Flint, Flint, Flint,

I see now why all the financial information ever posted here (this whole Forum) doesn't make you bat an eye.

There are many, many people like you. They are good souls. They have the value system we were taught as kids. Hard work = fair wage. Work harder to make more money. It's not right to accept pay for something you didn't do. It's not right to profit at the expense of others. Don't let someone borrow something if it isn't yours.

And on and on.

I believe in those precepts.

BANKS DONT!!!!!!!

You believe that they take in money - deposits - and very carefully decide who merits it being loaned to. You - as a borrower - believe that if you don't pay it back, perhaps some poor old person won't get their life savings back when they need it most. If you had borrowed the money from a friend, or business, that might be true. But Banks don't operate that way.

----{You said: No, Gregg. If you had 5882.00 on deposit, with a multiplier of 17, you would be able to lend me a maximum of 16/17ths of 5882.00 And no more. You cannot lend in excess of your deposits. }

By your calculations, if you borrowed $5882.00 from a bank, they would have to have remaining on deposit, $5536.00.

My friend, you must get this. Fractional Reserve Banking means, you only have to have 1 of the Denominator ( one seventeenth ) of the deposit - in our case, 1/17th of $5882 is $346.

You think that 16/17ths of that is still in the BANK?

How do you explain the Trillions and Trillions of dollars loaned out!!! Latest estimates of U.S. Bank exposure in the derivatives Market is about 35 TRILLION. If there was 32.94 Trillion dollars in U.S. Banks, would there be any body that didn't have a Beani Baby in the US? (Got tired of being serious)

Are you getting the picture????

If YOUR scenario is true - HOW COULD ANY BANK GO BROKE?????

Please understand this. For all of our's sake here on the Forum. I think then you will understand better why we are concerned, even without Y2K.

-- Gregg (g.abbott@starting-point.com), November 08, 1999

Answers

Greg,

Have YOU never borrowed money? Did you pay cash for your house?

-- (afool@his.money), November 08, 1999.

Gregg,

If you really want to learn about money and banking, I can suggest some good references. With all due respect, you may benefit by reading some mainstream banking texts.

-- Ken Decker (kcdecker@worldnet.att.net), November 08, 1999.

Ken Decker,

How about an answer to Gregg's legitimate question? A sneer does not an argument make.

-- (drumming.my.fingers@waiting.an.answer.com), November 08, 1999.

--Gregg,

You quoted Flint:

----{You said: No, Gregg. If you had 5882.00 on deposit, with a multiplier of 17, you would be able to lend me a maximum of 16/17ths of 5882.00 And no more. You cannot lend in excess of your deposits. }

My understanding of Flints' arguement is that the bank can only lend 16/17 of your orginal deposit which by your calculation would be $5536, with $346 remaining in reserve.

Am I missing something here?

-- Tommy Rogers (Been there@Just a Thought.com), November 08, 1999.

Gregg:

I answered your post at some length on the original thread. While I enjoy not seeing "server busy" messages all the time, the new latencies take some getting used to. My reply appeared, then vanished, then Amy's appeared, then hers vanished and mine appeared. Very frustrating.

Also, some of your concerns are off the original topic. You're welcome to email me privately, since I have many questions for you.

-- Flint (flintc@mindspring.com), November 08, 1999.

Flint, Why does this have to be taken "private?" This is not exactly a "what-are-you-wearing" kinda question that Gregg asked. Also, since Gregg started this thread, how can his question be "off topic?" I was actually interested in the answer.

Weird. Ken Decker weighed into this thread with no information or answer but with the same carefully-crafted patronizing insult in the same silly way as Flint. Do you suppose that Ken and .......

naaahhh.

-- (drumming.my.fingers@waiting.an.answer.com), November 08, 1999.

drumming:

While communication by slogan-and-insult can be entertaining, it falls far short of being educational. On most topics, I can try to provide at least a different viewpoint, for the consideration of those not actively hostile to different viewpoints. I believe there are some such people reading here.

On other topics, a basic education is a prerequisite. It's not my purpose here to provide a course of instruction in elementary bookkeeping.

Also, as I said, I replied on the original thread. I'm opposed in principle to crossposting long replies to multiple threads. As has already been pointed out (by Tommy Rodgers?) Gregg's entire question here is based on a misreading of what I wrote, which Gregg was kind enough to quote so as to make this misreading clear. I will point out, however, that when you borrow from a bank you are borrowing from a business. Banks are businesses.

-- Flint (flintc@mindspring.com), November 08, 1999.

Flint, and everyone else,

I'm going to try to end this "debate" by providing some reference material. I do appreciate everyone's comments.

I commend Flint for at least being particpatory in a decent way on this thread.

It's late, and might take me a day or two.

-- Gregg (g.abbott@starting-point.com), November 09, 1999.

I dusted off "Samuelsons Economics" and read up on money creation and the role of the central bank. This is what it said.

Say Bank A has 2000 on deposit and Amy borrows most of it. Now, unless Amy puts it under her mattress, it will at some point end up as a deposit in another bank. Money has now been created, ie the same money is in two banks at the same time. As long as banks can find people to lend to, this process will repeat itself. The way the math works out, if 1/17th of the money has to be kept as reserves, then the money can multiply by the inverse of that, which is 17. Hence $1000 in deposits turns into $17,000 in deposits, provided there are people to loan to.

Conversely, if Amy takes $1000 out of the bank and puts it under her mattress she has taken $17,000 out of the system.

As regards the role of the central bank, they determine the percent required as reserves. If they increase the reserve requirement, the money supply contracts.

I think the concern with regard to Y2k is that a lot of people won't be able to repay loans. Remember what happens when you can't repay a loan - the bank comes after the collateral. So I suppose the worse thing that can happen if you leave your money in the bank is that you end up with someone's house.

-- Amy Leone (leoneamy@aol.com), November 09, 1999.