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http://en.wikipedia.org/wiki/Fractional-reserve_banking http://en.wikipedia.org/wiki/Fractional-reserve_banking Fractional-reserve banking might be a good topi

by T-hawk 15y ago

http://en.wikipedia.org/wiki/Fractional-reserve_banking http://en.wikipedia.org/wiki/Fractional-reserve_banking Fractional-reserve banking might be a good topic to review. It is entirely possible for more debt than currency to exist. Suppose you deposit $100 at a bank, which lends $80 of it to Alice. She deposits her $80 in another bank which lends $60 to Bob. So that's a perfectly legit scenario where more debt ($140) exists than currency ($100). And it doesn't mean that the debt can never be paid back. > So you have two possibilities for the U.S. "debt" - AAA or F. Rating it anything else just demonstrates extraordinary ignorance. Did you just call the entirety of Standard & Poor's, a leading financial firm for over 150 years, extraordinarily ignorant? What basis can you demonstrate that you understand the world and national economies and credit markets better than a few thousand really smart economists? There certainly does exist a spectrum between being the safest investment in the world and currently actually in default (which is what an F actually means.) That said, it's true that S&P changing their rating doesn't have much concrete meaning. S&P didn't actually make the government any weaker than yesterday. Nobody knows what's going to happen next. S&P is guessing like the rest of us, although the guess is built on the strength of some very sophisticated financial models and analytical tools.

bokonist 15y ago
History shows that fractional reserve banking is incredibly unstable with that degree of leverage. As soon as there is the slightest hint of fear of bankruptcy, everyone hoards cash, no one can repay loans, and thousands of banks go bankrupt. See for reference every single recession and depression before the creation of the FDIC. The only reason fractional reserve works now is because there is an FDIC and Federal Reserve who will create new money any time there is excessive demand for people to convert deposits into cash. Fractional reserve only works because of the fiat powers of the government. So my point stands - if you assume the U.S. is using its fiat powers, then the debt is AAA. If you assume the U.S. is not using its fiat powers, then the U.S. should have the debt rating of an over-leveraged, 1929 private bank - ie, extremely low. Did you just call the entirety of Standard & Poor's, a leading financial firm for over 150 years, extraordinarily ignorant? Yes I did. And why shouldn't I? Maybe the S&P was glorious a hundred years ago. But the last few years their track record has been dismal. See for reference the entire subprime fiasco. What basis can you demonstrate that you understand the world and national economies and credit markets better than a few thousand really smart economists? All I have his my own brain, and my use of reason, logic and evidence. You either buy my arguments or you don't. If you're not willing to use your own reason, and base your views entirely on appeals to authority, then there really is not any point in further discussion. If you wish to see my arguments laid out in further detail, I do have a blog. Here are some general thoughts on the economy: http://intellectual-detox.com/assorted-thoughts-on-the-economy/ http://intellectual-detox.com/assorted-thoughts-on-the-econo... It's only been nine months since I posted that article, but so far my predictions have been spot on. Here is a post I wrote about the national debt: http://intellectual-detox.com/why-the-national-debt-is-non-problem/ http://intellectual-detox.com/why-the-national-debt-is-non-p...
giardini 15y ago
>What basis can you demonstrate that you understand the world and national economies and credit markets better than a few thousand really smart economists? OK, let's take the financial crisis, where S&P, Moody's, and Fitch rated thousands of CDOs as AAA. In return for the fabricated ratings, S&P et al received billions of dollars. Years later, the credit rating firms downgraded all those CDOs and they went belly up. The credit rating firms have been under investigation for years now and the Senate has called for criminal investigations by DOJ. Its time your "smart economists" took a perp walk. These firms should be smashed by the SEC and their officers branded on their foreheads with a giant letter "E". There are other more reliable companies in the industry that will rise to replace them. They have caused the loss of so much money, they have misled so many, they would not be missed.

by T-hawk 15y ago

bokonist 15y ago

History shows that fractional reserve banking is incredibly unstable with that degree of leverage. As soon as there is the slightest hint of fear of bankruptcy, everyone hoards cash, no one can repay loans, and thousands of banks go bankrupt. See for reference every single recession and depression before the creation of the FDIC. The only reason fractional reserve works now is because there is an FDIC and Federal Reserve who will create new money any time there is excessive demand for people to convert deposits into cash. Fractional reserve only works because of the fiat powers of the government. So my point stands - if you assume the U.S. is using its fiat powers, then the debt is AAA. If you assume the U.S. is not using its fiat powers, then the U.S. should have the debt rating of an over-leveraged, 1929 private bank - ie, extremely low. Did you just call the entirety of Standard & Poor's, a leading financial firm for over 150 years, extraordinarily ignorant? Yes I did. And why shouldn't I? Maybe the S&P was glorious a hundred years ago. But the last few years their track record has been dismal. See for reference the entire subprime fiasco. What basis can you demonstrate that you understand the world and national economies and credit markets better than a few thousand really smart economists? All I have his my own brain, and my use of reason, logic and evidence. You either buy my arguments or you don't. If you're not willing to use your own reason, and base your views entirely on appeals to authority, then there really is not any point in further discussion. If you wish to see my arguments laid out in further detail, I do have a blog. Here are some general thoughts on the economy: http://intellectual-detox.com/assorted-thoughts-on-the-economy/ http://intellectual-detox.com/assorted-thoughts-on-the-econo... It's only been nine months since I posted that article, but so far my predictions have been spot on. Here is a post I wrote about the national debt: http://intellectual-detox.com/why-the-national-debt-is-non-problem/ http://intellectual-detox.com/why-the-national-debt-is-non-p...

giardini 15y ago

>What basis can you demonstrate that you understand the world and national economies and credit markets better than a few thousand really smart economists? OK, let's take the financial crisis, where S&P, Moody's, and Fitch rated thousands of CDOs as AAA. In return for the fabricated ratings, S&P et al received billions of dollars. Years later, the credit rating firms downgraded all those CDOs and they went belly up. The credit rating firms have been under investigation for years now and the Senate has called for criminal investigations by DOJ. Its time your "smart economists" took a perp walk. These firms should be smashed by the SEC and their officers branded on their foreheads with a giant letter "E". There are other more reliable companies in the industry that will rise to replace them. They have caused the loss of so much money, they have misled so many, they would not be missed.