Political Theory

Re: Is there a moral obligation to pay back fractional reserve debt?

Stranger — Fri, 12 Feb 2010 03:51:32 GMT

caravelle:

i assume you arent mything here....when yuo say their credit...do you mean a credit max based on a federal reserve rule??? what is their credit???

Their credit is the willingness of other economic actors to accept their promises to pay in lieu of payment.

Re: Is there a moral obligation to pay back fractional reserve debt?

Stranger — Thu, 11 Feb 2010 22:06:12 GMT

caravelle:

if a check is deposited into a checking account does a bank then loan out most or much or in some cases all of 'what' was deposited and then somehow in meshing with the federal reserve keep somewhere near 10 percent in paper/coin cash of the total amount of lent funds???

There is no such a thing as a 10% reserve requirement. This is a myth. In reality banks can make loans as far as their credit allows them.

Re: Is there a moral obligation to pay back fractional reserve debt?

Caley McKibbin — Thu, 11 Feb 2010 11:27:43 GMT

In the narrowest sense, a contract is a contract. However, in the broader view, banks are mass swindlers on every level, from FRB to the panoply of political activity. If you don't accept the rules of game, you don't get to benefit from them.

Re: Is there a moral obligation to pay back fractional reserve debt?

hkarnoldson — Thu, 11 Feb 2010 09:38:45 GMT

caravelle:

are you sure...couldnt a deposit go to redeeming a cd that has been withdrawn or come to maturity?

Ehm no. Every transaction have one entry in a companies books, first they book the deposit "(Assets - cash" increases and "Liabilities - savings" increases) then they can move on to book the issuing of debt ("Assets - total loans and leases" increase; "Assets - cash" decrease).

I think I understood what Stranger was getting at now though. It does work the other way around. The interests the bank gets in the income statement do appear in the balance sheet and can thus be lent. But it is minuscule and could never cover all the liabilities of a bank. One of the largest Swedish banks as example. Total liabilites 3 693 484 MSEK, net interest earnings: 35 091 MSEK.

how do you know this?

Accounting 101.

That banks take deposit account balances into there own books is absurd in the first place.
A discount stock broker that did that with your deposited stocks would be thrown in jail, at least here. According to contracts for stock deposits the stock balance on the account belongs to me and they have no rights to it, the stocks can't be included in the companies assets if they go bust and they could never lend them to someone...