Is the US national "debt" an illusion?

[Mocking You]

Mocking You, don't say I didn't warn you

You were correct. It's not even worth responding to, there's too much icky poo to clean up!

 

[Mocking You]

Telephone lines is not money.

Step 1. Bank runs
Step 2. Bank bails out bank
Step 3. Bank on bank runs
Step 4. Government bails out bank
Step 5. Government prints a trillion dollars to bail out banks, the newly printed trillion finds its way back into the banks where fractional reserve goes for another round...........
Step 6. Inflation.

No inflation. Inflation would be possible but you forgot one critical step.

5.5 Thousands of corporations and people borrow the fresh $1 Trillion and start buying stuff.

Money sitting in banks does not cause inflation. We just saw that with QE1 through QE3. Yes, money was created and loaned to banks. REALLY CHEAP MONEY. But for the most part, it wasn't turned into loans. Inflation does not happen just because money is created, the money has to be put to use soaking up goods and services. Once there is a surplus of money in the marketplace, prices will rise to absorb it and inflation will occur.

 

[Nimrod]

No, they can not. No bank can ever loan out more cash than it has obtained control/ownership of.

That is not FRB.

$100 turns into $1000 in FBR. Only $100 is backed up. The other $900 is counterfeit into existence.

 

[Nimrod]

No inflation. Inflation would be possible but you forgot one critical step.

5.5 Thousands of corporations and people borrow the fresh $1 Trillion and start buying stuff.

Inflation is an increase in the money supply. What is done with the money is a separate matter.

To bail out the banks, trillions of $$$ were added to the accounts of the banks. I say not printed because printing is not happening on a grand scale. Money is exchanged with digits, not so much paper anymore.

 

[Mocking You]

Inflation is an increase in the money supply. What is done with the money is a separate matter.

That is so wrong, it's breathtaking. Inflation is the increase in the price of goods and services.

To bail out the banks, trillions of $$$ were added to the accounts of the banks. I say not printed because printing is not happening on a grand scale. Money is exchanged with digits, not so much paper anymore.

QE1, QE2, QE3....so where is the inflation?

What happened to the price of gold during this unprecedented expansion of the money supply?

 

[Tinark]

That is not FRB.

$100 turns into $1000 in FBR. Only $100 is backed up. The other $900 is counterfeit into existence.

Once again, you are using brand new definitions for words to suit you. No wonder why it is so difficult to communicate with you: you aren't speaking English but some modified version for it that only you and others like you understand.

Regardless, no bank is able to lend out more cash than it has obtained. If I get a $100,000 loan from a bank, and write a check to the person I want to spend the $100,000 with, the check will bounce due to insufficient funds. There is no way for the bank to magically poof the money into existence. It must obtain it.

 

[Nimrod]

That is so wrong, it's breathtaking. Inflation is the increase in the price of goods and services.

Check your history. The first time "inflation" was coined was back around the Civil War. It literally meant the increase in money supply.

Over time, the meaning changed.

We can know the correct meaning of the word by looking at it's cure.
The cure is to stop printing money. Stop the increase in money supply.

The meaning has changed because there are those who do not like to hear it. With your meaning, now the word "inflation" can be blamed on the "evil capitalist",or "greed", or any demon you choose. The solution is to have government take over and have price controls.

QE1, QE2, QE3....so where is the inflation?

http://www.shadowstats.com/alternate_data/inflation-charts

 

[Tinark]

Check your history. The first time "inflation" was coined was back around the Civil War. It literally meant the increase in money supply.

Over time, the meaning changed.

We can know the correct meaning of the word by looking at it's cure.
The cure is to stop printing money. Stop the increase in money supply.

The meaning has changed because there are those who do not like to hear it. With your meaning, now the word "inflation" can be blamed on the "evil capitalist",or "greed", or any demon you choose. The solution is to have government take over and have price controls.





http://www.shadowstats.com/alternate_data/inflation-charts

Another redefinition of words. Do you know how impossible it is to communicate when you just pick whatever definition you want rather than the commonly accepted definition? What is the purpose other than to confuse and obfuscate?

Let's count all the words you've redefined:
1. Fraud
2. Counterfeit
3. Fractional reserve banking
4. Inflation

How many more are you going to redefine?

 

[Nimrod]

Another redefinition of words. Do you know how impossible it is to communicate when you just pick whatever definition you want rather than the commonly accepted definition? What is the purpose other than to confuse and obfuscate?

Let's count all the words you've redefined:
1. Fraud
2. Counterfeit
3. Fractional reserve banking
4. Inflation

How many more are you going to redefine?

"
Before the World War the term "inflation" was in general applied to paper money. The paper money was thought to be inflated when the amount was greater than if the paper were strictly convertible or definitely related to the metallic standard. From this point of view inflation would now mean an abandonment of the gold standard, together with a consequential increase in the quantity of the currency in which prices are expressed. This is the interpretation given to inflation by Francis A. Walker. "A permanent excess of the circulating money of a country over that country's distributive share of the money of the commercial world, is called inflation" (Political Economy, 1887). "

1922 http://en.wikisource.org/wiki/1922_Encyclopædia_Britannica/Inflation

 

[Tinark]

"
Before the World War the term "inflation" was in general applied to paper money. The paper money was thought to be inflated when the amount was greater than if the paper were strictly convertible or definitely related to the metallic standard. From this point of view inflation would now mean an abandonment of the gold standard, together with a consequential increase in the quantity of the currency in which prices are expressed. This is the interpretation given to inflation by Francis A. Walker. "A permanent excess of the circulating money of a country over that country's distributive share of the money of the commercial world, is called inflation" (Political Economy, 1887). "

1922 http://en.wikisource.org/wiki/1922_Encyclopædia_Britannica/Inflation

Last I checked, this is 2015, not 1922 or 1887. Using ancient definitions does nothing other than to confuse and obfuscate, making communication impossible.

 

[Nimrod]

Once again, you are using brand new definitions for words to suit you. No wonder why it is so difficult to communicate with you: you aren't speaking English but some modified version for it that only you and others like you understand.

Regardless, no bank is able to lend out more cash than it has obtained. If I get a $100,000 loan from a bank, and write a check to the person I want to spend the $100,000 with, the check will bounce due to insufficient funds. There is no way for the bank to magically poof the money into existence. It must obtain it.

Joe deposits $100 in the bank.
The bank holds $10, writes a IOU paper of $90.
The bank loans out $90.
At any time Joe can withdraw $100. Even though $90 has been lent out and not been repaid.
In this example. $100 turned into $190.


Fractional Reserve means just that. A fraction only needs to be reserved.

 

[Nimrod]

Last I checked, this is 2015, not 1922 or 1887. Using ancient definitions does nothing other than to confuse and obfuscate, making communication impossible.

I said earlier the definition changed. But why?
Change the meaning, you change the solution to the problem.

Actually the solution or cure hasn't changed. In both definitions the cure is stop printing money.


What is your cure to "inflation"?

 

[Tinark]

Joe deposits $100 in the bank.
The bank holds $10, writes a IOU paper of $90.
The bank loans out $90.
At any time Joe can withdraw $100. Even though $90 has been lent out and not been repaid.
In this example. $100 turned into $190.


Fractional Reserve means just that. A fraction only needs to be reserved.

Ok, but none of that is fraud or counterfeiting. Joe is well aware that the bank may loan out his deposits, it's part of the agreement. The bank is telling Joe: we have other deposits at our bank to cover your demand to withdraw your money at any time you desire. In return for agreeing to this, we'll give you the convenience of a checking or savings account, other basic bank services (access to ATMs), and pay you a little bit of interest.

What's the problem? Why should the government step in and put a stop to these voluntary agreements?

Please leave other government institutions out of it for now. We need to establish an understanding on the very basics here before adding more to it. Let's just leave it as a private entity with completely voluntary arrangements with no government interference for now.

 

[Tinark]

I said earlier the definition changed. But why?
Change the meaning, you change the solution to the problem.

Actually the solution or cure hasn't changed. In both definitions the cure is stop printing money.


What is your cure to "inflation"?

I don't really care why it changed (feel free to start a new topic on that if you like). Words evolve and change meaning all the time. Let's just stick to the commonly accepted definitions for the purpose of clear communication in this topic, shall we?

 

[Nimrod]

Ok, but none of that is fraud or counterfeiting.

Yes it is. After Joe went back and took out his money, there is $190 out in the world when there should only be $100.

 

[Tinark]

Yes it is. After Joe went back and took out his money, there is $190 out in the world when there should only be $100.

No there shouldn't be - the additional funds were created by a series of private agreements between Joe, the bank, the bank's other depositors, and the borrower. The amount of physical cash didn't change.

Don't you typically support people's right to enter into an agreement of their choosing?

Also, what are you proposing to do to stop people from making these agreements?

 

[Mocking You]

Check your history. The first time "inflation" was coined was back around the Civil War. It literally meant the increase in money supply.

Over time, the meaning changed.

Since we are talking about inflation in the year 2015, it means "a general increase in the prices of goods and services", not what it meant 150 years ago.

We can know the correct meaning of the word by looking at it's cure.
The cure is to stop printing money. Stop the increase in money supply.

Kewl. So in order to stop the rampant inflation caused by QE1, QE2, and QE3, the Fed has stopped increasing the money supply. Oh wait, there was no rampant inflation.

The meaning has changed because there are those who do not like to hear it. With your meaning, now the word "inflation" can be blamed on the "evil capitalist",or "greed", or any demon you choose. The solution is to have government take over and have price controls.

The demon I choose is: Higher demand, and not enough supply (as in oil in the 1970's; beef in 2015)

http://www.shadowstats.com/alternate_data/inflation-charts

Awesome. You are redefining "inflation" and now you are redefining how it is calculated in an attempt to make your point.

 

[Nimrod]

No there shouldn't be - the additional funds were created by a series of private agreements between Joe, the bank, the bank's other depositors, and the borrower. The amount of physical cash didn't change.

After turning $100 to $190 in the example above. The bank inflated the money supply and in doing so made the person who had $100 worth less than $100, say $99 for the example. Inflation (multiply the money supply) caused prices to go up.

You have 2 owners of the same $100. Logically impossible.

Another case is when everyone goes to the bank to get their money back. Take the case of England. Britain went off the gold standard in 1931. That meant all those people holding cash that was redeemable by gold was worthless. Thank you fractional reserve. Was this not fraud?

When person A deposited $100. The bank made interest on the $90 that was counterfeit. This new money ONLY has value as it dilutes the value of that already in existence, in effect, stealing from the productive, while providing the banks the opportunity to charge interest on money they created, out of thin air.

When the bank gets a deposit of $100, the $90 it loans out is counterfeit money. Bank gets interest off the $90. What happens when the $90 is never payed back? No big deal, I guess. The bank was making money off of something that should not exist.

Let's say person A deposit $100. Person A fully understands the bank will loan out his money to person B. A contract was made. Person B never pays back. Can person A withdraw his money? Per FRB, yes.
How is that possible?

 

[Nimrod]

The demon I choose is: Higher demand, and not enough supply (as in oil in the 1970's; beef in 2015)

How did Higher demand come about? It came about because there is more money in circulation.

More Money in circulation -> higher demand -> higher prices.

 

[Tinark]

After turning $100 to $190 in the example above. The bank inflated the money supply and in doing so made the person who had $100 worth less than $100, say $99 for the example. Inflation (multiply the money supply) caused prices to go up.

So? This was all by agreement.

You have 2 owners of the same $100. Logically impossible.

False - how many times does this have to be explained to you? Joe is owed $100 from the bank. The bank is the owner of the $100 (or $10, if it loaned out $90. The borrower would then be the owner of the $10). Joe is not the owner of the $100 until he makes a withdraw of the bank, as he agreed. He has a _demand claim_ or a _withdraw claim_ on the cash - that's the key difference.

Another case is when everyone goes to the bank to get their money back. Take the case of England. Britain went off the gold standard in 1931. That meant all those people holding cash that was redeemable by gold was worthless. Thank you fractional reserve. Was this not fraud?

We weren't going to talk about government until we came to some sort of basic agreement/understanding of the arrangement of private individuals, remember? Do you have some sort of government Tourette's syndrome? Unable to stop yourself from talking about it?

When person A deposited $100. The bank made interest on the $90 that was counterfeit.

:bang: no, no no no NO. The $90 is not counterfeit. The bank owned the $100 through the agreement with Joe, remember? Therefore, as the rightful owner of that money, it has a right to then transfer $90 to the borrower and collect interest on it through a separate agreement with that borrower.

This new money ONLY has value as it dilutes the value of that already in existence, in effect, stealing from the productive, while providing the banks the opportunity to charge interest on money they created, out of thin air.

Me spending money dilutes the value of all the other money. Imagine if everyone spent their money twice as fast as they do now. You'd see massive inflation and dilution of the purchasing power of money.

What on earth does that have to do with the price of tea in China?

When the bank gets a deposit of $100, the $90 it loans out is counterfeit money. Bank gets interest off the $90. What happens when the $90 is never payed back? No big deal, I guess. The bank was making money off of something that should not exist.

Already addressed above. You don't get to decide whether it should exist or not. You weren't the one involved in the agreement. It is between Joe, the bank, and the borrower, remember? You don't get to stick your nose into their business.

Let's say person A deposit $100. Person A fully understands the bank will loan out his money to person B. A contract was made. Person B never pays back. Can person A withdraw his money? Per FRB, yes.
How is that possible?

Because person C, D and E made deposits at the bank and collected interest from other borrowers. The bank takes a loss of $100 and uses its other sources of cash to pay Joe back.