Free Republic

There you go. See, it was not that hard. "Certain restrictions apply." And they are all legal as the day is long. No argument on that point. Nice when industry writes its own laws isn't it? That still does not make it moral, ethical or less fraudulent.

The banking panics of the 1800's were caused by this fraud. The problem is that like any other ponzi scheme, it must have new inflows to keep moving forward. The central bank as lender of last resort cured the symptoms, but really just expanded the ponzi base.

Bernie Madoffs victims were thrilled right up til the end too.

Really, Todd? You refuse to acknowledge that during a time of banking stress, the bank will, indeed must, refuse to honor my demand?

I guess we are done then. thx

You can demand it at anytime. Imagine that.

Sure I can make the demand. But the bank has no obligation to return my money if too many wish the same.

It OK. You can admit it. We all know already. Go ahead. Its OK. Really.

Maybe you should post the agreement you signed when you opened your account?

Hmmm, are you hinting that perhaps I don't really have clear title to my demand deposit? Do I not really have the ability to demand my deposit back at any time?

Imagine that.

intentional perversion of truth

You do not think it an "intentional perversion of the truth" for a bank to say that you may demand access to your deposit at any time. When they know for a fact, that the simple act of mass redemption makes that impossible?

Cute, but keep your insulting remarks to yourself, please.

The laws don't change.

You are correct. They are already written and don't need to change, because this has happened many times already. But as you still refuse to acknowledge, I WILL be refused access to my demand deposit, if too many others wish access to theirs. The bank can and must refuse my demand, and everyone else's. Simply because they wish access to what should be available to them upon demand. It may be legal, but that doesn't change what it really is.

Getting personal. Now. Now.

My deposit is NOT available to me if I used it to purchase a CD. That is what a time deposit is all about.

What's the matter? You didn't address my comment about clear title to my demand deposit. Under normal circumstances, I can at will gain access. But why should the laws have to change if others wish to gain access to their demand deposits at the same time?

That is fraud. There is no need for legal banking protections if banking is honest.

They could sell their loan or pledge it as security for a loan.

Hardly makes my deposit available to me upon demand.

You don't have clear title to your bank account?

Legally, sure. Until everyone else wants their deposits as well. Then the rules change for some reason.

Why would banks accept demand deposits?

For storage/security fees.

It's a bad idea.

Heh, cause fraud is such a good idea. Gotcha.

Who said I wanted to eliminate banking? I want to eliminate fraud. True, today, the two are nearly indistinguishable, but they really aren’t the same thing.

Sure it can

How? It only has 1 $20 bill left, it loaned the rest out.

CDs have a zero percent requirement because there is clear title to the money in it for a specified time. Demand deposits should have a 100% reserve ratio. That is what I am recommending.

Why is that a public problem?

Aside from my explanation of why it is fraudulent above, it is the major cause of the boom/bust cycle we experience.

If you look back to the banking panics of the 1800s, most were created by the local banks practice of frb. By artificially increasing the money supply, it generates inflation and sends a message of a more powerful economy than really exists. This leads to mal-investment (the over-capacity that we see today) and inevitably ends in deflation. It is no co-incidence that the 30s depression was preceded by "The Roaring Twenties" and our current situation was similarly strong during the 90s.

Why would I explain it absent fractional reserve banking?

M1 includes currency in circulation and demand deposits.

You deposit 10 $20s in the bank. The banks loans out 9 $20s and keeps one in reserve. The money supply is your checking account ($200) plus the $180 that is in circulation. The money supply grows by $180 whether your $20s are gold coins, gold certificates or FRNs.

So after the original bank loans out 9 of my 20s, I change my mind and wish to withdraw 5 of the 10 I deposited. The bank only has one of those 20s in its vault. It cannot possibly give me what it has promised.

Now, if I deposited the 10 20s into a CD where I specifically fore go access to my money for a specified time, then things are very different. Those funds may certainly be lent out and the difference between the rate paid on the CD and the interest charged on the loan if the bankers profit.

The difference is that in the first instance, the bank promises to redeem upon demand that which it no longer has. But in the second, I willingly give up my claim on the funds for a specified time, with substantial penalty for early withdrawal.

Don't talk to me about the moral hazard of bailing out the banking system from temporary short term liquidity crises, until you can explain how to prevent the panics and depressions of the 1800's when we were on a gold standard.

Three words. Fractional. Reserve. Banking.

Paper, gold, rocks, whatever you might choose as money, will always be affected by the fraud that allows banks to lend out the money they promise to provide you upon demand.

A "bank run" is nothing more and nothing less than the fraud of fractional reserve banking being exposed. It is inevitable, as we are about to find out, not even the most powerful central bank in the world can hide the fraud forever.

With an honest banking system, bank runs cannot occur. Because the money you deposited is really there when you wish to access it. There would only be a panic in the event of fraud or other criminal activity.

Borrowing increases the money supply, even under the gold standard.

Care to explain this statement, absent fractional reserve banking, which while legal today, is quite obviously fraudulent?

Thanks

I believe that the story you linked stated that he sold some 500,000+ shares of GLD but also purchased 5,000,000 of the ishares gold fund. So, far from selling, he was still a strong net buyer.

One more time, loaning of demand deposits is like counterfeiting. Loaning of demand deposits is not. Reserve requirements have nothing to do with it. In one case the bank is promising to redeem a claim on something it does not have, in the other the depositor VOLUNTARILY gives up his claim for a specified period of time.

Your question was "You put $100 in the bank. The bank loans out $90 and keeps a $10 reserve. How is that like counterfeiting?"

I simply explained how they turn a $100 deposit into a claim on $100 and a $90 loan. Of course they do not have a printing press, but I did not say that is was counterfeiting, I said it was like counterfeiting. Your answer that the central bank stands ready to make the depositor good should the loan default, is where the actual printing would take place.

Now, if the banker made loans from time deposits, a CD for example, that is different. Because the depositor gives up his claim for a specified period, the banker may loan that money for a similar period of time without creating the problem described above.

You realize when you put money in the bank that the reason you receive interest is because the bank is loaning a portion of your funds, right?

You realize that this has nothing to do with the question, which was how does turning a $100 deposit into a $100 claim and a $90 loan equate to counterfeiting, right?

In real life we are in fact able to get the $100 whenever they want. That means it's not couterfeiting.

No. The fact that this works most of the time, does not change what is actually happening. When, enough people wish to get there "deposited" money back, the fraud is exposed. But the fraud is present right from the start.

You put $100 in the bank. The bank loans out $90 and keeps a $10 reserve. How is that like counterfeiting?

It is like counterfeiting in that you still believe that your $100 is available to you upon demand, while 90% of it is in someone else's hands and not really available to you at all. Both parties have a claim on that $90 that the bank no longer holds.