The Banks control the money supply, not the Federal Reserve

[MalikX]

No offense but the internet is full of so much misleading economic policy info it's crazy. People go on YouTube and feel like they have a PhD in Econ (aka like the end the fed propaganda on YouTube).

Ray Dalio is worth $15.9 billion, has a MBA from Harvard Business and runs Bridgewater Associates, one of the largest investment funds in the world. I'll listen to what he says before I listen to anyone on the Coli. No offense.

 

[MalikX]

This multiplier effect is the same whether it's paper money or electronic, it makes absolutely no difference. Secondly this fractional banking system is the same EVERYWHERE across the world, even less capitalist states like china. Fractional banking is not a bad thing, it is normal. It's similar to you buying a house for 400k but you only earn 80k. You don't have all 400k but as long as the bank doesn't ask for it all today you're fine. You're not screaming "all the 400k is debt" are you?

Your videos and sources are sensationalising something that's quite normal and boring, trying to spin it into a conspiracy .

I never said it wasn't practiced across the globe. I simply said the vast vast vast majority of money created in the economy is debt created by banks and that's factually correct. I never realized that and most people never realize that. You came in here trying to be a contrarian. Fractional banking is good, until it leads to a bank run and then it's not. The money isn't backed by anything. It's backed by people believing that it is. Fractional banking and debt is good, until it leads to global defaults, and then it's not.

Also, you shouldn't be buying a $400,000 house on a $80,000 salary. That's 5x your annual income. You're supposed to stick to 2-3x. People overextending themselves is how we got into the housing crisis in the first place

 

[Scholar]

Ray Dalio is worth $15.9 billion, has a MBA from Harvard Business and runs Bridgewater Associates, one of the largest investment funds in the world. I'll listen to what he says before I listen to anyone on the Coli. No offense.

What Billionaire Ray Dalio Gets Wrong About Money

I don't agree entirely with this article but it addresses your point that someone's net worth makes them an expert

 

[Menelik II]

I never said it wasn't practiced across the globe. I simply said the vast vast vast majority of money created in the economy is debt created by banks and that's factually correct. I never realized that and most people never realize that. You came in here trying to be a contrarian. Fractional banking is good, until it leads to a bank run and then it's not. The money isn't backed by anything. It's backed by people believing that it is. Fractional banking and debt is good, until it leads to global defaults, and then it's not.

Also, you shouldn't be buying a $400,000 house on a $80,000 salary. That's 5x your annual income. You're supposed to stick to 2-3x. People overextending themselves is how we got into the housing crisis in the first place

So what exactly is your point? You just realised something that's in a high school economics book, and is a pretty stable system used throughout the world?

 

[MalikX]

What Billionaire Ray Dalio Gets Wrong About Money

I don't agree entirely with this article but it addresses your point that someone's net worth makes them an expert

Peter Coy, author of that article, has spent his life being a writer and has a B.A. in history.

Ray Diallo runs a massive investment fund and is worth almost $16 billion dollars.

Real world application > theory

$16 billion dollars > a guy who writes articles

 

[Scholar]

I never said it wasn't practiced across the globe. I simply said the vast vast vast majority of money created in the economy is debt created by banks and that's factually correct. I never realized that and most people never realize that. You came in here trying to be a contrarian. Fractional banking is good, until it leads to a bank run and then it's not. The money isn't backed by anything. It's backed by people believing that it is. Fractional banking and debt is good, until it leads to global defaults, and then it's not.

Also, you shouldn't be buying a $400,000 house on a $80,000 salary. That's 5x your annual income. You're supposed to stick to 2-3x. People overextending themselves is how we got into the housing crisis in the first place

That money is back by depositors insurance, which the gov/fed guarantees everyone up to a$250k of their money. Fed would simply transfer funds to banks to ensure it

 

[MalikX]

So what exactly is your point? You just realised something that's in a high school economics book, and is a pretty stable system used throughout the world?

Contrarians My point was the banks are producing the vast majority of the money in the money supply. That was the title of the thread. That statement is factually correct. You ran in here saying I was wrong. A second poster told you I was right, so your argument changed from "it's not true, you're incorrect" to "yea, everybody does it, so what"

 

[Scholar]

Peter Coy, author of that article, has spent his life being a writer and has a B.A. in history.

Ray Diallo runs a massive investment fund and is worth almost $16 billion dollars.

Real world application > theory

$16 billion dollars > a guy who writes articles

Ahh so all the sources that he directly quotes in the article that have had careers in finance/ economics don't know anything either word

 

[Menelik II]

Contrarians My point was the banks are producing the vast majority of the money in the money supply. That was the title of the thread. That statement is factually correct. You ran in here saying I was wrong. A second poster told you I was right, so your argument changed from "it's not true, you're incorrect" to "yea, everybody does it, so what"

You are the contrarian thinking it's some conspiracy. Again, thebanks do the lending, but the fed controls the supply they pull the strings. The banks have to lend out more than the fed input, otherwise they wouldn't make any money.

I'm done trying to explain this. Read the links/videos or Wikipedia it.

 

[MalikX]

Ahh so all the sources that he directly quotes in the article that have had careers in finance/ economics don't know anything either word

There was only one person. His name is Paul Sheard. Paul Sheard works for Standard and Poors, a credit rating agency, as Chief Economist. If he's right or wrong, it doesn't really matter. If he was half as smart as Dallio, he'd be a billionaire too, instead of writing books and teaching classes. Economists are always telling Finance types what they're wrong about but, they never use their all encompassing knowledge about the markets to enrich themselves

 

[ⒶⓁⒾⒶⓈ]

Yes and no...The Fed controls interest rates which ultimately decides whether its worth it for banks to lend money or not ...

 

[MalikX]

You are the contrarian thinking it's some conspiracy. Again, thebanks do the lending, but the fed controls the supply they pull the strings. The banks have to lend out more than the fed input, otherwise they wouldn't make any money.

I'm done trying to explain this. Read the links/videos or Wikipedia it.

You're not explaining anything. You were wrong about a couple things already. The Fed controls interest rates. The only way for the Fed to stop the banks from flushing money/debt into the economy like water is to raise interest rates and that grinds the economy to a halt. We've grown very accustomed to debt spending. Take that away and the entire system falls, meaning the banks have much more power then they normally should have. You trying to make it seem like the Fed has complete and utter control of the economy when it's a symbiotic relationship at best.

 

[Menelik II]

You're not explaining anything. You were wrong about a couple things already. The Fed controls interest rates. The only way for the Fed to stop the banks from flushing money/debt into the economy like water is to raise interest rates and that grinds the economy to a halt. We've grown very accustomed to debt spending. Take that away and the entire system falls, meaning the banks have much more power then they normally should have. You trying to make it seem like the Fed has complete and utter control of the economy when it's a symbiotic relationship at best.

You don't know what your talking about. Fed controls the money supply and interest rates,they are 2 sides iof the same coin. The fed can also change the reserve requirement ratio and dictate how much they lend. They can even shut you down. The fed have loads of tools at their disposal.

 

[MalikX]

You don't know what your talking about. Fed controls the money supply and interest rates,they are 2 sides iof the same coin. The fed can also change the reserve requirement ratio and dictate how much they lend. They can even shut you down. The fed have loads of tools at their exposal.

The Fed uses interest rates, reserve ratios and open market operations to manipulate the money supply. There's $3 trillion dollars in the American Economy right now that was printed by the Fed. There's $50 trillion dollars worth of debt created by banks. The Fed isn't "shutting down" anything for any long duration of time. Who are you fooling? Our entire way of life is predicated on easy and undisturbed access to large amounts of debt (again, $50 trillion dollars worth) bringing the entire thing back full circle

The Federal Reserve, which issues the United States' monetary base (bank notes, coins, and bank reserves), has vastly increased its size since 2008 through quantitative easing programs — buying assets including Treasury bonds and mortgage-backed securities in open market operations with newly-created money:

(Federal Reserve Bank of St. Louis)

With such soaring quantities of new money resulting from quantitative easing, many economists including John Williams, Peter Schiff, and Marc Faber have predicted imminent high or hyper inflation. But by the broadest measures, like MIT's Billion Prices Project, the predictions haven't played out. Inflation hasn't soared along with the monetary base.

And the money supply, which is different from the monetary base (the actual currency), hasn't really grown either. Bank notes and coins are the most tangible kind of dollars, but there are many more kinds of things called "dollars" that are used for exchange. Most obviously, credit. Banks create money through the fractional reserve banking system. Banks can lend — and thus create credit — up to 10 times their reserves on hand.

This means that while the monetary base has tripled, the M2 money stock — which includes both checking and savings accounts as well as traveler's checks, time deposits, and money market deposit accounts — has not increased nearly as much:

(Federal Reserve Bank of St. Louis)
But even M2 does not encompass the entirety of the money supply. There exists another banking system — the shadow banking system— where credit expansion also takes place. Shadow credit creation takes place via securitization, a process by which debt-based assets like mortgages, credit card debt, and auto debt are pooled together and sold, and via repo, through which assets are pawned to a lender as collateral for credit.

One of the stories behind the 2008 crisis was the huge outgrowth of shadow credit creation that preceded it. Yet when the crisis hit, credit markets became spooked, shadow credit creation dried up, and the level of shadow assets began to deflate:

(Federal Reserve Bank of St. Louis)

So the hidden story behind the quantitative easing programs is that the new base money that the Fed has pushed into the financial system has been replacing shadow credit that dried up after 2008. The Fed does not control the money supply — most of the money supply has been created through credit. The Fed can only control one small part of the money supply. This is shown in this chart of M4 — the total money supply, including shadow money — created by Professor Steve Hanke of the Cato Institute, with the monetary base issued by the Fed in olive:

(Cato Institute)

Even after all that quantitative easing, the money supply has still shrunk.

In fact, quantitative easing may be choking off shadow credit creation. As the Fed buys more and more assets, there are less assets left in the market that can be used as collateral for credit creation. This so-called "safe-asset shortage" is one factor that has driven the price of Treasuries as well as corporate bonds and even junk debt to record highs. If choking off shadow credit creation and replacing shadow money with traditional money was the Fed's implicit goal, then it is succeeding. But the money the Fed has issued since the crisis hasn't even made up for the shrinkage.

 

[Menelik II]

You don't know what your talking about. Fed controls the money supply and interest rates,they are 2 sides iof the same coin. The fed can also change the reserve requirement ratio and dictate how much they lend. They can even shut you down. The fed have loads of tools at their disposal.

The Fed uses interest rates, reserve ratios and open market operations to manipulate the money supply. There's $3 trillion dollars in the American Economy right now that was printed by the Fed. There's $50 trillion dollars worth of debt created by banks. The Fed isn't "shutting down" anything for any long duration of time. Who are you fooling? Our entire way of life is predicated on easy and undisturbed access to large amounts of debt (again, $50 trillion dollars worth) bringing the entire thing back full circle

Purposefully misunderstanding me, I said al the thing the fed CAN do not WILL do.
But yeah, let you cook. Enjoy your newly acquired info.