2016: The Year of Bond Defaults

#151
#151
bamawriter said:
The difference between "money" and "legal tender" is not trivial.
Click to expand...

The difference between "money" and "legal tender" is a debate for an entirely different thread. Obviously, your definitions of "money" and "legal tender" are different than mine. When you start talking about fungibility, durability, easily recognizable, portable and needing to have intrinsic value within itself/sufficient rarity, then that is what some people consider as "money". 1s and 0s on a computer are not durable and are not sufficiently rare, so it is not "money", it is "legal tender". Legal tender is used to settle all payments public (govt taxes, fines and fees) and private (commercial transactions).

Again, this is a debate for another thread.
 
#152
#152
Rasputin_Vol said:
The difference between "money" and "legal tender" is a debate for an entirely different thread. Obviously, your definitions of "money" and "legal tender" are different than mine. When you start talking about fungibility, durability, easily recognizable, portable and needing to have intrinsic value within itself/sufficient rarity, then that is what some people consider as "money". 1s and 0s on a computer are not durable and are not sufficiently rare, so it is not "money", it is "legal tender". Legal tender is used to settle all payments public (govt taxes, fines and fees) and private (commercial transactions).

Again, this is a debate for another thread.
Click to expand...

It's not a debate for any thread. Legal tender is banknotes and coins. That's it.
 
#154
#154
GAVol said:
Current Loan to Deposit ratios are about 70%.
Click to expand...

See this is a perfect example of how banks use sleight of hand with language to confuse us. We're talking about the money multiplier effect and you use this ratio that makes it look like this system is completely reasonable. In fact I didn't believe it at first, so I looked it up. When I realized it's accurate my whole banking paradigm began to shift.... Until I remembered this statement from an economist "deposits don't create loans - loans create deposits."

That's when I realized the ratio you threw out measures deposit liabilities and not the reserves we had been discussing. Of course that ratio is going to be high, when a loan is issued to purchase something, the seller will eventually deposit the money into their bank. If the buyer and seller use the same bank the LTD ratio for that transaction is 100%. That ratio has nothing to do with what we were discussing.

Then I started wondering what kind of loans aren't eventually deposited into a bank. I'd appreciate any examples you guys can give. The only type I can think of are maybe foreign purchases, that get deposited in a foreign bank, and loans to hedge funds that are gambled in the stock market. If 30% of the loans banks make are going to the stock market, I'm actually pretty terrified.
 
Last edited:
#155
#155
red butler said:
See this is a perfect example of how banks use sleight of hand with language to confuse us. We're talking about the money multiplier effect and you use this ratio that makes it look like this system is completely reasonable. In fact I didn't believe it at first, so I looked it up. When I realized it's accurate my whole banking paradigm began to shift.... Until I remembered this statement from an economist "deposits don't create loans - loans create deposits."

That's when I realized the ratio you threw out measures deposit liabilities and not the reserves we had been discussing. Of course that ratio is going to be high, when a loan is issued to purchase something, the seller will eventually deposit the money into their bank. If the buyer and seller use the same bank the LTD ratio for that transaction is 100%. That ratio has nothing to do with what we were discussing.

Then I started wondering what kind of loans aren't eventually deposited into a bank. I'd appreciate any examples you guys can give. The only type I can think of are maybe foreign purchases, that get deposited in a foreign bank, and loans to hedge funds that are gambled in the stock market. If 30% of the loans banks make are going to the stock market, I'm actually pretty terrified.
Click to expand...

And then that seller's deposit can be called bank reserves and in turn, be lent out a multiple number of times. And so on... hockey stick/parabolic growth.
 
#156
#156
bamawriter said:
It's not a debate for any thread. Legal tender is banknotes and coins. That's it.
Click to expand...

Just curious, but those electronic 1s and 0s that we use to pay bills, pay for groceries, pay taxes, pay for services, pay on loans, etc... do those 1s and 0s (or more specifically the numbers behind the $ sign) represent the beaver pelts? Sea shells? Bushels of wheat? Federal Reserve banknotes?
 
#158
#158
GAVol said:
what numbers do we use then? I was just trying to show that banks aren't out there with loans outstanding 5 times their total deposits.
Click to expand...

I think what you're trying to show is exactly what the LTD ratio does, but it doesn't measure the amount of those deposits that the banks actually created. Unfortunately I don't know what the right metric is, but I do know commercial banks shouldn't have the authority to create 95% of the nation's money. That's just too much power and too much potential for abuse.
 
#159
#159
Rasputin_Vol said:
Just curious, but those electronic 1s and 0s that we use to pay bills, pay for groceries, pay taxes, pay for services, pay on loans, etc... do those 1s and 0s (or more specifically the numbers behind the $ sign) represent the beaver pelts? Sea shells? Bushels of wheat? Federal Reserve banknotes?
Click to expand...

They represent whatever amount of US currency.

It may be more helpful to think of it like this: if you walk into a bank and deposit 1,000 bucks cash into your checking account, the legal tender is not in your account; it's in the teller's drawer. You would then have the option of withdrawing your funds via debit card, wire, ACH, cheque, or even in legal tender via a teller or an ATM.

All legal tender is money, but not all money is legal tender.
 
#160
#160
GAVol said:
what numbers do we use then? I was just trying to show that banks aren't out there with loans outstanding 5 times their total deposits.
Click to expand...
https://www.nerdwallet.com/blog/credit-card-data/average-credit-card-debt-household/

'Muricans hold roughly $12.12 trillion in personal debt as of 2015. To get a loan to deposit ratio of 70%, that means that 'Muricans would need roughly $17 trillion in bank deposits. Oh, keep in mind that this doesn't include corporate debt.


Hmm... this says only $12.4 trillion in total deposits from domestic banks, foreign bans, US govt, corporations, etc. If we just compared apples to apples, we would have to subtract govt, bank and corporate deposits from that $12.4 number to ratio person loans/ personal deposits.

Deposit Data | All Banks
 
#161
#161
Rasputin_Vol said:
https://www.nerdwallet.com/blog/credit-card-data/average-credit-card-debt-household/

'Muricans hold roughly $12.12 trillion in personal debt as of 2015. To get a loan to deposit ratio of 70%, that means that 'Muricans would need roughly $17 trillion in bank deposits. Oh, keep in mind that this doesn't include corporate debt.


Hmm... this says only $12.4 trillion in total deposits from domestic banks, foreign bans, US govt, corporations, etc. If we just compared apples to apples, we would have to subtract govt, bank and corporate deposits from that $12.4 number to ratio person loans/ personal deposits.

Deposit Data | All Banks
Click to expand...

Without clicking either link, I can go ahead and tell you that there is a whole bunch of debt out there that isn't held by banks.
 
#162
#162
bamawriter said:
They represent whatever amount of US currency.

It may be more helpful to think of it like this: if you walk into a bank and deposit 1,000 bucks cash into your checking account, the legal tender is not in your account; it's in the teller's drawer. You would then have the option of withdrawing your funds via debit card, wire, ACH, cheque, or even in legal tender via a teller or an ATM.
Click to expand...

Ah man this semantic judo, you are engaging in right now...

OK, let me understand this. I walk into a bank with a thousand Federal Reserve notes (legal tender). I deposit those notes into the bank. The teller hands me a piece of paper back showing me how many Fed Reserve notes and/or treasury coins I have in my account. The bank calls it a deposit. I call it my deposit. I then leave the bank and notice an item on ebay that I want to buy. The item on ebay is priced in Federal Reserve notes. I make an electronic transaction to use my deposited Fed Reserve notes to purchase the item on ebay.

Explain to me how that transaction was not conducted with "electronic" Fed Reserve notes (or "electronic" legal tender)?
 
#163
#163
Rasputin_Vol said:
Ah man this semantic judo, you are engaging in right now...
Click to expand...

This is called plain English. There is nothing semantic about it.

OK, let me understand this.
Click to expand...

I'll gladly let you. I simply can't force you.

I walk into a bank with a thousand Federal Reserve notes (legal tender). I deposit those notes into the bank. The teller hands me a piece of paper back showing me how many Fed Reserve notes and/or treasury coins I have in my account.
Click to expand...

Nope. Your receipt shows you how much money you have on deposit. What is in your account is not legal tender. And in case you're curious, this was reality long before electronics were introduced into banking. Back in the day, deposits were entered into a paper ledger, and just like today the legal tender was put in a drawer or vault.

The bank calls it a deposit. I call it my deposit.
Click to expand...

And that's what it is.

I then leave the bank and notice an item on ebay that I want to buy. The item on ebay is priced in Federal Reserve notes.
Click to expand...

It's priced in US dollars. Unless a business is cash only, then nothing is really priced in Federal Reserve notes. Does eBay even accept cash? Maybe some sellers work it out for cash to be mailed, but that seems like a risky proposition.

I make an electronic transaction to use my deposited Fed Reserve notes to purchase the item on ebay.
Click to expand...

If it's on deposit, your money is not legal tender. If you pay electronically (debit card, ACH, etc) then no legal tender was exhanged.

Explain to me how that transaction was not conducted with "electronic" Fed Reserve notes (or "electronic" legal tender)?
Click to expand...

There are no such things.
 
  • Like
Reactions: 1 person
#164
#164
Rasputin_Vol said:
Ah man this semantic judo, you are engaging in right now...

OK, let me understand this. I walk into a bank with a thousand Federal Reserve notes (legal tender). I deposit those notes into the bank. The teller hands me a piece of paper back showing me how many Fed Reserve notes and/or treasury coins I have in my account. The bank calls it a deposit. I call it my deposit. I then leave the bank and notice an item on ebay that I want to buy. The item on ebay is priced in Federal Reserve notes. I make an electronic transaction to use my deposited Fed Reserve notes to purchase the item on ebay.

Explain to me how that transaction was not conducted with "electronic" Fed Reserve notes (or "electronic" legal tender)?
Click to expand...

I feel another definition coming on. The financial world playing loose with everyday words.
 
#165
#165
bamawriter said:
This is called plain English. There is nothing semantic about it.



I'll gladly let you. I simply can't force you.



Nope. Your receipt shows you how much money you have on deposit. What is in your account is not legal tender. And in case you're curious, this was reality long before electronics were introduced into banking. Back in the day, deposits were entered into a paper ledger, and just like today the legal tender was put in a drawer or vault.



And that's what it is.



It's priced in US dollars. Unless a business is cash only, then nothing is really priced in Federal Reserve notes. Does eBay even accept cash? Maybe some sellers work it out for cash to be mailed, but that seems like a risky proposition.



If it's on deposit, your money is not legal tender. If you pay electronically (debit card, ACH, etc) then no legal tender was exhanged.



There are no such things.
Click to expand...

So electronic transfers and credit or debit card transactions are fictitious?
 
#166
#166
Rasputin_Vol said:
https://www.nerdwallet.com/blog/credit-card-data/average-credit-card-debt-household/

'Muricans hold roughly $12.12 trillion in personal debt as of 2015. To get a loan to deposit ratio of 70%, that means that 'Muricans would need roughly $17 trillion in bank deposits. Oh, keep in mind that this doesn't include corporate debt.


Hmm... this says only $12.4 trillion in total deposits from domestic banks, foreign bans, US govt, corporations, etc. If we just compared apples to apples, we would have to subtract govt, bank and corporate deposits from that $12.4 number to ratio person loans/ personal deposits.

Deposit Data | All Banks
Click to expand...

Last year, it was a little under $8 trillion in bank held loans and $11 trillion in DDA accounts.... which puts the ratio in the 70s.
 
#167
#167
AM64 said:
So electronic transfers and credit or debit card transactions are fictitious?
Click to expand...

It's real. It's just not - by definition - legal tender... along with bank deposits, credit cards etc. All legal tender is money, but not all money is legal tender.

It's not a financial conspiracy. It's the dictionary.
 
  • Like
Reactions: 1 person
#168
#168
AM64 said:
So electronic transfers and credit or debit card transactions are fictitious?
Click to expand...

No. No more than a transaction via cheque is fictitious. The vast, vast majority of transactions are not performed using legal tender. But, if you have funds on deposit, you are entitled to the equivalent in legal tender should you choose to withdraw it in cash.
 
#169
#169
bamawriter said:
It's priced in US dollars. Unless a business is cash only, then nothing is really priced in Federal Reserve notes. Does eBay even accept cash? Maybe some sellers work it out for cash to be mailed, but that seems like a risky proposition.
Click to expand...
Now I can play semantic judo.

It is not priced in US dollars. It is priced in Federal reserve notes.

What is the definition of a US dollar?
 
  • Like
Reactions: 1 person
#170
#170
Rasputin_Vol said:
Now I can play semantic judo.

It is not priced in US dollars. It is priced in Federal reserve notes.

What is the definition of a US dollar?
Click to expand...

A dollar is a unit of US currency.

A Federal Reserve note is a financial instrument representing a dollar, backed by the full faith and credit of the United States (whatever you may consider that to be worth).

I think "semantic" is another word you haven't totally grasped.
 
  • Like
Reactions: 1 person
#171
#171
bamawriter said:
A dollar is a unit of US currency.

A Federal Reserve note is a financial instrument representing a dollar, backed by the full faith and credit of the United States (whatever you may consider that to be worth).

I think "semantic" is another word you haven't totally grasped.
Click to expand...

No, a US dollar is 371.25 grains or .7734 troy ounces of silver.

This nonsense about "backed by the full faith and credit of the United States" is Federal Reserve language.
 
  • Like
Reactions: 1 person
#173
#173
bamawriter said:
Okay. If that dollar isn't in the form of a Federal Reserve note, it isn't legal tender.

Clear now?
Click to expand...

I never said that my purchase on ebay was priced in US dollars. You did that. I clearly said that is was priced in Federal Reserve notes.

Clear now?
 
New posts
You must log in or register to reply here.

VN Store



Back
Top