Fractional Reserve Lending IS NOT bad - its unavoidable

[Razick]

FR isn't only the right to lend out money someone lent to us, in the end it's the right to create money by lending the same amount of money several times.
Technically, isn't fraud, but it's risky and concedes a public function (a sovereign one) to a corporation, the right to create money, crowding out as unnecessary the same amount of public money. If the bank can lend the same money, it doesn't have to ask for credit from the central bank. We all lose.

I disagree, we would lose if that money was sitting in a vault doing nothing. People need to save for their futures, and FRB allows that savings to be used productively to create economic value that benefits us all. If FRB was banned, money would have to be stored in vaults and under mattresses or (more likely) FRB would just take other forms.

[r34tr783tr78]

Ending it completely might be too demanding, but limiting it? 10% seems to be the rule around the world. That is playing with a serious risk.
And allows a drastic banking multiplier on the creation of money.

[Ozziecoin]

Wrong.
Fractional reserve lending is fraud.
Prices transmit information in a free market.
"Some holder(s) of a larger amount of this currency lend currency out to individuals, to collect interest. This creates a fractional reserve banking phenomenon"
lending money at interest is not fractional reserve banking.
You have your definitions mixed up. 

In what world is fractional reserve banking fraud? When you take your money to the bank and they agree to hold it for you and pay interest, you know that they are doing so in order to lend it out. If they didn't lend it out, you would have to pay THEM interest.

Also, the benefit of fractional reserve banking is that it allows multiple people to use the same money at the same time. You can have your money in a rainy-day fund, and I can use it to buy stuff until you need it back. Locking money in a vault and doing nothing with it for years is not productive.

Then have one to one lending.  NO problems with that.

[Ozziecoin]

FR isn't only the right to lend out money someone lent to us, in the end it's the right to create money by lending the same amount of money several times.
Technically, isn't fraud, but it's risky and concedes a public function (a sovereign one) to a corporation, the right to create money, crowding out as unnecessary the same amount of public money. If the bank can lend the same money, it doesn't have to ask for credit from the central bank. We all lose.

This is an intelligent comment. 

[Ozziecoin]

FR isn't only the right to lend out money someone lent to us, in the end it's the right to create money by lending the same amount of money several times.
Technically, isn't fraud, but it's risky and concedes a public function (a sovereign one) to a corporation, the right to create money, crowding out as unnecessary the same amount of public money. If the bank can lend the same money, it doesn't have to ask for credit from the central bank. We all lose.

I disagree, we would lose if that money was sitting in a vault doing nothing. People need to save for their futures, and FRB allows that savings to be used productively to create economic value that benefits us all. If FRB was banned, money would have to be stored in vaults and under mattresses or (more likely) FRB would just take other forms.

Banks are not only lending out the money that they have, they are lending out the money they DON'T have.

[twiifm]

FR isn't only the right to lend out money someone lent to us, in the end it's the right to create money by lending the same amount of money several times.
Technically, isn't fraud, but it's risky and concedes a public function (a sovereign one) to a corporation, the right to create money, crowding out as unnecessary the same amount of public money. If the bank can lend the same money, it doesn't have to ask for credit from the central bank. We all lose.

The risk is credit worthiness of the borrower.

In England there is no cap so banks can create unlimited credit as long as there are credit worthy borrowers.  The make the loans THEN they look for the reserves not the other way around. The problem occurs when deregulation allows things like subprime lending

The issue isn't whether we should have FRB or not.  It's absolutely necessary for modern economies.  The issue is how to regulate it in order to avoid systemic risk

[Ron~Popeil]

The real issue is not that we "allow" fractional reserve lending. The government should not be involved in banking at all.

Banks would not take such stupid risks if they were not back by the federal reserve's ability to print money. If you make stupid decisions you fail. The government bailout addiction makes it easy for banks to make stupid decisions and the hyper regulation after such a bailout leads to the demise of small banks which compounds the original issue by further centralizing the banking system and increasing the risk of systemic shocks. These newly merged frankenbanks are then even more likely to be bailed out for bad decision making. The bailouts come from you and me in the form of tax dollars and devalued currency. Rinse and repeat ad nauseam.

[Ozziecoin]

The real issue is not that we "allow" fractional reserve lending. The government should not be involved in banking at all.

Banks would not take such stupid risks if they were not back by the federal reserve's ability to print money. If you make stupid decisions you fail. The government bailout addiction makes it easy for banks to make stupid decisions and the hyper regulation after such a bailout leads to the demise of small banks which compounds the original issue by further centralizing the banking system and increasing the risk of systemic shocks. These newly merged frankenbanks are then even more likely to be bailed out for bad decision making. The bailouts come from you and me in the form of tax dollars and devalued currency. Rinse and repeat ad nauseam.

Agree with this.  But let's not forget the human propensity to be greedy, especially when they are not personally taking on risk themselves.

Banks are run by managers who are paid bonuses. When losses occur, it is the shareholders that get hit.  I don't recall any banker going to prison since the GFC. Maybe in Iceland. 

[twiifm]

The real issue is not that we "allow" fractional reserve lending. The government should not be involved in banking at all.

Banks would not take such stupid risks if they were not back by the federal reserve's ability to print money. If you make stupid decisions you fail. The government bailout addiction makes it easy for banks to make stupid decisions and the hyper regulation after such a bailout leads to the demise of small banks which compounds the original issue by further centralizing the banking system and increasing the risk of systemic shocks. These newly merged frankenbanks are then even more likely to be bailed out for bad decision making. The bailouts come from you and me in the form of tax dollars and devalued currency. Rinse and repeat ad nauseam.

You are wrong.  Bailout was an emergency loan that's already paid off w interest

In the case of AIG the Treasury took equity in terms of AIG stock and made a handsome profit selling in 2012.

I don't know about you but I didnt pay any more taxes because of bailouts.  I got suckered into an ARM mortgage by Countrywide and when my interest ballooned no bank allowed me refinance because my mortgage was underwater.  But I could roll it into an FHA jumbo.  So the govt helped me out a lot

[twiifm]

The real issue is not that we "allow" fractional reserve lending. The government should not be involved in banking at all.

Banks would not take such stupid risks if they were not back by the federal reserve's ability to print money. If you make stupid decisions you fail. The government bailout addiction makes it easy for banks to make stupid decisions and the hyper regulation after such a bailout leads to the demise of small banks which compounds the original issue by further centralizing the banking system and increasing the risk of systemic shocks. These newly merged frankenbanks are then even more likely to be bailed out for bad decision making. The bailouts come from you and me in the form of tax dollars and devalued currency. Rinse and repeat ad nauseam.

Agree with this.  But let's not forget the human propensity to be greedy, especially when they are not personally taking on risk themselves.

Banks are run by managers who are paid bonuses. When losses occur, it is the shareholders that get hit.  I don't recall any banker going to prison since the GFC. Maybe in Iceland. 

And if those risks make profits and stockholders make money? 

[r34tr783tr78]

Yes, the modern differentiation between property and management can have serious risks. An exaggerated attention to the short-term (profits this year) and a disregard for the long-term interests of the corporation. So, risks with good short-term profits are welcome.
A system of laissez-faire on the banking system was precisely what left us where we are.

[twiifm]

Yes, the modern differentiation between property and management can have serious risks. An exaggerated attention to the short-term (profits this year) and a disregard for the long-term interests of the corporation. So, risks with good short-term profits are welcome.
A system of laissez-faire on the banking system was precisely what left us where we are.

I agree that there should be more regulation but the debate is how much?  Is Dodd Frank enough to prevent another 2008?  We won't know til it happens again

[Ozziecoin]

The real issue is not that we "allow" fractional reserve lending. The government should not be involved in banking at all.

Banks would not take such stupid risks if they were not back by the federal reserve's ability to print money. If you make stupid decisions you fail. The government bailout addiction makes it easy for banks to make stupid decisions and the hyper regulation after such a bailout leads to the demise of small banks which compounds the original issue by further centralizing the banking system and increasing the risk of systemic shocks. These newly merged frankenbanks are then even more likely to be bailed out for bad decision making. The bailouts come from you and me in the form of tax dollars and devalued currency. Rinse and repeat ad nauseam.

Agree with this.  But let's not forget the human propensity to be greedy, especially when they are not personally taking on risk themselves.

Banks are run by managers who are paid bonuses. When losses occur, it is the shareholders that get hit.  I don't recall any banker going to prison since the GFC. Maybe in Iceland. 

And if those risks make profits and stockholders make money? 

Bankers make money in the short term (possible 5 to 10 year period), get paid bonuses.  The debt bubble eventually collapses leaving shareholders and taxpayers with the bill.

[Ozziecoin]

Yes, the modern differentiation between property and management can have serious risks. An exaggerated attention to the short-term (profits this year) and a disregard for the long-term interests of the corporation. So, risks with good short-term profits are welcome.
A system of laissez-faire on the banking system was precisely what left us where we are.

I agree that there should be more regulation but the debate is how much?  Is Dodd Frank enough to prevent another 2008?  We won't know til it happens again

Believe the answer is the Blockchain.  Post Great Depression various rules were implemented to prevent the exact scenario we are now in.  Things like separation of investment from savings banks.  Reserve requirements. 

Every single rule was broken down over time.  The most egregious was Alan Greenspan's mob in allowing investment banks to have virtually unlimited leverage.  As a consequence Lehman was able to leverage up 40 to 1.  The free market failed to perceive the risks until it was too late.

Even a little FRB is a slippery slope.  If all money was on the Blockchain, this will never be a problem ever again.

[twiifm]

The real issue is not that we "allow" fractional reserve lending. The government should not be involved in banking at all.

Banks would not take such stupid risks if they were not back by the federal reserve's ability to print money. If you make stupid decisions you fail. The government bailout addiction makes it easy for banks to make stupid decisions and the hyper regulation after such a bailout leads to the demise of small banks which compounds the original issue by further centralizing the banking system and increasing the risk of systemic shocks. These newly merged frankenbanks are then even more likely to be bailed out for bad decision making. The bailouts come from you and me in the form of tax dollars and devalued currency. Rinse and repeat ad nauseam.

Agree with this.  But let's not forget the human propensity to be greedy, especially when they are not personally taking on risk themselves.

Banks are run by managers who are paid bonuses. When losses occur, it is the shareholders that get hit.  I don't recall any banker going to prison since the GFC. Maybe in Iceland. 

And if those risks make profits and stockholders make money? 

Bankers make money in the short term (possible 5 to 10 year period), get paid bonuses.  The debt bubble eventually collapses leaving shareholders and taxpayers with the bill.

Christ dude, just stop w your "Occupy" cliches.  Clearly you don't know how banking or finance or taxes or stocks work.  Some banker screw your girlfriend or something?

[Ozziecoin]

The real issue is not that we "allow" fractional reserve lending. The government should not be involved in banking at all.

Banks would not take such stupid risks if they were not back by the federal reserve's ability to print money. If you make stupid decisions you fail. The government bailout addiction makes it easy for banks to make stupid decisions and the hyper regulation after such a bailout leads to the demise of small banks which compounds the original issue by further centralizing the banking system and increasing the risk of systemic shocks. These newly merged frankenbanks are then even more likely to be bailed out for bad decision making. The bailouts come from you and me in the form of tax dollars and devalued currency. Rinse and repeat ad nauseam.

You are wrong.  Bailout was an emergency loan that's already paid off w interest

In the case of AIG the Treasury took equity in terms of AIG stock and made a handsome profit selling in 2012.

I don't know about you but I didnt pay any more taxes because of bailouts.  I got suckered into an ARM mortgage by Countrywide and when my interest ballooned no bank allowed me refinance because my mortgage was underwater.  But I could roll it into an FHA jumbo.  So the govt helped me out a lot

You've been given a massive load of debt and you're thankful for that?  Mate, wise up.  If no one had massive debts, houses would be cheaper for everyone.

[Ozziecoin]

The real issue is not that we "allow" fractional reserve lending. The government should not be involved in banking at all.

Banks would not take such stupid risks if they were not back by the federal reserve's ability to print money. If you make stupid decisions you fail. The government bailout addiction makes it easy for banks to make stupid decisions and the hyper regulation after such a bailout leads to the demise of small banks which compounds the original issue by further centralizing the banking system and increasing the risk of systemic shocks. These newly merged frankenbanks are then even more likely to be bailed out for bad decision making. The bailouts come from you and me in the form of tax dollars and devalued currency. Rinse and repeat ad nauseam.

Agree with this.  But let's not forget the human propensity to be greedy, especially when they are not personally taking on risk themselves.

Banks are run by managers who are paid bonuses. When losses occur, it is the shareholders that get hit.  I don't recall any banker going to prison since the GFC. Maybe in Iceland.  

And if those risks make profits and stockholders make money?  

Bankers make money in the short term (possible 5 to 10 year period), get paid bonuses.  The debt bubble eventually collapses leaving shareholders and taxpayers with the bill.

Christ dude, just stop w your "Occupy" cliches.  Clearly you don't know how banking or finance or taxes or stocks work.  Some banker screw your girlfriend or something?

Mate, does this mean you're not part of the 99%?  Why are you so in love with the 1%?  Go the occupy movement!

I speak for the young, disenfranchised and asset poor people.  I make no apologies for that.

You speak of the Occupy movement as if they were to be despised.  I speak of them as brothers.

[r34tr783tr78]

This is supposed to be about arguments, not ad hominem attacks

[twiifm]

I don't despise Occupy Movement.  I just think they are disorganized and ignorant.  I get that they are hurting but they are directing their energies in the wrong direction.  They are loud but they have no clear message.

I know you are trying to do something w ozziecoin. Good luck to you but you are just so misguided. Instead of learning shit from the wackos here why don't you use Cousera.org and take some free classes from legit schools.  You can even find classes from Ivy League or elite schools like Stanford.  Seriously, check it out cause your knowledge of economics and finance is like high school level.

But I really don't care what you do.  Just stop repeating the same thing ad nauseum.  Its really boring.  Its not like a fresh perspective that nobody has heard before

[Ozziecoin]

I don't despise Occupy Movement.  I just think they are disorganized and ignorant.  I get that they are hurting but they are directing their energies in the wrong direction.  They are loud but they have no clear message.

I know you are trying to do something w ozziecoin. Good luck to you but you are just so misguided. Instead of learning shit from the wackos here why don't you use Cousera.org and take some free classes from legit schools.  You can even find classes from Ivy League or elite schools like Stanford.  Seriously, check it out cause your knowledge of economics and finance is like high school level.

But I really don't care what you do.  Just stop repeating the same thing ad nauseum.  Its really boring.  Its not like a fresh perspective that nobody has heard before

And what perspective do you offer? The same keynesian/neo-classical/monetarist clap trap that got us into this mess?  I studied all that. And I reject it all because it is false.  

I offer zero FRB money.  All on the Blockchain.  We are going to get ozziecoin to the community so parasites, which appear to include you, do not get to benefit from the rest of us.  

You say the Occupy Movement is disorganised and ignorant - well I'm not.  

I don't believe I'm the misguided one here.  I believe you offer zero solutions.  You have massive debt.  You accept massive debt.  You speak for the 1%.  And you think it is okay for FRB to inflate money.  

It is those academics running the Fed that are teaching at those ivy league schools you so glorify.  And at what cost? Hundred of thousands in fees? Please, they know nothing so they can teach you nothing.

Soros rejected neo-classical economics, citing there is no perfect market and proceeded to make billions with his theory of reflexivity.  Fama works for a company that exploits market inefficiencies.  Schiller says housing bubbles appear all the time.  Richard Fisher says they are juicing the markets.

You go study the Efficient Market Hypothesis.  I point out to you, if the markets were efficient then how come we had a market crash?  

If markets were efficient and self correcting then how come the Fed needs to intervene and print trillions?

There is a MASSIVE HOLE in economic theory right now.  You would be blind not to realise that.