Aaron HeidelbergerDec 31, 2009Hey we can agree on something! I think everyone should support there local banks. However your a failing to address the fact that all banks are based on the fraudulant practice of fractional reserve banking. George Baily would have never had a problem at his banks if the banks were useing an honest system of 100% reserve banking.
--------------------------Everyone, please note the main point: even a radical liberal and a radical conservative agree that you should take your money out of the big TARP banks and put it into your local community bank.
[The rest of this discussion is likely to go nowhere.]
So suppose you, I, and a thousand neighbors start a local full-reserve bank. We each put $5000 in savings. That's five million dollars of capital... which does nothing. We can't make loans, because we have to keep every penny on hand in case we all decide to withdraw our money at the same time. Isn't a full-reserve bank just a piggy bank?
Full-reserve banking is almost non-existent. Is that because...
(a) the market represents the collective and historical judgment of millions that full-reserve banking is a sub-optimal economic solution;
(b) the market is stupid and fails to produce useful services and goods; or
(c) the Federal Reserve has orchestrated a vast conspiracy to prevent everyone but you from recognizing an effective banking solution?
William BealJan 1Make that 2 radical conservatives =|;)(Nice hat, William!)
Aaron HeidelbergerJan 2So, Cory are you saying its OK for a private bank to create money? Maybe we should get together and create the Heidelberger bank and start printing our own money. But who would except Heidelberger notes? Well we can just lobby congress and make al law that requires all taxes and debts be paid with Heidelberger notes. Hmmm...do you think we could print enough to pay off my house, I think so.No, Aaron, I'm asking how a full-reserve bank is any different from my piggy bank, where money just sits. If you're advocating a complete ban on loans, just say so. Otherwise, describe a practical financial lending model.
Aaron HeidelbergerJan 2So No its not OK for private bank to create money? Because thats what the Federal reserve does. And the total amount that they create is no longer reported (M3) also the majority of there operation is NOT audited. www.auditthefed.com
How secure is your piggy bank? If a tornado rips through the town and you lose your house where did you piggy bank go? Banks have giant secure vaults and guards (sometimes). Plus Banks can still make make loans under 100% reserve banking, BUT the bank would have to loan out there own money not other peoples money. If people are putting ther ... See Moremoney in a bank what do they want it to do? they want it to "just sit" otherwise they would be putting their money in an investment like stocks, bonds or what ever.No, I'm not taking a position on your little "make their own money" talking point. Save it for the Ron Paul meeting. I'm asking where banks get the money to lend if they can't lend the money customers invest in savings. Under your scheme, it seems community banks that loan out of the combined wealth of a lot of small investors disappear. The only banks left are those with a handful of super-rich guys who float every loan out of their personal wealth (yikes). Where does the average guy get a loan? I still don't see the practical way in which full-reserve banks don't bring the economy to a screeching halt.
If the only purpose of a bank is to keep my money safe, that also spells the end of interest on savings accounts. The bank pays me interest for the privilege of lending my money out. Take away that option, and the bank will have to charge me for the privilege of babysitting my money in its vault.
And what vaults? Are you advocating we get rid of electronic funds transfers as well? Does the bank have to have 100% reserves in cash or gold? When's the last time your paycheck was anything more than a slip of paper, or a stream of electrons?
Aaron HeidelbergerJan 4How much interest do you make on a savings account at a bank? Hardly anything, for sure will not keep pace with inflation.
This video will explain everything. Have fun!
Aaron HeidelbergerJan 4"I still don't see the practical way in which full-reserve banks don't bring the economy to a screeching halt." ---The Monetary Reform Act. This would pay off the national debt, end the Federal reserves monoply on money, and allow the government to pay for the stuff it needs with out paying interest to a private bank.
The banks purpose IS to keep a persons money safe, prior to the Federal reserve act in 1913 the US dollar gained in value. http://www.westegg.com/inflation/ Play around with that inflation calculator using 1913 as a pivot point what kind of money would you rather have money that gains purchaseing power or loses it? Tough one I know.
The problem with the current system the banks are control of the money supply. Why do you think we have had these bank failures, they basically loaned out too much money on things they shouldn't have. Why because the fed set interest rates so low that banks and people did not want their money sitting in banks savings account where they were making nothing on iterest instead they bought houses and anything else createing a bubble. NOW if we hand sound money, with a set rate of growth in the money supply it would end these boom bust cycles caused by the fed/banks and easy money.
In 1964 a box a corn flakes cost 25 cents. Same box of corn flakes now is over $3, in 1964 a quarter was made of 90% silver, a pre1965 quarter is worth about $3.11 about the same price you can buy box a corn flakes for now. So in 40+ years the value of that quarter has not changed.
In the 70's under Carter the money supply increased by 12% that caused higher prices in everything.
Eventually interest rates had to climb to 20% in order to suck back the ecess money supply and stop inflation. In the last few years our money supply has increased by 120% yes 120%. Talk about bringing an economy to a screeching halt, what do think rates will have to go to suck that back in? 50% 80%?
We have a system based on fraud.
I welcome further discussion here. But if you're going to advocate this system, you must explain one simple thing: where does a full-reserve bank get the money to make loans?