You avoided answering the question directly. Please look at it again. Yes, and that's the issue. Or is this JUST A FACT OF LIFE? Why is the money you earn today, sufficient for a meal, not sufficient for that same meal 5 years from now? Did the food get scarcer? Did it become harder to make? Until you are willing to define inflation, and we both know I define it as monetary inflation, not some nebulous collection of random and irrational factors we can't progress. So please do not use inflation as an answer if you aren't willing to define it. We're arguing in circles here. Fractional reserve banking enables a fiat currency. I'm not arguing any of that (nor did I). But what I would like to know is how you fractionally bank specie without bills of credit? It's not a straw man. See my question above. Fine, argue semantics. You're a smart man, you understood exactly what I was talking about. Gold is more than a medium of exchange, it is also a good to be bartered for and with. Because you can change the government every 2 years? Because you have the right to a redress of grievances, and to withhold your taxes until they are satisfied? Monetary policy is politics. It must be in the hands of the people through their representatives, not private bankers. But if the FED is independent, it is neither a department or officer. And you are missing the value of a dollar. Once something is defined in the Constitution, it cannot be redefined. Congress is responsible for fixing weight and measures, and the measure of a dollar is clear defined in the Coinage Act and has never been changed. For the sake of a complete argument, when, and name them. And if you're going to talk about the 3 central banks we had and were decommissioned, you're merely making the case against the FED. So by creating additional lending capacity, is this not creating new money? And how can you create new money, without counterfeiting? The additional lending capacity is a product of math, not tangible wealth. A formula for diluting the productive and accumulated wealth of the depositors. We've already covered the territory of how the FED enables the member banks to multiply their deposits during open market operations. What I want to know is, how do you justify the moral hazard, of creating this additional lending capacity, releasing it into the economy, and driving up prices? The private citizen has no such facility or process available to them to multiply their money fractionally. If I keep my money out of the bank, and in my wallet, it actually devalues in purchasing power over time. Do you not see a problem with this?
Federal Reserve is not the problem. Department of Education is the problem. Why in the world would anyone use green pieces of paper in place of money if they didn't undergo early conditioning program. Abolish Dept. of Education and the Fed collapses by itself over the time. If there is a reason people use so-called "dollars" to buy stuff from each other other than Dept. of Education I haven't found it yet
Guerilla, I started to write a huge response, but realized that maybe we have a different understanding of what fractional reserve banking is. I already tried to explain it with an example, but there still seems to be some confusion. Could you explain to me in your own words how fractional reserve banking works? Just show me what happens to an initial deposit of $100 (I don't care what RRR you use; 10% would be practical). We have to make clear where we are disagreeing on the issue.
I think the issue isn't a lack of understanding, it's a difference of perspective. Would you be happy using this explanation? http://en.wikipedia.org/wiki/Fractional-reserve_banking Now, I have left several questions in my last post, and I would like some response to them please. The mechanics of the system, don't justify the (1) legality and (2) morality of the FED.
That article is hardly complete. I am one of the people actively participating to clean it up. We have to have an agreement about how the system works before we can start getting into legal and moral issues. I'm not even really sure what your perspective is since you never refer to any specific process. For example, where does counterfeiting occur? You haven't talked about how it happens; you just insist that it does without making any specific reference.
Post a definition for me, I'll peruse it, and hopefully we can use that as a foundation. I'd like to get on with the conversation rather than stay mired in technical details that are for the most part superfluous. I'm coming at this from an Austrian perspective, it won't be heavy on math, it will be heavy on examples and rational conclusions. I don't even know how to go at this, given that you won't respond to my last post, and now we're stuck over technical definitions that mean nothing to the questions I posed. I asked you quite clearly, how can additional lending capacity be created by a bank, for profit, when no such mechanism exists for me as a private citizen to do the same. Is this moral? What is "additional lending capacity"? Is this not counterfeiting? While we're struggling to come to a common definition of Fractional Reserve Banking, I'd like you to consider what money is. What it represents. How it is created. How it can be destroyed.
Fractional reserve banking refers to a common banking practice where a fraction (portion) of a bank's reserves (deposits) is used to make loans. I'm asking for a broad definition, but technical details are necessary in order to substantiate it. That's like asking: why can't I be like Microsoft and manufacture and sell software, or why can't I be like McDonald's and sell burgers? You could practice fractional reserve banking just like you could make software and sell burgers. Just go find someone that will trust you enough to store their money in your piggy bank. This is exactly why we need to sort out the technical details; you're asking questions that are rather absurd. If the banking system couldn't loan out deposits, it would have no lending capacity. Since it can, banks can loan out the idle money which gets used in the economy. The money supply increases because idle money becomes active. Physically, there is no new money being created. Money is a medium of exchange that : 1) is divisible 2) acts a short-term store of value. Money represents a portion of your liquid assets. Money is created by fractional reserve banking and outright transactions. Money is destroyed by repaid loans and outright sales. Printing money has no effect on our money supply.
Ok, now I am riled up and pissed off (in a good way). But I promised NPT a long response in another thread, and I have a basketball game tonight. This might take until tomorrow, but I will be back to deal with this, because my questions are not "absurd", you're dodging answering them.
No, it's not a joke. The Bureau of Engraving and Printing prints money, and that money is used for two things: 1) Replace old or worn out notes 2) Exchange for electronic money. If you disagree, please do explain how the process of printing money affects the money supply (I'm sure I won't be hearing back from you again).
I've given an answer to all of these questions, yet you haven't answered one simple question: how does fractional reserve banking work? It's a shame that you've resulted to an ad hominem argument.
You'll get a reply tomorrow so please be ready with lots of semantic arguments in lieu of substantive ones.
As the government prints more money, it devalues the rest. You make something simple into something complex and pat your own back for it. highfive 2 u. http://en.wikipedia.org/wiki/Inflation_tax
So do they just drop the printed money off a helicopter? Go on, show me where the dollars printed by the Bureau of Engraving and Printing goes. You can't, can you? Some of the printed dollars go to replace old notes and some get exchanged for electronic currency. There's your answer; it can't get any simpler than that.