Puzzle. Burn a ten dollar note.

[McDuck]

A Young person gets his first pay.
It’s direct credited into his bank account.
If that same young person withdraws $1 from their bank account, have they (under the fractional reserve system) destroyed $10 worth of debt creation?

[spaceman]

LOLZ....no

Can't believe this is an even remotely serious question.

Careful if you continue down this track, you'll end up subscribing to "UNCENSORED" and bookmarking the David Icke web-site.

Cheers
Spaceman

[Asterix]

Careful McDuck, while most around these parts enjoy a good discussion around the broader concept of fractional reserve banking and the role of private banks in the creation of money or otherwise, Spaceman does not. He will respond with mocking and derisive statements and questionable cartoons in an attempt to quash a discussion that clearly makes him angry and uncomfortable. He has already been responsible for an interesting thread being locked, and its unlikely he will not stop until the same happens here. Unfortunately he hasnt got the maturity to allow others to enjoy the discussion without his unpleasantness.

[cube]

Lol. very nice. I'm going to allow a bitcoin as money.
your score is A out of 1010.

You can bring your score up to B if you point out how paypal deposits and bitcoins differ.

PS: Muppet gets 4 for a quick pun.

You can't use computing power to generate paypal deposits.

[spaceman]

Careful McDuck, while most around these parts enjoy a good discussion around the broader concept of fractional reserve banking and the role of private banks in the creation of money or otherwise, Spaceman does not. He will respond with mocking and derisive statements and questionable cartoons in an attempt to quash a discussion that clearly makes him angry and uncomfortable. He has already been responsible for an interesting thread being locked, and its unlikely he will not stop until the same happens here. Unfortunately he hasnt got the maturity to allow others to enjoy the discussion without his unpleasantness.

Liar Liar pants on fire......I enjoy a good discussion on any subject as much as the next person. I do have a fairly short fuse for arrant stupidity though. FRB is a very simple concept to understand (hint the name pretty much gives it away) yet there are some conspiracy theorists who insist that it is inherently evil and part of some cunning master-plan to enslave the common man to the will of the hidden ruling elite. Those that do so are simply out of touch with reality and deserve ridicule and mocking in exactly the same way as "truthers", "birthers", holocaust deniers, white supremacists and all sorts of other assorted nut-jobs. Just because somebody clings strongly to a stupid conviction doesn't make that conviction any less stupid, no matter what they say.

Saying something is interesting also doesn't stop it being stupid.....in the infamous "closed" thread it was certainly interesting that seymour claimed that people didn't go into banks and borrow money.......if you think interesting is a synonym for stupid.

It's also interesting that some people think the moon landings were faked......interesting that 9/11 was an inside job.....interesting that the reptilian elite have a moon base on the dark side of the moon from whence they control the collective human consciousness....etc etc

You and anybody else are quite welcome to enjoy whatever interesting topics you like...... if you don't like somebody calling a spade a spade and pointing out the stupidity of your pet theories why don't you have a crack of proving me wrong and how much smarter you are than me. Nobody has risen to the challenge so far why don't you be the first....here's a question from ages ago that nobody could answer....have at it......show everybody how interesting I am.

"Whenever a bank gives out a loan in a fractional-reserve banking system, a new sum of money is created"

Seymour walks into his bank and sits down with Jurgs his friendly bank manager, who just happens to have a pile of cash on his desk.

Syemour: "can I have some of that please??"
Jurgs" "Yes, just sign this form and I'll give you some"
Seymour: " thanks awfully, very decent of you" ....signs form and walks out with some of the pile of cash on the desk which of course is now a little smaller as some of it is in seymours pocket.

This is what happens (more or less) everyday time and time again. It should be absolutely no problem for you to tell us all where this new sum of money is that has been created aye seymour......have at it.

Has money been created in the pile on the desk???....no it's smaller
Has the money in seymours pocket been created????...no it came from the pile on the desk
Is the form that seymour filled in money??....no it's a form from the bank.

Where is this newly created money syemour??????

Just change seymour/syemour for asterix........physic spaceman predicts no attempt to actually answer the question.

Cheers
Spaceman

[McDuck]

You can't use computing power to generate paypal deposits.

NICE!
And Cube shifts up to a B (in hexadecimal).
I would have also accepted that Paypal won’t let you spend the same coin twice, a small problem that Bitcoins have had in the past.

[McDuck]

....enjoy a good discussion around the broader concept of fractional reserve banking and the role of private banks in the creation of money or otherwise....

That’s a nice summation of the potential of this puzzle.

[McDuck]

...LOLZ....no.....

Cheers
Spaceman

Lol, I knew you’d have the width of thought to ponder this one.
Firstly, let me state that there is some slight of hand in the “dollar deposit withdrawn solution”.
But there are also some interesting ideas here.

So let’s run it through a few tests.

Test 1.

If all the customers of a small bank withdrew all their money from that bank,
would that bank loose power to generate loans,
because the fractional reserve agreement states that loans must be a backed up a ratio,
that ratio (for example) is a dollar in the vault for every nine dollars loaned out?

[spaceman]

The answer to Test 1 depends on several factors which you haven't told us so it's impossible to answer.......or I could state some of the missing factors to make the answer whatever I want.

EG 1. The bank has more money on hand than what it owes the customers.

Bank has $200 owes customers $100.......customers take all of their $100 bank has $100 remaining....bank retains the power to make loans.

EG 2. The bank has less money on hand that it owes the customers

Bank has $100 owes customers $200.....first customers get their money bank, the customers that are unable to get their money riot burn down the bank and murder all of the bank staff....the bank looses the power to generate loans.

EG 2a The bank has less money on hand that it owes the customers

Bank has $100 owes customers $200 ......bank is able to borrow money from elsewhere to satisfy it's customers.....bank earns the goodwill of existing customers and gains new ones, trades through the tough times and eventually recovers enough that it is able to repay the loans it took out to survive and prospers thanks to the goodwill of the existing and new customers......bank retains the power to generate loans.

EG 2b The bank has less money on hand that it owes the customers

Bank has $100 owes customers $200....gets a bailout by the govt at the expense the tax payer....bank retains the power to generate loans

ETC ETC

Irrespective of what customers are doing if the bank has money it is able to loan out a portion of that money....if it has no money (or has only the mandated reserve left) ......well duh!!!! it is unable to loan out any. For no matter what somebody like Jurgs might like to say, you can't lend out what you don't have.

Cheers
Spaceman

[McDuck]

Spaceman, can I check that we’re on the same page about something?
If a bank had $100 , could it loan it out several times and charge interest?
Example.
Bank loans public member Bob $90.
Bob buys a $90 cow from Sue.
Sue deposits the $90 back into the bank.
Bank loans John that $90 to buy a chicken from Jane.
Jane deposits the $90 back into the bank.
And repeat…
So far has the bank loaned out $180 when it only has $100?
(P.S. some small liberties have been taken to round figures for simplification)

[spaceman]

Yes and no..... I see what you're trying to say but IMHO you're saying it badly.

If a bank had $100 , could it loan it out several times and charge interest?

If the bank has only $100 then it can only loan Bob $90....no probs.

Now the bank only has $10 in it which is the reserve....it can make no further loans at this time.

Sue deposits the $90 back into the bank.

(missed a couple of steps I know)......The bank now has $100 again and it can make another loan...no probs here

Bank loans John that $90 to buy a chicken from Jane

Nay Nay ....the bank may not loan John $90 that would be loaning all of Sues money and that is not allowed.....instead the maximum loan to John is $81 as $9 must be kept as reserve. So the reserve is now $19 ($10 from the original $100 and $9 from Sue)

Now the bank has $19 in it and can make no further loans at this time.

Jane deposits $81...the cycle can continue

With each go round the money that the bank can loan out decreases and the reserve increases.

So the bank has loaned out a total of $171 .......sure no problems.....BUT...it was only able to make that second loan AFTER it received the deposit from Sue.

Yes there is only $100 in the system so the apparent trick of the bank lending out more that it has seems confusing.....but it doesn't take much looking to figure out what happened.

The bank started with $100 and accepted a deposit of $90 for a total of $190 and has loaned out $171.

$171 < $190

Cheers
Spaceman

[muppet]

Glad to see that at least two people are reading this utterly boring thread.

[spaceman]

Want me to liven it up with some sweet lol-cats??? or maybe a troll-face????


Cheers
Spaceman

[McDuck]

Sorry Muppet, you’re right, the minutia of how money supply is controlled and by who is a bit low on entertainment value. But it’s useful in planning your wealth stratagems. Knowledge is power. I’ll keep the posts to a minimum. (AKA, increase the reserve ratio on information).

SPACEMAN

Nice. I was worried that you hadn’t seen how the bank's initial 100 units (say bottle caps) had become 1000 bottle caps.
I want to ask you more about this, but for fear of wasting valuable forum time I’ll disappear until next week.
If I forget, remind me to explain how a bank could literally be considered a form of solar storage cell.
$=mc2

[Bob Kane]

What I'd like to know is where have you been, McDuck, for the last three years?