Quote:
Originally Posted by Bubble99
I’m looking for simplified explanations how the fed increases the money supply in the US? Like do they just print more money or do they issue more bonds?
Also what do they mean by the fed increasing those reserves?
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A little bit o' history first.
Whenever you hear a Gold puke screaming, "
Gold Standard!" black-list that site or go find another Useless Tube video because they're lying to you.
Whenever Gold or Silver are used as a standard, the price is fixed/regulated.
For example, prior to 1833 the price of Gold was fixed at $18.35/ounce.
It was reset to $18.93/ounce in 1833 due to the number of panics and recessions the US had earlier which are never supposed to happen according to the witless Gold pukes.
For the next 100 years, Gold never exceed $21.32/ounce. Why? I just explained that. The price of Gold is fixed/regulated.
During that time you never had the 2nd Great Depression [of the 19th Century] or the Great Depression [of the 20th Century] or the dozens of recessions and panics in-between because the Gold pukes say that isn't possible, except it is possible and those things really happened.
If we went back to the Gold Standard the price would be fixed at about $65-$69/ounce and not the current price of $1,994/ounce.
Those people who hoard Gold would lose their shirts in a blood-bath and I think that would be fitting punishment for the lies they tell.
During the Civil War and for a few years after, Monetary Inflation plus Demand-pull Inflation was running 100% to 150% per year.
Gold price never changed. It remained at $18.93/ounce the entire time.
Is Gold a hedge against "inflation" (snicker)?
Nope.
From 1870 to 1920 wages doubled every 10 years and so did prices.
What did Gold do? It freaking jumped from $18.93/ounce to $18.94/ounce.
During WW I it reached $18.99/ounce and in 1920 it hit $20.68/ounce.
Is Gold a hedge against "inflation"? Nope.
Gold might possibly be a hedge against "inflation" but only when it is unregulated and unfixed and allowed to float which means it isn't used as standard to back currency.
Now that you know that, before the Federal Reserve existed banks issued their own currencies. Not all banks did but the really big banks did so you had maybe 1,000 different currencies floating around.
If you go to your main branch public library or a university library you can look at one of the 3 magazines published that had lithographs of all the currencies issued by all the banks. Two of the magazines were published weekly and the third was published monthly.
Let's say you had $10,000 from Fred's Bank and you wanted to put it in Bob's Bank.
Bob's Bank would get the latest magazine and look up the value of Fred's currency because maybe that $10,000 from Fred's Bank is equal to $10,000 from Bob's Bank or maybe it's only worth $5,000 or maybe $12,000 or maybe $7,500. I don't know but if you're getting the idea that banking in the US was a nightmare then that's a good thing.
90% of the people on this forum need to visit a demolition expert to blast off the 3 foot thick carbon steel anachronistic bubble they live in.
Only about half of the households in the US used banks. The other half didn't like banks or weren't educated enough to use or understand banking.
Even so, there were literally 10s of 1,000s of banks in the US.
Cincinnati isn't all that big and yet it had 114 banks just prior the Great Depression. A few banks went out of business but a lot of them merged.
You need to know all that so's you can understand the problem and the problem is a bank can only loan a fraction of its deposits.
So, you have Cincinnati with 200,000 people which is about 30,000 households.
Out of that you have 20,000 households willing to deposit money and all 114 banks are competing for those 20,000 households.
As a bank, you can only loan out a fraction of your deposits.
If you have $1 Million in deposits you cannot loan $1 Million because the second you do a customer will walk through the door to make a $500 withdraw and you can't cover it because you loaned out all your deposits.
Having commercial accounts was good but also a problem when payday comes because you have to have enough cash on hand to cover the payroll.
As you can see, that arrangement is stifling on economic growth because you're limited to what you can loan.
Fractional reserve banking solves that problem.
The fraction might be set so that you can have $1 Million in deposits but loan out $10 Million.
What about your deposits and depositors?
The Federal Reserve will cover them. The way that works is you borrow money from the Federal Reserve at the prime rate.
Hopefully you also understand why interest is a necessity. If you allowed people to borrow interest-free they'd borrow money for frivolous reasons and waste it without producing anything and it would cut out the people who want to borrow money for valid reasons.
Interest is the cost of borrowing money and that's also why you can never have interest-free borrowing because someone at the bank has to manage that account and that ain't free unless you're willing to volunteer your time and work for a bank for free.
Yes, there are the jackasses that will pay $1,500 for a $500 TV because they use a credit card instead of saving up $500 over two or three months and then they have the unmitigated gall to whine they ain't got $400 for an emergency.
You should also understand the Federal Reserve does not print money out of thin air like the liars claim.
You have $1 Million in deposits and you just loaned out $3.75 Million on 15 mortgages.
That money is spent on a good, namely property.
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