Could the Weimar Hyperinflation Happen Again in America?

[N Rothschild]

shame atilla stopped page 4!

 

[N Rothschild]

here is another (short) one which shows how all money is debt

http://www.federalreserveeducation.org/fed101_html/policy/frtoday_depositCreation.pdf

US treasury sells 10k of bonds to the FED, fed in returns adds 10k of freshly printed money into the money supply. (so that 10k is now owed to the fed by the treasury)

Now the frac reserve system churns and burns that 10k (which is owed to the fed by the treasury) into lots of new loans.

every dollar in the system is owed by SOMEONE to someone else. And debt its self is backed by the fact the Treasury ca then TAX the people in order to pay back the FED. Hence why the US DOLLAR BILL says it is legal tender for all DEBTS.

ARE YOU STARTING TO UNDERSTAND HOW ALL MONEY IS DEBT YET YOU MORON

 

[Atilla]

here is another (short) one which shows how all money is debt

http://www.federalreserveeducation.org/fed101_html/policy/frtoday_depositCreation.pdf

US treasury sells 10k of bonds to the FED, fed in returns adds 10k of freshly printed money into the money supply. (so that 10k is now owed to the fed by the treasury)

Now the frac reserve system churns and burns that 10k (which is owed to the fed by the treasury) into lots of new loans.

every dollar in the system is owed by SOMEONE to someone else. And debt its self is backed by the fact the Treasury ca then TAX the people in order to pay back the FED. Hence why the US DOLLAR BILL says it is legal tender for all DEBTS.

ARE YOU STARTING TO UNDERSTAND HOW ALL MONEY IS DEBT YET YOU MORON

Basics guys basics!!!

You obviously can't fathom money like metres or kilograms is a unit of measure of value.

Ask the question on google what is money?

It is a value of goods and services in any economy.

All money is not debt. Money is only a unit of measure.


However increase in the money supply (fiat money being a key culprit) leads to inflationary effect of real goods and services.

This is where the fractional reserve system in the way banks work become a contributory factor.


This is about as basic a theory of inflation as one can get.

 

[N Rothschild]

omg..i actually give up. you are in pure denial. (or just thick as ****)

 

[Benton D Struckcheon]

Basics guys basics!!!

You obviously can't fathom money like metres or kilograms is a unit of measure of value.

Ask the question on google what is money?

It is a value of goods and services in any economy.

All money is not debt. Money is only a unit of measure.


However increase in the money supply (fiat money being a key culprit) leads to inflationary effect of real goods and services.

This is where the fractional reserve system in the way banks work become a contributory factor.


This is about as basic a theory of inflation as one can get.

Well, to me these are the basics:

1 - Banks create most money through their operations. The Fed just follows along, rubber-stamping their actions while making it look like they're leading, when all they're doing is following way behind.
2 - At some point, the debt through which this money creation occurs becomes too great to support, especially if you've got the world's reserve currency, so that no one is going to allow you to default. To do so would cause a global crunch that would make the Great Depression look like the Minor Depression.
3 - Crunch.
4 - Deflation.

We're at 3. Only truly heroic efforts can prevent 4 from happening, or stop it once it starts.
Over here in the US, this happened last time as a result of WWII; no such event is on the horizon this time. Without a total war like that, the kind of Federal fiscal spending that would have to occur to actually prevent a deflation is politically impossible. Didn't even occur in the last Great Depression until WWII, and this downturn isn't even that bad.
So, no economic catastrophe, and no total war. Therefore, no political cover for the kind of massive spending actually needed.
Like Roosevelt before him, absent that war, Obama is actually thinking about spending freezes and capping the deficit at 3% of GDP.
As for the Fed doing it, forget it. What they're doing is pissing into the ocean. I would have thought Keen made that clear, but maybe not...

 

[Atilla]

Well, to me these are the basics:

1 - Banks create most money through their operations. The Fed just follows along, rubber-stamping their actions while making it look like they're leading, when all they're doing is following way behind. Yes I agree banks have a multiplier effect on the quantity of money in circulation. This can be controlled via reserve ratios that are set by central banks which the banks need to comply with. Higher the reserve ratio lower the multiplier effect in creating money.
2 - At some point, the debt through which this money creation occurs becomes too great to support, especially if you've got the world's reserve currency, so that no one is going to allow you to default. To do so would cause a global crunch that would make the Great Depression look like the Minor Depression. This is the tricky part. This is down to money management and having responsible policies. To sya banks create debt is incorrect. They lend money. They don't create debt. To seriously consider cause and effect and walk away with something one would need to look into the money exchange mechanism.

Businesses borrows money to invest. Whilst business has debt to bank it also has money to buy goods and services. Because of cheap money asset prices have become inflated.

Those asset prices ie property values now have burst and people are left in negative equity or in debt.

The transfer mechanism is important. Money in itself is not debt.

For example

If the fisherman catches more fish.
The shepard has a good summer and there are more sheep.
Chickens in free range get to play more.

Goods increase in supply. However, if one only has the same quantity of money ie 100 units of money how does one finance the extra goods and services. Thus creation of money facilitates the exchange of goods and services.

As long as it grows in proportion to goods and services there is no problem.

BUT, if units of money are greater than goods and services or there is excess goods and services over money than we face inflation or deflation respectively.

This is all very basic economics. Not science at all.


3 - Crunch. Asset property price bubble has burst. People or banks left in negative equity.

4 - Deflation. Yes a possibility. But with food stuff and fuel prices on the increase + billions of monies injected by governments imo makes this unlikely at the moment. Things could get worst with government failures if bailing out the banks debts with tax payers money can not be financed - and more money is printed leading to loss of confidence in whole system. Equally this could lead to more inflation

We're at 3. Only truly heroic efforts can prevent 4 from happening, or stop it once it starts.
Over here in the US, this happened last time as a result of WWII; no such event is on the horizon this time. Without a total war like that, the kind of Federal fiscal spending that would have to occur to actually prevent a deflation is politically impossible. Didn't even occur in the last Great Depression until WWII, and this downturn isn't even that bad.
So, no economic catastrophe, and no total war. Therefore, no political cover for the kind of massive spending actually needed.
Like Roosevelt before him, absent that war, Obama is actually thinking about spending freezes and capping the deficit at 3% of GDP.
As for the Fed doing it, forget it. What they're doing is pissing into the ocean. I would have thought Keen made that clear, but maybe not...

I don't dispute these points and they are possible. I would add that I think the Fed being unaccountable to Senate and under no other jurisdiction is a special case. Does such a system exist in any other country? Governments manage the central banks. Even if the BoE is independent from political influence it has to account for its actions to parliament.

I have no idea how the Fed can pass a bill for $800bn on 3 or 4 pages of A4 and not be accountable as to how that money is spent.

 

[N Rothschild]

" They lend money. They don't create debt." one of the stupidst things ive ever read.

The bank lends money...what is a loan? its debt...someone is in debt to the bank. that money did not EXIST UNTILL THE LOAN WAS MADE AND THE DEBT UNDERTAKEN BY THE BORROWER. MONEY IS DEBT YOU MORON.

 

[N Rothschild]

just incase you missed it

But you know what, ignore the facts, ignore the evidence straight from the federal reserve..money inst debt..money is fish. Enjoy your life of living int total ignorance atilla, im done with you

 

[Atilla]

" They lend money. They don't create debt." one of the stupidst things ive ever read.

The bank lends money...what is a loan? its debt...someone is in debt to the bank. that money did not EXIST UNTILL THE LOAN WAS MADE AND THE DEBT UNDERTAKEN BY THE BORROWER. MONEY IS DEBT YOU MORON.

Borrowers create debt when they borrow money.

Are lenders in debt too?

To say there is only debt means you are ignoring one half of the economy.

Your bank manager doesn't say I'm going to create some debt. He says I'm going to make a loan.

The borrower doesn't say I'm going to lend money. The borrower knows he is going into debt for a reason.

You feel not explaining your self but calling abusive names and shouting makes you what... somehow well informed?

It is the level of your comprehension - unable to explain your self but shout abuse. You lack the faculties of intelligence. I'm not saying you are stupid but you don't have the ability to work through cause and effect - essentially the ability to reason. This is 'O' level stuff. I guess you've been reading one to many comic books. :cheesy:


See if you can reason the difference between excessive risky lending and good banking practice in this article below. Why has one country imploded and another continues to thrive?

Is Canada prone to the sub-prime crisis and subprime bubble?
Luckily, Canada has survived so far in this US subprime crisis American that has seemed to grip all credit around the world. The neighbors to the North seem to be bucking the trend with real estate prices still skyrocketing and increasing at a much faster rate than inflation. There are several reasons why the Canadian real estate market seems to be more stable than that of the US. Up until 2007, Canada banks and financial institutions would only lend up to 75% of the purchase value of a home or presales condo, meaning that the home buyer would have to place a deposit of 25% of more upon closing in order to purchase a home or pre-construction condominium. This has since been raised to a ratio of 80% bank financing and 20% downpayment. Even so, any more financing from a lender or bank above 80% would require insurance, which increases the mortgage rate by a whole lot. These Canada sub-prime mortgages or subprime lending was not all that common as the interest rates were much higher than the traditional mortgages when compared against each other. Therefore, most Canadians saved until they could get at least 20 to 25% of a downpayment on a home before making a purchase. The Canadian banks have been much stricter on subprime lending practises when compared with the US sub-prime crisis. It is this reason that it is known that under 3% of all mortgages in Canada are considered to be subprime lending or sub-prime mortgage packages. In most cases, Canadians banks are very safe in their Canadian real estate holdings, but the problem arises when many of these financial institutions have holdings in the US or have leant money to US lenders and banks to fund US subprime mortgages and lending practises. This is where we see many billion dollar write-offs through 2007 and even 2008. Many people ask if the US subprime woes will reach Canada's burgeoning real estate markets. The answer is yes and no. Banks have been very careful in handing out subprime mortgages to home buyers, so they are safe that way. However, with the downturn of the American economy, and with Canadian exports/imports so dependant on their Southern neighbors, there is no doubt that growth in Canada will also slow. However, the latest reports show that Canada real estate is still expected to grow faster than inflation, bucking the trend in the US where the subprime mortgage lending practises have finally caught up.

Canadian Banks Cautious after US Sub-Prime Mess - is a Canada Sub-Prime Meltdown on Its Way?
It's not unusual for homebuyers to be shocked by the amount of debt lenders will let them take on, but the US sub-prime mortgage crisis is making banks on both sides of the border more cautious according to the Torstar News Service. With the Canadian econmy slowing and financial markets fallout continuing over the US sub-prime meltdown that has pushed mortgage rates higher in Canada, banks are making sure people know what they are getting into. "We are being more cautious," says Joan Dal Bianco, a mortgage expert and vice-president of real estate secured lending at TD Canada Trust. "We have a discusssion about how much you can really afford." She notes Canada house hunters here don't face the same dangerous choices. Unscrupulous US bank lenders were pre-approving borrowers for mortgages at initial "teaser rates" as low as 1 per cent - often not warning that payments could rise by a third or more when the cheap rates expired. This is one of teh major reasons for the current US sub-prime meltdown which has not yet caused a Canada sub-prime mess just yet. "We qualify buyers at the posted mortgage rates," she says. Posted rates from Canadian banks are now in teh 7 per cent range for closed mortgage terms from on to 10 years, although it's easy to get a percentage point or more off by negotiating. The rule of thumb is that mortgage payments shouldn't exceed 33 per cent of a family's gross income. That's not to say buying a house in Canada won't land you deep in debt, even as mortgage rates are expected to slide in teh coming weeks - leaving variable rate mortgages popular because the interest rates fall with the prime rate. The trick is to be fully aware of how far in debt you'll be, and be comfortable that your finances will cope. The amount a homeowner will end up paying in principal and interest on the home mortgage over the years can be double the amount borrowed says Greg Johnston, senior consultant at mortgage broker Your Mortgage Connection. That means, a $300,000 mortgage today can take $600,000 out of your pocket. "new people coming into the Canadian real estate market are somewhat aware of that," Johnston notes.

 

[Atilla]

just incase you missed it

But you know what, ignore the facts, ignore the evidence straight from the federal reserve..money inst debt..money is fish. Enjoy your life of living int total ignorance atilla, im done with you

I can see your perspective.

You are talking about dollars and fiat currencies.

I am talking about money as a unit of measure of value.

So what happens when you have lent money to someone and they have defaulted on their debt? Rhetorical question... You sue them and if they don't have the money to pay back your loan you sease their assets.

Hellooo anyone in there??? :cheesy:

 

[N Rothschild]

who the hell is talking about the definition of what money is? im talking about money as a fiat currency and how it exists and is created by debt. you know, to go along with the post i made that you wrongly disputed.

 

[N Rothschild]

every single dollar in the system is owed to someone, by someone. this is undeniable FACT. (hence it says so on the bloody federal reserve note)

 

[N Rothschild]

you can bark on all day long about the definition of money as a unit of measured value and bla bla bla..doesnt change the fact that ALL money was created and exists as debt. so you want me to go over the mechanics again? a five year old could understand this stuff...

 

[Atilla]

who the hell is talking about the definition of what money is? im talking about money as a fiat currency and how it exists and is created by debt. you know, to go along with the post i made that you wrongly disputed.

You continue debating with your self - master... :cheesy:

 

[N Rothschild]

did you not get enough oxygen to the brain when your mother gave birth to you or what?

 

[Benton D Struckcheon]

I don't dispute these points and they are possible. I would add that I think the Fed being unaccountable to Senate and under no other jurisdiction is a special case. Does such a system exist in any other country? Governments manage the central banks. Even if the BoE is independent from political influence it has to account for its actions to parliament.

I have no idea how the Fed can pass a bill for $800bn on 3 or 4 pages of A4 and not be accountable as to how that money is spent.

That was the Treasury, not the Fed.
You missed it at point number one.
One more time:

1 - Banking is a business.
2 - Like any other business, it is a profit-seeking enterprise.
3 - At banks, what is bought and sold is money. Banks buy money wholesale (what they pay you for a deposit) and sell it retail (what they charge you for a loan).
4 - If a major customer comes to a bank and says they want money, they're going to get it.
5 - Afterwards, the bank will worry about where to find that money.
6 - This action will increase the money in circulation.
7 - The Fed isn't about to say no to the bank.
8 - The money is created out of thin air.
9 - The debt burden to the economy increases.
10 - At some point, this becomes unsustainable, and collapses.

We're at 10. I really don't know how to make this any simpler. Go back and reread Keen (I'm assuming you read that link in the first place). Citing the multiplier is a sure sign you either haven't read it or don't understand it.

 

[Benton D Struckcheon]

I'll try from a slightly different angle:

In the context, especially, of a nation that possesses the world's reserve currency, any reserve requirement that that country's central bank tries to enforce is going to be unenforceable.

This is the essence of the fiat currency problem.
I don't share the idea that fiat currencies cause instability; like Hyman Minsky, I think instability is inherent in capitalism, regardless of whether the currency is backed or not. But a global fiat currency regime has the problem that the country with the reserve currency has carte blanche to create as much debt, which means as much money, as it feels like. No getting around it.
While backed currencies cause instability through other avenues, fiat currencies have this as their central cause of instability, on a global scale.
The Fed is completely powerless to either abet or restrain this. The US government can only treat the symptom - joblessness - but not the cause, because the cause is a result of the strength of the US's private economy, which has zilch to do with the government, except that the government's undisputed monopoly on power allows it to enforce property rights, which is a priceless public good.

 

[N Rothschild]

don't waste your breath guy is an ignoramus

 

[Atilla]

That was the Treasury, not the Fed.
You missed it at point number one.
One more time:

1 - Banking is a business.
2 - Like any other business, it is a profit-seeking enterprise.
3 - At banks, what is bought and sold is money. Banks buy money wholesale (what they pay you for a deposit) and sell it retail (what they charge you for a loan).
4 - If a major customer comes to a bank and says they want money, they're going to get it. My understanding is that the problem started when they started lending to minor customers who didn't have money in the first place. More a case of risk / credit control.
5 - Afterwards, the bank will worry about where to find that money.
6 - This action will increase the money in circulation.
7 - The Fed isn't about to say no to the bank. They said no to Lehman's didn't they???
8 - The money is created out of thin air.
9 - The debt burden to the economy increases.
10 - At some point, this becomes unsustainable, and collapses.

We're at 10. I really don't know how to make this any simpler. Go back and reread Keen (I'm assuming you read that link in the first place). Citing the multiplier is a sure sign you either haven't read it or don't understand it.

So how does the US government or Fed control the Banks then?

I haven't read all the links posted up here no. I was busy watching the new paint dry in my loo... :cheesy:

I do understand the fractional reserve system thanks. Problem is some people are shouting and not listening...

So what is the difference between the multiplier effect and banks ability to raise loans using the same money that is deposited with them? I trust we are not debating jargon use of words here...


I have so much debt in my bank account I think I better go an earn some more debt to pay my debt back... Which will only mean I have more debt so I need to earn more debt to pay more of my debt back. Cradle to grave...

I know I know it says so on the US dollar bill. It must be debt I'm working for.

I know I'll sell all my assets so I can have more debt...


Forgive me BDS but I do appreciate the subtle differences of our differences unlike some people.

I must go as time is debt. Mustn't create more debt. :cheesy:

 

[N Rothschild]

see this is where your small brain cant work it out. for every dollar/pound you have in the bank..someone else needs that to pay back a loan/creditcard etc. few people have more cash than they have debt, and if you do, then someone else needs that money to pay back there debts. capiche? you maybe have 100k in your bank acount and no debts, but for every person with 100k in the bank there is probably 100 people who OWE 100k on there mortgage.

it is what devides the rich from the poor. the rich have something the poor need, the CASH to pay back there debts.