Off topic- Intuit logging in to my bank account?- Conclusion (I

[prl]

On 9/10/11 11:25, . wrote:
> Robert Heller<heller<at>  deepsoft.com>  writes:
>
>> At Sat, 08 Oct 2011 15:26:42 +0100 John Dablin<jdablin<at>
>   ntlworld.com>  wrote:
>>> On 08/10/11 12:57, . wrote:
>>>> Be realistic- US banks are all fractional
>>>> reserve based.  So if I deposit $100 into a bank they can
> multiply that
>>>> money up to $90 while only keeping $10 in actual cash
>>> Isn't it worse than that? I read somewhere they keep $100
> and multiply
>>> it up to $900.
>> Since when has the 'banking industry' *ever* just 'sat' on
> their
>> deposits?  'Cash' is itself worthless, except as a marker or
> placeholder
>> used to faciliate transactions -- it is far more convient to
> carry slips
>> of paper with pictures of dead presidents or living kings/queens
> or
>> whatever that hauling a goat under your arm and more convient
> still to
>> carry a slip of paper you can write a number on (a check) than a
> pile of
>   fixed
>> denomination currency and have that slip of paper converted to a
>> monitary value that someone else can write a slip of paper
> (a check)
>> against.
>>
>>> John Dablin
> The Federal Reserve flooded the banking system with over 15
> Billion dollars back in 2010, yet the banks were restricting the
> dispersment of that money
> into the US economy via loans.
>
> Money, to be of value, must have 4 essential qualities;
>
> 1.  It must be an historical store of value....Gold and Silver meet that.
>
> 2.  It must be divisible
>
> 3.  It must be portable and compact
>
> 4.  It must be durable
>
> The current FRN (Federal Reserve Note) meets only point 3.
> Paper money has
> no way of storing value, it's easily destroyed and has never been a
>   preferred means of exchange except as fiat currency favored by those that would destroy our wealth.
>
> As the great destroyer of the US economy Allan Greenspan said a few
> weeks ago, in effect, the US can never go bankrupt and it can always
> meet it's
>
> obligations because it has a printing press.  That's a very arrogant
> statement and also very true.  The problem is most people think paper
> money is
> ok to use and have and not a true form of money such as silver and Gold.
>
> You can still buy a gallon of gasoline for almost 1 dime......you
>   certainly
>   can!
> But the dime must be made of Silver (pre-1964)...which has the current
> value
>   of
> $2.25
>

This has noting to do with the multiplier effect of banking and loans. 
If you deposit $100 in a bank, the bank may loan out that amount of 
money less whatever the reserve requirement is. Let's say for 
illustration that it's 10%. That means that of the $100 that you have 
deposited (loaned to the bank), the bank may loan out $90. However, that 
$90 will get spent, and typically ends back being deposited in (loaned 
to) a bank. For simplicity's sake, we'll assume that there's only one 
bank, but in reality this applies to the banking system as a whole. Now 
the bank has an extra $90 in deposits, so it can loan out $81 (90%) of 
that. That gets spent and deposited, and so on. The total multiplier 
effect is simply the sum of the geometric series 1 + (1-r) + (1-r)^2 + 
(1-r)^3 + ... where r is the reserve requirement as a fraction. The sum 
of an infinite geometric series like that is 1/r, so if the reserve is 
10%, r=0.1 and the total amount of money created (including the original 
deposit) is $100 * 1/0.1 = $1000. In most banking systems r is a good 
deal less than 10%, and so the multiplier is correspondingly greater.

This is a feature of the banking system, and has nothing to do with 
governments except the extent to which they specify a minimum reserve 
requirement, and the extent to which they create money by issuing 
government bonds (which are then multiplied by the banking system, not 
by the government).

And as has been pointed out before, only a tiny fraction of the total 
money supply in a modern economy is in cash, whether the country issues 
gold-based money or not.