Topic: The Biggest Scam In The History Of Mankind - Hidden Secrets of Money - page 2. (Read 9184 times)

This was a very educating watch. Thank you. I suspected that there was a scam behind all this printing press and currency out of thin air business, but I did not think it was running that deeply. Murdock and Mavrodi are just small fry by comparison.

I would also recommend everyone to watch the first episode:
http://www.youtube.com/watch?v=DyV0OfU3-FU

It really puts the difference between money and currency into perspective.

And Bitcoin fills the criteria of being money, while dollar is only a currency.

Quoting myself in #68:


The migration from reserves in gold to reserves in credit is the process of money completely becoming debt. The present stage of that process would not be possible with gold still acting as money. Central banks know that, which is why they try (and mostly succeed in) making people totally forget that gold ever could be - or even was - money.

As for (partially) denominating dollars in gold, this was the case until 1971. The reason why Nixon severed the link to gold was because other countries were withdrawing their gold, which, unfortunately, thanks to fractional-reserve banking also belonged to the USA.

The other thing you guys aren't taking into account is that some "reserves" (actually, all of them, depending on how you think about it) are just more debt. Some forms of debt (like certain instruments other banks make) can serve as reserves to "insure" deposits. Thus the banks can always "switch off" debt, just like the federal reserve an the government do, to achieve basically the  same end.

In reality, there is no m0. The entire concept is dumb, since if all the debt was repaid, there would be no money supply (except, I suppose, some Federal Reserve Notes owned by the Federal Reserve). That's why the entire argument about gold (or bitcoin, or whatever) denominated currencies causing deflation is stupid, because we could have literally the exact same system denominated in gold as we do right now, since everything we use is debt right now anyway. The only reason why USD isn't denominated in gold is to prevent the public from seeing the exchange of IOUs for what it really is.

That is why it is called the "monetary base." Likewise, the base of your building never changes, or your building would collapse.


Reserves are just money not loaned. At the beginning, the monetary base contains "excess reserves." As commercial banks loan those excess reserves, the money supply increases to up to ten times the remaining (not excessive) reserves.

Just look at this example, no matter how many times banks loan out the money, MB never change
http://en.wikipedia.org/wiki/Money_supply#Example

This also means that M1 in reality could never reach 10x of MB if the reserve ratio is 10%, since that will put all the MB at reserve and no money available to spend

Please explain what exactly do you mean by "base money." Since it is "not a secret," I guess you have no reason not to reveal it.

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

Every country has its own terms of base money, some call it M1, some call it M0, or MB, but basically they are very similar. Base money is not a secret, but just described in a very misleading way, since from account point of view they are also numbers. But if you want to trace how money flows, you must use the base money, that is the only money that can be spent

Running the risk or becoming repetitive, "long gone are the days in which those reserves were something other than checkbook money from the central bank" (just replace "reserves" by "base money").

This statement is true depends on what you mean by the word "money supply": The majority of M1 is credit (checkbook money). However, there is a minority of M1 called M0, which is base money created by central banks

In fact, most of the people are unaware that M0 and M1 are totally different things: Since M1 include M0, they must be the same type of things with different scope right? (I remember decades ago, some guy laughed at their neighbor: You only got 4MB RAM drive? I have a 40MB hard drive!)

When you see the word money, you could always first ask: Is that base money or checkbook money? And I had an impression that many professors in economy schools don't understand this question

Commercial banks can only loan so much money: they must retain a fraction as reserves (otherwise there would be booms and busts every week). Additionally, long gone are the days in which those reserves were something other than checkbook money from the central bank. Today, the majority of the money supply is credit, whether created by central or commercial banks. In other words, reserves are no longer what their name implies (for which reason, Peter Schiff once suggested the Department of the Treasury changed its name to "Department of the Debt").

What they said is actually true, depends on how you take it. They indeed created a lot of checkbook money, and all those checkbook money are counted in their assets and liability statistics

But they never tell you the difference between checkbook money and base money, doing so will reveal the obvious

Is it really difficult to understand my example? Why there is a LIBOR rate? If commercial banks indeed can create money for themselves, they never need the FED to bailout them

IMHO I don't think he'd like it because he's a big proponent of "intrinsic value", and he'd argue that Bitcoin doesn't have as much intrinsic value as Gold. Which it doesn't, but it exchanges that for greater utility & safety.

Its a bummer Maloney still is taking a cautious stance on Bitcoin. Everything I could find on him and his stace on Bitcoin demonstrates that. Only if he took time to sit down and truely understand it... He would probably be pushing it alongside Gold / Silver =)

Mike Maloney has been continuously putting out great content. I'm not 100% on board with everything he says. But he is definitely a shining light in the precious metals community.

Yea the Modern Money Mechanics is a great document to start with. I strongly suggest anyone to read it.

I suggest you do a little research on how commercial banks indeed work. You can start by reading this public-domain workbook on the subject by the Federal Reserve Bank of Chicago: http://bit.ly/18OX3r7. Here is an excerpt:

You both have the same money on the bank's checkbook, but you can't both spend it at the same time, since base money which is spendable never get duplicated

1. Alice deposit $100 into her account
Alice account balance: $100
Bob account balance: $0
Bank money pool: $100 (This money comes from Alice but now belongs to bank)

2. Bank loan out $90 to Bob:
Alice account balance: $100
Bob account balance: $90 (there is another record saying he owe banks $90)
Bank money pool: $90 (Bank take out $100, deposite $10 at FED due to 10% reserve requirement, and loan the rest to Bob. These $90 return to the bank money pool since Bob's account is in the same bank)

3. Both Alice and Bob withdraw $50 at the same time:
Alice account balance: $50
Bob account balance: $40
Bank money pool: -$10
A negative value means now the bank went broke

Notice that bank's money pool get smaller and smaller after each loan action, because of the reserve requirement

When number of accounts in the bank increases, bank's money pool will increase to $1000 or $1,000,000, both Alice and Bob can fully withdraw their balance without causing a bank run, but that just mean some of the other accounts lose the ability to withdraw at the same time

In fact, even banks have millions of users, they could all come to bank requesting withdraw during a crisis, and bank will have to borrow money from other banks to deal with it, that is why LIBOR rate (short term lending rate between banks) usually spike up during such time

If "each account statement is kept intact," then what happens "behind the scene" is irrelevant: it is only relevant that a fraction of the same bank deposit remains legally mine while also legally belonging to its borrower: we both have the same money, and we both can and usually do spend it at the same time.

The worst and most fatal system apologists and therefore more part of the problem than a solution are those people who postulate that the one huge fucking fraud began one hundred years ago.
The truth is: The fraud began with systemic Organized Violence, which was installed around 10'000 years ago, as the non-patriarchal, self-sufficient communities have been collectivized, patriarchized, patronized, subjugated and destroyed. The Society is no more the humankind; the civilist (homo oeconomicus) is not a human. Central Banks are only inherent symptoms in the system: the Society.

I know but what the heck. What even caused it to go down that much before the federal reserve. Was that 40% loss of value really just due to fractional reserve? Shouldn't that add additional demand as well to compensate for the additional supply, at least in the long term?