Why we will ultimately nationalize the banking system

Haha, this is one funny post...

How in God's name do you "loan out deposits"? Why does having "electronic credits" help? How do money growth statistics tell you that things "aren't healing"?

And, finally, the most burning question of all: why do you love to make statements like "if the above is true, and it is,..." or "if they don't, and they aren't,..."? Actually, if I am right, and I am, you're mostly wrong.

 

If banks don't loan deposits what do they loan _______?

Electronic credits would prevent people from withdrawing their cash if the credits were required to be kept in a US bank (eliminate bank runs on the Fed system as a whole). No money under the mattress or cash only society possible under this scenario.

Money growth is negative still so debt is decreasing not increasing, therefore the economy is still contracting not expanding. Of course government debt is expanding to make up for the contraction x 10, but it isn't hitting the real economy.

 

The OP's definition of leverage was "for $1m equity they can loan $11m deposits". That makes no sense, as both deposits and equity are liabilities. You can't define leverage like that. If you want to define leverage, you can look at the ratio of assets (i.e. loans) to equity.

The bank run on the Fed system as a whole has never been an issue. To trigger a run on a bunch of specific banks, all I have to do is take my electronic credits and invest them all into treasury bills. Unless you have a way of controlling how capital can move, an electronic system will not make a shred of difference. In fact, most of the funding that was pulled from the banking system after Leh was obviously electronic. Did it make the institutional run on the banking system any better?

How do you go from decreasing debt to contracting economy? As far as I can see, the economy is bouncing due to the well-publicized inventory rebuild. How do you know that the govt spending is not hitting the real economy? If you look at 'Cash for Clunkers', for instance, there is very little doubt that this program, in spite of its well-known faults, definitely hit the real economy.

 

Maybe the Chinese can take Washington and the politicians too, you know, two birds with one stone.

 

I agree with Thalamus09, all we will have that will not be readily tracked will be the barter system and that will be punisable by law if detected.

 

One wild guess is as good as the next.