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Central Banking is a bit of a legal fiction to "legalize" otherwise fraudulent misappropriation of customers' money. Using deposits as loans is fraud, and has

Central Banking is a bit of a legal fiction to "legalize" otherwise fraudulent misappropriation of customers' money. Using deposits as loans is fraud, and has been recognized as fraud for a long time, until governments (and banks!) realized that if they worked together they could hide the fraud until it wasn't a problem for the people doing the fraud anymore. Fractional reserve banking is actually "fraudulent misappropriation of deposits", and in roman times, if someone's bank failed, the only way it could fail would be if illegal stuff was going on, so the banker had 1 year to make their customers whole, and if they didn't, they were beheaded in front of their banking table. (most of them would generally skip town rather than be beheaded, but it's a nice public signal about how the world feels about fraudulent banking practices) In the modern world, when someone's bank fails, they gaslight the rest of us by publishing _another_ book about how they didn't see it coming... https://mises.org/library/money-bank-credit-and-economic-cycles https://mises.org/library/money-bank-credit-and-economic-cyc...

hammock 4y ago
Fractional reserve banking isn’t how money is created, and loans are not made on deposits. That’s an outdated theory. Money is created simply by banks making a ledger entry (an asset and a balancing liability). Nothing more needed. Wish I had a great paper for you on this, I have seen some but blanking at the moment. Maybe a likeminded HN colleague can help out Edit: here is a decent start https://www.bankofengland.co.uk/-/media/boe/files/quarterly-bulletin/2014/money-creation-in-the-modern-economy.pdf https://www.bankofengland.co.uk/-/media/boe/files/quarterly-...
- wonder_er 4y ago
  I perceive that you don't agree with my frame, but it's not 'an outdated theory'. I linked to a book that explains it in great depth, not that I would expect anyone to read it. _real_ money is backed by _real_ things. What banks create when they make a ledger entry that creates new money isn't "real" money. It's fake money, but because of the fungible nature of money, their fake money gets mixed in with real money, growing the purchasing power of those who get it at the expense of reduced purchasing power of everyone else who has dollars. THAT ALL SAID! I appreciate the engagement, and my god if you wanna hash this out more I'd love a zoom call to see where we'd find "a failure to disagree". I suspect we'd agree on most things. BTW, love your username. I rode a moped from Denver to BC to Vancouver to Seattle and back, a few weeks ago, and of the 20+ days I was gone, spent 12 of them hammock camping. I love hammocks. They're perfect, in many situations.
  - alangibson 4y ago
    > _real_ money is backed by _real_ things This is not true, and it hasn't been for a long time. Even the idea of 'real' money is nonsense. Money is symbolic. Read something by Moser for a description of how money now works.
  - hammock 4y ago
    Reading this I suspect there is a lot we don’t disagree on, namely the overwhelming relevance of purchasing power, and goods and services
  - imtringued 4y ago
    >_real_ money is backed by _real_ things I'm not sure there is a more real thing than another person's labor, which is what people offer when they sign a debt contract. The way fiat works is effectively a time banking network with abstract currency units.
- 99_00 4y ago
  The funny thing is that people who think that fractional reserve banking and money multiplier is a fraud will think that the reality of banking is even more of a fraud. >Banks first decide how much to lend depending on the profitable lending opportunities available to them — which will, crucially, depend on the interest rate set by the Bank of England. It is these lending decisions that determine how many bank deposits are created by the banking system. The amount of bank deposits in turn influences how much central bank money banks want to hold in reserve (to meet withdrawals by the public, make payments to other banks, or meet regulatory liquidity requirements), which is then, in normal times, supplied on demand by the Bank of England.
alangibson 4y ago
Roman banking, such that it was, has little in common with modern banking. Banks now exist to create money. Money produced by the government is mostly used by banks to do overnight settlements
tastyfreeze 4y ago
I agree. Thank you for sharing this point of view. I see central banking as one of the greatest enemies to our country. I see two futures ahead of us. The continuation of central banking and fiat currency until it fails in catastrophe and poverty of the nation, or removing the Fed and returning to precious metal currency. Either path is painful. Continuing on the current path has ended in destruction of every country in history that has followed the same path. Gold and silver served civilizations well for millennia.
AndrewKemendo 4y ago
I had this view as an undergraduate in economics. I got really really into reading Marx and Mises and Hayek etc... which at the time was mostly just academic theory. "End the Fed" lead by Ron Paul kind of started this movement IMO. Anyway, the reality is people don't want the constraints of denominated money because it's not flexible enough for human desires. Credit has roots in non-exact social contract that predate banking forever, so the concept of borrowing, interest etc... are as you point out old. The fact that Islamic traders in 600AD decided to not charge interest is totally irrelevant to modern monetary theory And that's what I find is the difference in how people view these issues, do you look forward to how we can use existing and new methods for exchange? Or do you look backwards and try to re-create a previous system? I've never seen the second strategy actually work because people reject it.
- tastyfreeze 4y ago
  People haven't rejected the constraints of denominated money. Governments have. Governments have repeatedly destroyed commodity money because it prevents them from achieving an agenda that would require more money than they have. Historically these agendas have been wars. In modernity we have tacked on wealth redistribution and a social safety net. Without the constraints imposed on government by commodity money the government will continually grow without bound to the detriment of the prosperity of the people. After all, government creates nothing. More government spending means you and I work more hours to support the government, whatever the agenda, and less hours to enrich ourselves. I can decide better what to do with my money than any bureaucrat. If I believed they could do better I would donate willingly instead of at the point of a gun.
  - imtringued 4y ago
    > Governments have repeatedly destroyed commodity money because it prevents them from achieving an agenda that would require more money than they have. It is called a bigger economy. A bigger economy needs more money and the money has to be given to the new comers that created new wealth rather than to those who didn't.

hammock 4y ago

Fractional reserve banking isn’t how money is created, and loans are not made on deposits. That’s an outdated theory. Money is created simply by banks making a ledger entry (an asset and a balancing liability). Nothing more needed. Wish I had a great paper for you on this, I have seen some but blanking at the moment. Maybe a likeminded HN colleague can help out Edit: here is a decent start https://www.bankofengland.co.uk/-/media/boe/files/quarterly-bulletin/2014/money-creation-in-the-modern-economy.pdf https://www.bankofengland.co.uk/-/media/boe/files/quarterly-...

wonder_er 4y ago
I perceive that you don't agree with my frame, but it's not 'an outdated theory'. I linked to a book that explains it in great depth, not that I would expect anyone to read it. _real_ money is backed by _real_ things. What banks create when they make a ledger entry that creates new money isn't "real" money. It's fake money, but because of the fungible nature of money, their fake money gets mixed in with real money, growing the purchasing power of those who get it at the expense of reduced purchasing power of everyone else who has dollars. THAT ALL SAID! I appreciate the engagement, and my god if you wanna hash this out more I'd love a zoom call to see where we'd find "a failure to disagree". I suspect we'd agree on most things. BTW, love your username. I rode a moped from Denver to BC to Vancouver to Seattle and back, a few weeks ago, and of the 20+ days I was gone, spent 12 of them hammock camping. I love hammocks. They're perfect, in many situations.
- alangibson 4y ago
  > _real_ money is backed by _real_ things This is not true, and it hasn't been for a long time. Even the idea of 'real' money is nonsense. Money is symbolic. Read something by Moser for a description of how money now works.
- hammock 4y ago
  Reading this I suspect there is a lot we don’t disagree on, namely the overwhelming relevance of purchasing power, and goods and services
- imtringued 4y ago
  >_real_ money is backed by _real_ things I'm not sure there is a more real thing than another person's labor, which is what people offer when they sign a debt contract. The way fiat works is effectively a time banking network with abstract currency units.
99_00 4y ago
The funny thing is that people who think that fractional reserve banking and money multiplier is a fraud will think that the reality of banking is even more of a fraud. >Banks first decide how much to lend depending on the profitable lending opportunities available to them — which will, crucially, depend on the interest rate set by the Bank of England. It is these lending decisions that determine how many bank deposits are created by the banking system. The amount of bank deposits in turn influences how much central bank money banks want to hold in reserve (to meet withdrawals by the public, make payments to other banks, or meet regulatory liquidity requirements), which is then, in normal times, supplied on demand by the Bank of England.

alangibson 4y ago

Roman banking, such that it was, has little in common with modern banking. Banks now exist to create money. Money produced by the government is mostly used by banks to do overnight settlements

tastyfreeze 4y ago

I agree. Thank you for sharing this point of view. I see central banking as one of the greatest enemies to our country. I see two futures ahead of us. The continuation of central banking and fiat currency until it fails in catastrophe and poverty of the nation, or removing the Fed and returning to precious metal currency. Either path is painful. Continuing on the current path has ended in destruction of every country in history that has followed the same path. Gold and silver served civilizations well for millennia.

AndrewKemendo 4y ago

I had this view as an undergraduate in economics. I got really really into reading Marx and Mises and Hayek etc... which at the time was mostly just academic theory. "End the Fed" lead by Ron Paul kind of started this movement IMO. Anyway, the reality is people don't want the constraints of denominated money because it's not flexible enough for human desires. Credit has roots in non-exact social contract that predate banking forever, so the concept of borrowing, interest etc... are as you point out old. The fact that Islamic traders in 600AD decided to not charge interest is totally irrelevant to modern monetary theory And that's what I find is the difference in how people view these issues, do you look forward to how we can use existing and new methods for exchange? Or do you look backwards and try to re-create a previous system? I've never seen the second strategy actually work because people reject it.

tastyfreeze 4y ago
People haven't rejected the constraints of denominated money. Governments have. Governments have repeatedly destroyed commodity money because it prevents them from achieving an agenda that would require more money than they have. Historically these agendas have been wars. In modernity we have tacked on wealth redistribution and a social safety net. Without the constraints imposed on government by commodity money the government will continually grow without bound to the detriment of the prosperity of the people. After all, government creates nothing. More government spending means you and I work more hours to support the government, whatever the agenda, and less hours to enrich ourselves. I can decide better what to do with my money than any bureaucrat. If I believed they could do better I would donate willingly instead of at the point of a gun.
- imtringued 4y ago
  > Governments have repeatedly destroyed commodity money because it prevents them from achieving an agenda that would require more money than they have. It is called a bigger economy. A bigger economy needs more money and the money has to be given to the new comers that created new wealth rather than to those who didn't.