Recession? Inflation?

fivestring · Aug 29, 2003

Very good look into reality.
If people don't believe it, they should go into their bank and tell the mgr. they are closing their account. The bank only cares if you have loans or credit card debt. Banks do not make money on your deposits. They don't care if you have $100,000.00 in the bank, if you are borrowing from them, you're not making them any money. They make money on your loans ... all comes back to the golden word -- D E B T.
Like the Lending Tree commercial says, "Help me, I'm in debt up to my eyeballs". That's a lot of folks saying that -- 2 paychecks away from bankruptcy.

cowboydoc · Aug 29, 2003

"Banks do not make money on your deposits."

Sure they do. They use this money to make other investments and loans.

pruntyc · Aug 29, 2003

I liked what I read one time. The man wrote, that we don't really own anything, the gov. does. He said just don't pay you rent "I mean taxes" and see who really owns it. It makes sense to me, because I think he is right. /forums/images/graemlins/smile.gif

fivestring · Aug 29, 2003

"Sure they do. They use this money to make other investments and loans." 

They don't make hardly any money off deposits. They make money off the loans (personal, business or credir cards).
They try to invest money just as we do. They also lose money, more than we do. They write off bad loans and charge-offs (unpaid credit cards and such) up the wazzooo. That's another reason they charge fees, to help offset the losses.
That's why they don't pay you squat for interest... because they don't make squat for interest when they try to invest. On the other hand, you borrow from them and you pay 8,9,18% interest and they make all the profit (money) from you.
My wife works at a credit union. That topic is brought up a lot in their meetings. I also did not know this stuff about financial institutions. I was like you, thought my deposits were money for them. When folks close out accounts (ten of thousands of dollars) the credit union doesn't even ask why unless there is an outstanding loan balance or charge card balance. That is the bread and butter of financial institutions. Why do you think there are so many mortgage companies, lending companies, and all financial institutions offer charge cards? It goes hand-in-hand with not having any credit history is as bad as having bad credit history.
This again, I did not know until she told me.
We need to own banks, mortgage companies, insurance companies and media outlets.
These are your power forces in the world.

Libertine · Aug 30, 2003

cowboydoc:

"Banks do not make money on your deposits."

Sure they do. They use this money to make other investments and loans. 

Actually, this is partially true, but not for the reason you may think. Imagine you are a bank. You have NO depositors. I want to borrow $100. You create a debit entry on your books of $100 (my note - your asset) and a credit entry on your books (my account - your liability). Now the FED has certain "rules" on how much you can create (lend). I'm not sure of the current ratio, but it used to be around 6:1, i.e. the total amount of new debt money was around 6 times the amount deposited with the FED - this 6 times distributed amoung the various members of the banking system. (That's why it's called "fractional reserve banking"!!!) The real benefit of you (your bank) having deposits is that you can pass those deposits on to the FED, let them hold it (actually, they don't hold anything, just a bookkeeping entry showing a liability to you offset by the FED's debit - asset - entry), and they will let you lend out a certain multiple of that (as I said, don't know the current multiple).

But you have to be a "member" of the club to do that. Fivestring's mention of mortgage companies, savings & loan companies (are they still around?), etc. isn't correct, or, at least they didn't used to be a "member" of the credit creating club. All spendable debt money originates with banks (ultimately the FED), which is why if you look at credit cards you will note most are issued by banks. If you, or, I, issued our own credit cards we would have to have offsetting deposits, or, we would have to pass our asset (the cardholder's liability) on to someone who could create the debt money. It is difficult to grasp, because we all have to work for, give up something to get, the "money" we use (spend, save, etc.) therefore there is an inherent psychological reluctance to understand that what we are actually working for is someone else's debt (except for a very, very small monetary "base" that doesn't circulate anyway).

Perhaps my explanation isn't very clear. You might want to discuss it with someone higher up on the banking food chain who will be frank about it with you and can explain it more clearly than I. Every dollar you (or I, or anyone else) has, is someone else's debt. Think about the implications of that. Then it will be clearer why I said that overall debt in the system HAS to keep growing and growing and growing just to keep the thing afloat. The only way it can end is a collapse of the debt system with wages going back to a few dollars a day, prices falling and falling and the holders of the debt liquidated out.

JEH

cowboydoc · Aug 30, 2003

Reaper,

Yes this is exactly what i was talking about. You have to have assets in the bank to be able to have a foundation from which to make loans and credit cards from. Like you I don't know the exact science of it but it does depend on how much money you have in your bank. That's why banks do cds, money market accts., and minimums on their savings and checking accts. This helps them assure that they have their minimum amount of funds at all times.

fivestring · Aug 30, 2003

"it does depend on how much money you have in your bank. That's why banks do cds, money market accts., and minimums on their savings and checking accts. This helps them assure that they have their minimum amount of funds at all times."

And that minimum being for loans so they can make money. If financial institutions couldn't loan money, most would go out of business. How many of us could pay cash for a tractor? Most folks finance them. Tractor sales would probably drop 50-75% if folks could not borrow money to purchase them. John Deere credit does more than tractors, too. One of my bass boats was financed through them.
I wonder how long our society will last on borrowed money... It's really kind of sad that most folks are just a couple of paychecks away from bankruptcy.

Libertine · Aug 30, 2003

cowboydoc:

Like you I don't know the exact science of it . . . 

tish tish . . . I could say that sounds a bit like ad hominem, but I won't. I will say what I said in the post, to wit: perhaps I didn't do a very good job explaining it - that's my fault, not yours.

The fact that the entire economic system is based on using debt, which originates in a single source, as its medium of exchange (money) is something of such enormity that it is difficult to grasp as well as the implications. It's certainly difficult to explain. Like I said, maybe I didn't do a very good job trying to communicate it. That doesn't mean I don't understand it.

One of my many failings in life is to try to put concretes (such as this thread Recession? Inflation?) in a broader context. Ah, well.

JEH

Libertine · Aug 30, 2003

fivestring:

I wonder how long our society will last on borrowed money... 

I wonder too. Hopefully until I die anyway. The head of one of the FED Banks told an aquintance of mine (he had helped them develop the clad coinage to work in venting machines when they started counterfeiting US coins in the 1960s) in the early 1970s that they thought they could hold it together until about 1980. If you recall your history they came close to losing it at that time. But they are pretty smart fellows - I have a tremendous respect for Greenspan. I hope they can keep it going until after I'm dead.

JEH

PS fivestring, thanks for your kind remark in another thread.