Global capitalism and 21st century fascism

[CDNBear]

Obviously you have no idea of fractional reserve banking. In Canada we have a zero reserve in effect. Banks do create the money they lend from thin air! Actually it is the stroke of a pen (when you sign) and a few keystokes on their computer.

And that doesn't mean that banks can create new money on a whim. The over all performance of a bank as determined by OSFI, is what affects each charter banks ability to multiply an initial hard cash deposit, via M1, M2, M3, and M2+. It's far more complicated and heavily regulated to control market volatility and promote predictability.

Regulations for charter banks and processes like LVTS, which makes virtual settlement instant. Whereas ACSS is more paper based, as in chequing.

Charter banks may not be legally required to hold a reserve, but they are required to have non negative clearing balances at the Bank of Canada.

If the system was as you tried to insinuate, there would be economic chaos and rabid unchecked inflation.

Don't tell me you really believe when a bank loans out say $500k for a mortgage they take that from some reserve of cash or go exchange some gold bullion for cash and then give it to you.

Nope, but I'm stupid enough to believe the crap you're peddling either.

I didn't go to uni for 4 years studying economics and finance to be wrong about this.

You should ask for your money back, or at least stop trying to misrepresent the facts. I won't pretend to know all about banking and high finance, but I know people who do, I know how to ask questions and read.

I'd love to read the transcripts from the court case you referenced, do you have a link?

 

[captain morgan]

Would regulating Banks to offer stronger opportunity's in the saving and investment sector for normal people, not be a good move for our economy? Especially with our Boom/bust American friends. A small scale product for people with a amazing interest rate and totally safe. I know the housing market is basically supposed to do that job but I don't feel its enough.

I see the system right now as, where the big guy screws the smaller guy under him, and he then follows to screw the one under him all the way down. When it gets to the working class who do they screw? there kids o.0?

There has to be a way for the Middle class guy to screw the one thats back on top. the bank.
Or we get this situation we are faced with now, where Rich get richer and Poor get poorer

It would maybe explain why some people right now are drowning in debt.

Compelling the banks to offer higher interest rates through gvt intervention is probably a no-go. As it stands, banks (and gvt) do offer higher yield alternatives but they do require a commitment from the investor such as committing the money for a lengthy period of time (ie public and private sector bonds). These may be the examples that you are looking for, but if you want high liquidity and immediate access to the funds, then the return drops considerably.

As far as bigger guys screwing smaller guys, I believe that you should look at it as everyone in the transaction chain wants their piece of the pie. That still doesn't make it a heart-warming thought, however, that is just part of the reality of the human experience.

Lastly, the only reason why some folks are drowning in debt is because they are living beyond their means. The only solution to this is to alter your expectations and spend less than you make.

 

[Colpy]

Global Rich List

if you donated just one hour's salary (approx $83.77 - UK estimate).

All you have to do is make a choice.

$8 could buy you 15 organic apples OR 25 fruit trees for farmers in Honduras to grow and sell fruit at their local market.

$30 could buy you an ER DVD Boxset OR a First Aid kit for a village in Haiti.

$73 could buy you a new mobile phone OR a new mobile health clinic to care for AIDS orphans in Uganda.

$2400 could buy you a second generation High Definition TV OR schooling for an entire generation of school children in an Angolan village.


I dumped a bunch of money into a local church charity that built a school in Guatemala. My kid went down twice and the wife and I went down with her to help complete on the second trip.

I don't go for the Christian thing too much but these ones don't push any beliefs beyond what Catholics who have been running missions for ages so I didn't mind.

Privacy_Policy

Yeah....

I've dumped a bunch into World Vision.........simply because they are one of the best-rated charities in the country.....

 

[captain morgan]

Obviously you have no idea of fractional reserve banking. In Canada we have a zero reserve in effect. Banks do create the money they lend from thin air! Actually it is the stroke of a pen (when you sign) and a few keystokes on their computer.

Not true... Any of it.

Charter banks must have a % of all of their assets in hard currency to be made available within a reasonable period of time to the owner of that cash. Further, none of the retail/merchant or ibanks can "create" money with a few keystrokes without selling an asset or collateralizing the "new" money against an asset. The only body that can do this is the Central Bank of a nation and in doing so, they are essentially pledging (indirectly) national assets against the new issue. I say "indirectly" because releasing more currency into the public markets affects the value of that currency on international markets.

Don't tell me you really believe when a bank loans out say $500k for a mortgage they take that from some reserve of cash or go exchange some gold bullion for cash and then give it to you. They create it from the signed agreement to pay by entering that as a credit on their ledger using GAAP and then debit against the credit entry.

The exchange may be electronic, but yes, that is what happens.... To make your example more complete: the $500k goes to the home seller who then decides to buy a new home elsewhere... That money does have to trade hands in a very tangible form, doesn't it?

I didn't go to uni for 4 years studying economics and finance to be wrong about this.

Apparently you did.... Maybe you ought to get into some higher level classes on this.

 

[Tonington]

Not true... Any of it.

Umm, no, he is correct.

There is no mention of reserve requirements in The Bank Act. No reserve ratio. Go to the Bank of Canada's website and search reserve requirement. It previously was in section 457 of the Bank Act, which was repealed.

In Canada, there is no reserve requirement for private lenders.

Or, I'll link to it for you
Implementation of Monetary Policy in a Regime with Zero Reserve Requirements

Go to the Appendix. Reserve requirements were phased out over a two year period, from June 1992- June 1994.

 

[CDNBear]

Umm, no, he is correct.

There is no mention of reserve requirements in The Bank Act. No reserve ratio. Go to the Bank of Canada's website and search reserve requirement. It previously was in section 457 of the Bank Act, which was repealed.

In Canada, there is no reserve requirement for private lenders.

Or, I'll link to it for you
Implementation of Monetary Policy in a Regime with Zero Reserve Requirements

Go to the Appendix. Reserve requirements were phased out over a two year period, from June 1992- June 1994.

This is true, but at the end of the day, the bank still has to show collateral, to cover negative balances at the BOC level.

A bank doesn't necessarily have to have vault cash, but it has to have the assets to back up their lending and financial transactions. The banks do not have the ability to lend beyond their own strength, or that of the dollar.

And your link, is the same one my Mother sent me too, lol. As well as this one...

Powered by Google Docs

 

[Tonington]

This is true, but at the end of the day, the bank still has to show collateral, to cover negative balances at the BOC level.

What he said was there is no reserve requirement, which is true, and that banks create money out of thin air, which they also do. When they give someone an interest bearing loan, they have just created money. The value of the economy has grown.

 

[captain morgan]

Umm, no, he is correct.

There is no mention of reserve requirements in The Bank Act. No reserve ratio. Go to the Bank of Canada's website and search reserve requirement. It previously was in section 457 of the Bank Act, which was repealed.

In Canada, there is no reserve requirement for private lenders.

Or, I'll link to it for you
Implementation of Monetary Policy in a Regime with Zero Reserve Requirements

Go to the Appendix. Reserve requirements were phased out over a two year period, from June 1992- June 1994.

You ought to thoroughly read the docs that you post, the "traditional" reserve requirement has been replaced but not eliminated. The BOC will finance any shortfalls due to unexpected/projected circumstances, but the mechanism still exists in an altered fashion.

Further, you might think about seeking info from the source rather than from working papers... Let me help you out on this:

Bank of Canada Act

This is true, but at the end of the day, the bank still has to show collateral, to cover negative balances at the BOC level.

A bank doesn't necessarily have to have vault cash, but it has to have the assets to back up their lending and financial transactions. The banks do not have the ability to lend beyond their own strength, or that of the dollar.

And your link, is the same one my Mother sent me too, lol. As well as this one...

Powered by Google Docs

Bingo!

 

[CDNBear]

What he said was there is no reserve requirement, which is true, and that banks create money out of thin air, which they also do. When they give someone an interest bearing loan, they have just created money. The value of the economy has grown.

That's a very over simplification, of a fairly complicated system. And that was not what he said, he qualified his opinion with a story about money having no value. Which is consistent with other conspiracy nuttery.

As Captain Morgan has already mentioned, banks do not have vault cash reserves, but they must have solvent sustainability and the power to support their lending. There are checks and balances, regulations, and limits to the ability to lend. That are dependent on a banks strength and holdings, as determined by the OSFI. Each bank can only lend a specified percentage, greater then their total assets. Assets are not a reserve, but what makes the institution strong enough to have the ability to lend. That alone isn't the only mitigating factor in the OSFI's determination of how much a bank can lend. A bank must also be able to show an institutional policy that is sound.

They are still accountable to the BOC, and OSFI, for any monies they may "create" and must show they have the ability to cover it's value. Thus, no money is actually created. As the loan is backed by a physical element of value.

If it were as simplistic as you have made it out to be, there would be economic chaos, and rabid inflation.

 

[captain morgan]

Yours is an excellent overview, especially the observation that a simplistic analyses is not suitable to explain an extremely complex system.

Kudos!

 

[CDNBear]

Yours is an excellent overview, especially the observation that a simplistic analyses is not suitable to explain an extremely complex system.

Kudos!

Thanx. It helps when I can pick up the phone and ask my Mommy all about it, lol. She worked for the CIBC for 27 years. The last seven, she was a VP.

 

[captain morgan]

Nothing like being able to go right to the source to get some accurate info.

 

[Tonington]

You ought to thoroughly read the docs that you post, the "traditional" reserve requirement has been replaced but not eliminated. The BOC will finance any shortfalls due to unexpected/projected circumstances, but the mechanism still exists in an altered fashion.

I did, there is zero requirement for reserve funds for private lending institutions, contrary to your insistence that politicalnick was wrong. Did you actually read it?

Bank of Canada Act

No requirement listed for reserve funds.

That is a simple matter of fact.

That's a very over simplification, of a fairly complicated system.

Well, I'm not trying to explain the whole system. I only agreed with nick, that a bank has no requirement to have reserve on hand when they give you a loan. The government doesn't necessitate that.

From a business stand point, of course they need reserve on hand. But it's not required for granting a loan.

And that was not what he said, he qualified his opinion with a story about money having no value.

It is for my part in this discussion. I'm not interested in the other stuff that was said, or the title of this thread for that matter. I'll leave that stuff to you and anyone else who wants to discuss that.

There are checks and balances, regulations, and limits to the ability to lend.

I'm not disputing that...Canada has a strong regulatory environment for banking compared to our OECD counterparts. Those regulations used to include a section where the Act dictated reserve funds, it's gone now.

 

[CDNBear]

Well, I'm not trying to explain the whole system. I only agreed with nick, that a bank has no requirement to have reserve on hand when they give you a loan.

Gotchya, fair enough.

 

[Tonington]

Gotchya, fair enough.

Here is a decent contrast that I found in a paper in Banks and Banking Systems:

II. Reserve Requirements in Canada

Following the establishment of the Bank of Canada in 1935, chartered banks in Canada were legally required to maintain daily cash reserves in the form of Bank of Canada notes and deposits held at the Bank of Canada equal to 5% of their deposit liabilities from customers. Since then, the legal reserve requirements had undergone several reforms such as changes in the legal reserve ratios and the methods of calculation. The major reforms during the period under study included lagged reserve accounting introduced in 1980 and the weighting system for reserve calculations introduced in June 1986 (see, for example, Appendix 17A in Binhammer and Sephton, 2001, for details). But the most interesting and dramatic reform is the abolishment of legal reserve requirements following the Bank Act of 1992, which has significant and profound implications for both banking stability and the implementation of monetary policy.

A main objective of zero reserve requirements is to reduce volatilities in both settlement balances and short-term interest rates so as to enhance the effectiveness of monetary policy. Canada’s current payments system consists of the large value transfer system (LVTS) and the Automated Clearing Settlement System (ACSS). The former is a real-time, electronic fund transfer settlement system for large-value, wholesale transactions over $50,000, whereas the latter is essentially paperbased and handles non-LVTS transactions like cheques. Although chartered banks are no longer legally required to hold reserves, participants in LVTS or direct clearers in the ACSS are required to maintain non-negative clearing balances with the Bank of Canada.

Under LVTS, participants are able to track in each trading day their LVTS receipts and payments in real time, thus eliminating most of the uncertainty in predicting the end-of-the-day settlement balances under the old payments system. The LVTS closes for client transactions at 6 p.m., followed by a pre-settlement trading period of half an hour in Bank-of-Canada clearing balances among participants themselves. This pre-settlement trading is expected to achieve a zero settlement balance for each participant because participants with surplus settlement balances would lend to those with deficit balances. At the end of the settlement day (at 8 p.m. or earlier), a participant with a debit (negative) balance has to take a collateralized overdraft loan from the Bank of Canada at the Bank Rate, whereas one with a credit balance is paid interest at the Bank Rate less 50 basispoints.

As long as the overnight bid-ask spreads in the interbank market are within the operating band announced by the Bank of Canada, participants should find it more profitable to resolve their nonzero clearing balances among themselves during the pre-settlement period than to have nonzero settlement balances at the Bank of Canada (see Clinton, 1997, for details about how the system operates). As a result, this framework motivates the banking system to target zero settlement balances at the Bank of Canada.

Similarly in the ACCS, direct clearers with net negative clearing balances on a settlement day make interest payments at the Bank Rate plus 150 basis points for their loans from the Bank of Canada for settlements. On the other hand, direct clearers with net positive clearing balances receive interest payments at the Bank Rate less 150 basis points. The large rate spread of 300 basis points provides incentives for direct clearers to resolve their non-zero clearing balances among themselves in an overnight interbank market in retroactive ACSS clearing balances.

In sum, the current institutional arrangements of the Canadian payments system essentially impose a penalty cost on chartered banks with negative clearing balances and an opportunity cost on those with excess settlement balances. Such costs provide incentives for chartered banks to target their clearing balances to zero, or as close to zero as possible, even though they are not legally subject to any legal reserve requirements.
​

 

[CDNBear]

Here is a decent contrast that I found in a paper in Banks and Banking Systems:

Yep, I read all that in that link I posted earlier.

That and the information passed on to me by dear old Mom, was the basis of my posts.

 

[damngrumpy]

It always amazes me when someone puts an idea forward and makes some suggestions,
that some resort to distortions of the truth, to condemn the idea. For example the thing
about Greece being a socialist utopia. As I remember Greece has had a troubled past
mostly due to constant fluctuations between the right and left of the political spectrum.
There was a time when Greece was run by ruthless right wing military dictators and the
concepts of education and a decent living for the working class wasn't even on the radar.
From there the rubber band stretched to the other end of the scale causing even more
problems. To put it mildly the fascism of the past led to the excessive socialism of the
present.
As for the current situation we have unbridled capitalism and that has led to the present
difficulties we are about to face. When you don't weigh the social costs and benefits to
the equation of a society something has to give. On a lesser scale we saw this during
the French Revolution. Unbridled power in that case, with the land barons, and the
government of the day issuing power for those with means saw the streets swell with
unhappy working people and the poor. Instead of building a better society, they killed all
the people with the skills to run the country leaving them open to a worse fate down the
road.
The collapse of Rome is another example of what happens when the checks and balances
of a society go by the wayside. For us the problem of a modern society operating on a
system where greed is the only motivator, will be ten fold. We haven't seen the collapse of
the monetary system yet, and a much bigger problem is looming that is about to make the
Great Depression seem like a blip on the radar screens. We are so far into the mess we are
in we don't even know there is a forest we can't see for the trees. I firmly believe we will be
engulfed by this human tragedy withing the next five years.
I am not a fan of either rabid capitalism or socialism, we need to have the private sector and
governments engaged. While I do not subscribe to social nationalism I do support fiscal
nationalism. For example, I believe the resources of Canada should benefit the financial
and social well being of Canadians first. Canadians business and consumers should have
first access to gas and oil, home heating oil and so on. Other minerals should be made
available to Canadian business and manufacturers. The government should ensure that a
healthy portion of the proceeds goes directly or indirectly to individual Canadians in the form
of dividends or in terms of offsetting medicare and other costs.
In addition I do not believe the food commodities should be part of the stock market industry.
Water should be controlled by governments and medicare could be distributed by private outlets
but the universal medicare system we have should be strengthened and maintained.
Capitalism should also be encouraged and maintained, it should not however be allowed to rise
to the point of power that these institutions could rival governments in terms of power.
Transnational Corporate power should and must be curtailed. Monopoly by virtue of economics
or market share control should be outlawed in order to encourage all those who want a place
in the market place should have the means and opportunity to participate. That does not mean
we should protect the private sector from failure on an individual basis. Failure breeds future
success as much as anything else. Business must be responsible to the community it serves.
It must also make a profit and operated efficiently.
I don't want to see the corporate sector ripped apart and given to people who don't understand
the system or who do not take the initiative to make their own way in the world. An example of
disaster when that happens is Mugabe in Zimbabwe he gave the land once owned by white farmers
to his countrymen who destroyed agriculture there created inflation and food shortages and
eventually more poverty than originally thought possible. I support some changes but not a whole
sale destruction of business or the incentive to succeed

 

[captain morgan]

I did, there is zero requirement for reserve funds for private lending institutions, contrary to your insistence that politicalnick was wrong. Did you actually read it?

Bank of Canada Act

No requirement listed for reserve funds.

That is a simple matter of fact.

I did read the document - I posted it for your benefit such that you didn't have to rely on working papers submitted by low level analysts similar to the one you posted initially.... Remember?

Had you read through the Act, you would have learned that these rules are current to 04/28/2011 and also read about the reserve requirements stipulated by the Act.

Where your mistakes occur is based on the notion that reserve funds are narrowly defined as cash/paper currency that a bank (presumably every branch) must maintain... As Cdn Bear so accurately pointed out, that narrow interpretation is not the case. Bears Stern & Lehman Brothers (albeit American entities) fell victim to the very scenario that Bear described despite being in a system where they have set cash reserve percentages.

Clearly, your understanding of this issue is highly deficient, otherwise you never would have posted this:

....and that banks create money out of thin air, which they also do. When they give someone an interest bearing loan, they have just created money.

Possessing a basic understanding would have resulted in your not posting this response. Because the banks must maintain a set reserve requirement, regardless of it's form, banks are unable to "create money out of thin air".

Well, I'm not trying to explain the whole system. I only agreed with nick, that a bank has no requirement to have reserve on hand when they give you a loan. The government doesn't necessitate that.

Again, this is incorrect. All of the hullabaloo a few years ago about all of the credit drying-up was also a reflection of the banks not having sufficient reserve funds (assets) to cover any additional loans.... This would be an impossible situation if there was no reserve requirement and that banks could just "create money out of thin air", non?

 

[PoliticalNick]

I'd love to read the transcripts from the court case you referenced, do you have a link?

I am having a great deal of trouble getting them as they were sealed at the banks request. If they remained open in the public record everyone would be using them to get out of every loan and mortage in the US. I have a couple of different opinions from Canadian lawyers as to whether this may be a functional argument in Canada. From what I understand there have been a couple of attempts but lower court judges seem disinclined to hear the cases and simply dismiss without prejudice and the cost of taking it to the SCC is probably a lot more than paying the loan.

Charter banks must have a % of all of their assets in hard currency to be made available within a reasonable period of time to the owner of that cash. Further, none of the retail/merchant or ibanks can "create" money with a few keystrokes without selling an asset or collateralizing the "new" money against an asset. The only body that can do this is the Central Bank of a nation and in doing so, they are essentially pledging (indirectly) national assets against the new issue. I say "indirectly" because releasing more currency into the public markets affects the value of that currency on international markets.

Yes the bank has to have assets to make the loan against, but what you overlook is they list your promise to pay as the asset to offset the loan amount. When they give you the money it does not reduce their hard assets in any way, they dont sell $25k of gold on the market to give you $25k in cash. They enter you PTP as an asset and make the loan against it, that is why it has 2 accounting entries in the general ledger, one is a credit and the other is the balancing debit and therefore they will not have a negative balance sheet from lending. If they used an existing asset to monetize the loan it would devalue that asset by the amount of the loan and it would not be long before they had no assets or the ones they did have were worthless.

The exchange may be electronic, but yes, that is what happens.... To make your example more complete: the $500k goes to the home seller who then decides to buy a new home elsewhere... That money does have to trade hands in a very tangible form, doesn't it?

The money changes hands between me and the seller to complete the contract of sale. The banks and lawyers may handle the transaction but it is a private contract. We have a binding contract where both parties have given valuable consideration, I gave money, they gave real estate. Where I got the money has nothing to do with how legitimate or binding that contract is. It is the contract with the bank that lacks valuable consideration on one side and is theoretically unenforceable. Does this theory pan out in an actual courtroom? I only know of the 1 case in Minnesota and the records are sealed so it is hard to find out where the jury made it's determination.

That's a very over simplification, of a fairly complicated system. And that was not what he said, he qualified his opinion with a story about money having no value. Which is consistent with other conspiracy nuttery.

As Captain Morgan has already mentioned, banks do not have vault cash reserves, but they must have solvent sustainability and the power to support their lending. There are checks and balances, regulations, and limits to the ability to lend. That are dependent on a banks strength and holdings, as determined by the OSFI. Each bank can only lend a specified percentage, greater then their total assets. Assets are not a reserve, but what makes the institution strong enough to have the ability to lend. That alone isn't the only mitigating factor in the OSFI's determination of how much a bank can lend. A bank must also be able to show an institutional policy that is sound.

They are still accountable to the BOC, and OSFI, for any monies they may "create" and must show they have the ability to cover it's value. Thus, no money is actually created. As the loan is backed by a physical element of value.

If it were as simplistic as you have made it out to be, there would be economic chaos, and rabid inflation.

They certainly want to make it too complicated for most to understand as it make it easier to fleece the unknowing public. The simple point being that it is your signature on the loan document that assigns it the element of value which is in turn used to fund the loan. You as the lendee are giving value to both sides of the contract by assigning a value to the PTP and accepting their fiat currency as value for your signature.

 

[Tonington]

Had you read through the Act, you would have learned that these rules are current to 04/28/2011 and also read about the reserve requirements stipulated by the Act.

I did read it, there is no clause in the Bank Act that mandates requisite reserve ratios or reserves period. If you think it's there, then post the relevant section.

It's been gone since 1994...