Is the banking system really gonna fall apart?

reply to post by KoolerKing


KoolerKing,

I think the most likely scenario for a banking fail would be similar to what happened in the Depression. When I had your question years ago, (and didn't have ATS) I spent quite a bit of time going over the history of the Depression.

Specifically I researched why did so many people go to the bank to withdraw their money at the same time, why did the banks have no money to hand out, what was the response of the government, and what were the reactions of the people?

I think it would help you to do the same type of research. You will understand better, therefore you will be able to plan better.

Understanding = Less Fear

Here is the simple math. Printing money devalues the currency. if you have 100,000 in circulation and you add another 100,000 you just devalued your currency by 50% because you now have twice the money chasing the same goods and services so prices always rise to adjust to the amount of currency in circulation its a law of economics. So if you have 1000 in the bank it will now only buy half the goods and services it previously bought before more currency was added to the economy.

Currency valuation is relative, not quantitative. The actual quantity would have to be grotesquely out of line with your relative value before it would have a major effect.

Ok here's what most people do not understand. Printing money is not the main way our system adds currency to the economy. Printing federal reserve notes is just the petty cash of the system. The main way currency is added is by making loans. When you take out a loan a promissory note is created and considered an asset and is traded and sold on the market it is currency. Then you have fractional reserve. So if your note is for 10,000 they can now loan another 90,000 based on the note. Where did all this money come from that they are loaning? Answer from thin air based on your signature! Can you now begin to see how they blew up the real estate bubble so huge? They do not even need to print it it is just book entry money on a computer screen.

Federal Reserve is the only institution (in the US) that can 'create' currency. And their notes are not the petty cash (they don't create cash), it is the entirety of the US currency. Currency comes in many forms, cash being one of the minor ones. As for fractionals and derivatives (I have excluded the next paragraph as they are essentially the same), they are not creations. They are futures spent today. A very distinct difference.

Why has it not completely collapsed yet? Couple things. The real estate market is deflating which was the crash of 2008 this takes currency out of the system. However it has not finished deflating because those derivatives are still out their floating around and soon they will all come home to roost and then it will finish collapsing. Right now the federal reserve is inflating more by buying 60% of their own bonds because no one else will. And by the way bonds work just like promissory notes and are essentially the same thing money from nothing. Here is the rub though when our government wants money it does not print it for the most part it buys bonds from the federal reserve at interest. So we have the banking cabal creating money from nothing loaning it to government at interest which interest was never even created this further devalues the currency and adds to the national debt which they cannot pay so they borrow more money to pay the interest only. It is fiscal insanity. That would be like you borrowing money just to pay the minimum payment on your credit card perpetually you can never pay it off and you just keep racking up more and more debt. Amplify that by a thousand time and you can see why the government is trillions in debt and growing exponentially. How long do you think that can last?

Market is not currency driven. Market is production driven. It will crash when production stops.

So essentially government is living off a seemingly unlimited credit card. But everyone knows that credit is not unlimited. China Japan and Saudi Arabia are our major bond buyers providing the credit for our national credit card so to speak but they are cutting way back which is why the fed is buying it now. Soon though no one will buy and the credit will be cut off and it will all come crashing down and then you will see hyperinflation in essential goods and services as they try and print their way out and deflation in non essentials etc.

The 3 examples of US debt holders account for approx 20% of US debt (3T of 15T). The primary debt owner of US debt is US citizens. If Japan and China (SA is not even worth mentioning, they hold less than 1% when combined with OPEC) liquidated all US debt holdings, you would expect to see a movement equal to their debt holdings...about 20% all other things equal. In fact, the drop in internal consumer confidence, if such event did occur, would account for a bigger valuation movement.

There is no other way it can go you cannot continue to create loans/money from nothing for ever and debase your currency it is a mathematical certainty that it sill crash. Every fiat system in history like ours has ended badly. We are at the end of the cycle. The economy is so much larger now then in the 30s and is globally connected so it takes longer for the cancer to work through the entire global system but Iceland and Greece are the first to go eventually England and America will go and the rest of the planet with us!

The fact that the economy is global has increased the speed at which the markets respond. It takes far less time today, than it ever did for 'cancers' to spread. As for continuing to create loans...as long as there is a continuation of production, loans can be issued. I would personally never do it, due to the repayment time frames exceeding my lifetime (many times over), but countries do not have to worry about that issue.

Those that say the banking system can't collapse and the fed reserve master know what they are doing should study some history they are delusional and buying the coolaid.

A system is either used, changed, or not used. The banking system has been in a constant state of change for as long as humanity has had currency. Until we find a time/place where a trade medium (currency) is no longer required, it will continue to be used.

Originally posted by Jean Paul Zodeaux
reply to post by peck420

 

You may as well have replied with Pfffffffttttttttttttttttttttttttttttttt!

2nd.

The thought did cross my mind, but I thought that would be more insulting that what I did respond with.

2nd.

Thanks for information everyone. It still do not understand fractional reserve currency. So we keep robbing peter to pay paul. What happens when paul has had enough?

reply to post by KoolerKing


Fractional reserve is simple: I put my gold in the banker's vault, and he gives me an IOU for that gold. Enough people do it, and the IOU becomes "as good as gold". But then then banker starts making loans, only he doesn't give out gold----he gives out an IOU that he prints up against the value of all the gold people have deposited in his vault. He can do this as much as he wants, so long as not too many people come to collect their gold at one time. If the banker has 100 gold coins in his vault, he can write IOUs equal to 1000 gold coins or more, however much he wants (making the loan based upon a fraction of his reserve---to loan 1000, I only need 1/10th of that in gold). It's all good so long as all those loans come back with interest in time for the original depositor's gold to all be "put back" or accounted for. But if all the people who hold IOUs come collecting their gold at the same time, either 9 out of 10 people get nothing, or everyone only gets 10% of their IOU worth (in this scenario).

reply to post by peck420

 Currency valuation is relative, not quantitative. The actual quantity would have to be grotesquely out of line with your relative value before it would have a major effect.

  

You have no clue what you are talking about. The "quantity" of currency in circulation in an economy is always relative to the prices of goods and services in that currency. Prices will always adjust to the amount of currency in circulation its economics 101 and thousands of years of history...

 Federal Reserve is the only institution (in the US) that can 'create' currency. And their notes are not the petty cash (they don't create cash), it is the entirety of the US currency. Currency comes in many forms, cash being one of the minor ones. As for fractionals and derivatives (I have excluded the next paragraph as they are essentially the same), they are not creations. They are futures spent today. A very distinct difference.

 

No the Federal Reserve Cartel is the only one that can create legal tender anyone can create currency. I can make glass beads and trade them for blankets and that is currency. Federal reserve notes are indeed the petty cash of the current monetary system. Loans are the main form of money creation in the current system. What is a fractional? Derivatives are indeed creations in the form of bundled loan notes sold as securities. Fractional reserve just means they only need a fraction of supposed money/assets to create 9 times that amount out of thin air. You can do that when so called money is created from nothing

 Market is not currency driven. Market is production driven. It will crash when production stops.

 

Gee thats funny housing production was in full swing when the loans book entry currency bubble popped only then did production stop. Markets are supposed to be production driven but in this case they are not they are falsely driven by inflation that is the problem! IWO the creation of more money so investors buy more real estate to try and cash in on the rising prices its a false market demand not a natural market demand. That is currency driven my friend and that is why it crashed because it was a false demand created by currency creation in the form of loans and not a natural demand for more houses. That is why there are so many vacant houses.

Loans are the life blood of our monetary system that is why they are still pulling out all the stops to try and get people to borrow more money. What has happened now that the bubble has deflated 40-50% they are now trying to re-inflate it and trying to blame the crash on people taking out loans they could not afford. And idiots are buying up houses at what they think are rock bottom prices. But the joke is on them it will crash further this is just the calm before the storm.

 The 3 examples of US debt holders account for approx 20% of US debt (3T of 15T). The primary debt owner of US debt is US citizens. If Japan and China (SA is not even worth mentioning, they hold less than 1% when combined with OPEC) liquidated all US debt holdings, you would expect to see a movement equal to their debt holdings...about 20% all other things equal. In fact, the drop in internal consumer confidence, if such event did occur, would account for a bigger valuation movement.

 


Yeah drink that cool-aide my friend. And if you believe that I would like to interest you in some prime everglades land in Florida... Take a look at the last bond auctions and tell me how many Americans were buyers? For all practical purposes zero. And when they tell you Americans hold most of the debt they have held that debt from the past through retirement funds, mutual funds, IRA's etc. What they won't tell you is those Americans have lost up to 40% in those investments. Americans are not buying new debt (except in the form of forced taxes) which is what the government needs to continue to operate a trillions of dollars budget. That is why the Federal Reserve Cartel is buying 60% of the bonds. Because no one else will!

Their flawed Keynesian model has to have ever increasing debt to continue that is why they borrow like drunken sailors. However doing so always debases the currency until it is worthless that is what is happening its what has happened every time in history with this type of system and it will crash everything it has nothing to do with production just ask Iceland and Greece... Coming to country near you soon!

continued in next post...

reply to post by peck420

 The fact that the economy is global has increased the speed at which the markets respond. It takes far less time today, than it ever did for 'cancers' to spread. As for continuing to create loans...as long as there is a continuation of production, loans can be issued. I would personally never do it, due to the repayment time frames exceeding my lifetime (many times over), but countries do not have to worry about that issue.

 

No the fact that the economy is global takes longer to flush out bad debt because it is dispersed much more widely. Loans are issued daily where there is no production. Hundreds of thousands continue to get laid off monthly production has dropped nearly 50% as in all those companies out of business laying off thousands. They create loans and claim that is part of the GNP and call it production when it is nothing of the kind. But keep sipping that cool-aid friend you'll get it finally when you are living under a bridge... or maybe not...

reply to post by hawkiye


Quite a bit more detailed response than "ppffftttttttttttt" for sure. But hey, as long as there's folks still blindly trusting the system, we might as well make some money off them, right? Lol......

Nice response (and you refrained from matching the condescension, well done, I wouldn't have had the same self-restraint if I were you!)

reply to post by fnpmitchreturns


The government is just flat out lying about inflation to make things look rosey. The government exempts food and energy from it`s inflation calculations.food and energy are a major part of everyones monthly budget so why are they excluded?
a quick internet search will show you what the real inflation rate is. In the last 5 years the cost of most foods doubled and even tripled in price thats a 200%- 300% inflation rate on many food products, has your pay check increased by 200%-300% in the last 5 years?
in the last 4 years my electric bill has more than doubled even though i use less electric now than i did 4 years ago.
The government official inflation rate is all smoke, mirrors and lies designed to maintain the peoples confidence in the economy and prevent an economic collapse.

Originally posted by Tardacus
reply to post by fnpmitchreturns

 

The government is just flat out lying about inflation to make things look rosey. The government exempts food and energy from it`s inflation calculations.food and energy are a major part of everyones monthly budget so why are they excluded?
a quick internet search will show you what the real inflation rate is. In the last 5 years the cost of most foods doubled and even tripled in price thats a 200%- 300% inflation rate on many food products, has your pay check increased by 200%-300% in the last 5 years?
in the last 4 years my electric bill has more than doubled even though i use less electric now than i did 4 years ago.
The government official inflation rate is all smoke, mirrors and lies designed to maintain the peoples confidence in the economy and prevent an economic collapse.

edit on 28-5-2012 by Tardacus because: (no reason given)

edit on 28-5-2012 by Tardacus because: (no reason given)

Oh where do I start.

The government is not lying about the inflation rate. Its freely available for all to see. The other sites that show massive rates are there to cause fear and panic.

If the official rate is all smoke and mirrors then, we would have massive inflation and economic problems if it was really that bad. You can hide stuff but it will still show, however in this case there is nothing to hid, its all there.
There is no hyperinflation that the dommers keep talking about. Stop being so gullible and paranoid.

reply to post by gorgi



If you think the government is putting out true numbers you are about as naive as it gets...

Originally posted by hawkiye
reply to post by gorgi

 

If you think the government is putting out true numbers you are about as naive as it gets...

Hey, no need to fling an insult without backing it up with data. Just cite a couple numbers that prove the government numbers lie, and your comment might have some merit. Don't just hit-and-run call names, though.