Half of U.S. pays no federal income tax

[dreamdancer 0]

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>ie the banks created too much money

Banks don't create any money, any more than you do when you use your credit card to get cash from an ATM.

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Fractional-reserve banking is the banking practice in which banks keep only a fraction of their deposits in reserve (as cash and other highly liquid assets) and lend out the remainder, while maintaining the simultaneous obligation to redeem all these deposits upon demand. Fractional reserve banking necessarily occurs when banks lend out any fraction of the funds received from deposit accounts. This practice is universal in modern banking, and can be contrasted with full-reserve banking which is no longer generally practised.

By its nature, the practice of fractional reserve banking expands money supply (cash and demand deposits) beyond what it would otherwise be. Because of the prevalence of fractional reserve banking, the broad money supply of most countries is a multiple larger than the amount of base money created by the country's central bank. That multiple (called the money multiplier) is determined by the reserve requirement or other financial ratio requirements imposed by financial regulators, and by the excess reserves kept by commercial banks.

Central banks generally mandate reserve requirements that require banks to keep a minimum fraction of their demand deposits as cash reserves. This both limits the amount of money creation that occurs in the commercial banking system, and ensures that banks have enough ready cash to meet normal demand for withdrawals.

http://en.wikipedia.org/wiki/Fractional_reserve_banking

stay away from moving propellers - they bite
blue skies from thai sky adventures
good solid response-provoking keyboarding

[Bolas 5]

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You may not understand how loans work, then. When you get a loan (say, a mortgage) the bank writes a check to the previous owner/developer. They then deposit the check and the bank transfers the money. They do this because they actually HAVE the money. Why do they have the money? Because everyone else is paying their mortgages back.

This is assuming that the previous owner developer actually owned the property versus they had a mortgage/loan as well. In that case it's just a bank transfer of funds. Which may or may not be done depending on what the original bank owes or is owed from other loans/mortgages.

So while a property may be built for $500,000 and sell for $1 million. The only "real" money is likely to be the initial payments and the profits on the sale. The rest is just potential future earnings.

This is why banks should have just revalued the houses and allowed those that weren't underwater to simply refinance at the lower value. This would have limited the people that could still pay from choosing to simply buy another house and walk away from the one they had.

Stupidity if left untreated is self-correcting
If ya can't be good, look good, if that fails, make 'em laugh.

[billvon 3,116]

I'll highlight the important section for you:

"Fractional-reserve banking is the banking practice in which banks keep only a fraction of their deposits in reserve (as cash and other highly liquid assets) and lend out the remainder, while maintaining the simultaneous obligation to redeem all these deposits upon demand. Fractional reserve banking necessarily occurs when banks lend out any fraction of the funds received from deposit accounts. This practice is universal in modern banking, and can be contrasted with full-reserve banking which is no longer generally practised."

In other words, they don't create any money. All the money they have is either in their vault (or someone else's vault) or in people's homes. Here's an example:

Andy's Bank starts operation with $1,000,000. They loan most of that money out with mortgages. They now have only $100,000 in reserves, but on paper they are still fine, because they can report the value of the mortgages. Indeed, they are now better than fine, because those mortgages are worth more than the money they lent out. In other words, on paper, they are now worth over $1,000,000 - and that additional money will come from people who purchased those loans.

A year goes by. Due to people paying back their loans, they now have $300,000 in reserves. They lend out $250,000 to other people who want loans.

So far Andy's Bank has lent out $1,150,000 in money, despite starting with only $1,000,000. How did they get the extra money? Did they "create" it? Did they just print it on a printing press in the basement, or move a decimal point on their spreadsheet? No - they sold a valuable product (mortgages) and made a profit on those mortgages. In other words, they earned it. Sorta the same way anyone makes money.

[billvon 3,116]

>This is assuming that the previous owner developer actually owned the
>property versus they had a mortgage/loan as well.

Of course. In any case, though, the actual money is transferred under direction of the previous owner, who may well elect to transfer it directly to his bank.

>This is why banks should have just revalued the houses and allowed
>those that weren't underwater to simply refinance at the lower value.

Not a bad idea.

[dreamdancer 0]

if banks don't create money how can they lend out 100 and expect back 120? who is creating that extra 20?

stay away from moving propellers - they bite
blue skies from thai sky adventures
good solid response-provoking keyboarding

[Bolas 5]

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actual money

In most cases there is no such thing involved in the transactions.

In cases of home developers, that money is used to pay back the original loan with that bank or perhaps another or used as the basis for the next loan.

You mentioned it prior in your prior post "reserves in their vault or someone elses"

Bank 1 owes Bank 2 $x but Bank 3 owes $x to Bank 2 which owes $x to Bank 1. If all 3 banks are about the same size and x represents 50% of their required reserves then that some 50% money unit is being used multiple times.

Add hundreds of more banks (investments, stocks, bonds, etc.) and fractions of $x spread all over the world and you start to see the picture.

All is well and good unless people using the banks either stop paying or take out their money.

The banking industry in reality did not need to be "bailed out." In that matter neither did GM, Chrysler, etc. as it was not about actual money, but securing new loans for their existing debt.

Stupidity if left untreated is self-correcting
If ya can't be good, look good, if that fails, make 'em laugh.

[billvon 3,116]

>if banks don't create money how can they lend out 100 and expect back
>120? who is creating that extra 20?

The people who buy their mortgages from them. They give them more money than they got (called "interest.")

Let's say you started the week with $200, worked at your job for 40 hours, then ended up with $1000. How did you create the money? Do you have a printing press in your basement?

[Bolas 5]

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if banks don't create money how can they lend out 100 and expect back 120? who is creating that extra 20?

They don't create money, they create credit.

Stupidity if left untreated is self-correcting
If ya can't be good, look good, if that fails, make 'em laugh.

[dreamdancer 0]

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if banks don't create money how can they lend out 100 and expect back 120? who is creating that extra 20?

They don't create money, they create credit.

but sooner or later that credit has to be 'realised' into actual money. if the multiplier effect has been over-used then the two won't match (even after productivity improvements out in the real economy). there was too much interest/credit to pay back with real money - result shortcircuit. not the fault of the people who bought tickets on the plane - but the banks (and shadow structure) that sold too many tickets to seat everyone.

stay away from moving propellers - they bite
blue skies from thai sky adventures
good solid response-provoking keyboarding

[dreamdancer 0]

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>if banks don't create money how can they lend out 100 and expect back
>120? who is creating that extra 20?

The people who buy their mortgages from them. They give them more money than they got (called "interest.")

but they're buying money - with more money. if everyone (at the same time) did that what would happen?

stay away from moving propellers - they bite
blue skies from thai sky adventures
good solid response-provoking keyboarding

[billvon 3,116]

>but they're buying money - with more money.

Right! Just as you could by getting a mortgage, credit card or home equity loan.

>if everyone (at the same time) did that what would happen?

If everyone did what? Asked for a mortgage? They'd say no to some of them until they had the money.

[Bolas 5]

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>but they're buying money - with more money.

Right! Just as you could by getting a mortgage, credit card or home equity loan.

>if everyone (at the same time) did that what would happen?

If everyone did what? Asked for a mortgage? They'd say no to some of them until they had the money.

Hardly. They'd use the potential money that the mortgages already sold would generate as the basis of payment for the new ones.

Stupidity if left untreated is self-correcting
If ya can't be good, look good, if that fails, make 'em laugh.

[Bolas 5]

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if banks don't create money how can they lend out 100 and expect back 120? who is creating that extra 20?

They don't create money, they create credit.

but sooner or later that credit has to be 'realised' into actual money. if the multiplier effect has been over-used then the two won't match (even after productivity improvements out in the real economy). there was too much interest/credit to pay back with real money - result shortcircuit. not the fault of the people who bought tickets on the plane - but the banks (and shadow structure) that sold too many tickets to seat everyone.

It doesn't have to be realized as real money as it's not until it is actually redeemed for actual cash. Considering how little cash transactions actually occur these days...

Interesting theory that overcreditization in general caused this, not just an abundance of bad loans.

Stupidity if left untreated is self-correcting
If ya can't be good, look good, if that fails, make 'em laugh.

[billvon 3,116]

>They'd use the potential money that the mortgages already sold would
>generate as the basis of payment for the new ones.

If they could get a loan from another bank, with the mortgages as collateral - yes.

[dreamdancer 0]

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>but they're buying money - with more money.

Right! Just as you could by getting a mortgage, credit card or home equity loan.

>if everyone (at the same time) did that what would happen?

If everyone did what? Asked for a mortgage? They'd say no to some of them until they had the money.

no, what would happen if everyone actually got a mortgage/loan (at the same time). what would happen then?

stay away from moving propellers - they bite
blue skies from thai sky adventures
good solid response-provoking keyboarding

[billvon 3,116]

>no, what would happen if everyone actually got a mortgage/loan (at the
>same time). what would happen then?

If they all actually did get a mortgage at the same time? Then developers/sellers would sell a lot of houses.

[Bolas 5]

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>but they're buying money - with more money.

Right! Just as you could by getting a mortgage, credit card or home equity loan.

>if everyone (at the same time) did that what would happen?

If everyone did what? Asked for a mortgage? They'd say no to some of them until they had the money.

no, what would happen if everyone actually got a mortgage/loan (at the same time). what would happen then?

I think I see where you're going.

If there is limited supply of a product, the price is higher. As more of a product is created the price comes down as it may become cheaper to produce. If there's too much of a product, the price drops sharply as the excess inventory is viewed as a liability.

Simple supply and demand economics. We've seen this with video game systems, gas, cars, etc.

Credit is a product but when its value drops, it has to compensate by getting larger which causes what is bought on credit to increase as well independent of the item's actual value.

So how do you recreate demand in a product that was oversold? You limit supply.

So how do you get credit and prices back to sane levels? You limit the supply which has been done.

Stupidity if left untreated is self-correcting
If ya can't be good, look good, if that fails, make 'em laugh.

[rhaig 0]

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but sooner or later that credit has to be 'realised' into actual money.

actually no, it doesn't. when was the last time a mortgage payment was made in cash? either bits are shifted in accounts, or a check is written. in either case, debt is transferred from one account to another.

--
Rob

[kallend 2,148]

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I have no objection at all to the possession of large sums of money come by honestly, preferably by hard work, skill and talent.

Interesting. You're okay with people having lots of money if they earn it by honestly working, but object to people just given it for doing nothing. Yet support government programs that give people money for doing nothing.

So it's a quantity thing?

How would you deal with a hard worker who lost his job in the recession (caused by wealthy bankers) through no fault of his/her own? Let him/her and family starve?

No. Both the company and the employee contributed to the unemployment fund so they are due that.

These people are not doing nothing either. They are searching for a job, doing part time work, freelance, taking a pay cut for another job, etc.

OK, just how many of the UNDESERVING poor are taking your money?

...

The only sure way to survive a canopy collision is not to have one.

[rushmc 23]

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I have no objection at all to the possession of large sums of money come by honestly, preferably by hard work, skill and talent.

Interesting. You're okay with people having lots of money if they earn it by honestly working, but object to people just given it for doing nothing. Yet support government programs that give people money for doing nothing.

So it's a quantity thing?

How would you deal with a hard worker who lost his job in the recession (caused by wealthy bankers) through no fault of his/her own? Let him/her and family starve?

No. Both the company and the employee contributed to the unemployment fund so they are due that.

These people are not doing nothing either. They are searching for a job, doing part time work, freelance, taking a pay cut for another job, etc.

OK, just how many of the UNDESERVING poor are taking your money?

UNDESERVING poor? None, cause there is no such thing (think about it before you reply to this part)

But that is not what is being talked about, it is just your twist to frame the debate your way

But who is being talked about is the class of bums who take cause they can. They dont have to work cause other bums who have money support the policies that create them..They are called Democrats and they do it to create a voting block

"America will never be destroyed from the outside,
if we falter and lose our freedoms,
it will be because we destroyed ourselves."
Abraham Lincoln

[dreamdancer 0]

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Big Bucks for Bankers, Pennies for the Unemployed

When the big banks were about to go under, Congress was quick to give them all the money they could ever ask for. But now that millions of Americans have been put out of work by the crisis that the big banks caused, Congress can't seem to find the will to throw them a lifeline.

Late last month, as Congress was about to go on vacation for two weeks, Senate Democrats brought up a bill to extend unemployment benefits. The bill was held up by Senator Colburn (R-MD), and since then 200,000 unemployed Americans have seen their unemployment benefits expire with no hope for finding a job in this down economy.

It is true that Republicans blocked quick passage of the bill, but the Democrats didn't set aside enough time to debate it and bring it to a vote. The truth is, both sides were taking the opportunity to play politics with the uninsured - something they wouldn't dare have done to the big banks when they came looking for a bailout.

For the record, the Republicans are wrong for insisting that the extension, which will cost about $9 billion, should be offset. Unemployment benefits, because they put money in the hands of people who are most likely to go out and spend it, not save it, are the single most stimulative form of government spending there is.

http://www.commondreams.org/view/2010/04/15-3

stay away from moving propellers - they bite
blue skies from thai sky adventures
good solid response-provoking keyboarding

[airdvr 210]

Interesting read until right here...

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no hope for finding a job in this down economy

Yep..that's right. No hope. No chance they'll ever find a job but wait.... What about all the "Hope and change"? Where's all that? Where's the jobs saved or created? Maybe they're in the stock market. These hopeless SOB's might as well take the pipe.

Please don't dent the planet.

Destinations by Roxanne

[marks2065 0]

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Interesting read until right here...

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no hope for finding a job in this down economy

Yep..that's right. No hope. No chance they'll ever find a job but wait.... What about all the "Hope and change"? Where's all that? Where's the jobs saved or created? Maybe they're in the stock market. These hopeless SOB's might as well take the pipe.

maybe if they didn't vote for hope and change they would have at least had what they had, now hope and change has taken what they had. (and soon to be alot more when the taxes go up to pay the debt)
If we loose our AAA bond raTING WE ARE ALL SCREWED and that would not Bush's fault.

[dreamdancer 0]

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Interesting read until right here...

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no hope for finding a job in this down economy

Yep..that's right. No hope. No chance they'll ever find a job but wait.... What about all the "Hope and change"? Where's all that? Where's the jobs saved or created? Maybe they're in the stock market. These hopeless SOB's might as well take the pipe.

this might help...

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$4.6 trillion dollars was handed out the banks in a few months when they needed help, but for the bank's victims, the unemployed, they only get a few billion in aid in fits and starts.

In the short term, Congress should stop playing politics and pass the temporary benefits extension. In the medium term, they should extend benefits to the end of the year for all recipients and add a fifth tier of unemployment insurance for those who have been jobless for more than a year and need help the most.

But for the long term, Congress must get serious about creating jobs. The small tax credit bills and other measures Congress has passed are completely inadequate to seriousness and the depth of the problem with 30 million unemployed or underemployed. Has anyone noticed the $1 trillion in excess bank reserves now parked at the Federal Reserve because banks are hoarding their money? An appropriate level of bank reserves should be set aside and the excess funds should be forced out onto the street in the form of credit to small businesses. This would put Wall Street to work rebuilding Main Street in a serious fashion.

http://www.commondreams.org/view/2010/04/15-3

stay away from moving propellers - they bite
blue skies from thai sky adventures
good solid response-provoking keyboarding

[airdvr 210]

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Interesting read until right here...

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no hope for finding a job in this down economy

Yep..that's right. No hope. No chance they'll ever find a job but wait.... What about all the "Hope and change"? Where's all that? Where's the jobs saved or created? Maybe they're in the stock market. These hopeless SOB's might as well take the pipe.

this might help...

Quote

$4.6 trillion dollars was handed out the banks in a few months when they needed help, but for the bank's victims, the unemployed, they only get a few billion in aid in fits and starts.

In the short term, Congress should stop playing politics and pass the temporary benefits extension. In the medium term, they should extend benefits to the end of the year for all recipients and add a fifth tier of unemployment insurance for those who have been jobless for more than a year and need help the most.

But for the long term, Congress must get serious about creating jobs. The small tax credit bills and other measures Congress has passed are completely inadequate to seriousness and the depth of the problem with 30 million unemployed or underemployed. Has anyone noticed the $1 trillion in excess bank reserves now parked at the Federal Reserve because banks are hoarding their money? An appropriate level of bank reserves should be set aside and the excess funds should be forced out onto the street in the form of credit to small businesses. This would put Wall Street to work rebuilding Main Street in a serious fashion.

http://www.commondreams.org/view/2010/04/15-3

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Congress must get serious about creating jobs

Umkay...haven't they been doing that?

Please don't dent the planet.

Destinations by Roxanne