Bitcoin Forum

I was wondering if in the future a bit bank is created what services could it have?   A few examples I was thinking of that might be possible:

A bit bank might just be an easier place to store bitcoins for the average user so they didn't have to worry about losing the coins
A bit bank might be just an "additional signature" to someones wealth. You could store your own wealth how you wanted but you could require some signature from the bank. (not to get off subject but this would be especially useful for preventing bitcoins from being used to kidnap for ransom possibly. If you stored your wealth with a bank that had a policy of not signing wealth over in the event of a ransom then it might thwart that however unlikely scenario)
Would a bit bank also be able to provide "faster" transactions?

Have you thinked on natural uses of a Bank, loans / mortgages?

Well since banks don't lend out depositor money but rather create new money through loans and fractional reserve banking... I didn't think along those lines. I suppose there could be a bank that offers loans with interest rates for bitcoins.

I'm not so sure that this is true in personal banking.

Interest and time deposits

:P
though it would be hard to do that

Of course they lend out depositor money, where do you think the "reserves" in fractional reserves comes from?

Well, it is.

Reliable non-tinfoil-hat source backing up your statement?

How about a bank that stores all deposited money in bitcoin? This bank would:

* allow accounts to be funded with their bitcoin or USD (thinking US-centric for the moment)
* allow deposits and withdrawals in USD or bitcoin
* automatically convert USD deposits to bitcoin, and convert back for USD withdrawals
* instead of paying interest, account holders gain value as bitcoin appreciates
* issue debit cards drawn against the account
* provide a smartphone app for easy direct spending of bitcoins
* charge all fees in bitcoin
* initially use mtgox for conversion of funds, but eventually operate its own exchange (and earn money from the spread in buy/sell)
* provide security and guarantee bitcoin and USD funds from theft
* allow members to set percentage of funds to hold in bitcoin vs USD (risk management)

A bank like that would quickly become my primary bank.

http://www.youtube.com/watch?v=WKF8XHeQHpU

That's a cute fairy tale.  I don't see any reason to believe what he is saying is a fact though.

Banks are redundant.

I have no desire to prove anything or convince you of anything.
If you desire knowledge or proof you will find it.

But I mean, simple question, what does "personal banking" even mean ? Like loans to private individuals ?

Max Keiser is an expert in the field of finance (esp financial fraud), and a former insider...hell he invented the algorithms that JP Morgan etc use for their high frequency algorithmic trading scam.   Anyway, do your own research and see if it's true or not.  You asked for a source, you got one, and you call it a fairy tale. 

Of course banks don't have the money they lend out, why do you think we're off the gold standard anyway? 

Sorry, I meant retail banking.  As opposed to an "Investment Bank", or "Central Bank".

Since the repeal of Glass–Steagall there's little difference. They're casinos with FDIC backing.

There's this hot topic in Europe right now about separating bank acitivites between "retail" and "investment" banking (advertised as legit vs. casino banking).

There really is no difference between what you call retail and investment banking, banks are allowed, to a certain extent, to balance debt obligations from borrowers with monetary creation, effectively realizing the money-as-debt paradigm, the debt is money, therefore it is perfectly logical to create as much money as people are willing to borrow.

Look at it the intuitive way, do you really think people collectively deposit enough money into banks for all the houses they collectively buy and borrow money for ?

From deposits. Reserves are deposits and whatever they lend out is money they create. The fractional reserve originally meant how much gold backs up the money. Now it means how many deposits (which are considered reserves) there are which determines how much new money (through loans) can be given.

If all banks did was lend out other peoples money then there wouldn't be any "fractional reserve" since everything would be a reserve. And............. there wouldn't be any money since that is the mechanism which creates money and if it didn't exist we wouldn't have any.

Of course what this means is that a bitcoin bank that did lend out couldn't lend out in excess of it's reserves. So that automatically limits it's profits as compared to a regular bank that simply creates money and charges interest on that money it creates. But it could still probably be profitable since the way regular banks do it I would consider to be evilly profitable.

I think that you should have it set up like a normal bank, but with bitcoins only.

If it means the same fractional reserve requirements then I'll pass.

This is actually a good idea. If I had hundreds of thousands of dollars of BTC savings I would love to have it spread out into a multisig transaction with signatures from a few various parties required (eg. a 3-out-of-5 between my brainwallet, my offline paper wallet, my friend and some kind of "bank").

I think there will be no bank, but many services like online wallet to simplify average people's usage
https://blockchain.info/wallet/

For a standard person he might be concerned about keeping too much assets at home for whatever reason and he want a couple of third party online wallet provider to diversify the risk

About banking, check this post:


https://bitcointalk.org/index.php?topic=129423.0 (https://bitcointalk.org/index.php?topic=129423.0)

http://upload.wikimedia.org/wikipedia/commons/f/f2/Money-creation.gif

For each 16 dollar central bank created, only 9 loaned out eventually

Reserves are a percentage of deposits banks are required to hold as mandated by a central bank (The Fed in the case of the US).  The rest of the deposits are loaned out.  You said, "banks don't lend out depositor money" which is incorrect.  Banks do not lend out reserves but they most certainly lend against deposits.

From wikipedia:

I meant the loan/mortgage part and the savings part; basically, the basic functions of a bank.

Sound banks

1) A basic storage bank. The bank would keep your bitcoins and not lend them out. 100% reserve. It is like a warehouse. Why would you deposit into such a bank? If you don't trust yourself with a password, if you worry about a fire or something, where you come out of the incident with your life, but nothing else. You could go to the bank, show your face and reclaim your money. You would have to pay to have an account. Services like debit cards could be offered.

2) A savings and loan bank. The bank accepts your deposits, and lend out the coins to house buying. You would have limits of how much and how early you could rewdraw your coins. This would be matched with loan repayments, so there would always be money for all depositors according to their deposit agreements. The bank would qualify the borrowers and the value of the house. There would be only reserves to cover late payments and bad loans. The borrowers would pay interest, this would cover cost of operation and interest to depositors.

Of course, as long as the current fractional reserve bank regime continues, these bank forms would probably be unprofitable.

If bank lending causes the money supply to grow... then are loans really someone else's money? Obviously they can't be.

Obviously it can be and is true. This is exactly what fractional reserve banking is. This is how regular banks "create" money. The depositor still believes that the full amount of their deposit is sitting in their bank account while someone who has a loan out thinks they have that money. The overlap is "new money" because they obviously both can't own the same exact funds, yet theoretically that is exactly what is happening. Those "created" dollars never actually come into existence, though, they only exist on paper.

This is why runs on banks is such bad news. If everyone runs and withdraws all of their money at once from a bank, the bank doesn't have all of those funds because a very large portion is out on loan at any given time.

Runs on the bank are only bad news because of rules that banks impose on themselves. Lending and "banking" could be two totally separate institutions but they aren't because of the convoluted self imposed rules banks put on themselves to masquerade the fact that they essentially create money from nothing and charge interest on it.

If person A's money is lent to person B... and person B's money is lent to C... and person C's money is lent to D and so on... and the money supply expands.... and they can all essentially "demand deposit" and spend their money at will... then is person A's money really being lent?  IF a = b and b =c and c = d then a = d. So person D's money is actually person A's.. And person C's money is also A's. ANd person B's money is also A's. If money is lent out multiple times and the total net effect of this is a growth in the money supply which means......... that if there is more money after a loan is created, then new money had to have been created. New money cannot also be older money. Someone's deposit is used as a basis for making another loan.. but the total net effect of what is going on is essentially new money is being created.

Some of these self imposed rules I am talking about are reserves themselves. The one redeeming value they have is that they are essentially one way the banks use to control the money supply itself. But they are a self imposed rule. If banks didn't have a reserve ratio then they would never have "bank runs" because meeting demands could be done without any problem. With the flick of a pen (or keystroke).

If the banking system was honest it wouldn't be as convoluted as it is. There wouldn't be reserves or reserve ratios. As soon as the Federal reserve deposits money and creates reserves at member banks you can calculate from that deposit how much theoretical money can be created knowing the theoretical maximum reserve ratios. So you don't need reserves to constrain the money supply. You could do the same thing through a more direct method.

Here is how an honest banking system would work:

For the public sector (the government), Instead of delegating the power to create money to some cabal (like the Federal reserve) instead you keep the power and create it yourself. You don't need to pay interest to yourself #1.  #2...... you tax back what you create. If you tax back what you create then inflation is impossible.   That's it. Compared to what we have now that is incredibly simple............ and honest. Politicians, however, would not like the idea of only being able to spend what they can directly tax since right now they spend so so much through inflationary (hidden) means.

For the private sector... if people were free to chose then they would pick something honest over something dishonest automatically. Which is probably why bitcoin would win. Or a fully backed currency with no "fractional reserve" part. But... many people ascribe our system of credit to be something worthwhile. Maybe it's not but here is how an honest credit system would work that could possibly compete with bitcoin or a fully backed currency.  If you design a debt based credit system then money is created through loans. What keeps loans from being inflationary is mostly that they are paid back. When money is paid back , the principal is destroyed and the interest is taken as a service fee. An honest system would take a service fee as a service fee. Also..... The amount of total money can be directly controlled. The question on inflation in such a system is important... and the more important question than "how much money " should be created is the length of loans themselves. A 1 minute loan ... is not inflationary at all. A 1 million year loan is entirely inflationary. To limit inflation in such a system you don't need to charge interest on loans. You need to give shorter loans.

Congratulations, in a very long post you have convinced me that you have no idea what you're talking about, and that I'll probably never believe otherwise. If you take out the fractional reserve method, there is no bank lending. There is no bank lending, because there's no capital to do it with, since you have to have 100% on hand at all times. Good luck buying a car. In order to finance any sort of credit or loan we now resort to finding loan sharks who like to break kneecaps if you're a dollar late on your payment instead of paying a little extra.

Are you insane? Do you even know what the word economics is? Inflation.. Impossible? This conversation should end right here. More people are added to the system every day, without increasing the money supply ever you actually would create deflation as the available money supply gets spread thinner and thinner among an ever increasing population. Deflation is also bad.

You also don't understand how lending works. Theoretical new money is created through lending, not actual new money. If person A, B, C, and D are the only depositors at a bank, and they all have loans out for the total value of the bank, then if they were to all demand their deposited money without paying off any of the loans then the bank would have a negative net worth of the entire bank. The bank lends people's money out to others while still acknowledging that the money lent mostly belongs to others. If the depositors of a bank demand their money, they are contractually and legally obligated to provide it by all means necessary including liquidating the bank and all real assets it holds. As long as loans are out, and everyone isn't demanding their money at the same time, there is extra money in the system only on paper because it is double counted by both the person who received a loan, and the person who's funds were used to fund the loan. Person A's money above the reserve amount is not lent out multiple times. It is lent out once. A bank can not lend more than it currently has above reserves (unless it borrows this money from other banks). It cannot lend the same funds out once. Also, when a person takes out a loan, that is not THEIR money. It is the bank's money, and by extension the depositor's money.

Your entire theory of economics and finance is wrong, not only is it wrong but it is bad, and you should feel bad. Take a class.

P.S. money and banking will ALWAYS be convoluted. No matter how honest it is. Just look around you, even bitcoin has its issues when it comes to security, processing, dishonest individuals, unpaid loans, etc.

Non fractional reserve bank lending:

If the bank lends out the money, but restricts the depositor to only redraw the money when the loan is repaid, there is no money creation. With hundreds of depositors and hundreds of borrowers, this could be quite flexible. The lending would oil the wheels of commerce, but money is not created.

The depositor would not feel that he still had the money in his posession, only he would know that he had the right to get the money back. This is different from now, where the deposit is at your disposal immediately, even when it is lent out.

That basically entails a money-market account. And if that were the optimal way to do things that everybody wanted, why doesn't everybody do it?

And in terms of "greasing the wheels of commerce", I would be willing to bet that the net economic benefit of this system is less than half of the benefit of fractional reserve since finding people that are willing to essentially loan their funds out by depositing it in the bank and not having the "guarantee" that they will get the funds back is less than (actually, much less than) half of the people with money to deposit. Just speculation there, but please, prove me wrong.

Yes it is like a lending consortium. It is not profitable under the current circumstances. A fractional reserve bank is always more profitable, since it can essentially lend the money multiple times. Until it crashes of course, but that is no problem for the depositors nor the investors. Benny and the Jets come to the rescue. A lending consortium would be possible if fractional reserve banking is outlawed, or when the banks and depositors are not bailed out by the public.

Money can't be lent multiple times. It is lent once until it is paid back. Why is this so hard for you two to understand? Once money leaves the bank in the form of a loan, it is gone. HOWEVER, if somebody's money is lent out and then that person demands their deposit back, the bank must find another individual's funds to then cover that loan. Lend once, wait for repayment, lend again. Also, it only crashes because of A) dishonest or idiotic individuals taking out more than they KNOW they can pay back, or B) unusual circumstances leave many, many, many, MANY people unable to repay loans.

Being bailed out by the public is an off-topic subject, in what I'm analyzing. This is the function of a regular bank discussion, not a central bank.

FTFY

Why would it be the responsibility of the borrower to protect the assets of the bank and the bank's depositors?

FTFY

If the lender has access to enough assets of the irresponsible borrower to cover the value of the loan then this isn't a situation where "Lend once, wait for repayment, lend again" would crash.  The lender simply takes control of the borrowers assets and exchanges them for enough currency to cover repayment.

You were specifically referencing a situation where your "Lend once, wait for repayment, lend again" crashes.  That only happens if the lender is irresponsible and has lent more money to someone than they KNOW they can recover.

It is not necessary for the lender to protect the assets of the borrower, but it absolutely necessary for the lender to protect their own assets.

Uh, right. That's called a secured loan, which is the vast majority of major loans. The banks do this.

That's why some banks didn't really care if you could pay back, because they knew that their loans were tied to an asset that would cover the lost capital. Do you really think banks would make a loan that wasn't 99% likely to be repaid either by the borrower or through the repossession of the asset being borrowed for?

The vast majority of the time the bank's assets are more than protected. It's the borrower that isn't, and rightly so. (rightly except for the few banks that purposely added malicious terms to their loans so discretely that even most bankers didn't know what was going on)

Ok, so if we are in agreement about secured loans, then explain what you meant by this statement:

"Also, it only crashes because of A) dishonest or idiotic individuals taking out more than they KNOW they can pay back"

What crashes?  Why does it crash?

Okay, you're right, I phrased that sentence entirely wrong. It should have read "The system only fails when many individuals default on loans that were more than they could reasonably pay almost instantaneously and the bank is left with the majority of its net worth in illiquid assets at which point a large population of the bank's depositors withdraw."

Better?

That description seems to already be covered by "B) unusual circumstances leave many, many, many, MANY people unable to repay loans".  So are you saying that your A) reasoning does not apply, and that B) is the only time the system fails?

I wouldn't say that people taking out loans that they can't reasonably pay counts as unusual circumstance. People do it every day.

Right, and the system doesn't fail under those circumstances.  It fails under the "unusual circumstances" when "many individuals default on loans that were more than they could reasonably pay almost instantaneously and the bank is left with the majority of its net worth in illiquid assets at which point a large population of the bank's depositors withdraw". Which as I said, seems to be covered already by your statement that "it only crashes because . . . B) unusual circumstances leave many, many, many, MANY people unable to repay loans".  If not, can you explain for me the distinction between:

"The system only fails when many individuals default on loans that were more than they could reasonably pay almost instantaneously and the bank is left with the majority of its net worth in illiquid assets at which point a large population of the bank's depositors withdraw."

and

"it only crashes because . . . B) unusual circumstances leave many, many, many, MANY people unable to repay loans"

In either case it is the responsibility of the bank (or lender) to ensure they protect their assets and not over extend themselves into bad debt. So it really comes down to the fact that the fractional reserve banking system only fails when the banks act irresponsibly maintaining inadequate reserves and extending high risk loans with funds from on demand deposits.

Can you clarify what you mean? Because it sounds like you are saying I am advocating a fully backed system. When I said get rid of reserves that means there wouldn't be any reserves. No fractional reserve... and no reserves.


To make this easier to understand... imagine if government money was separate from private money. Lets call the government money "greenback" and the private money "blueback" . You can exchange one for the other. So when you pay your taxes... you can essentially pay with bluebacks or greenbacks. For the government to finance it's operations... if it creates a certain amount of "greenback" and spends it into circulation by paying government employees for example.... then those greenbacks would automatically have value since you can use them as payment of taxes. If the amount of greenbacks that are created in a year are also taxed back  then you cannot have inflation (from greenbacks) . If the greenbacks were not taxed back out of circulation... then whatever wasn't taxed would be inflationary and it would devalue them.  If there wasn't two separate systems but a single system.... and the government still spend theirs into circulation and taxed it back 1:1 then there couldn't be inflation in the currency (from the government sector) .


Of course. So if all the debts in the economy were paid back no money would exist. So no money exists right? since it's all just.... theoretical.

Read up on fractional reserve banking.

Okay, whatever, we'll go ahead and say sure, B) is the only case because the difference is so minuscule it doesn't really matter anyway. Do me a favor, define "high risk loan" then at the same time, define adequate reserves. Because a high risk loan is really basically any loan that is lent to someone other than a corporate entity with very regular and steady income. Loans are inherently risky, especially to individuals. So are you saying that banks shouldn't provide loans whatsoever?



If you're saying that we should have a 100% unbacked system than that's just as bad, because if a bank were to be 100% extended and someone tried to withdraw $1, that bank would be insolvent. Talk about free money everywhere, then the banks would REALLY need big brother around.


You still aren't addressing the problem of deflation in an economy that never adds to the money supply because they always tax is back. Inflation isn't always a bad thing. This is a pointless prospect.


No, you half-baked moron. The people deposit real money. Think of it this way: Person A deposits $100 dollars into the bank. The mandated reserve ratio is 20%, so the bank has $80 to lend out. Person B takes out an $80 loan. The bank now only has $20 on hand to cover Person A's withdrawals, HOWEVER person A's bank account STILL SAYS HE HAS $100 TO WITHDRAW. At the SAME TIME person B used his $80 dollar loan to purchase something. Therefore, the bank has "created" $80 of theoretical "new money" because that is the overlap between what it lent out and what it still tells people they own. There is still 100$ of real money floating around, but there is now an additional $80 of theoretical money.

If all the debts in the economy were paid back, all of the theoretical money would not exist, however there would still be money in the system EQUAL TO THE PAYBACK AMOUNT OF THE LOANS PLUS THE RESERVES.

This is NOT that hard to understand.


I'm a Finance and Banking student, I think I've done plenty on the subject. See my example to the person above. Person A's $80 is not lent out "multiple times" because the bank that is not a central bank can't print dollars. The $80 leaves the bank in the form of cash in a loan, therefore it is lent once. Cash is king and cash is final. I don't understand where you think this $80 can be lent out multiple times without ever being paid back. You are wrong. Very wrong.

You are mistaken on this point as well.

Here is a scenario:
A total of $1000 in actual physical currency exists...

Alfred deposits this $1000 into an on demand checking account at a bank.
(Bank deposits $1000, Bank loans $0, Reserve on hand $1000, Reserve 100%)

Betty receives a loan from the bank of $800.
(Bank deposits $1000, Bank loans $800, Reserve on hand $200, Reserve 20%)

Betty uses the $800 to purchase something from Charlie
Charlie deposits the $800 that he just received from Betty into his own checking account.
(Bank deposits $1800, Bank loans $800, Reserve on hand $1000, Reserve 55%)

Denise receives a loan from the bank of $640. (re-loaning out the same money that was already loaned out to Betty)
(Bank deposits $1800, Bank loans $1440, Reserve on hand $360, Reserve 20%)

Denise uses the $640 to purchase something from Elliot
Elliot deposits the $640 that he just received from Denise into his own checking account.
(Bank deposits $2440, Bank loans $1440, Reserve on hand $1000, Reserve 41%)

Francine receives a loan from the bank of $512. (re-loaning out the same money that was already loaned out to Betty and Denise)
(Bank deposits $2440, Bank loans $1952, Reserve on hand $488, Reserve 20%)

Francine uses the $512 to purchase something from George
George deposits the $512 that he just received from Francine into his own checking account.
(Bank deposits $2952, Bank loans $1952, Reserve on hand $1000, Reserve 34%)

Hanna receives a loan from the bank of $409. (re-loaning out the same money that was already loaned out to Betty, Denise, and Francine)
(Bank deposits $2952, Bank loans $2361, Reserve on hand $591, Reserve 20%)

Hanna uses the $409 to purchase something from Ivan
Ivan deposits the $409 that he just received from Francine into his own checking account.
(Bank deposits $3361, Bank loans $2361, Reserve on hand $1000, Reserve 30%)

At this point we already have $3361 in deposits from that single $1000.  Alfred, Charlie, Elliot, George, and Ivan all believe that they are the true owners of this money since they each held the physical cash in their hand and then deposited it into their own checking account.  Where did the extra $2361 come from? Meanwhile the bank has re-loaned out the same money over and over without a single cent of it having been repaid yet.

This process can continue over and over, expanding the money supply until there is $5000 in deposits, since the maximum the bank can ever have in reserve is the full $1000 of physical cash in existence.  This would result in $5000 in deposits, $4000 in outstanding loans waiting on repayment, and $1000 in reserves. Notice that at this point the "PAYBACK AMOUNT OF THE LOANS PLUS THE RESERVES", as you put it, would be $5000, but there is not $5000 of "real money" as you state.

Now, what happens if Alfred decides he has found a new bank that he likes better?  He withdraws his full $1000 from this bank and deposits it into a checking account at the other bank.  Later that same day Charlie tries to withdraw $10 from his account, but the bank no longer has any reserves because Charlie unexpectedly left with all of it.  Where does the bank get the money from to allow Charlie to withdraw his money?

Notice, at this point the bank fails, and there isn't a single person who defaulted on their loan.

Theoretically this could happen, sure, but in the real world banks that don't know what they're doing don't last very long. A bank would never go down to a reserve ratio of 20% with only one customer, moreover, their risk management team wouldn't allow multiple loans on the same funds, especially with one entity that has the ability to take all of it out. Each loan adds a degree of risk to the bank's portfolio, and in the even of an even-withdraw which becomes ever more likely over time they would, indeed, go under.

But you are assuming that we are dealing with a bank that is 100% abusing the reserve system and not paying attention to it's risk. Loans are a liability, because of their inherent default risk. Banks keep cash on-hand that don't count to the over-all reserve ratio to cover large portions of their risk similar to how an insurance company keeps a reserve amount to cover any potential short-term payouts while investing the rest.

Banking doesn't only consist of the fractional reserve, and you can't make an example of a bank ONLY using fractional reserve principles. In this case, the bank would NOT have lent out the extra funds without having additional capital to back them at a ratio determined internally. Bankers aren't stupid, they think about these scenarios.

Certainly, and perhaps I confused the point of the post by demonstrating at the end that a bank can go under without anyone defaulting on a loan. Note, clearly many banks have gone under due to inadequately managing the risk (I've had the FDIC shut down 4 of the banks that I've used in the past 6 years, without that insurance to protect me from the irresponsible banks that don't pay enough attention to the risks they are taking I certainly wouldn't be using any banking), so apparently they don't think about these scenarios enough.

However, the point of my post was to demonstrate that with fractional reserve banking, the same money IS loaned out repeatedly.  My example is oversimplified, since there are a LOT more than 1 bank, and the initial funds come to the bank from a central bank rather than a single depositor.  Loans from one bank end up deposited at another bank which re-loans out the same loaned money.  That loan may end up deposited in three other banks that re-loan out the same money.  Some of the funds of some of those loans may make their way back into deposits at the first bank which can now re-loan out the same money that it initially loaned out.

The post was in reply to your statement:

Okay, I see what your saying. You've been through four banks from improperly managed risk? I'm sorry to hear about that, that's the most cases I've ever heard of for one person.

And I also see where you're coming from on the multiple lending front, my point was that the actual, physical cash, is only in one place at one time. The rest of it is all on paper, but the cash is only ever in one person's hand at a time. It's not like they take someone's $1000 and simultaneously give four people a loan for $1000. The lending occurs in steps and has infinitely more to it, as you said.

Ya dig?

Ok, read better books or switch school. By the way, you can read about it on the Fed's website. Look for "money multiplier".

These things are essential to money creation:

1) The deposits are availlable for immediate redraw. The loans are not.

2) The deposits are guaranteed by the state.

3) The bank is refunded by the state when necessary.

If it were not for this, fractional reserve banking would be limited, because depositors would loose money and banks would go bankrupt, and the public would have limited trust in such banks.

Fractional reserve banking is really fraud, and should be outlawed and prosecuted.

Why can it go on? I found this tidbit as a note in Rothbard's "Man, Economy and State"

"Perhaps one reason for continuing confidence in the banking system is that people generally believe that fraud is prosecuted by the government and that, therefore, any practice not so prosecuted must be sound. Governments, indeed (as we shall se below), always go out of their way to bolster the banking system"

Compare this to HSBC's money laundering:
"The US department of justice said HSBC had moved $881m for two drug cartels in Mexico and Colombia and accepted $15bn in unexplained "bulk cash"..." (the Guardian)

"The US authorities said HSBC did not face criminal charges because the bank was too big to prosecute and no individuals were implicated. " (the Guardian)

"...the bank is now under new management and will not make the same mistakes again" (HSBC according to the Guardian)

Yep.

I opened a NetBank account in 2006.
NetBank was closed by FDIC on Sept. 28, 2007.

I moved my funds to Founders Bank
Founders Bank was closed by FDIC on July 9, 2009.

I moved my funds to George Washington Savings Bank
George Washington Savings Bank was closed by the FDIC on Feb 19, 2010.

I moved my funds to Citizens First National Bank
Citizens First National was closed by the FDIC on November 2, 2012.

My funds are currently with Heartland Bank and Trust.


See the following link (http://www.fdic.gov/bank/individual/failed/banklist.html) for a list of the 496 banks that the FDIC has closed just since the year 2000
http://www.fdic.gov/bank/individual/failed/banklist.html


Certainly, but the full inflated $5000 is all available in the economy to be spent, so it all contributes to inflation of the money supply.

Regardless of whether they do or not, the end result is the same.

We really aren't on the same page. In the system I proposed where money is created through a loan and there are no such things as reserves, reserve ratios.. or a fractional reserve system...... How would a bank be insolvent if someone tried to withdraw $1? That person's money isn't loaned to anyone. There is no reserve ratio. There are no reserves... so how? The answer: you aren't actually thinking about what i'm saying.




If a government prints money ,it is a tax through inflation. If a government gets the Federal reserve to print in for them... the same. Unpreventable inflation isn't a bad thing. But preventable inflation is. Otherwise why is counterfeiting illegal? If a government taxes back what it prints/spends and not extra............ then it is not taxing additionally through inflation.  The point is that if government was not allowed to spend beyond what they can tax... and not allowed to inflate our currency... then taxes would rise to such a level that people would revolt when they saw the true cost of what it all really is.

In the first scenario where there is a public money system and there is a private one... if there is inflation in the public money system what happens to the private one? Nothing. Government employees and government money would just have less purchasing power. If there is deflation in the government money system what happens to the private one? There would obviously be less government employees since I doubt they would be working for free. Anyways there wouldn't be a sudden surge of government money then a sudden disappearance. Money would be spent throughout the year and money would be taxed throughout the year.

Now what happens if it is all the same system? Would there be massive deflation? Think about what you are saying here. You are basically saying that taxes  (removal of money from the system) would cause deflation.  Yet all I am doing is basically defining taxes as the payment of a debt. That's how banks operate. When the principal is paid back... the money is destroyed. The interest recirculates. Taxes (the repayment of the public money that was spent) would be no different. The taxes represent the exact opposite of what the spending itself first represented. There is a cancellation. And there is no deflationary and virtually no inflationary aspect to that system. It's simple..... and perfect. As long as you can get the government to agree not to print/spend more than they can actually tax. If the government simply created the money it needed to finance itself and taxed it back, no more and no less... then we wouldn't have a public debt. And we wouldn't be taxed by our government through inflation.

Did you just assert that counterfeiting is illegal because it creates additional inflation? Officially withdrawing my discussion from this thread. I can't help you.

Your so so wrong, if you ask a good accountant or someone thats works in a bank quite high up they will tell you when doing accounting with banks its different, what me and you would think of as an asset (depositors money) Is classed as a liability, because it is not the banks money it has an obligation to pay it back, Now loans are classed as assets as they are contractual debt obligations, infact if you look on a British Pound note it very clearly says: 'I promise to pay the bearer on demand the sum of £...' The paper money we use is no different from a loan agreement it is a contractual debt obligation, only nowadays the bank of england will not redeem your promisory note for gold it will infact replace your note with another note and it states as much on the bank of England website.

So money is debt, if you want to find out the reserve ratios that banks are supposed to keep then look up Basel 2.

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

Basel 2 is set by the Bank for International Settlements, you should read this article if your are interested in who owns everything

http://www.thedailybell.com/28462/The-Bank-For-International-Settlements-Beware-a-Crash