Our monetary system

[JG4_Helofly]

Originally Posted by arthursmedley

Er...your idea of how banking works is false. Commercial banks do not create credit out of thin air. I think you may be confusing the idea of "quantitative easing" whereby central banks have electronically created credit they transfer to commercial banks to facilitate lending (or create asset bubbles).

No. It's not false. The money which is lend by a bank did not exist before. It's true that initialy a relatively small amount of money comes from the central bank and goes to the commercial banks, but the commercial banks can lend more money then they get from the CB. Otherwise every bank would have a 100% backed reserve and that's not the case. The min. reserve must be around 7%.

[arthursmedley]

Originally Posted by JG4_Helofly

No. It's not false. The money which is lend by a bank did not exist before. It's true that initialy a relatively small amount of money comes from the central bank and goes to the commercial banks, but the commercial banks can lend more money then they get from the CB. Otherwise every bank would have a 100% backed reserve and that's not the case. The min. reserve must be around 7%.

They borrow these funds from other commercial banks and re-lend at higher rates of interest. Thats one of the reasons our banking systems are in big trouble.

Think hard about this. Do you really think banks just 'magic' up money out of nowhere? If they did no one would have any confidence in paper money at all. We'd be exchanging lumps of gold again.

[JG4_Helofly]

Originally Posted by arthursmedley

They borrow these funds from other commercial banks and re-lend at higher rates of interest. Thats one of the reasons our banking systems are in big trouble.

Think hard about this. Do you really think banks just 'magic' up money out of nowhere? If they did no one would have any confidence in paper money at all. We'd be exchanging lumps of gold again.

So how is money created then? Does all the money come from the central bank in your view?
The reality is that commercial bank can lend more money then they have (central money from the central bank) that's why there is a cash reserve ratio which limits the amount of money a bank can lend.
As said earlier, there are some good videos in the internet about all this. Maybe you should look this up. I just know some in german and french, so probably not usefull for you?

[MD_Titus]

pushing digits round spreadsheets.

[MadBlaster]

There's more to it than that. America made a contract with God. That is why dollar is the reserve currency. That is also why it says "In God We Trust" on the money. God talks to Bernanke each morning over coffee and donuts and decides how much money to print each day.

[arthursmedley]

Originally Posted by MadBlaster

God talks to Bernanke each morning over coffee and donuts and decides how much money to print each day.

Now this could be true.

[MD_Titus]

Originally Posted by MadBlaster

There's more to it than that. America made a contract with God. That is why dollar is the reserve currency. That is also why it says "In God We Trust" on the money. God talks to Bernanke each morning over coffee and donuts and decides how much money to print each day.

sure it was god?

[chantaje]

imo a great ponzi scheme.
i found a great doc about this some time ago.

http://www.youtube.com/watch?v=5K41O2QfpjA

Originally Posted by MadBlaster

There's more to it than that. America made a contract with God. That is why dollar is the reserve currency. That is also why it says "In God We Trust" on the money. God talks to Bernanke each morning over coffee and donuts and decides how much money to print each day.

LOL that might have a better logic than the one they use now.