« Naive? | Main | About Oz Analytics »

Monday, August 31, 2009


Feed You can follow this conversation by subscribing to the comment feed for this post.


Arthur Wankspittle,Read again my explanation I petsod earlier, I will not repeat all of it.As for fractional reserve banking, this is what Modern Money Mechanics have to say:1) a deposit is made 2) Assuming 10% is required as reserve, 90% is what the bank is allowed to lend. 3) Eventually the money lend will be re-deposited to a financial institution in which the process repeats on and on. When the lending process reach its final stage, it is calculated that the original deposit created a loan 9 times itself.The fractional reserve banking is nothing more than a method, a mathematical process, to calculate the theoretical limit of how much money the banks will ultimately lend without violating the Federal Reserve Board of Governors' mandate.But that is not how it works in real practice. The bank don't accept deposits, place 10% as reserve and lend 90% of it, and wait for another deposit and then repeat the process. If they did this it would be a slow process and they are not really creating new money. They would simply be lending money already in existence. This is contrary to Modern Money Mechanics which states the following: Of course they [banks] do not really pay out loans from the money they receive as deposits. If they did this, no ADDITIONAL MONEY would be CREATED. What they do when they MAKE LOANS is to accept promissory notes in EXCHANGE FOR CREDITS to the borrower's transaction account .What they do in real practice is this, the deposit made by the depositor is categorized right away as reserve, this reserve will then allow the bank to create ADDITIONAL MONEY that is 9 times the reserve. The new money is used to EXCHANGE FOR CREDIT the promissory note the purported borrow submits to and accepted by the bank. So the bank never lend any of their depositors' money as Modern Money Mechanics claimed, and their never was a loan because there was only equal EXCHANGE of properties.And as for the issue of creating money out of thin air or out of nothing is simply incorrect. The new money created is backed or secured by the 10% reserve the member banks are mandated to keep. Since only 10% is securing the new money created, it is possible the system could fail. When this happens, the the FDIC kicks in.In summary there is no debt after the purported loan transaction was completed. I have not walk the walk on mortgage loan by I have on other loan and won. I have proofs, my court paperS, but I will not release it just to anyone, only to my closest friends whom I could trust. Believe me, the bank's lawyer admitted that the bank could not prove they lend me any money. Case dismiss. That is why I don't believe anyone telling me anything otherwise. I have proof.Rey

The comments to this entry are closed.

My Photo

Site Meter

Become a Fan