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>The government prints money whenever a bank wants to lend it out No they don't. Currency in circulation is but a fraction of the money supply. >If we actual

>The government prints money whenever a bank wants to lend it out No they don't. Currency in circulation is but a fraction of the money supply. >If we actually described things as they were, instead of using euphemisms like "fractional reserve banking", the proper name for this would be "fraud" Only if you accept that any IOU (which is "backed" by nothing but a promise to repay) is "fraud". >then they start rushing to the bank to redeem their notes for actual wealth before everyone else does--in other words, a bank run During a bank run people are rushing to obtain notes from the bank, not redeem them. The bank then doesn't have enough cash to fulfill the redemption. You have it backwards. >But in fact they don't, because it's illegal. They do it everyday, in plain sight of MASSIVE amounts of regulation. You are seriously confused about the banking system. Less time viewing conspiracy theories on YouTube, more time reading work by the people who design and use the system. Despite what your sources tell you, the system is transparent (albeit complicated).

pdonis 11y ago
> Currency in circulation is but a fraction of the money supply You are interpreting "printing money" way too literally. See my other comments in parallel subthreads. > Only if you accept that any IOU (which is "backed" by nothing but a promise to repay) is "fraud". A bank doesn't give me an IOU when it gives me a loan; it gives me actual money. Nor does it give depositors IOUs; they can get actual money in exchange for their deposits any time. > During a bank run people are rushing to obtain notes from the bank, not redeem them. To obtain notes corresponding to the amount they had on deposit, yes. > The bank then doesn't have enough cash to fulfill the redemption. Aren't you contradicting yourself? You just said "redemption" had nothing to do with it. > They do it everyday, in plain sight of MASSIVE amounts of regulation. No, they do something that is equivalent to the government printing money, if you don't insist on a way too literal interpretation. See above. What the banks do not do is create money outside the very precise rules set down by the regulations you refer to. They also don't create money that is not denominated in the government's fiat currency. So they don't do anything that is analogous to what private banks did before governments outlawed private currency.
- gizmo 11y ago
  > A bank doesn't give me an IOU when it gives me a loan; it gives me actual money Actual money is an IOU. From the gov't to the holder of the piece of paper. It used to say so on every bill: "Will pay to the bearer on demand".
  - pdonis 11y ago
    > It used to say so on every bill: "Will pay to the bearer on demand". Yes, "used to say", before the government decided it would no longer pay specie (gold) for currency notes. So money used to be an IOU of a sort, but it isn't now. (And even when specie payments were being made, there was never enough gold to back all the notes in circulation, so the IOUs weren't all valid anyway. They worked because people didn't treat them as IOUs; they treated them as a valuable commodity in their own right. So I don't think money ever really functioned as an IOU. Now, of course, we have no choice but to treat it as a valuable commodity in its own right.)
- forgetsusername 11y ago
  >Aren't you contradicting yourself? You just said "redemption" had nothing to do with it. First of all, I didn't say redemption "has nothing to do with it". I did use the word redemption, but in a completely different context than you. To reiterate: people are trying to obtain dollars in a bank run, not get rid of them. They're trying to exchange their bank IOUs (chequing accounts), which are worthless if the bank collapses, for FRB IOUs, which will still have value. >A bank doesn't give me an IOU when it gives me a loan; it gives me actual money. Nor does it give depositors IOUs; they can get actual money in exchange for their deposits any time. Umm, a chequing account with deposits is a bank liability (IOU). And you can't get money in exchange for your deposit at any time, account dependent. Your chequing account? Sure. That's why you receive a negative rate on it net of fees. Again, you don't even seem to have a grasp of day-to-day personal banking. Follow the balance sheet transactions for a loan, watch how the assets and liabilities move around. If you can't even do that, why are you arguing about this stuff?
  - pdonis 11y ago

pdonis 11y ago

> Currency in circulation is but a fraction of the money supply You are interpreting "printing money" way too literally. See my other comments in parallel subthreads. > Only if you accept that any IOU (which is "backed" by nothing but a promise to repay) is "fraud". A bank doesn't give me an IOU when it gives me a loan; it gives me actual money. Nor does it give depositors IOUs; they can get actual money in exchange for their deposits any time. > During a bank run people are rushing to obtain notes from the bank, not redeem them. To obtain notes corresponding to the amount they had on deposit, yes. > The bank then doesn't have enough cash to fulfill the redemption. Aren't you contradicting yourself? You just said "redemption" had nothing to do with it. > They do it everyday, in plain sight of MASSIVE amounts of regulation. No, they do something that is equivalent to the government printing money, if you don't insist on a way too literal interpretation. See above. What the banks do not do is create money outside the very precise rules set down by the regulations you refer to. They also don't create money that is not denominated in the government's fiat currency. So they don't do anything that is analogous to what private banks did before governments outlawed private currency.

gizmo 11y ago
> A bank doesn't give me an IOU when it gives me a loan; it gives me actual money Actual money is an IOU. From the gov't to the holder of the piece of paper. It used to say so on every bill: "Will pay to the bearer on demand".
- pdonis 11y ago
  > It used to say so on every bill: "Will pay to the bearer on demand". Yes, "used to say", before the government decided it would no longer pay specie (gold) for currency notes. So money used to be an IOU of a sort, but it isn't now. (And even when specie payments were being made, there was never enough gold to back all the notes in circulation, so the IOUs weren't all valid anyway. They worked because people didn't treat them as IOUs; they treated them as a valuable commodity in their own right. So I don't think money ever really functioned as an IOU. Now, of course, we have no choice but to treat it as a valuable commodity in its own right.)
forgetsusername 11y ago
>Aren't you contradicting yourself? You just said "redemption" had nothing to do with it. First of all, I didn't say redemption "has nothing to do with it". I did use the word redemption, but in a completely different context than you. To reiterate: people are trying to obtain dollars in a bank run, not get rid of them. They're trying to exchange their bank IOUs (chequing accounts), which are worthless if the bank collapses, for FRB IOUs, which will still have value. >A bank doesn't give me an IOU when it gives me a loan; it gives me actual money. Nor does it give depositors IOUs; they can get actual money in exchange for their deposits any time. Umm, a chequing account with deposits is a bank liability (IOU). And you can't get money in exchange for your deposit at any time, account dependent. Your chequing account? Sure. That's why you receive a negative rate on it net of fees. Again, you don't even seem to have a grasp of day-to-day personal banking. Follow the balance sheet transactions for a loan, watch how the assets and liabilities move around. If you can't even do that, why are you arguing about this stuff?
- pdonis 11y ago