Jim Myrtle

Jim Myrtle
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  • Why The U.S. Is Europe: Central Bank Deficit Funding Thinly Veiled  [View article]
    "You said a bank can't loan more than its deposits"

    Correct. a bank with $1000 in deposits cannot loan more than $1000.

    "A CB always lends more than its deposits"

    I'm not talking about central banks, I'm talking about commerical banks.

    "What you are really talking about is the balance of the accounting equation"

    Yes, people who claim a bank can lend multiples of deposits don't understand accounting.
    Oct 8, 2012. 02:09 PM | 1 Like Like |Link to Comment
  • Why The U.S. Is Europe: Central Bank Deficit Funding Thinly Veiled  [View article]
    "Sure it does"

    No it doesn't.

    "In my example above, there were no deposits until the CB created them"

    So what?
    Imagine the Fed creating $1 billion in new money. At the end of the FRB process, assuming a 10% reserve requirement, what are total deposits, total loans and total reserve balances?
    Oct 8, 2012. 10:46 AM | Likes Like |Link to Comment
  • Why The U.S. Is Europe: Central Bank Deficit Funding Thinly Veiled  [View article]
    "Not as a single bank, but on the whole the system monetizes real assets"

    The entire system does not allow for more loans than deposits either.
    Oct 8, 2012. 10:06 AM | Likes Like |Link to Comment
  • Why The U.S. Is Europe: Central Bank Deficit Funding Thinly Veiled  [View article]
    "Nice, with a deposit the money supply could grow to infinity. Gotta love those multipliers!"

    And at each step along the way, no bank can lend a multiple of their deposits.
    Oct 8, 2012. 09:39 AM | Likes Like |Link to Comment
  • Why The U.S. Is Europe: Central Bank Deficit Funding Thinly Veiled  [View article]
    "Read it, Jim!!! It says "*THAT* deposit" (emphasis added) "

    This?

    "that second bank may then loan or invest a multiple of that deposit"

    Yes, that's the ridiculous claim I'm ridiculing. Emphatically.
    Oct 7, 2012. 11:56 PM | 1 Like Like |Link to Comment
  • Why The U.S. Is Europe: Central Bank Deficit Funding Thinly Veiled  [View article]
    "Thank you for that little bit of sanity"

    Thanks for not claiming banks can lend multiples of their deposits.
    Oct 7, 2012. 11:54 PM | Likes Like |Link to Comment
  • Why The U.S. Is Europe: Central Bank Deficit Funding Thinly Veiled  [View article]
    "In your scenario the Fed is the first recipient"

    It wasn't my scenario, it was Mike Holt's.

    The Fed creates high-powered money.
    No one "receives" it until the Fed buys something with it.
    So that would make the primary dealer the first recipient.

    "Goldman and JPM are second recipients, they benefit by the commission paid"

    When the Fed buys a bond from Goldman, they pay Goldman a commission? Are you sure? And by that I mean, can you prove it?

    Let me know if you get clue.
    Oct 7, 2012. 11:52 PM | Likes Like |Link to Comment
  • Why The U.S. Is Europe: Central Bank Deficit Funding Thinly Veiled  [View article]
    "1/r if the bank lent your deposit in a fractional way"

    No. Based on my original deposit alone, not redeposits of loaned money, the bank can loan (1-r)*(my deposit).

    "The point being made is, banks do not lend your deposit (which provided the bank with reserves.)"

    You should try that, because my deposit provided the vault cash or reserve that will clear the loan check. No original deposit, no cash or reserve balance, the loan check bounces.

    "There is no multiplier, the money supply is theoretically infinite"

    Yes, if each deposit is a non-reserve deposit, like a CD or savings account and the borrower (or the person he buys from, using his loan) puts the loan money in a CD or savings account, the money supply could grow to infinity.

    And at each point in the loan chain, the claim that any single bank can loan multiples of any single deposit is still wrong.
    Oct 7, 2012. 11:45 AM | Likes Like |Link to Comment
  • Why The U.S. Is Europe: Central Bank Deficit Funding Thinly Veiled  [View article]
    "Monetary policy adds net reserves to the entire banking system, your fund transfer to JP Morgan did not"

    The original claim said nothing about the entire banking system, but about the second bank to receive the high powered money.
    Oct 7, 2012. 11:01 AM | Likes Like |Link to Comment
  • Why The U.S. Is Europe: Central Bank Deficit Funding Thinly Veiled  [View article]
    "a bank can make loans equal to a multiple of the reserve amount equal to the original deposit"


    I deposit $1000 in the bank.
    How much can the bank loan based on my original deposit alone?
    Oct 7, 2012. 10:58 AM | Likes Like |Link to Comment
  • Why The U.S. Is Europe: Central Bank Deficit Funding Thinly Veiled  [View article]
    "Jim, the original claim was not that banks could loan more than their deposits"

    Really?

    "that second bank may then loan or invest a multiple of that deposit, say ten times the amount of the deposit"

    That word multiple is what makes your claim incorrect.

    " That is because the bank only has to set aside a small reserve for each subsequent loan"

    Excellent! That's what I said. That's why they can't loan multiples of their deposits. Glad you finally understand.

    "A bank may make loans equal to a multiple of the money created by the Federal Reserve that is then deposited with a bank"

    The banking system, through fractional reserve banking, can create money based on deposits. That money creation is in no way limited to only those deposits of newly created high-powered money.

    $1000 created by the Fed to buy a bond owned by JPM allows the same loan as $1000 I deposit in a new account at JPM.
    Oct 7, 2012. 08:35 AM | Likes Like |Link to Comment
  • Why The U.S. Is Europe: Central Bank Deficit Funding Thinly Veiled  [View article]
    "The original point was that banks can make loans multiple times greater than the money created by the Federal Reserve"

    No, the original claim was that banks could loan more than their deposits. Here......

    "For example, if a bank that is a primary securities dealer sells government securities to the Federal Reserve, and then deposits the cash received in another bank, that second bank may then loan or invest a multiple of that deposit, say ten times the amount of the deposit"

    http://seekingalpha.co...

    "Do you get it now?"

    Yes, I get your confusion and I'm trying to help you.
    Oct 6, 2012. 08:12 PM | 1 Like Like |Link to Comment
  • Why The U.S. Is Europe: Central Bank Deficit Funding Thinly Veiled  [View article]
    "Jim, would you be willing to loan somone $700 billion dollars at a 1% interest rate for "a short period of time?" "

    1%? LOL!
    That wasn't the rate charged for TARP.

    "The proceeds would be used to prop up a bank that was brought to its knees because a handful of individuals at the bank found a way to temporarily generate illusory profits on which they could pay themselves bonuses of hundreds of millions of dollars"

    I agree, the crooks who cooked the books at Fannie and Freddie should be in jail.

    "The scheme was based upon another one of those elegant new mathematical models that nobody understood but were afraid to admit so they were all willing to go along with it"

    I know, writing mortgages, what were they thinking?
    Oct 6, 2012. 07:58 PM | 1 Like Like |Link to Comment
  • Why The U.S. Is Europe: Central Bank Deficit Funding Thinly Veiled  [View article]
    "Due to your inability to grasp this concept, and/or your refusal to concede that $100 of money created by the Federal Reserve can be leveraged into bank assets of a far higher amount, you will never be a banker"

    Any deposit can lead to additional loans, not just deposits of newly created high-powered money.

    I'm still waiting for proof that a bank can lend more than, let alone ten times, their deposits.
    Try again?
    Oct 6, 2012. 04:29 PM | Likes Like |Link to Comment
  • Why The U.S. Is Europe: Central Bank Deficit Funding Thinly Veiled  [View article]
    "However, by allowing banks to engage in other activities, this right to borrow directly from the Federal Reserve at artificially low interest rates and to then leverage the amounts borrowed for purposes other than making loans results in perverse outcomes entirely different than those that were intended"

    This is awful! How much are the banks borrowing from the Fed at these artificially low rates?

    "(with the full expectation that they would be bailed out if those other risky activities were to turn against them --"

    Bailed out? You mean loaned money for a short period of time?
    Oct 6, 2012. 04:21 PM | Likes Like |Link to Comment
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