Thursday, March 18, 2010

Pediatrics Examination

Du Pareil au Même

An incredible way of not growing old is not growing. And especially not evolve. All this is rather reassuring. The best things do not really end. They wear down, become distorted under the weight of years, they erode, they deteriorate but remain as brazen as their humble beginning. Rejuvenated for a man who sees his past come undone. A man with a past too long, too heavy. Almost cavernous.
The memories do not deaf to the contrary. They give the opportunity to shake his head stupidly, as before, wrinkles and more. A real makeover by a man who loves death.

(Rob Zombie - Hellbilly Deluxe 2 - Roadrunner)

Saturday, March 13, 2010

Women Wearing Diapers Instead Of Pads

The workings of money creation vicious

In 100% Money, in 1935, the economist Irving Fisher described how money can simply be created and destroyed by the banking system in our monetary system and how it weakens the financial system and the economy as a whole. Although time has passed, our monetary system today is fundamentally the same as the time Fisher.


The Bank of Amsterdam the old system and 100%

[...]

The earliest banking systems appear to have been systems coverage. Its origin came from the habit of depositing their gold and other valuables with goldsmiths and other holding facilities to protect these deposits. Gold and valuables were exchanged and filed by certificate paper called bank money who were in reality checks. As a whole the gold was kept safe, the old system was clearly a 100%, very close to that proposed here. That began to change when a portion of this gold was lent. In England, this has emerged around the year 1645.

The Bank of Amsterdam (belonging to the city of Amsterdam) started the same way and carried out this policy change at about the same time. The late Professor Charles F. Dunbar of Harvard University says that bank:

"It is clear that the original concept of the bank as a bank deposit did not include the loan as one of its functions. They were founded without capital and was admitted to both by law authorizing and public they held at any time all species that scriptural money in circulation was supposed to represent. " [1]

Bank lending grew gradually and surreptitiously. It was an abuse that was facilitated by the fact that banks had no obligation to issue public reports. Professor Dunbar says:

"The scope of the secrecy that surrounded the state banks and their transactions is revealed by the complete ignorance that prevailed about the true nature of their trade. "

" At regular intervals during the last hundred years of the bank, doubts were raised as to the true presence of all species represented by the scriptural money. However, these doubts seem to have been easily refuted or dismissed as minor, although it is now certain that in some cases at least, they were well founded and Bels. "

" It seems, however, that there was no serious warning about the security of the bank before the disclosures of 1790 and 1791. "

The bank then made bankrupt" after a career 182 years. " They found that she had lent money to the City of Amsterdam, replacing the actual money deposited by bonds of the City and that this practice "had lasted for over a century and a half" without public opinion became aware .

"For generations, the strange constitution of the bank had allowed the administration to hide this guilty secret and stifle suspicion. A banking system of great value which was impossible if the bankruptcy was eventually led wisely and in disrepute and in ruins because of complete ignorance of the public the true state of affairs and lack of accountable on the part of managers towards public opinion. "

In view of our subject, the only significant difference between the abuse that ultimately led to the loss of the Bank of Amsterdam and the modern practice of lending depositors' money (which virtually destroyed our capitalist civilization) is that the modern system is not secret but operates openly, with the consent of all parties concerned, and is supposed to be protected by law or other regulations, especially on reservations. These regulations are extremely complicated, as anyone who has studied carefully our large bank code. The Glass Banking Act of 1934 and Ominbus Banking Act of 1935 is no exception. They are essentially an effort to find a cure defects in our banking system has to question the lack of wilderness. We could do without most of these laws once the reserves become integrals.

Pay 10 times its reserves

Under our current system or system 10%, the actual money is not paid once but multiple time. What follows is an imaginary and simplified illustration of the process by which this is done and which follows the modern intimate link between loans and deposits, a relationship more intimate than that which destroyed the Bank of Amsterdam.

Suppose a bank is based 1 st June, it is the only present within a community and its starting capital is 1 million dollars in hard cash in safe custody. The bank then proceeds to loan money. The first customer borrows, say, $ 10 000 and sign a debt exchange that commits to repay this sum. Suppose the jailer gives these hand-$ 10 000 in hard cash to the client but this client makes them immediately to the teller and so the removal. Other customers do the same thing so that by the end of the day the million dollar has been completely lent and then reintroduced.

At that time the bank has only lent his own capital to its clients and its clients after receiving the money have redeposited.

These clients now regard this money as their money. Although this is not the case legally, at this stage, in practice, this money is their money rather than bank deposits because of $ 1 million saved on the heels of their checkbook are covered by wilderness.

Our imaginary bank then deposit one million (representing a liabilities due to depositors) and has assets of two million, one million consists of money deposited and the rest consisting debt.

If money ringing can be considered the property of the depositors, debt securities are the ones owned by the bank. It is true that legally two million belong to the bank, but in practice as we have just indicated, the million into the coffers of the bank belongs to depositors. The money is almost kept safe for them by the bank.

Applicants may transfer a check from one individual to their respective share of the million dollar to pay for groceries or other purchases where checks are commonly accepted . So far the situation is almost exactly the same as the bank of Amsterdam before the start of his secret manipulations.

On June 2 happens exactly the same as 1 st June The bank undertakes to pay the money she has in real clients hire the second day, the same million dollar in practice yesterday belonged to depositors, but legally the bank. Then, today's customers, like those of yesterday, redeposit the money as soon as they receive the same million dollars. At the end of the day, the bank's liabilities amounted to two million dollars (hard cash as recorded on the heels checkbooks) and the asset is 3 million, ie one million real dollars and two million of debt securities representing loans for the two days.

The danger begins here. Deposits are now two million, but assets that three million will include one million cash. The bank has done what the Bank of Amsterdam had surreptitiously replacing money through debt. Half deposit is now covered by debt. However, from the viewpoint of applicants, those two million deposit account of cash. On the heels of their checkbooks, it says they have a total of two million and they call it "money in the bank." They move two million dollars by check, just as if it was money in the pockets, changing hands, according to some estimates, at a rate of once every fortnight.

The bank is no longer in the role of a custodian. It assumes a responsibility far more seriously, the supply of hard cash that it does not. It is in the position someone who sold a commodity short. It relies on good management (and his lucky star) for this commodity, hard cash when it is needed. As we have already noticed, legally million hard cash like the rest of the assets owned by the bank. The ownership of the two million depositors' money in the bank "is more than just fiction. They are not even in the coffers of the bank. These two million simply do not exist. Applicants do not have two million dollars even though they usually believe and that their statements confirm theirs. All they have is the right to require the hard cash, two million.

By allowing the second wave of applicant to exchange a check that is not real money, the bank has, in fact , created from scratch (thanks to a simple promise to provide hard cash on demand) one million dollars of additional money in circulation. Every dollar on deposit is a mere promise to provide a dollar at the request of depositors. These promises to pay its depositors instantly based in part on the cons-promise of debtors to repay one time or another the bank. The latter, the debt securities of depositors cover half of their deposits, the other half being covered by one million cash.

On 3 June, the bank lends that money ringing million for the third time and still gets back as redeposited the debtors.

In practice, of course, money rarely actually passes through the counter of the teller but simply remains untouched in the vaults. It happens in most cases we tell applicants to save the "deposits" on the heel of successive their checkbook, assuring everyone that he will have the option of paying by check the total its own repository .

June 4, the million is on loan and filed a fourth time. June 5, the fifth time and so on until 10 June inclusive. The deposits are then ten million dollars while the actual money is still a million dollars (and debt securities are now ten million dollars). Then (if the bank has not stopped earlier), the law is introduced. The legal limit of 10% reserve has been reached. [2]

The legal minimum on reservations in the United States is not uniformly 10%, but convenience, our entire current system, the fractional reserve will subsequently called "system 10%."

From "hard cash" that is not money ringing

Most deposits are created the curious way that we have just described, paying. Sometimes a bit of money by sounding really going teller counter in one direction or another, borrowed really retired, to pay employees, for example, or filed by a retail store who usually deal in cash example. But more often, bank deposits are created from scratch from loans, as in our hypothetical example. In other words, almost nine tenths deposits of depositors from their own IOUs, with the help of the bank.

Apart from the loans (debt) and the hard cash, bank assets usually consist of "investments" such as bonds. The above principles apply to these investments as well as loans. Indeed, a bank may buy bonds, say to investment companies, paying deposits, that is to say, "extending credit" of these companies without using any actual money, just like when granting a loan. It follows that bank deposits increase with investment, as with loans, and therefore with increasing loans and investments taken together. Also, of course, deposits decrease when investment decreases, and decrease when loans when loans and investments taken together decrease.

We shall focus on lending and investment in Chapter V. Here we are interested mainly, what are bank deposits, the alleged "money in the bank" or what we call money on checking account, and how this "hard cash" is not really of cash.

As we said earlier, each applicant still calls his "deposit" his " money in the bank. " But the only justification for this is that he feels sure how to get "his" cold, hard cash when it wants, and he can if there be none too many others who want to withdraw "their" hard cash at the same time or condition that enough hard cash is deposited by others. Until the bank can offer and all of the money claimed by sounding applicants, 10 million dollar deposit by check may be moved with as much happiness as if they were covered by an equivalent amount of cash. Checks moving from one applicant to another simply transfer the deposit, the right to require the hard cash, leaving untouched the money in his coffers. Between different banks depositing the checks largely cancel each other to through the clearing house so that whatsoever between applicants of the same bank or between the depositors of banks different, there is very little need for hard cash, in good weather.

Thus, being largely free (in good weather) important applications into cash, this bank for illustration was able to perform a miracle. It showed $ 10 million where there was a million previously. It has caused an inflation of means of payment. It was created from scratch $ 9 million from debt or debt. This "money" is called in different ways but all have essentially the same meaning: "credit" "credit money", "deposit currency", "money in the bank", "money that I have the bank, "" deposits "," deposits that can be transferred by check, "" account deposit check. In chapter 1 we called it "checkbook money".

With reserves of 10%, only 10% of the money on checking account itself can be regarded as a real money deposit. The remaining 90% is a synthetic substitute to hard cash, created by a sort of hocus-pocus. The client believes that he has received a loan from the money the bank had previously and was then reintroduced. He does not see that the money he deposited was actually created by the bank from its own borrowing its own debt. He helped the bank to create money from scratch and this money creation is not just about himself and the bank but the nation as a whole just as the money created by the gold digger when he reports gold at the Mint for the nation as a whole.

How banks destroy "money on checking account "

Banks not only have the power to create such a synthetic currency, they can also destroy it, by reversing the process described above. Take the first customer who, on 1 st June has borrowed $ 10,000. On September 1, after using the money for his business, that is to say, dedicated to the labor, materials, equipment, and he won $ 10,000 plus a profit and file all (mainly as checks). He repays his debt of $ 10 000 with a check covered by its bank deposit. This destroys a payment equivalent amount ($ 10,000) means of payment circulating in the United States because it reduces to $ 10 000 balance his checkbook, but increases the account balance check anyone else. The decrease in deposits and $ 10 000 loans as well.

Thus, in the same way that money on checking account is created from scratch when loans are contracted, the checking account money is destroyed when loans are repaid. In each case the public interest is concerned.

This is the basis for the assertion of Chapter 1 that the banks are basically private money issuers. However, Mr Edmund Platt, former deputy governor of the Reserve Federal reminder 7 it takes two to make a loan. "Banks are powerless," he said, "because if a crisis of confidence, or for any other reason, borrowers are missing." This is perfectly true, but we are all the more unfortunate because it shows that our methods of payment does not depend just 14,500 private issuers of money but also for millions of borrowers. Mr. Platt also cites British economist Keynes "it is highly prejudicial that applicants can take the initiative to change the volume of currency in the community."

However, the important fact is that the fractional reserve banking system that gives both parties the bank and the borrower, the power to cause inflation or deflation means of payment; unintentional power which gives a national involvement and against nature in a transaction that would otherwise innocent.

banking activity on a tightrope

If both parties instead of being a bank and an individual was an individual and an individual, they would not cause inflation means of payment by making a loan for the simple reason that the lender could not lend what he n has not as can the banks. An individual can give $ 10 from his pocket unless he has money in his pocket to take it. And if it's ready, they are no longer in his pocket. He can not keep $ 10 in his pocket and at the same time lead to ten different people, simply by promising to provide every person the $ 10 paid on demand. If it constitutes itself into a commercial bank, then it will do and can hold ten titles a total debt of, say, $ 100 000 and allow debtors to make this move $ 100,000 ( which 90 000 are imaginary) by writing checks covered by him, trusting in the same time his luck that they never require more than $ 10 000 into cash at once.

Only commercial banks and trust companies can lend money they create from scratch in lending. Banks do not create savings deposits. They lend the money deposited with them.

the same way that two individuals can not reduce the outstanding payment by liquidating a debt, a savings bank and an individual can do Nor.

Quid about the dangers that banks incur themselves?

As commercial banks and trust companies still support a very large volume fluctuates and "credit" or money in checking account covered by a small amount of hard cash, they find themselves in a situation as difficult as that of a driver who would carry an enormous amount of hay on a small and narrow van. On a smooth road, but hopefully this is not the case when the road is rough.

Failure fundamental system of fractional reserve

There's irony, she is unconscious or no, when the banker "conservative" advises his clients not to make cavalry, not to do business with cash rickety, not speculate with money from others or not to sell short.

A banker with extensive experience became a supporter of the wilderness system said: "There is no real businessman who imagine manage his business with a record resembling that of an ordinary commercial bank, and if he tried no commercial bank would lend him money. If you do not believe me, try with any commercial bank. Take his own record, make it sufficiently for it to apply to a company and ask the banker loan officer of the bank how much he would increase the credit line the company has a liability due to any time from ten times its cash and assets largely frozen even when nominally called liquid! "

Assuming that such banks can avoid sinking in warm weather or, as in England or Canada, even in tumultuous times, they do that by saving just great harm to the population, c that is to say, by reducing the outstanding payment. Thus, not only the banker would not allow its business customers manage their business with cash as fragile as his but it is even more unjustifiable to see the banker to based its business on a foundation so weak, or rather is it still more unjustifiable that we allow the bankers to have such dangerous practices. For reservations tottering banks undermines our entire economic structure. By inflation or deflation means of payment in circulation, the fractional reserve system affects everyone, including the millions of innocent people in that have nothing to do with these transactions.

As is well said in a memorandum written by some economists at the University Chicago friendly system 100%, "If an evil genius had sought to aggravate the wound that represent the cycles of business and employment, he could hardly do better than a system of private deposit banks under its present form. "

The smallness of the reserves and the link between the checking account deposits and loans are the major defects arising from our banking system today. These and the fatal consequences that follow can be summarized in the following four proposals to be studied more seriously Chapter VII:

(1) The system of fractional reserve banking money binds to loans (and investment) banks.

(2) The system and have intimate resulting in bank runs and bankruptcies.

(3) They also result in inflation and deflation of our main "money" (money in checking account) to As the loans (and investment) banking increase or decrease.

(4) growth and decline of bank loans and so "money on checking account" are primarily responsible for large booms and large depressions.

(5) By aggregating these four proposals, it is legitimate to say that the system 10% is a major contributing factor to the terrible calamities like those we have experienced recently .



[1] The Theory and History of banking , by Charles F. Dunbar, New York (Putnam), 1901, p 103

[2] Strictly speaking, the example does not apply fully to new bank moving into a community where there are already other commercial banks. The million when it is then loaned transferred by check with other banks and so is not entirely redeposited in the same bank. Other banks as they receive their share will withdraw some of that million from the coffers of the new bank to transfer them to their own coffers. This release of reserves from the coffers of a bank into the coffers of banks conceals the process highlighted above in which the same money is lent several times, and even usually conceals the bankers.

The loan process is more obvious multiple when there is only bank to consider. But even when there are several banks, this process is true for banks as a whole . The spill of money from one bank to the other simply changes the bank where the loan will be extra.

Banking paradox that what is true for banks as a whole is not true for a single bank was first highlighted by Chester Phillips, now dean of the University of Iowa.

7 New York Herald Tribune, January 2, 1935