the no more pennies scam
- Thread starter bohunr
- Start date
steve garrett
Well-known member
the government isn't printing money in the way most people think they are. Most money is created in the commercial banks with lending. And even that is misleading. because if a bank does a loan. That money just goes to someone elses bank account. a deposit to a bank is a liability on their balance sheet meaning they owe the person who made the deposit. Instead what they do is create a loan with that deposit to someone else which creates an asset. Assets are used as reserves in the banking system. Another words a note, which is a loan and promise to pay by someone else, it has value that is used as collateral by the bank to meet reserve requirements.
If I only had to pay you 1% interest but I could do loans at 5% I am pocketing a 4% spread. this is what the banks are doing. its a funny word called Arbitrage. but what isn't realized is, they are also pledging these loans/notes as reserve requirements. Its really why the US $$ will have so much trouble being replaced. There is simply too much debt that is payable in US$. to pay US $ you of course need US $ to pay it. This keeps the demand for $$ up. In fact recently it was qatar or the UAE where we had to backstop their currency with USD, We agreed to let them trade their currency at a fixed amount for USD. This prevented an out of control run on their currency which would have meant ever increasing and accelerating amounts of their currency would be needed to get the USD they needed for financial transactions.
inflation helps most of us because most people don't actually save any money. The way to get ahead of it is to have assets that are leveraged with fixed rate debt that rise with inflation. its why most peoples wealth is in their homes. inflation washes away the debt.
If I only had to pay you 1% interest but I could do loans at 5% I am pocketing a 4% spread. this is what the banks are doing. its a funny word called Arbitrage. but what isn't realized is, they are also pledging these loans/notes as reserve requirements. Its really why the US $$ will have so much trouble being replaced. There is simply too much debt that is payable in US$. to pay US $ you of course need US $ to pay it. This keeps the demand for $$ up. In fact recently it was qatar or the UAE where we had to backstop their currency with USD, We agreed to let them trade their currency at a fixed amount for USD. This prevented an out of control run on their currency which would have meant ever increasing and accelerating amounts of their currency would be needed to get the USD they needed for financial transactions.
inflation helps most of us because most people don't actually save any money. The way to get ahead of it is to have assets that are leveraged with fixed rate debt that rise with inflation. its why most peoples wealth is in their homes. inflation washes away the debt.