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Who authorizes the Central Bank to print US monopoly money with no gold? Why doesn't the US Treasure do it?
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In accordance with industry accepted best practices we ask that users limit their copy / paste of copyrighted material to the relevant portions of the article you wish to discuss and no more than 50% of the source material, provide a link back to the original article and provide your original comments / criticism in your post with the article.
[quote:Nine's:MV8xOTEyNDEwXzMxOTkyMzQyXzdENTNFN0Y0] [quote:King David 18812725:MV8xOTEyNDEwXzMxOTkxNzcyXzQzQzJCMzA1] [quote:Nine's:MV8xOTEyNDEwXzMxOTkwNjg0Xzk0NDcwN0FE] Read "The Creature From Jekyll Island,". It explains about banking and how, when you put in 1,000. the bank can lend 10,000, with your 1,000. backing it. So while you collect maybe 1 percent interest on that thou, the bank collects 6-8 percent on 10,000, thanks to your deposit. Does that help? :charlie: http://en.wikipedia.org/wiki/Fractional_reserve_banking [/quote] That's called Fractional Reserve Banking/Lending(FRL), in the example you gave the Bank was using a 10% reserve. However Banks don't really use FRL, because they don't really loan any fraction of depositor's money. They use a system called "Temporary Money". Under this system they are still required to hold the depositor's money is "Reserve", but they never loan any of it. All of the money they loan comes from thin air, 100% of it is created when they make the loan. There is nothing wrong with this system, it works rather well. In the world of banking Deposit's are Bank Liabilities, and outstanding loans are Bank Assets. The more money a Bank creates and loans out, the more that Bank is worth. Loans are Assets to a Bank, because they payout over time. It's only when Banks make risky loans that things get dicey. Before the Credit Crisis of 2008 Goldman Sachs was Leveraged 27:1, if they were using Fractional Reverse lending the Reserve Ratio was 27 to 1. During to height of the Credit Crisis Goldman was Over Leveraged 372:1, and as of June first their leverage Ratio is 13:1. So Banks aren't using Fractional Reserve Lending, because there is no set reserve ratio, only Tiers of leverage, and that depends on what kind of Bank they are too. Commercial, Large Cap, or small Cap. Or a State Chartered Bank. Deposits are only part of what a Bank leverages, they other side is their Capital Requirements. This is in the news a lot, we hear Banks need to Re-Capitalize. Banks must hold Bank owned Cash, Gold, Stock, Bonds and other types of securities that they are allowed to leverage to create money from thin air. Say a Bank holds $1 Billion Dollars worth of US Bonds, that's a Tier 1 asset so the Fed and BIS may let that Bank Leverage that 17:1. Making $17 Billion Dollars worth of loans off that $1 Billion of Capital. Gold is a Tier 3 asset so a Bank may only be able to leverage it 10:1 or 5:1, really it's up to the Fed and BIS( International Bank of Settlements ) to decide. Private Banks should not be allowed to Leverage anything, they should only be allowed to loan money they really have. What's really stupid is Banks are allowed to Leverage their own stocks and bonds, so if their Stocks go down or their Bonds get down graded it makes it very difficult for them to raise capital, that in turn makes their stock sink more, making it harder to raise capital, making their stock drop more...etc, etc, etc. [/quote] :stoned: OK. Thanks. It'll take a few more readings to register all that. [/quote]
Original Message
Do the Central Banks back it with their own money?
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