Re: Credit doesn't exist?!?

On 22 Jun 2006 16:14:06 -0700, "DarkProtoman" <Protoman2050@xxxxxxxxx>
wrote:


Zerge wrote:
DarkProtoman wrote:
What does this mean and how is it even possible:
I read some article on wikipedia about a guy saying, essential, that
banks are commiting legalized fraud, and the money to fund their loans
is created out of thin air. I forgot the link to it, so could you post
the link? Thanks!!!

A fraud, by definition, is an illegal act. Therefore the phrase
"legalized fraud" makes no sense whatsoever.

And yes, money is "created out of thin air". Basically central banks
authorize commercial banks to open new credit accounts for clients, and
assign to those accounts certain amount of money, which does not exist
in physical form, nor is backed by gold. There's nothing wrong with
this; central banks and commercial banks keep tabs on their computers
on how much money everybody has in their accounts. There's no fraud
behind it. What you are reading are brainless consipracy theories from
people who are absolutely clueless about economic matters.

I found the link:

http://en.wikipedia.org/wiki/fractional_reserve_banking#Criticism_of_banks_and_bank_loans

But, what keeps our money from becoming absolutely worthless, like
France's assignat and mandat?

That link is pure crackpottery, Wiki at its worst.

Well, the time Wikipedia had a picture of Emperor Palpatine up as Pope
Benedict XVI may have been worse, but at least that was entertaining.

"according to a former Chairman of the Federal Reserve Board, western
bank loans are actually based on fraud."

Really? Name that former Chairman of the FRB. Woulda been somewhat
more impressive with the name and quote eh? <g>

"a thinking person will now realize that if all the loans were called
in at once, the system would collapse because not enough money has
been created to pay the debts"

A thinking person would realize that if *all* loans were called in *at
once*, the system would *already* have collapsed due to whatever
caused such a thing, and the quantity of money about would be the
least of people's worries.

Anyhow, even the basic premise is stupidly wrong, because money
*flows*.

A owes $1 to B, who owes $1 to C, who owes $1 to D, who owes $1 to
E...

Oh my gosh! If there's only $1 and there's $4 of debt, there's not
enough money to pay all the debts, and if all the debts get called at
once, the system will collapse!!!

Oh, wait. A pays $1 to B, who pays it to C, who pays it to D, who
pays it to E .. all $4 paid off, everybody's happy, and we still have
the $1.

So ... never mind.

Forget the Wiki idiocy -- take a look at the fed points I linked to in
my other post, or go to the library and take a look at any 101 econ
text's section on "money creation".




.

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