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No one seems to have pointed out that the original example given is actually wrong. (I've stumbled on this looking for something else, but had to comment.) The second balance sheet should still show $1000 as both the total assets and liabilities. The "deposit creation multiplier" idea referred to is the theoretical maximum aggregate balance sheet of the banking sector, if there is more than one bank and they all lend to each other and only each other. Its double counting, but that's allowed in the calculation of M4 money supply, but isn't allowed on any particular bank balance sheet (which is why the example is so wrong).

promisory notes

promisory notes

Således har økonomen Murray N. Rothbard kaldt fractional reserve banking for »fraudulent reserve banking«. I sin bog The Case Against The Fed kan man blandt andet læse om Rothbards udførlige argumentation imod fractional reserve banking, som han kort sagt beskriver som »lovlig forfalskning«.

This is clearly a very safe form of banking, but as described so far, the bank would simply be acting like a safe deposit box. It would not be able to make any loans.

Expressed like this, a mechanism for banks to make loans becomes available. The mechanism is via the use of time deposits.

This perpetual game of borrow-lend-borrow and fractional reserve banking is dependent on the paradigm of infinite economic growth.

The U.S. government has confirmed that indeed a recession began in December 2007, when the price of oil climbed to nearly $100 a barrel.

And this is what governments are seeing, banks are seeing, what markets are seeing, but no one is talking about it because it portends changes that are greater than anyone can seriously contemplate.

Critics of the concept of peak oil claim that it is crazy to suggest we’re running out of oil – and they’re right! These critics fail to understand the predicament of Peak Oil which is that the rate of growth in the daily/monthly/yearly production of oil is slowing and after the peak, will fall into permanent decline.

A few things. First I’m pretty sure nothing should be 0% risk weighted. Second, yes, risk weightings are going to continue to be a big part of the real problem. Third Basel III fails to address the issue of the hegemony of the ratings agency cartel. On another note, I remain fairly convinced that there isn’t any way to completely remove the chance that banks blow up. Banks are completely unlike any other corporate structure – they are inherently levered and can therefore be wiped out by a nasty run on the bank, even if perfectly solvent. So what’s the answer? The minute we admit that TBTF exists, we have to charge for the privilege of being TBTF rather than try to regulate it out. Insurance premiums payable to a pre-funded disaster recovery fund, that are heavily geared to (true) leverage and spiral exponentially above 30x leverage sounds like a good start. Throw in additional premia based on the % of revenues from trading, the type of funding that props up the balance sheet and the liquidity of underlying assets, and Bob’s your uncle, we might have the beginnings of something that works.

As an ardent supporter of Ron Paul, I must acknowledge Paul Krugman's point about getting inflation wrong, at least in the years since the crash. He is right that there were many outspoken critics of monetary expansion at the time, including Paul and Schiff, who predicted massive inflation around the corner. But there are two further points to be made about Austrian Economics in general.First, there were at the time and continue to be Austrians who correctly anticipated the strong deflationary pressures we actually ended up facing. Mike Shedlock, for example, is concerned much more with contracting aggregate credit than expanding monetary base.Second, Austrians are unanimous on a much bigger point: that we are still in the middle of this crisis. We reject any suggestion that a recovery is underway or that any underlying structural problems have actually been resolved. As such, we have yet to confront the worst consequences of the crisis and once we do, some of the outcomes Paul and Schiff predict could come into play.Austrians also agree that while the monetary expansion may not have yet caused massive inflation, it has managed to keep incumbent banks in power. Money printing is thus seen as maintaining the status quo. Rather than the mighty banks falling and being replaced by smaller, fairer banks, they remain entrenched. This populist angst towards money printing - as a tool of the establishment - currently holds more sway than concern about rampant inflation.

The modern banking system manufactures money out of nothing

The sudden jump in the price of gold after the demise of the Bretton Woods accords was a result of the significant prior debasement of the US dollar due to excessive inflation of the monetary supply via central bank (Federal Reserve) coordinated fractional reserve banking under the Bretton Woods partial gold standard.

A lot of it was spent on bailing out US banks and that money is still there, as well as money funnelled into well connected corporations within the US. Already in the UK inflation is going out of control because of QE in this country, why should the US expect to be any different? What will happen when the US’s banks begin lending those trillions they are sitting on?

prefer ron paul /austrian economics view of life, but if you take on fiat debts worth trillions… you can’t solve the problem by cutting spending and having people suffer for this, this is not right, this type of debt should be canceled first (at least most of it)

»Nu sætter jeg 100.000 kroner ind på din kassekredit«. Pointen er, at banken udlåner nogle penge, som de ikke har.

Det er en særdeles lukrativ forretning at stå for produktionen af penge.

Den finans- og gældskrise, der i løbet af de seneste 3-4 år har bredt sig til stadig flere områder af samfundet, er ikke en kortvarig forstyrrelse, det er selve kulminationen på en finansiel udbytning, der har fundet sted i de seneste tre til fire årtier.

Muslimsk bankdrift adskiller sig fra almindelig bankdrift, fordi udlån af penge med renter er forbudt.

I stedet indgår banken og kunden aftaler, hvor banken køber noget, som kunden efterfølgende køber tilbage i små bidder til en på forhånd aftalt pris.