GaryClare said:

---

Helicopter Ben said:

---

FriendlyAg said:

---

Growth would come to a screeching halt without fractional reserve banking. Capitalism is far from perfect and this is a risky side effect of pushing growth, but it's the best system we have…

---

Fractional reserve banking isn't necessarily bad, but it also doesn't mean growth would come to a halt if we stopped the practice. It is only bad if the depositors decide to withdraw and there aren't enough reserves to cover the withdrawals. The problem with this is that the incentive to keep reducing reserves chasing more profit is too high and banks can't be trusted to keep risk at a manageable level. If they haven't had a run on deposits for a long time, why not just loan out even more? The incentive, and therefore tendency, is to keep taking on risk until there's almost no reserves at all. Once depositors figure out their savings are at risk, it's all over in a hurry.

This problem is amplified with government meddling and things like the FDIC. The banks know they will be bailed out by the taxpayer if they screw up. As it stands now, I'd bet not one person in 10,000 even looks at their banks balance sheet. The assumption is that it doesn't matter and no banks ever fail. I don't know how in the world you would call that capitalism.

What we need is real capitalism (aka free markets) in banking. Private banks would have to compete for your deposits. Some could advertise high reserves and therefore be much safer. Some could offer lower reserves but a higher interest rate. The consumer would get to decide and the banks that prove to be the best stewards of money would win their business. Our current system does not operate anywhere near a capitalist model.

And that leads to the fed. They are the real culprit in the destruction of our currency. I'm not aware of any other entity that can create currency (inflation) out of thin air. Unless you get first access to the new currency, the dollars you earn and save deteriorate…slowly at first, and then rapidly as it becomes increasingly necessary to "print" more. The only fair system is a fixed monetary system. And as I've pointed out a thousand times, there is no reason that the money supply needs to increase. It only needs to be able to divide. If our currency had held its value, we would still be able to purchase things with quarters, nickels, dimes, and even pennies. And if at some point there weren't enough of these, we could issue a unit even smaller than the penny.

---

I find the topic of the federal reserve very interesting but wonder if I have the brainpower to figure it all out. When I read summaries like yours I typically agree with the thought process. But then I always think that the last hundred years in the United States have probably been the most prosperous in human history. And the federal reserve system had to be a big reason why. What is your opinion on that thought process?

---

The natural state of a truly free market is deflation. Think of how flat-screen TVs have gotten cheaper and better over the last 25 years. IMHO, our monetary system has hindered the benefits of such deflation that could have flowed to a larger proportion of our population if there had been sound money. Check out www.wtfhappenedin1971.com.

GaryClare said:

---

I find the topic of the federal reserve very interesting but wonder if I have the brainpower to figure it all out. When I read summaries like yours I typically agree with the thought process. But then I always think that the last hundred years in the United States have probably been the most prosperous in human history. And the federal reserve system had to be a big reason why. What is your opinion on that thought process?

---

It's Texas Aggies Dammit answered it quite thoroughly. But I will add that we can't know how a different scenario would have played out. I would argue that 99% of Americans today would have been MUCH better off without the federal reserve. Even more so, if we had stayed on the gold standard. I think most of us would agree that capitalism isn't perfect but it's the best/most effective system we have given the realities of human nature. The reason for a gold standard is exactly the same. A fixed money supply is best because it removes the ability of people to cozy up to the govt and get closer to the spigot of new money. Also, the govt would not have been able to waste so much money on all the useless wars and welfare state. They would have to tax us honestly to pay for those. In our current system, we pay for all of that waste through inflation.

But more to your question, the best way to compare is in overall standard of living, not just nominal growth. The govt loves to report gdp growth or any other nominal growth statistics. But they fail to represent what really matters. Quality of life, standard of living, purchasing power, cost of living etc are the only factors that really matter. IOW, are people's lives improving?

For this we should look to things like income to housing ratio. The salary needed to purchase a home has roughly doubled since 2017. And an even better way to look at it would be hours of labor needed to purchase x product or y service. From all of the data I've seen, these metrics are declining. There's not a perfect way to compare this, but there is one way that works fairly well. And that is to compare to the gold or silver price.

For example, in 1964 minimum wage was $1.25 per hour and let's say you took payment in quarters. I use this year because it is the last year our coins were minted in silver. So if we compare that to today's silver price (~$37) we get roughly $33.50 worth of purchasing power today. ITAD is correct that prices should fall over time as we get more efficient and better technology. Nobody should really care if their salaries went up or not. They should only care if they can AFFORD more things. With a fixed money supply, this is exactly what we would expect to happen. But because of the federal reserve the reverse is happening.

aTmAg said:

---

Its Texas Aggies, dammit said:

---

aTmAg said:

---

CrackerJackAg said:

---

NPH- said:

---

---

No that's exactly how it works

Known fact for a very long time

I suggest Creature from Jekyll Island. Great book.

---

Nope he is wrong. The only money that is ever created is by the Fed, treasury, and maybe the computers Musk mentioned during DOGE that apparently had the power to unilaterally add money to their own bank accounts from nowhere.

M2, M3, etc. all just double, triple, etc. count that same money whenever it is loaned out. They are wrong. They shouldn't be called the "money supply", they should be called "The bank account summary" or something. As they mislead people like most other government stats.

If we really could create money by merely lending it, then we could end hunger by "creating" food by lending it out over and over. We could create houses by lending them out over and over. And so on.

---

No, when money is lent, everybody else's money becomes worth less. That is the problem.

---

It does not.

If I lend you $100 then, I no longer have $100 to spend. We didn't create new money, we just transferred who is holding existing money.

---

Except interest and the time value of money stipulate that you as the owner of the debt actually have an asset worth more than $100.

The whole purpose of the fed raising and lowering interest rates is to curb or spur lending based on the macro financial environment. Because lending expands the money supply in a fractional reserve system. This is finance/economics 101.

And anyone who says this practice is bad for the economy is welcome to campaign on reducing every persons standard of living and killing class mobility. You can surely overextend your lending, but the solution is not to completely stop lending.

Its Texas Aggies, dammit said:

---

GaryClare said:

---

Helicopter Ben said:

---

FriendlyAg said:

---

Growth would come to a screeching halt without fractional reserve banking. Capitalism is far from perfect and this is a risky side effect of pushing growth, but it's the best system we have…

---

Fractional reserve banking isn't necessarily bad, but it also doesn't mean growth would come to a halt if we stopped the practice. It is only bad if the depositors decide to withdraw and there aren't enough reserves to cover the withdrawals. The problem with this is that the incentive to keep reducing reserves chasing more profit is too high and banks can't be trusted to keep risk at a manageable level. If they haven't had a run on deposits for a long time, why not just loan out even more? The incentive, and therefore tendency, is to keep taking on risk until there's almost no reserves at all. Once depositors figure out their savings are at risk, it's all over in a hurry.

This problem is amplified with government meddling and things like the FDIC. The banks know they will be bailed out by the taxpayer if they screw up. As it stands now, I'd bet not one person in 10,000 even looks at their banks balance sheet. The assumption is that it doesn't matter and no banks ever fail. I don't know how in the world you would call that capitalism.

What we need is real capitalism (aka free markets) in banking. Private banks would have to compete for your deposits. Some could advertise high reserves and therefore be much safer. Some could offer lower reserves but a higher interest rate. The consumer would get to decide and the banks that prove to be the best stewards of money would win their business. Our current system does not operate anywhere near a capitalist model.

And that leads to the fed. They are the real culprit in the destruction of our currency. I'm not aware of any other entity that can create currency (inflation) out of thin air. Unless you get first access to the new currency, the dollars you earn and save deteriorate…slowly at first, and then rapidly as it becomes increasingly necessary to "print" more. The only fair system is a fixed monetary system. And as I've pointed out a thousand times, there is no reason that the money supply needs to increase. It only needs to be able to divide. If our currency had held its value, we would still be able to purchase things with quarters, nickels, dimes, and even pennies. And if at some point there weren't enough of these, we could issue a unit even smaller than the penny.

---

I find the topic of the federal reserve very interesting but wonder if I have the brainpower to figure it all out. When I read summaries like yours I typically agree with the thought process. But then I always think that the last hundred years in the United States have probably been the most prosperous in human history. And the federal reserve system had to be a big reason why. What is your opinion on that thought process?

---

The natural state of a truly free market is deflation. Think of how flat-screen TVs have gotten cheaper and better over the last 25 years. IMHO, our monetary system has hindered the benefits of such deflation that could have flowed to a larger proportion of our population if there had been sound money. Check out www.wtfhappenedin1971.com.

---

Deflation is crippling for an economy. Goods becoming cheaper through technology and innovation is WILDLY different than a deflationary dollar.

Free market lending is great.

What we have is not that.

A system that:

- Creates money supply out of thin air is inflationary and a hidden tax.

- Hides money through "creative" accounting allows for distortion and manipulation.

- Rewards bad behavior encourages more of it and discourages good business practices.

- Bails out bad actors on the backs of others is immoral.

- Reduces/eliminates competition through regulation is anti-capitalist.

- Incentivizes war is evil

- Allows for unrestrained government spending is destructive

The Fed does all of that.

It claims to keep us us out of financial crises, but it just bails out the well-connected and shifts the costs to the public and leaves a mess in its wake.

Kvetch said:

---

aTmAg said:

---

Its Texas Aggies, dammit said:

---

aTmAg said:

---

CrackerJackAg said:

---

NPH- said:

---

---

No that's exactly how it works

Known fact for a very long time

I suggest Creature from Jekyll Island. Great book.

---

Nope he is wrong. The only money that is ever created is by the Fed, treasury, and maybe the computers Musk mentioned during DOGE that apparently had the power to unilaterally add money to their own bank accounts from nowhere.

M2, M3, etc. all just double, triple, etc. count that same money whenever it is loaned out. They are wrong. They shouldn't be called the "money supply", they should be called "The bank account summary" or something. As they mislead people like most other government stats.

If we really could create money by merely lending it, then we could end hunger by "creating" food by lending it out over and over. We could create houses by lending them out over and over. And so on.

---

No, when money is lent, everybody else's money becomes worth less. That is the problem.

---

It does not.

If I lend you $100 then, I no longer have $100 to spend. We didn't create new money, we just transferred who is holding existing money.

---

Except interest and the time value of money stipulate that you as the owner of the debt actually have an asset worth more than $100.

The whole purpose of the fed raising and lowering interest rates is to curb or spur lending based on the macro financial environment. Because lending expands the money supply in a fractional reserve system. This is finance/economics 101.

And anyone who says this practice is bad for the economy is welcome to campaign on reducing every persons standard of living and killing class mobility. You can surely overextend your lending, but the solution is not to completely stop lending.

---

I see no reason why we could not have sound money and let the free market set interest rates.

Its Texas Aggies, dammit said:

---

sam callahan said:

---

I listened to this podcast a few days ago. I found it interesting and helpful, though some of what he described as novel seemed like it had been discussed before, just not widely known/accepted.

It did make me finally start Creature From Jekylll Island, which I have been meaning to read for years. I had shied away because I thought it would be a dry slog and too complex. It's neither of those, but it is a slog - you can only hear so many stories of croynsim and malefesanace before you have to take a break. It's just too maddening otherwise.

I lost faith in "we need the Fed to protect us from financial crises" a long while back, but man what an eye opener.

The big banks and some of the big corporations have done a number on us. I may turn into my grandad and stuff money under my mattress...but I'd still get hosed by inflation.

---

Lots of people who did not study business have no idea. I did not until the last few years. For example, I had no idea that money I deposit in the bank is no longer mine but becomes an unsecured loan to the bank.

"It is well enough that the people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning." Henry Ford

---

What happens with a margin loan?
Deposit money in the bank/brokerage. Buy stocks with the money. Buy more stocks on margin secured by the stocks you bought with your money given to the bank. Then take out a margin loan secured by the stocks you bought with your money you gave to the bank which is also an unsecured loan but now they're loaning it back to you at 7%.

Kvetch said:

---

Its Texas Aggies, dammit said:

---

GaryClare said:

---

Helicopter Ben said:

---

FriendlyAg said:

---

Growth would come to a screeching halt without fractional reserve banking. Capitalism is far from perfect and this is a risky side effect of pushing growth, but it's the best system we have…

---

Fractional reserve banking isn't necessarily bad, but it also doesn't mean growth would come to a halt if we stopped the practice. It is only bad if the depositors decide to withdraw and there aren't enough reserves to cover the withdrawals. The problem with this is that the incentive to keep reducing reserves chasing more profit is too high and banks can't be trusted to keep risk at a manageable level. If they haven't had a run on deposits for a long time, why not just loan out even more? The incentive, and therefore tendency, is to keep taking on risk until there's almost no reserves at all. Once depositors figure out their savings are at risk, it's all over in a hurry.

This problem is amplified with government meddling and things like the FDIC. The banks know they will be bailed out by the taxpayer if they screw up. As it stands now, I'd bet not one person in 10,000 even looks at their banks balance sheet. The assumption is that it doesn't matter and no banks ever fail. I don't know how in the world you would call that capitalism.

What we need is real capitalism (aka free markets) in banking. Private banks would have to compete for your deposits. Some could advertise high reserves and therefore be much safer. Some could offer lower reserves but a higher interest rate. The consumer would get to decide and the banks that prove to be the best stewards of money would win their business. Our current system does not operate anywhere near a capitalist model.

And that leads to the fed. They are the real culprit in the destruction of our currency. I'm not aware of any other entity that can create currency (inflation) out of thin air. Unless you get first access to the new currency, the dollars you earn and save deteriorate…slowly at first, and then rapidly as it becomes increasingly necessary to "print" more. The only fair system is a fixed monetary system. And as I've pointed out a thousand times, there is no reason that the money supply needs to increase. It only needs to be able to divide. If our currency had held its value, we would still be able to purchase things with quarters, nickels, dimes, and even pennies. And if at some point there weren't enough of these, we could issue a unit even smaller than the penny.

---

I find the topic of the federal reserve very interesting but wonder if I have the brainpower to figure it all out. When I read summaries like yours I typically agree with the thought process. But then I always think that the last hundred years in the United States have probably been the most prosperous in human history. And the federal reserve system had to be a big reason why. What is your opinion on that thought process?

---

The natural state of a truly free market is deflation. Think of how flat-screen TVs have gotten cheaper and better over the last 25 years. IMHO, our monetary system has hindered the benefits of such deflation that could have flowed to a larger proportion of our population if there had been sound money. Check out www.wtfhappenedin1971.com.

---

Deflation is crippling for an economy. Goods becoming cheaper through technology and innovation is WILDLY different than a deflationary dollar.

---

As a general matter, deflation is the market's disinfectant. When credit expansion and artificial stimulus distort the capital structure, falling prices re-price misallocated resources toward sustainable uses. Trying to stop prices from falling just keeps the misallocation on life support.

No "deflationary spiral" exists in voluntary markets. Historically, real output and living standards rose while prices gently declined. Falling prices reflect rising productivity, not collapsing demand.

Deflation only threatens borrowers who levered up on artificially low rates. Liquidation and bankruptcy allocate losses to those who made bad bets. it is justice, not pathology. Bailing them out simply socializes the losses. Think GFC. Privatize the gains and socialize the losses.

The inordinate fear of deflation is Keynesian BS. Austrians regard this as code for "protect leveraged elites at the expense of savers and sound money."

techno-ag said:

---

Its Texas Aggies, dammit said:

---

sam callahan said:

---

I listened to this podcast a few days ago. I found it interesting and helpful, though some of what he described as novel seemed like it had been discussed before, just not widely known/accepted.

It did make me finally start Creature From Jekylll Island, which I have been meaning to read for years. I had shied away because I thought it would be a dry slog and too complex. It's neither of those, but it is a slog - you can only hear so many stories of croynsim and malefesanace before you have to take a break. It's just too maddening otherwise.

I lost faith in "we need the Fed to protect us from financial crises" a long while back, but man what an eye opener.

The big banks and some of the big corporations have done a number on us. I may turn into my grandad and stuff money under my mattress...but I'd still get hosed by inflation.

---

Lots of people who did not study business have no idea. I did not until the last few years. For example, I had no idea that money I deposit in the bank is no longer mine but becomes an unsecured loan to the bank.

"It is well enough that the people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning." Henry Ford

---

What happens with a margin loan?
Deposit money in the bank/brokerage. Buy stocks with the money. Buy more stocks on margin secured by the stocks you bought with your money given to the bank. Then take out a margin loan secured by the stocks you bought with your money you gave to the bank which is also an unsecured loan but now they're loaning it back to you at 7%.

---

I was thinking more of a simple checking account. In that case, I'd rather have it in a 100% secured bank like Custodia. I'll pay a fee. Just make sure I don't lose my money. Other money goes into things that are risky. I recognize those situations are different.

Its Texas Aggies, dammit said:

---

Kvetch said:

---

aTmAg said:

---

Its Texas Aggies, dammit said:

---

aTmAg said:

---

CrackerJackAg said:

---

NPH- said:

---

---

No that's exactly how it works

Known fact for a very long time

I suggest Creature from Jekyll Island. Great book.

---

Nope he is wrong. The only money that is ever created is by the Fed, treasury, and maybe the computers Musk mentioned during DOGE that apparently had the power to unilaterally add money to their own bank accounts from nowhere.

M2, M3, etc. all just double, triple, etc. count that same money whenever it is loaned out. They are wrong. They shouldn't be called the "money supply", they should be called "The bank account summary" or something. As they mislead people like most other government stats.

If we really could create money by merely lending it, then we could end hunger by "creating" food by lending it out over and over. We could create houses by lending them out over and over. And so on.

---

No, when money is lent, everybody else's money becomes worth less. That is the problem.

---

It does not.

If I lend you $100 then, I no longer have $100 to spend. We didn't create new money, we just transferred who is holding existing money.

---

Except interest and the time value of money stipulate that you as the owner of the debt actually have an asset worth more than $100.

The whole purpose of the fed raising and lowering interest rates is to curb or spur lending based on the macro financial environment. Because lending expands the money supply in a fractional reserve system. This is finance/economics 101.

And anyone who says this practice is bad for the economy is welcome to campaign on reducing every persons standard of living and killing class mobility. You can surely overextend your lending, but the solution is not to completely stop lending.

---

I see no reason why we could not have sound money and let the free market set interest rates.

---

The market does set interest rates. The reserve rate is just a tool for the fed to disincentivize lending to prevent massive inflation, largely in response to bank runs of 100+ years ago.

Money is an illusion.

We should have money based on actual assets. Gold for example.

But then we couldn't fund the forever wars and proxy wars….so maybe that's the reason for it all along.

The Fed has been purposefully debasing our currency through monetary policy for over 100 years. They've provided cover to morally bankrupt politicians who are fiscally reckless, as well as, helped them keep their comfy legislature seats by never having to raise taxes or adhering to a budget...just increase the credit card limit - the American people are good for it; see Schumer and McConnell.

Year over year, the Fed and government continue to steal our time and labor through debt and inflation. Regardless of where one sits in the financial hierarchy of society, ethically and morally, that shouldn't sit well with anyone.

The Federal Reserve, central banking, and this fiat fantasy will either end with a lot of weeping and gnashing of teeth, by even those who made good decisions in life and did everything right. Or, this financial system morphs into something even more sinister. Reading the tea-leaves, it looks like we're headed for something far more sinister but, I digress.

Personally, I'd like to see the Fed abolished and a return to sound money - gold, silver, and copper. I want balanced budgets, no foreign entanglements, free trade/free markets, and the least amount of taxes and regulation possible. But that's just me...

Quote:

---

The market does set interest rates. The reserve rate is just a tool for the fed to disincentivize lending to prevent massive inflation, largely in response to bank runs of 100+ years ago.

---

Can you explain why there were bank runs 100 years ago?

Kvetch said:

---

aTmAg said:

---

Its Texas Aggies, dammit said:

---

aTmAg said:

---

CrackerJackAg said:

---

NPH- said:

---

---

No that's exactly how it works

Known fact for a very long time

I suggest Creature from Jekyll Island. Great book.

---

Nope he is wrong. The only money that is ever created is by the Fed, treasury, and maybe the computers Musk mentioned during DOGE that apparently had the power to unilaterally add money to their own bank accounts from nowhere.

M2, M3, etc. all just double, triple, etc. count that same money whenever it is loaned out. They are wrong. They shouldn't be called the "money supply", they should be called "The bank account summary" or something. As they mislead people like most other government stats.

If we really could create money by merely lending it, then we could end hunger by "creating" food by lending it out over and over. We could create houses by lending them out over and over. And so on.

---

No, when money is lent, everybody else's money becomes worth less. That is the problem.

---

It does not.

If I lend you $100 then, I no longer have $100 to spend. We didn't create new money, we just transferred who is holding existing money.

---

Except interest and the time value of money stipulate that you as the owner of the debt actually have an asset worth more than $100.

The whole purpose of the fed raising and lowering interest rates is to curb or spur lending based on the macro financial environment. Because lending expands the money supply in a fractional reserve system. This is finance/economics 101.

And anyone who says this practice is bad for the economy is welcome to campaign on reducing every persons standard of living and killing class mobility. You can surely overextend your lending, but the solution is not to completely stop lending.

---

I don't know how to bold but your first paragraph is false. You said:

"Except interest and the time value of money stipulate that you as the owner of the debt actually have an asset worth more than $100."

The RIGHT answer is, it depends. It depends on the interest rate of the loan instrument. If rates go up the loan instrument is worth less than the $100 to the bank. If rates go down the loan instrument is worth more to the bank. The same math as on a US Treasury. And, whatever, none of this creates new money. It's simply an instrument priced according to the yield. For this same reason, people refinance higher priced mortgage loans when rates go down and don't refinance when pricing goes up.

The asset worth of the loan is a function of principle, rate, and RISK

Since the Fed puts all the risk on the public, it's not valued properly as an asset

Helicopter Ben said:

---

FriendlyAg said:

---

Growth would come to a screeching halt without fractional reserve banking. Capitalism is far from perfect and this is a risky side effect of pushing growth, but it's the best system we have…

---

Fractional reserve banking isn't necessarily bad, but it also doesn't mean growth would come to a halt if we stopped the practice. It is only bad if the depositors decide to withdraw and there aren't enough reserves to cover the withdrawals. The problem with this is that the incentive to keep reducing reserves chasing more profit is too high and banks can't be trusted to keep risk at a manageable level. If they haven't had a run on deposits for a long time, why not just loan out even more? The incentive, and therefore tendency, is to keep taking on risk until there's almost no reserves at all. Once depositors figure out their savings are at risk, it's all over in a hurry.

This problem is amplified with government meddling and things like the FDIC. The banks know they will be bailed out by the taxpayer if they screw up. As it stands now, I'd bet not one person in 10,000 even looks at their banks balance sheet. The assumption is that it doesn't matter and no banks ever fail. I don't know how in the world you would call that capitalism.

What we need is real capitalism (aka free markets) in banking. Private banks would have to compete for your deposits. Some could advertise high reserves and therefore be much safer. Some could offer lower reserves but a higher interest rate. The consumer would get to decide and the banks that prove to be the best stewards of money would win their business. Our current system does not operate anywhere near a capitalist model.

And that leads to the fed. They are the real culprit in the destruction of our currency. I'm not aware of any other entity that can create currency (inflation) out of thin air. Unless you get first access to the new currency, the dollars you earn and save deteriorate…slowly at first, and then rapidly as it becomes increasingly necessary to "print" more. The only fair system is a fixed monetary system. And as I've pointed out a thousand times, there is no reason that the money supply needs to increase. It only needs to be able to divide. If our currency had held its value, we would still be able to purchase things with quarters, nickels, dimes, and even pennies. And if at some point there weren't enough of these, we could issue a unit even smaller than the penny.

---

Bingo

Its Texas Aggies, dammit said:

---

sam callahan said:

---

I listened to this podcast a few days ago. I found it interesting and helpful, though some of what he described as novel seemed like it had been discussed before, just not widely known/accepted.

It did make me finally start Creature From Jekylll Island, which I have been meaning to read for years. I had shied away because I thought it would be a dry slog and too complex. It's neither of those, but it is a slog - you can only hear so many stories of croynsim and malefesanace before you have to take a break. It's just too maddening otherwise.

I lost faith in "we need the Fed to protect us from financial crises" a long while back, but man what an eye opener.

The big banks and some of the big corporations have done a number on us. I may turn into my grandad and stuff money under my mattress...but I'd still get hosed by inflation.

---

Lots of people who did not study business have no idea. I did not until the last few years. For example, I had no idea that money I deposit in the bank is no longer mine but becomes an unsecured loan to the bank.

"It is well enough that the people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning." Henry Ford

---

Not only that, but FDIC covers just a tiny fraction of what it claims to. You have no money, and nobody is there to back it up outside of an isolated case.

Kvetch said:

---

Its Texas Aggies, dammit said:

---

GaryClare said:

---

Helicopter Ben said:

---

FriendlyAg said:

---

Growth would come to a screeching halt without fractional reserve banking. Capitalism is far from perfect and this is a risky side effect of pushing growth, but it's the best system we have…

---

Fractional reserve banking isn't necessarily bad, but it also doesn't mean growth would come to a halt if we stopped the practice. It is only bad if the depositors decide to withdraw and there aren't enough reserves to cover the withdrawals. The problem with this is that the incentive to keep reducing reserves chasing more profit is too high and banks can't be trusted to keep risk at a manageable level. If they haven't had a run on deposits for a long time, why not just loan out even more? The incentive, and therefore tendency, is to keep taking on risk until there's almost no reserves at all. Once depositors figure out their savings are at risk, it's all over in a hurry.

This problem is amplified with government meddling and things like the FDIC. The banks know they will be bailed out by the taxpayer if they screw up. As it stands now, I'd bet not one person in 10,000 even looks at their banks balance sheet. The assumption is that it doesn't matter and no banks ever fail. I don't know how in the world you would call that capitalism.

What we need is real capitalism (aka free markets) in banking. Private banks would have to compete for your deposits. Some could advertise high reserves and therefore be much safer. Some could offer lower reserves but a higher interest rate. The consumer would get to decide and the banks that prove to be the best stewards of money would win their business. Our current system does not operate anywhere near a capitalist model.

And that leads to the fed. They are the real culprit in the destruction of our currency. I'm not aware of any other entity that can create currency (inflation) out of thin air. Unless you get first access to the new currency, the dollars you earn and save deteriorate…slowly at first, and then rapidly as it becomes increasingly necessary to "print" more. The only fair system is a fixed monetary system. And as I've pointed out a thousand times, there is no reason that the money supply needs to increase. It only needs to be able to divide. If our currency had held its value, we would still be able to purchase things with quarters, nickels, dimes, and even pennies. And if at some point there weren't enough of these, we could issue a unit even smaller than the penny.

---

I find the topic of the federal reserve very interesting but wonder if I have the brainpower to figure it all out. When I read summaries like yours I typically agree with the thought process. But then I always think that the last hundred years in the United States have probably been the most prosperous in human history. And the federal reserve system had to be a big reason why. What is your opinion on that thought process?

---

The natural state of a truly free market is deflation. Think of how flat-screen TVs have gotten cheaper and better over the last 25 years. IMHO, our monetary system has hindered the benefits of such deflation that could have flowed to a larger proportion of our population if there had been sound money. Check out www.wtfhappenedin1971.com.

---

Deflation is crippling for an economy designed to destroy the purchasing power of the currency while inflating assets and prices in the economy.

---

FIFY

Quote:

---

Goods becoming cheaper through technology and innovation is WILDLY different than a deflationary dollar.

---

Again, only in an economy designed to destroy the populous through constant inflation. A deflationary economy is one where good investments, as well as general bank deposits, return more than the risk free rate in the economy. Because of constant deflation, holding cash is rewarding. Meaning that only productive companies are rewarded with investment and all others fail naturally. It's the epitome of truly free market capitalism. Arguing against sound money and deflation is arguing for a continued socialistic corporatocracy that rewards the haves through the destruction of the have nots, and not needing actual productivity to improve to do so.

Hard times are coming at some point. It is prophecy.

And I heard a voice from among the four living beings say, "A loaf of wheat bread or three loaves of barley will cost a day's pay. And don't waste the olive oil and wine."
Revelation 6:6 (NLT)

Quote:

---

Not only that, but FDIC covers just a tiny fraction of what it claims to

---

Plus it encourages risky behavior. Every bank pays the same rate. If it were real insurance it would be risk adjusted. As it is now, it would be like a 16-year old boy and a 40-year old man with a clean driving record paying the same premium.

I feel like these sorts of threads are similar to the property tax threads.

The same group that is angry about socialized losses and bail outs (I agree is BS) also don't recognize that there have been quite a few bank failures in recent years. Banks do fail.

I would argue though that the general population is emotional and not thinking in terms of actual risk. Think about the toilet paper shortages or the DFW gas crises a few years ago. People run on stuff all the time because of fear, not because of an actual risk of that item running out.

The same people upset about bailouts also are upset that FDIC limits are too low? I'm confused by the varying moving positions.

Lastly, in a scenario where money is tied to a hard asset and in a so called deflationary scenario… how do you incentivize efficient capital allocation? If everyone doesn't invest and just sits on their cash and we don't have fractional reserve banking, how do you get capital to move from person to person? How do you allow for loans for businesses to start or for people to buy houses.

It doesn't make sense to me that you get a reward without risk.

techno-ag said:

---

Hard times are coming at some point. It is prophecy.

And I heard a voice from among the four living beings say, "A loaf of wheat bread or three loaves of barley will cost a day's pay. And don't waste the olive oil and wine."
Revelation 6:6 (NLT)

---

They will never quit printing. That's why a guy like Paul Tudor Jones says he is buying things they cannot print. Like gold, other commodities, and bitcoin.

Azeew said:

---

Kvetch said:

---

aTmAg said:

---

Its Texas Aggies, dammit said:

---

aTmAg said:

---

CrackerJackAg said:

---

NPH- said:

---

---

No that's exactly how it works

Known fact for a very long time

I suggest Creature from Jekyll Island. Great book.

---

Nope he is wrong. The only money that is ever created is by the Fed, treasury, and maybe the computers Musk mentioned during DOGE that apparently had the power to unilaterally add money to their own bank accounts from nowhere.

M2, M3, etc. all just double, triple, etc. count that same money whenever it is loaned out. They are wrong. They shouldn't be called the "money supply", they should be called "The bank account summary" or something. As they mislead people like most other government stats.

If we really could create money by merely lending it, then we could end hunger by "creating" food by lending it out over and over. We could create houses by lending them out over and over. And so on.

---

No, when money is lent, everybody else's money becomes worth less. That is the problem.

---

It does not.

If I lend you $100 then, I no longer have $100 to spend. We didn't create new money, we just transferred who is holding existing money.

---

Except interest and the time value of money stipulate that you as the owner of the debt actually have an asset worth more than $100.

The whole purpose of the fed raising and lowering interest rates is to curb or spur lending based on the macro financial environment. Because lending expands the money supply in a fractional reserve system. This is finance/economics 101.

And anyone who says this practice is bad for the economy is welcome to campaign on reducing every persons standard of living and killing class mobility. You can surely overextend your lending, but the solution is not to completely stop lending.

---

I don't know how to bold but your first paragraph is false. You said:

"Except interest and the time value of money stipulate that you as the owner of the debt actually have an asset worth more than $100."

The RIGHT answer is, it depends. It depends on the interest rate of the loan instrument. If rates go up the loan instrument is worth less than the $100 to the bank. If rates go down the loan instrument is worth more to the bank. The same math as on a US Treasury. And, whatever, none of this creates new money. It's simply an instrument priced according to the yield. For this same reason, people refinance higher priced mortgage loans when rates go down and don't refinance when pricing goes up.

---

I was generalizing since the idea that lending grows the money supply was being debated. Obviously the direction of rate change impacts the value of the receivable.

It doesn't create new money in that additional $100 bills are in circulation. It does, however, expand the money supply. Which is why lending provides the leverage for the average American opportunities they wouldn't otherwise have. If lending were a 0 sum game, nobody would do it. It would be a waste of capital.

Heineken-Ashi said:

---

Kvetch said:

---

Its Texas Aggies, dammit said:

---

GaryClare said:

---

Helicopter Ben said:

---

FriendlyAg said:

---

Growth would come to a screeching halt without fractional reserve banking. Capitalism is far from perfect and this is a risky side effect of pushing growth, but it's the best system we have…

---

Fractional reserve banking isn't necessarily bad, but it also doesn't mean growth would come to a halt if we stopped the practice. It is only bad if the depositors decide to withdraw and there aren't enough reserves to cover the withdrawals. The problem with this is that the incentive to keep reducing reserves chasing more profit is too high and banks can't be trusted to keep risk at a manageable level. If they haven't had a run on deposits for a long time, why not just loan out even more? The incentive, and therefore tendency, is to keep taking on risk until there's almost no reserves at all. Once depositors figure out their savings are at risk, it's all over in a hurry.

This problem is amplified with government meddling and things like the FDIC. The banks know they will be bailed out by the taxpayer if they screw up. As it stands now, I'd bet not one person in 10,000 even looks at their banks balance sheet. The assumption is that it doesn't matter and no banks ever fail. I don't know how in the world you would call that capitalism.

What we need is real capitalism (aka free markets) in banking. Private banks would have to compete for your deposits. Some could advertise high reserves and therefore be much safer. Some could offer lower reserves but a higher interest rate. The consumer would get to decide and the banks that prove to be the best stewards of money would win their business. Our current system does not operate anywhere near a capitalist model.

And that leads to the fed. They are the real culprit in the destruction of our currency. I'm not aware of any other entity that can create currency (inflation) out of thin air. Unless you get first access to the new currency, the dollars you earn and save deteriorate…slowly at first, and then rapidly as it becomes increasingly necessary to "print" more. The only fair system is a fixed monetary system. And as I've pointed out a thousand times, there is no reason that the money supply needs to increase. It only needs to be able to divide. If our currency had held its value, we would still be able to purchase things with quarters, nickels, dimes, and even pennies. And if at some point there weren't enough of these, we could issue a unit even smaller than the penny.

---

I find the topic of the federal reserve very interesting but wonder if I have the brainpower to figure it all out. When I read summaries like yours I typically agree with the thought process. But then I always think that the last hundred years in the United States have probably been the most prosperous in human history. And the federal reserve system had to be a big reason why. What is your opinion on that thought process?

---

The natural state of a truly free market is deflation. Think of how flat-screen TVs have gotten cheaper and better over the last 25 years. IMHO, our monetary system has hindered the benefits of such deflation that could have flowed to a larger proportion of our population if there had been sound money. Check out www.wtfhappenedin1971.com.

---

Deflation is crippling for an economy designed to destroy the purchasing power of the currency while inflating assets and prices in the economy.

---

FIFY

Quote:

---

Goods becoming cheaper through technology and innovation is WILDLY different than a deflationary dollar.

---

Again, only in an economy designed to destroy the populous through constant inflation. A deflationary economy is one where good investments, as well as general bank deposits, return more than the risk free rate in the economy. Because of constant deflation, holding cash is rewarding. Meaning that only productive companies are rewarded with investment and all others fail naturally. It's the epitome of truly free market capitalism. Arguing against sound money and deflation is arguing for a continued socialistic corporatocracy that rewards the haves through the destruction of the have nots, and not needing actual productivity to improve to do so.

---

None of this is true. An economy self cannibalizes over time with anything other than moderate deflation. If I'm a company that pays your salary and over time the product that I sell becomes cheaper and cheaper, I either have to constantly sell 2 more teas, cut your wages, or fire you. We are not only consumers, so continual price declines isn't some panacea.

Inflation is a byproduct of a system where capital flows freely to allow for innovation. It can certainly get out of control because no system is perfect, but let's not pretend the alternative is some perfect system.

Kvetch said:

---

Heineken-Ashi said:

---

Kvetch said:

---

Its Texas Aggies, dammit said:

---

GaryClare said:

---

Helicopter Ben said:

---

FriendlyAg said:

---

Growth would come to a screeching halt without fractional reserve banking. Capitalism is far from perfect and this is a risky side effect of pushing growth, but it's the best system we have…

---

Fractional reserve banking isn't necessarily bad, but it also doesn't mean growth would come to a halt if we stopped the practice. It is only bad if the depositors decide to withdraw and there aren't enough reserves to cover the withdrawals. The problem with this is that the incentive to keep reducing reserves chasing more profit is too high and banks can't be trusted to keep risk at a manageable level. If they haven't had a run on deposits for a long time, why not just loan out even more? The incentive, and therefore tendency, is to keep taking on risk until there's almost no reserves at all. Once depositors figure out their savings are at risk, it's all over in a hurry.

This problem is amplified with government meddling and things like the FDIC. The banks know they will be bailed out by the taxpayer if they screw up. As it stands now, I'd bet not one person in 10,000 even looks at their banks balance sheet. The assumption is that it doesn't matter and no banks ever fail. I don't know how in the world you would call that capitalism.

What we need is real capitalism (aka free markets) in banking. Private banks would have to compete for your deposits. Some could advertise high reserves and therefore be much safer. Some could offer lower reserves but a higher interest rate. The consumer would get to decide and the banks that prove to be the best stewards of money would win their business. Our current system does not operate anywhere near a capitalist model.

And that leads to the fed. They are the real culprit in the destruction of our currency. I'm not aware of any other entity that can create currency (inflation) out of thin air. Unless you get first access to the new currency, the dollars you earn and save deteriorate…slowly at first, and then rapidly as it becomes increasingly necessary to "print" more. The only fair system is a fixed monetary system. And as I've pointed out a thousand times, there is no reason that the money supply needs to increase. It only needs to be able to divide. If our currency had held its value, we would still be able to purchase things with quarters, nickels, dimes, and even pennies. And if at some point there weren't enough of these, we could issue a unit even smaller than the penny.

---

I find the topic of the federal reserve very interesting but wonder if I have the brainpower to figure it all out. When I read summaries like yours I typically agree with the thought process. But then I always think that the last hundred years in the United States have probably been the most prosperous in human history. And the federal reserve system had to be a big reason why. What is your opinion on that thought process?

---

The natural state of a truly free market is deflation. Think of how flat-screen TVs have gotten cheaper and better over the last 25 years. IMHO, our monetary system has hindered the benefits of such deflation that could have flowed to a larger proportion of our population if there had been sound money. Check out www.wtfhappenedin1971.com.

---

Deflation is crippling for an economy designed to destroy the purchasing power of the currency while inflating assets and prices in the economy.

---

FIFY

Quote:

---

Goods becoming cheaper through technology and innovation is WILDLY different than a deflationary dollar.

---

Again, only in an economy designed to destroy the populous through constant inflation. A deflationary economy is one where good investments, as well as general bank deposits, return more than the risk free rate in the economy. Because of constant deflation, holding cash is rewarding. Meaning that only productive companies are rewarded with investment and all others fail naturally. It's the epitome of truly free market capitalism. Arguing against sound money and deflation is arguing for a continued socialistic corporatocracy that rewards the haves through the destruction of the have nots, and not needing actual productivity to improve to do so.

---

None of this is true. An economy self cannibalizes over time with anything other than moderate deflation. If I'm a company that pays your salary and over time the product that I sell becomes cheaper and cheaper, I either have to constantly sell 2 more teas, cut your wages, or fire you. We are not only consumers, so continual price declines isn't some panacea.

Inflation is a byproduct of a system where capital flows freely to allow for innovation. It can certainly get out of control because no system is perfect, but let's not pretend the alternative is some perfect system.

---

I would love to look behind the curtain and see what proportion of defenders of the current system are bankers or former bankers.

Consistently one of the best posters on this site.

Great post.

Its Texas Aggies, dammit said:

---

Kvetch said:

---

aTmAg said:

---

Its Texas Aggies, dammit said:

---

aTmAg said:

---

CrackerJackAg said:

---

NPH- said:

---

---

No that's exactly how it works

Known fact for a very long time

I suggest Creature from Jekyll Island. Great book.

---

Nope he is wrong. The only money that is ever created is by the Fed, treasury, and maybe the computers Musk mentioned during DOGE that apparently had the power to unilaterally add money to their own bank accounts from nowhere.

M2, M3, etc. all just double, triple, etc. count that same money whenever it is loaned out. They are wrong. They shouldn't be called the "money supply", they should be called "The bank account summary" or something. As they mislead people like most other government stats.

If we really could create money by merely lending it, then we could end hunger by "creating" food by lending it out over and over. We could create houses by lending them out over and over. And so on.

---

No, when money is lent, everybody else's money becomes worth less. That is the problem.

---

It does not.

If I lend you $100 then, I no longer have $100 to spend. We didn't create new money, we just transferred who is holding existing money.

---

Except interest and the time value of money stipulate that you as the owner of the debt actually have an asset worth more than $100.

The whole purpose of the fed raising and lowering interest rates is to curb or spur lending based on the macro financial environment. Because lending expands the money supply in a fractional reserve system. This is finance/economics 101.

And anyone who says this practice is bad for the economy is welcome to campaign on reducing every persons standard of living and killing class mobility. You can surely overextend your lending, but the solution is not to completely stop lending.

---

I see no reason why we could not have sound money and let the free market set interest rates.

---

Believe it or not the free market does set interest rates. The only interest rates "set" by policy is Fed Funds rate which is a backstop short term lending rate. All other interest rates are 100% set by the market via government bond auctions and secondary market transactions. But the important thing to realize is that in the history of the independent federal reserve, the Fed has typically followed price signals in the secondary market. For example if the yield curve flattens or inverts, that's often a time where you see the Fed look at decreasing the Fed Funds rate. And this is logical if you really think about it. Typically, when 1, 2, 5, 10, and 30 year interest rates are going lower it's often tied to forecasts of lower inflation and lower growth, and therefore we need to stimulate demand for more lending. However, when forward inflation expectations are higher, rates stay higher to manage the money supply.

The market leads the Fed, not the other way around. So when Chairman Donald Mao tries to ignore market signals (10 and 30 year interest rates well over 4% and not set by the Fed), you should be concerned about this Communist effort to take over a competent and functioning capitalist system. The outcome is likely even more inflation, even more control by the politburo, and less transparency over real economic conditions.

While I won't say you should blindly trust all American institutions, I would suggest that you don't just blindly accept somebody who sounds smart but has a counter institutional view. This guy, like many of his ilk are more often than not Charlatans. More often than not, reality is not as salacious as our attention spans wish it was.

Azeew said:

---

Simple accounting.

-Depositor deposits $100
-Bank invests in Fed Funds $100
-Bank loans $50; Bank liquidates $50 of Fed Funds to fund loan

Final Balances:
Depositor Account = $100
Loan to Borrower = $50
Bank Fed Funds Acct = $50

No money "created"

---

No money was created but the balance sheet expanded by $100 thus showing overall growth in the economy.

Kvetch said:

---

Heineken-Ashi said:

---

Kvetch said:

---

Its Texas Aggies, dammit said:

---

GaryClare said:

---

Helicopter Ben said:

---

FriendlyAg said:

---

Growth would come to a screeching halt without fractional reserve banking. Capitalism is far from perfect and this is a risky side effect of pushing growth, but it's the best system we have…

---

Fractional reserve banking isn't necessarily bad, but it also doesn't mean growth would come to a halt if we stopped the practice. It is only bad if the depositors decide to withdraw and there aren't enough reserves to cover the withdrawals. The problem with this is that the incentive to keep reducing reserves chasing more profit is too high and banks can't be trusted to keep risk at a manageable level. If they haven't had a run on deposits for a long time, why not just loan out even more? The incentive, and therefore tendency, is to keep taking on risk until there's almost no reserves at all. Once depositors figure out their savings are at risk, it's all over in a hurry.

This problem is amplified with government meddling and things like the FDIC. The banks know they will be bailed out by the taxpayer if they screw up. As it stands now, I'd bet not one person in 10,000 even looks at their banks balance sheet. The assumption is that it doesn't matter and no banks ever fail. I don't know how in the world you would call that capitalism.

What we need is real capitalism (aka free markets) in banking. Private banks would have to compete for your deposits. Some could advertise high reserves and therefore be much safer. Some could offer lower reserves but a higher interest rate. The consumer would get to decide and the banks that prove to be the best stewards of money would win their business. Our current system does not operate anywhere near a capitalist model.

And that leads to the fed. They are the real culprit in the destruction of our currency. I'm not aware of any other entity that can create currency (inflation) out of thin air. Unless you get first access to the new currency, the dollars you earn and save deteriorate…slowly at first, and then rapidly as it becomes increasingly necessary to "print" more. The only fair system is a fixed monetary system. And as I've pointed out a thousand times, there is no reason that the money supply needs to increase. It only needs to be able to divide. If our currency had held its value, we would still be able to purchase things with quarters, nickels, dimes, and even pennies. And if at some point there weren't enough of these, we could issue a unit even smaller than the penny.

---

I find the topic of the federal reserve very interesting but wonder if I have the brainpower to figure it all out. When I read summaries like yours I typically agree with the thought process. But then I always think that the last hundred years in the United States have probably been the most prosperous in human history. And the federal reserve system had to be a big reason why. What is your opinion on that thought process?

---

The natural state of a truly free market is deflation. Think of how flat-screen TVs have gotten cheaper and better over the last 25 years. IMHO, our monetary system has hindered the benefits of such deflation that could have flowed to a larger proportion of our population if there had been sound money. Check out www.wtfhappenedin1971.com.

---

Deflation is crippling for an economy designed to destroy the purchasing power of the currency while inflating assets and prices in the economy.

---

FIFY

Quote:

---

Goods becoming cheaper through technology and innovation is WILDLY different than a deflationary dollar.

---

Again, only in an economy designed to destroy the populous through constant inflation. A deflationary economy is one where good investments, as well as general bank deposits, return more than the risk free rate in the economy. Because of constant deflation, holding cash is rewarding. Meaning that only productive companies are rewarded with investment and all others fail naturally. It's the epitome of truly free market capitalism. Arguing against sound money and deflation is arguing for a continued socialistic corporatocracy that rewards the haves through the destruction of the have nots, and not needing actual productivity to improve to do so.

---

None of this is true. An economy self cannibalizes over time with anything other than moderate deflation. If I'm a company that pays your salary and over time the product that I sell becomes cheaper and cheaper, I either have to constantly sell 2 more teas, cut your wages, or fire you. We are not only consumers, so continual price declines isn't some panacea.

Inflation is a byproduct of a system where capital flows freely to allow for innovation. It can certainly get out of control because no system is perfect, but let's not pretend the alternative is some perfect system.

---

Not even close to true. Inflation is a monetary phenomenon, full stop. Price increases =/= inflation.

What you see as inflation is nothing more than the dollar losing purchasing power. Looking at SPX measured against gold shows you all you need to know. There are periods where productivity is gained and value is created. But since 2000, the stock market is net down if measured in gold. Gold isn't changing. The value of the dollar is.

Its Texas Aggies, dammit said:

---

Kvetch said:

---

Heineken-Ashi said:

---

Kvetch said:

---

Its Texas Aggies, dammit said:

---

GaryClare said:

---

Helicopter Ben said:

---

FriendlyAg said:

---

Growth would come to a screeching halt without fractional reserve banking. Capitalism is far from perfect and this is a risky side effect of pushing growth, but it's the best system we have…

---

Fractional reserve banking isn't necessarily bad, but it also doesn't mean growth would come to a halt if we stopped the practice. It is only bad if the depositors decide to withdraw and there aren't enough reserves to cover the withdrawals. The problem with this is that the incentive to keep reducing reserves chasing more profit is too high and banks can't be trusted to keep risk at a manageable level. If they haven't had a run on deposits for a long time, why not just loan out even more? The incentive, and therefore tendency, is to keep taking on risk until there's almost no reserves at all. Once depositors figure out their savings are at risk, it's all over in a hurry.

This problem is amplified with government meddling and things like the FDIC. The banks know they will be bailed out by the taxpayer if they screw up. As it stands now, I'd bet not one person in 10,000 even looks at their banks balance sheet. The assumption is that it doesn't matter and no banks ever fail. I don't know how in the world you would call that capitalism.

What we need is real capitalism (aka free markets) in banking. Private banks would have to compete for your deposits. Some could advertise high reserves and therefore be much safer. Some could offer lower reserves but a higher interest rate. The consumer would get to decide and the banks that prove to be the best stewards of money would win their business. Our current system does not operate anywhere near a capitalist model.

And that leads to the fed. They are the real culprit in the destruction of our currency. I'm not aware of any other entity that can create currency (inflation) out of thin air. Unless you get first access to the new currency, the dollars you earn and save deteriorate…slowly at first, and then rapidly as it becomes increasingly necessary to "print" more. The only fair system is a fixed monetary system. And as I've pointed out a thousand times, there is no reason that the money supply needs to increase. It only needs to be able to divide. If our currency had held its value, we would still be able to purchase things with quarters, nickels, dimes, and even pennies. And if at some point there weren't enough of these, we could issue a unit even smaller than the penny.

---

I find the topic of the federal reserve very interesting but wonder if I have the brainpower to figure it all out. When I read summaries like yours I typically agree with the thought process. But then I always think that the last hundred years in the United States have probably been the most prosperous in human history. And the federal reserve system had to be a big reason why. What is your opinion on that thought process?

---

The natural state of a truly free market is deflation. Think of how flat-screen TVs have gotten cheaper and better over the last 25 years. IMHO, our monetary system has hindered the benefits of such deflation that could have flowed to a larger proportion of our population if there had been sound money. Check out www.wtfhappenedin1971.com.

---

Deflation is crippling for an economy designed to destroy the purchasing power of the currency while inflating assets and prices in the economy.

---

FIFY

Quote:

---

Goods becoming cheaper through technology and innovation is WILDLY different than a deflationary dollar.

---

Again, only in an economy designed to destroy the populous through constant inflation. A deflationary economy is one where good investments, as well as general bank deposits, return more than the risk free rate in the economy. Because of constant deflation, holding cash is rewarding. Meaning that only productive companies are rewarded with investment and all others fail naturally. It's the epitome of truly free market capitalism. Arguing against sound money and deflation is arguing for a continued socialistic corporatocracy that rewards the haves through the destruction of the have nots, and not needing actual productivity to improve to do so.

---

None of this is true. An economy self cannibalizes over time with anything other than moderate deflation. If I'm a company that pays your salary and over time the product that I sell becomes cheaper and cheaper, I either have to constantly sell 2 more teas, cut your wages, or fire you. We are not only consumers, so continual price declines isn't some panacea.

Inflation is a byproduct of a system where capital flows freely to allow for innovation. It can certainly get out of control because no system is perfect, but let's not pretend the alternative is some perfect system.

---

I would love to look behind the curtain and see what proportion of defenders of the current system are bankers or former bankers.

---

Why do you keep bringing this up?

And why does no one want to talk about how actual capital would move in a different system? You guys only want to talk about gold or bitcoin and doing away with fractional reserve banking, but you haven't explained how capital can freely flow. It's necessary for our economy.

FriendlyAg said:

---

Why do you keep bringing this up?

And why does no one want to talk about how actual capital would move in a different system? You guys only want to talk about gold or bitcoin and doing away with fractional reserve banking, but you haven't explained how capital can freely flow. It's necessary for our economy.

---

I wonder if I struck a nerve to have elicited such a Friendly response.

It's an internet discussion forum. People talk about stuff. Nobody is forcing to read or respond to any thread.

So you don't want to discuss? You didn't answer any of my questions!

What do you do for a living? Or did you do?

I worked for a bank for two years 10 years ago. I don't "like the fed" and I think some banks have acted in bad faith. A lot of banks are following the rules. They take risk and make calculated bets (loans) or other investments in order to make a profit. Some of them make poor choices and face the music.

What I am more interested in talking about is, let's play into your fantasy.

Banks go away? The Fed goes away? Ok… we all have paper money that says "1 gold bar". How do you envision the economy working?

I want to build a new warehouse for my company, do I have to go find a bunch of guys with paper that say "1 gold bar" and I ask them if I can use their paper to build my building and I'll pay them back in the future?

You don't think people would pool their money and create banks?

I'm just genuinely curious how you think it all plays out. Do we get rid of accounting too?

FriendlyAg said:

---

So you don't want to discuss? You didn't answer any of my questions!

What do you do for a living? Or did you do?

---

I'm not going to let you bait me into outing myself and I'm not obligated to answer your questions.

That being said, how about we deescalate?

It does not seem you have done much other than defend the current system, which I consider to have resulted in a lot of harm to many people over the last 100 or so years. That would be understandable if you have benefited from the system. That is human nature. The AMA protects the interests of doctors. The ABA protects the interests of lawyers. Congress protects its own interests. Internal reform seldom aligns with incentives of groups that benefit from reform not happening.

I'm open to a fair and respectful interaction. I don't claim to have all the answers, but it does trouble me that savers and working people with minimal assets have suffered so much due to money printing. As just one example, the endless wars have in my view been enabled by the money printer.

Do you see any issues with fiat money and fractional reserve banking; if so, how can those issues be addressed in your opinion?