be kept in a US bank (eliminate bank runs on the Fed system as a whole). No money under the mattress or cash only society possible under this scenario.

Money growth is negative still so debt is decreasing not increasing, therefore the economy is still contracting not expanding. Of course government debt is expanding to make up for the contraction x 10, but it isn't hitting the real economy.
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The OP's definition of leverage was "for $1m equity they can loan $11m deposits". That makes no sense, as both deposits and equity are liabilities. You can't define leverage like that. If you want to define leverage, you can look at the ratio of assets (i.e. loans) to equity.

The bank run on the Fed system as a whole has never been an issue. To trigger a run on a bunch of specific banks, all I have to do is take my electronic credits and invest them all into treasury bills. Unless you have a way of controlling how capital can move, an electronic system will not make a shred of difference. In fact, most of the funding that was pulled from the banking system after Leh was obviously electronic. Did it make the institutional run on the banking system any better?

How do you go from decreasing debt to contracting economy? As far as I can see, the economy is bouncing due to the well-publicized inventory rebuild. How do you know that the govt spending is not hitting the real economy? If you look at 'Cash for Clunkers', for instance, there is very little doubt that this program, in spite of its well-known faults, definitely hit the real economy.
 
Quote from Emini Maestro:

Hillary already guaranteed those bonds with equity, meaning WHEN we do not repay them, China can take our West coast. It's already done.
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Maybe the Chinese can take Washington and the politicians too, you know, two birds with one stone. :D
 
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