Posted: Mar 27, 2013 9:32 pm
There are almost too many points I want to make / questions to ask etc to know where to go with this. I'm going to just feel free to use this thread to say whatever I want in order to try to understand how it works so I can eventually either
a) Start persuading people there is something terribly wrong with the way modern banking works or
b) Relax and laugh at people who think there is something terribly wrong with how modern banking works.
My problem is I see what I think are flaws in what people on 'both sides' of this say and thus find it hard to learn from anyone as I cannot be sure they really understand things.
As to fractional reserve banking, all that is really going on there is I lend to person A, person A lends to person B, person B lends to person C etc etc (with some of the persons being banks). That does increase the effective money supply and hence inflation but that's not what this thread is about and I don't see it as a problem. That is, I don't see unearned wealth being gained via this mechanism. As to whether the government should be insuring against bank runs, that's another matter. Interesting discussion sure but some way down the list of my concerns here.
What that video says is that this bit
Is not right - that they aren't lending out parts of deposits, but lending out of thin air. Personally I suspect the video is wrong and the banks have to borrow from the Central Bank in order to do this. But this still raises the question, if banks can borrow from a central bank why do they need depositors?
I hate this shit but at the same time my lack of understanding really bugs me..
a) Start persuading people there is something terribly wrong with the way modern banking works or
b) Relax and laugh at people who think there is something terribly wrong with how modern banking works.
My problem is I see what I think are flaws in what people on 'both sides' of this say and thus find it hard to learn from anyone as I cannot be sure they really understand things.
As to fractional reserve banking, all that is really going on there is I lend to person A, person A lends to person B, person B lends to person C etc etc (with some of the persons being banks). That does increase the effective money supply and hence inflation but that's not what this thread is about and I don't see it as a problem. That is, I don't see unearned wealth being gained via this mechanism. As to whether the government should be insuring against bank runs, that's another matter. Interesting discussion sure but some way down the list of my concerns here.
What that video says is that this bit
UtilityMonster wrote:..whereby [banks] take in deposits and lend it out to other people...
Is not right - that they aren't lending out parts of deposits, but lending out of thin air. Personally I suspect the video is wrong and the banks have to borrow from the Central Bank in order to do this. But this still raises the question, if banks can borrow from a central bank why do they need depositors?
I hate this shit but at the same time my lack of understanding really bugs me..