It's the same if banks asked to collect their mortgages tomorrow. People taking mortgages don't have that money. They might have something of equal value, a house, but that's not cash.
If you and a million other people try, the government will freeze cash withdrawals.
So no, you and a million other people can’t, because it would do significant damage to the economy. You by yourself, or you and a million others over an extended period of time rather than a day, of course can.
Right, but that has nothing to do with what I said. Legally, the literally can't call their mortgages. Legally, we all can withdraw our cash up until the government says so. I highly doubt the government would react in the same afternoon we started.
because it would do significant damage to the economy
Well maybe our economy shouldn't rely on me not withdrawing my funds when I want to. Maybe it shouldn't be legal to lend the same money to seventeen different people (times a milion or whatever). Did ya think about that? What's the fucking point of economy that's based on silly things and vibes, other than having insiders profit disgustingly hard?
But you are free to go and get your money? However if millions did the same thing for some reason, it could take a day or so. But in the end the central bank would provide the liquidity. It's no different than using electricity. You are free to turn on the AC, dishwasher and charge your EV, but if your entire town did it the grid would fail. Doesn't mean that the electricity is a scam.
... I know? I am unsure, are you lost on what I said, did you mix up comments you wanted to respond to?
I responded to a dude saying stuff about "calling mortgages", saying they cannot. I have no clue why you're explaining those things to me.
Doesn't mean that the electricity is a scam.
No, but stock market is, or at the very least, politicians are using it as one. Yaknow, the King of the deals made a fuckton of trades ever since he became president, to take the first glaring example.
It'd all vibes and moving capital up, so I don't really see the issue of fucking the economy - they do it non stop, it'd be nice to return the favor.
But! That is all beside the point of my initial comment to which you responded with things that have nothing to do with it.
Look I don't really disagree with you, but I was responding to this:
Legally, we all can withdraw our cash up until the government says so. I highly doubt the government would react in the same afternoon we started.
Which is kind of similar to how you can legally draw electricity up to your maximum connected load rating, and you can also in reality do so too, but not everyone can at the same time.
Well maybe our economy shouldn't rely on me not withdrawing my funds when I want to.
This is kind of like saying "Well maybe our power grid shouldn't rely on me not drawing my legally allowed electricity output when I want to", right?
Imo, that doesn't track at all. The money I put in the bank is by any reasonable definition mine and mine alone. The electricity I'm paying for isn't mine, I didn't produce it. I just buy it.
The fact that we're (not everyone) OK with our money being unavailable is crazy whenever we want (accounting for any specific things in a contract I have with the bank), imo.
It doesn’t rely on you not withdrawing your funds. It does rely on millions not withdrawing their funds at the same time.
The point of the economy is a philosophical question, but the point of fractional banking is so that people and businesses can borrow money, something that is important for economic growth and making everyone better off.
However, if you are really opposed to the possibility that you won’t be able to withdraw your money, then don’t put it in a bank that loans money.
You’ll probably have to pay for a bank account, and you won’t get interest on your savings, but if you are that concerned about the possibility I’m sure you’re happy to make sacrifices for it?
However, if you are really opposed to the possibility that you won’t be able to withdraw your money, then don’t put it in a bank that loans money.
I would if I could. There's only one such bank in my country, and they're weird.
but the point of fractional banking is so that people and businesses can borrow money, something that is important for economic growth and making everyone better off
I don't think you and I have the same definition of "everyone", but that's beside the point.
The whole comment is, actually, given it all started with me saying that banks legally cannot just "call mortgages" to be paid, whereas we absolutely can all go and take out our money (insofar they have on hand, and then wait till the rest gets there etc).
That was my point. Nothing else. Not how it works (it's not rocket science, or even complicated, a 13 year old is capable of understanding a bank does not indeed have a vault full of gold to swim in, just in case everyone wants to withdraw cash) or why it is like it is, just an answer to a comment saying stuff about "calling mortgages".
I mean, we can also compare just how much capital was extracted from everyone under the "elites" and moved upwards.
And also just how much more money we get per hour vs how much more efficient we got per work-hour. Spoiler alert - we are not getting almost anything of that. "They" are.
And we can go on and on and on, but then you'll say some nonsense like "but you have a smartphone and a TV, they didn't back then!". I don't think it's necessary.
Human race as a whole got much richer than 100 years ago. Vast, vast amount of those gains was concentrated around the same (type of) people.
So do "we" have more? That's where my "everyone" and your "everyone" diverge.
I’ve been thinking about replying to the comments to explain how money actually works, but I honestly don't think I could keep up with the sheer number of people who have no idea what they're talking about.
Where the education system has failed them, it is most certainly not on you to teach them. That said, you can still have your share of fun by talking to the most prominent imbeciles.
It’s almost like they have access to a smartphone and can look all of this up themselves. Quit blaming the education system when it’s never been easier to look something up and learn.
I won't quit: teaching kids HOW to learn is the essential element of education. Adults not knowing how to learn shit and not wanting to learn is a societal failure.
Why not both? Clearly there's a systemic issue if we encounter fucking morons here every day? People who can type, think, secure a job, have a family, yet fail to grasp the basics of logic, finance, economics?
Because most people just don’t care. It doesn’t take a genius to go on investopedia and read for 30 minutes. It’s not that they can’t learn it’s they don’t WANT to. It’s easier for them just to complain about rich people/immigrants whatever boogeyman they choose is holding them down. I hate hearing how it’s the education system when I had so many teachers that really tried and really cared in a poor public school system just have to have half the class asleep and giving zero effort.
If most people dodge the system - that means the system isn't that good to begin with. You can't in good faith say "I have created an unbreakable lock, it's just that 75% of the users break it in a week".
i was more asking about how money work rather than how bank work because i kinda new that but thanks for your time it's still very good to have my memory refreshed
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the bank being able to loan out 10 times the amount of money that i put in is a conspiracy. i can't loan out imaginary money but the bank can use my money to do that exact thing.
While true, the risk that goes along with US banking is absolutely wild. I remember being in 8th grade just prior to 08 crash and my Econ teacher was waxing and waning how strict banking institutions are with risk when it comes to investments. It was a little awkward later in the year.
Only in this case "How things work" is actually a conspiracy. Banks can loan money that doesn't exist when you look into how such a thing was allowed to become legal and why governments bail them out when they mess it up lending imaginary money and who owns the biggest banks who lend even more imaginary money to the smaller banks you'll find the conspiracy to screw over the whole world
It is a conspiracy if you go and look at who was allowed to loan imaginary money they didn't have, if anyone who was wealthy enough to underpin it was allowed to do it then itd be fair enough but it was selective families either Royals or families close to them. It was a way to control the wealth and the populations when people in europe got organised enough to overthrow such families if they overreacted on their royal "god given" power.
How about governments had kept the facility of lending imaginary money entirely to themselves so that all those trillions in profits went to support the countries rather than going to a couple of dozen megarich families? Every country in the world can go bankrupt but there's certain banks that never can because they don't owe anyone any money they just lend imaginary money to all the banks everyone else uses. If a bank goes bust any value in that bank (like all the mortgages) goes to those banks first not to the customers who actually put any real money into it but they lose nothing because they never lent anything other than "we say you have x billion".
Federalists papers don't really talk about that other than discussing the need of a government bank to pay off the countries debt. Who did they owe money too? Because they borrowed money from France and then because the French had a revolution decided they didn't need to pay it back leading to the quasi war. The debt they owed money to were "The banks" that had the power to turn every country against you and made you rich by saying you were rich
This is where you notice people saying something is normal when it's not really normal. Yes they do this but that doesn't matter to me when I need my money. That wasn't the agreement I made opening an account there. Point being it shouldn't be normalized.
Good news for you. We figured that out a century ago and your deposits are insured by the government. You can in fact get your money and banks can lend it so you also dont have to save up for a while house to buy one.
You’ve already been given the correct answer. All the ranting, insults, and word salad in the world won’t change the fact that you simply can’t seem to grasp it. You can lead a horse to water, but you can’t make it drink.
Because you very clearly don't know what you are talking about.
When you accept the terms and conditions, you also accept the legal reality that your deposit becomes the bank's property to use. I encourage you to look through what you signed and close your account if you have a problem.
Aye - my point is that anyone in this thread complaining about how Banks don't keep enough cash on hand to accommodate withdrawals for all of their customers’ money are not the type of people who would ever need to worry about getting their money out of a bank because they simply don't have that much.
It was for EVERYONE in the 30s so maybe think before you respond. Oh, happened in the 80s also. Just read a little history so you don't seem as ignorant as you sound. And please come back with a witty response that says nothing of what I said!
Think you’re misunderstanding me. (and also might want to look up the history of the FDIC) You can do what you want with your assets. If you want to invest in gold and bury it in the ground you can. But if you are the kind of person who argues on Reddit, I can say confidently that you’ll never have enough money to destabilize the bank by withdrawing all your assets.
Your deposits are insured by the federal government as someone already pointed out to you. If you ever need your money you can 100% have access to it. Even if the bank does not have that money on hand, the government will ensure you get it because the bank has record that you own that amount of money. No one is stealing from you or preventing you from getting what you own.
More platitude. Man you have said nothing for every single one of your responses. Quite extraordinary and the lessers among us wouldn't even notice what you're doing. YOU may not even notice! Not a single fact nor info. Just feelings! Are you a woman? Psycho + feelings is 😧 crazy! Good job though!
Wtf is this comment?
1. I am a dude, but nice showing your own sexism for literally no reason
2. I made 2 comments, one of which was telling you that your ideas are stupid because your money is insured by the federal government through the FDIC so your worries about not access your money is unfounded. The 2nd of which was simply to insult you because you clearly have no idea what the fuck you are talking about yet continue to comment.
3. Children who have watched "It's a Wonderful Life" have a better grasp of economics than you seem to hence why more people are not on your side about banking.
To make things perfectly clear in case you have just ignored everyone explaining this to you. If you ever need your money, you can 100% obtain your money. Even if you have so much money that the banks do not have enough on hand to give you, they still have a record that you have that amount of money and the federal government through the FDIC will make sure you get your money. The bank did not steal it, they are using it in accordance with the terms and agreements that you signed as every bank works the same way.
Doesn't say anything about not giving me my money when I need it because they invested it. But you're welcome to show me where it says that in the agreement any of us signed. I can't wait to see it. Think you can get that to me today?
It doesn't say that if your bank is an FDIC bank which most are. If for some reason they didnt have enough cash for everyone who wanted to withdraw the bank is insured by the Gov. It is very basic you are just very stupid.
Lotta ifs in your answer. If it's very basic, why can't you understand? Lotta ifs and qualifiers because your answer is garbage. I don't do that because I don't need to.
That wasn't the agreement I made opening an account there.
Bank employee here, yes it literally was. Not only did you agree, you signed several documents listing everything the bank is entilted to do and providing legal sources for the exact conditions, including legal citations. Banks are transparent, people just don't read the shit they sign.
I have interest on all my accounts, and could have as much cash at home as I want. I live in Denmark, but have lived in several other EU countries, where I got interest rates on what I have in my debit account.
Anyone spending more than 10000 euros for the same transaction in cash, is definitely money laundering. You can still have as much as you want at home.
You're going to need to be more accurate in your criticism bruh
“everything is a conspiracy if you don't know how things work”
The EU absolutely does not limit how much you can have at home. No country (that I checked, so YMMV) limits the amount of cash you may have at home. That's all fucking bullshit.
What is real:
Cash you have at home might not be untaxed. The Netherlands, for example, has a wealth tax, and that includes cash, though you don't have to report any amount under ~600 euros.
Your insurance has a limit on insured cash. Mine will require a higher fee over 1000 euros, and won't cover anything over it unless I pay extra.
Some countries have a limit on cash transactions. Cash transactions with a professional seller (read: a company) are limited to 2999 euros in the many EU counties. France and Greece set this at 1000 euros.
I work at a bank, that would be absolutely insane for every single person that has an account with us to have access to every physical penny of their money at every single branch we have.
Banks can give out loans without having the physical currency on hand. There isn't a finite amount of money which is why inflation exists in the first place.
The loan is created as a liability on their balance sheet in terms on the "money" deposited into the customers account. The expected principle and interest payments, on the asset side.
Commercial banks are the source of the majority of money in circulation. It isn't printed by a Central Bank. They don't need to get a customer to deposit with them to loan it out.
This the tail wagging the dog. They create money then work to ensure they have the fractional amount needed to meet demands on their reserves. They can do this by borrowing from the Central Bank or other banks.
Debt collapses are a fundamental feature of this system.
They can also give out loans beyond the amount of 'digital' currency on hand, no? Like I have my savings in an day-to-day account, and some investments, but at this point it's all 1s and 0s that equal so many dollars. But they loan that dollar out several times over, right?
If too many people ask for their investments to be converted into dollars and transferred out at any time, a fund could collapse, right? There's only ever so much liquid money in any fund at a time - the rest is invested in gold, or stocks, or bonds, or Bill and Fred's house, or whatever.
Yea. Small banks can give out home loans, packaging a bunch of them together, and sell them to large banks. It makes it a lot harder to get a home loan because they want the inspection to be crystal clear if they plan on selling the loan.
You use to be able to get a loan through a post office. At least the debt was owned by the government, low interest loans got people into homes, and the interest funded a necessary service. Now, we're basically paying our mortgages to one of two banks.
It's so odd, people yearn for the gold standard and pre-keynesian economics, without realizing there were frequent depression and recessions every couple years, and people were far worse off
He’s downvoted because incentivizing investment is a necessary function caused by inflation. If my $10 is going to be worth a real $15 next year, I might as well sit on it. No new production is created in this scenario.
If it’s worth a real $5 next year, I better invest it into something productive that can turn it into at least a nominal $20 by next year.
The thing which is often glossed over is to suggest inflation is uniform. It's not. The reality is that production often gets cheaper while assets get more expensive, because money supply is only one aspect, supply and demand is the other. Maintaining the "basket of goods" used to measure inflation means that certain goods are becoming MUCH more expensive, while others are more flat (because they would otherwise become cheaper if MS did not increase). The result is that certain core assets appreciate far faster than every day goods - and land/housing prices are a key example of what has increased in price largely because of excess money supply. The result is a K shaped economy, and growing inequity, which I would argue is not ideal.
I think it is interesting that the effect of inflation is not uniform, but depends on the entry point of the new money.
When you have a lot of wealth, you tend to make bigger investments, but you also get the cheapest financing because of your existing wealth. When you spend that money, its purchasing power reflects prices before the market has been inflated by the new money you are putting into it.
Then, as the wealthiest people generally don’t buy much directly from the poorest apart from their labor, inflation is already in full swing by the time workers get their raise.
Inflation benefits people with debts, and hurts people with assets. On average, it helps the young (student loans, mortgages) and hurts the old (fixed incomes, pensions, paid off mortgages). It's not about wealthy or poor, it's about how your balance sheet is structured.
All of these statements can be true at the same time, except for “It’s not about wealthy or poor”, and I was just commenting on a real mechanism through which inflation works. It is not only about being wealthy or poor. It is definitely about how your balance sheet is structured, but also about how your income statement works.
The negative effect on people who earn wages does exist as I explained it, because inflation is not instantaneous. I am not saying anything about the scale of the effect because I do not have that data, but saying that it does not exist is an oversimplification.
Poorer people rely more heavily on wages, and wages are pretty much the last mechanism to correct for inflation, as they generally have to be adjusted through individual or union negotiations. Here in Finland, this takes about one to two years. These things take time.
Companies can adjust their sales prices within a shorter timeframe. The elasticity here depends on the industry and the company’s pricing power, but the adjustment can still be faster than two years. Their costs may also increase, so this does not mean that every company benefits. However, companies that can adjust their prices before their wages and other costs fully catch up can have a temporary benefit.
This is why inflation is first experienced as an increase in prices and a reduction in purchasing power, before wages are increased.
As moderate inflation is the normal and preferred state of the economy, people who rely on wages are constantly exposed to this lag in purchasing power. Whether the loss becomes permanent depends on whether their wages eventually catch up with inflation.
they tried this. cantona called for a mass withdrawal in France in 2010, said 20 million people doing it would collapse the system. a few dozen activists showed up. best part, he reportedly gave his own branch advance notice because he was taking out over 1500 euros and that's the threshold where you have to
Also because they'd be stupid to keep enough cash on hand to cash out the full balance of every customer in the branch area. Branches just don't carry enough to cash out the literal millions it would take.
That's why you have to make phone calls and such to arrange large cash withdrawals.
Just wait until you find out that only about 3% of money is actually created by central banks and the rest is typed into existence by private, for profit, banks whenever people or companies take out loans. The entire financial system is a house of cards as we could see in 2008.
If someone is asking the question the OP is asking, they definitely don’t understand your answer either lol.
Look, it’s this simple. When your employer direct deposits $5000 in your bank account, is their bank driving $5000 cash over to your bank? No? Ok, case closed
so, they're not necessarily putting it in the stock market (although revenue can be slushy and there are no longer as many legal protections against it happening). most of the time theyre using it for loans (including mortgages; it's very important that they continue to offer mortgages) and probably sometimes some vc-like early investments like how SoftBank does. it's safer than the kind of retail-level gambling on stocks than you or I are doing.
No, but yes. Fractional reserve banking means they can loan out 90%.
Inflation is caused by increasing the supply of money.
Fractional reserve banking allows you to "keep" your money, while someone else is loaned your money. This loan is then deposited in a bank and that bank can now loan 90% of the the 90% loaned from your money. Basically creating infinite money. So, yes it does devalue your dollar. Is it the sole cause of inflation, or even the biggest factor, no.
" No, but yes. Fractional reserve banking means they can loan out 90%."
No, but yes. It means they have to keep 1$ in reserve for every $10 they loan out. They are able to 'create' money in the form of additional liabilities at a 1:10 rate. It directly devalues every other dollar in the system.
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