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The price of Eggs is up 50% in my neck of the woods over the past 6 months. House prices are up 20-30% over the same time frame. The stock market is up close

The price of Eggs is up 50% in my neck of the woods over the past 6 months. House prices are up 20-30% over the same time frame. The stock market is up close to 50% over the same time frame... This is not happening because the economy is booming. It is happening because the limits on printing money have been completely erased. >In light of the shift to an ample reserves regime, the Board has reduced reserve requirement ratios to zero percent effective on March 26, the beginning of the next reserve maintenance period. This action eliminates reserve requirements for thousands of depository institutions and will help to support lending to households and businesses. Any American Bank can lend any amount of money without holding anything in reserve. Let that sink in for a minute. The reserve requirements used to be 10%... for decades... and money was still being created very fast due to lending from fractional reserve banks... Now fractional reserve banking is not even a thing... it's just no reserve banking. I am seriously concerned that north america will experience hyper inflation over the next few years as a result of that meeting back in March. Pens are powerful. [0] https://www.federalreserve.gov/newsevents/pressreleases/monetary20200315b.htm https://www.federalreserve.gov/newsevents/pressreleases/mone...

webinvest 6y ago
Yes I agree with everything you said. I have a few questions for you if you don’t mind. A) In an environment where banks can lend every penny they have, is there a way to see how much of the money outstanding is loan money and vs how much is hard money? With a 10% reserve ratio, the theoretical max was $10 of loan money for every $1 of hard money. Therefore the ratio could be as high as 10:1. 2) What would happen if some banks wound up having -10% assets in reserve after a few defaults?
- flyGuyOnTheSly 6y ago
  The premise of A is incorrect. (Banks cannot only lend out ONLY every penny they have...) Banks have (until March 2020) been able to lend out 10x the amount of pennies they have... aka assets listed on their books. Now they are able to lend out an infinite amount of pennies they have. Theoretically all money is "loan money". That's how money is primary created through fractional reserve banking, through loans. I own a house that is worth $1m. Somebody buys my house with $100k downpayment and $900k in loaned money from a bank in the form of a mortgage. Now I have $1m, the bank has $1m worth of assets listed on their books, and (until March 2020) the same bank would be able to loan out another $9m in money from the $1m in hard assets they have just added to their books.
  - webinvest 6y ago
    Let’s say there are only two banks in the world for simplicity. 1)You start with boomer’s 1M of savings in BankA 2) The bank lends out 1M of that to Judy who deposits it in bank b. 3) bank b lends out that 1M to James who deposits it into his account in bank A. 4) bank a lends out that 1M to Jesse who buys a house from Karen. Karen deposits the money in her account at bank b. 5) bank B lends that 1M out to Jordan who buys cryptocurrencies. The Cryptocurrency seller Jake deposits the proceeds into bank A. We now have: Boomer: 1M in bank A(the only “real money) Judy: 1M bank B James: 1M in bank A Karen: 1M in bank B Jake: 1M in bank A. 4 million dollars has been created from the initial 1M dollars. 5M in bank assets, 4M in bank liabilities. This process goes on and on. What do you mean by all money is loan money?
    - flyGuyOnTheSly 6y ago
      I mean exactly what you just laid out there. That's how money is created. By loaning it out to others in exchange for hard assets... Or at least that's how it was created prior to the reserve requirement being eliminated.

webinvest 6y ago

Yes I agree with everything you said. I have a few questions for you if you don’t mind. A) In an environment where banks can lend every penny they have, is there a way to see how much of the money outstanding is loan money and vs how much is hard money? With a 10% reserve ratio, the theoretical max was $10 of loan money for every $1 of hard money. Therefore the ratio could be as high as 10:1. 2) What would happen if some banks wound up having -10% assets in reserve after a few defaults?

flyGuyOnTheSly 6y ago
The premise of A is incorrect. (Banks cannot only lend out ONLY every penny they have...) Banks have (until March 2020) been able to lend out 10x the amount of pennies they have... aka assets listed on their books. Now they are able to lend out an infinite amount of pennies they have. Theoretically all money is "loan money". That's how money is primary created through fractional reserve banking, through loans. I own a house that is worth $1m. Somebody buys my house with $100k downpayment and $900k in loaned money from a bank in the form of a mortgage. Now I have $1m, the bank has $1m worth of assets listed on their books, and (until March 2020) the same bank would be able to loan out another $9m in money from the $1m in hard assets they have just added to their books.
- webinvest 6y ago
  Let’s say there are only two banks in the world for simplicity. 1)You start with boomer’s 1M of savings in BankA 2) The bank lends out 1M of that to Judy who deposits it in bank b. 3) bank b lends out that 1M to James who deposits it into his account in bank A. 4) bank a lends out that 1M to Jesse who buys a house from Karen. Karen deposits the money in her account at bank b. 5) bank B lends that 1M out to Jordan who buys cryptocurrencies. The Cryptocurrency seller Jake deposits the proceeds into bank A. We now have: Boomer: 1M in bank A(the only “real money) Judy: 1M bank B James: 1M in bank A Karen: 1M in bank B Jake: 1M in bank A. 4 million dollars has been created from the initial 1M dollars. 5M in bank assets, 4M in bank liabilities. This process goes on and on. What do you mean by all money is loan money?
  - flyGuyOnTheSly 6y ago
    I mean exactly what you just laid out there. That's how money is created. By loaning it out to others in exchange for hard assets... Or at least that's how it was created prior to the reserve requirement being eliminated.