Matt: So how should one "get ready" Liquidate all real assets and then open two different forex accounts with half the money short the dollar index in one account and the other half long the dollar index in the other account??????? so ones assets cannot change relative to other currencies of the world?
I'll set my hair on fire and run in circles yelling "The debt is out of control" at the top of my lungs, the same as people have done for the last half dozen decades...
and I suppose you think that can go on indefinitely you know broken clock is right 2 times a day these wackos you make fun of, could just be right this time
Fractional reserve banking itself is flawed. The world doesn't realize this yet. It doesn't matter the country. Here's why: Even if banks only made loans to credit worthy people the system will still collapse. This is because of a key factor: interest. Banks take on deposits and must pay out a set rate of interest to the depositors. In turn they loan out the money to credit worthy (or not so credit worthy) individuals at a higher rate of interest. Nearly every dollar at the bank has to be loaned out in order to pay for the interest to depositors + profits to the bank owners. Those loaned out dollars are then in turn deposited in bank accounts in other people's names (IE, whoever is cashing the loan check), and are loaned out again in order to pay the loan check depositors' interest. Under this system $1 can be loaned out across many banks perhaps hundreds of times creating hundreds of dollars in loans. These hundreds of dollars in loans will generate the banks involved huge profits in interest payments! All from $1!!! All this creates a highly complex web of debt. Banks are the ones keeping the books on who owes who. When this process goes smoothly in good economic times the banks make enormous profits. When it goes poorly (like the USA now) the government bails the banks out so the depositors don't lose money. Trust is essential for this system to work. Without Governmental deposit insurance, people wouldn't give put their money in banks to earn interest on. $1 can be multiplied across many accounts at different banks to create hundreds in loans. Where will all the money to pay back hundreds in loans come from? This money didn't exist in the first place. The poor borrower will have to come up with a way to pay back money that doesn't exist + interest. Well the borrowers will be unable to pay when such a situation arises. They will then be deprived of their houses/farms/cars by the bankers all because they couldn't pay back something the really didn't exist in the first place. This is the fatal flaw of fractional reserve banking. Not only are the borrowers getting screwed, the depositors will get screwed too. When the final banking crisis arrives, banks will be stuck with a whole lot of loans that CANNOT be paid back. The banks will be INSOLVENT in the extreme. The government will have to bail them and the depositors out with printed money. So the buying power of the average depositor's $ will be greatly reduced by the money printing. A better solution would be to abolish fractional reserve banking. Wipe away all the debts. Make banking state run with no private for profit banks. Only lend to credit worthy individuals. 99% of economists DO NOT UNDERSTAND THIS. Fractional reserve banking will always result in a debt crisis. thx for reading ppl. ask me any q's you might have
Every banking system will eventually collapse. Which should be a clue the problem isn't fractional reserve. EVERY monetary system - including gold standard - will result in debt crises. Current central bank run is pushing 100 years, which is an astounding accomplishment. Even if it comes crashing down tomorrow, it will have been an immensely successful enterprise.
Are you trying the nothing is forever argument on me? Seriously though there are much more stable forms of banking than the current US system. The problem isn't the fractional reserve per say, it is the current implementation of it. The current system has a mathematical tendency towards debt crisis. There are other banking systems that do not have this natural tendency towards a final debt crisis. Also banking institutions being highly greed driven is very distortive and counter productive to the real economy. Banks are a tremendous sink of wealth to the real economy. I fail to see what good central banking has done for us. I'll admit, central banking is good for traders because it creates lots of funny money liquidity. If it weren't for the industrial revolution and massive usage of fossil fuels to create economic growth central banking would be nowhere.
I guess the question I have is: Successful for whom? Is it really successful for the people if it's supposedly helped 3 generations and bankrupted/destroyed 2 others?
For starters, for the 300-odd million Americans whose standard of life is dramatically better now than it was when (this) Fed first opened its doors. But all that aside - since credit expansion and bubbles are a feature of ALL monetary systems, including "non-fiat" - what exactly is the problem here?
Not to argue, but I'd say certainly more than 2 generations are going to pay for our current debt status, and maybe more than 4 generations will be hampered in their economic achievements, comparatively speaking. If our country stands that long.