How Money is Made From Thin Air

Discussion in 'Markets & Economies' started by GoldenEye, Aug 7, 2021.

  1. GoldenEye

    GoldenEye Well-Known Member Silver Stacker

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    A good explanation of how banks create money from nothing.

     
  2. neonuke

    neonuke Well-Known Member Silver Stacker

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    What a great video, excellent content and great editing too
     
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  3. mmm....shiney!

    mmm....shiney! Administrator Staff Member Silver Stacker

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    Yep, he's got the bit about commercial banks creating money out of thin air right. But it's pretty much common knowledge and it's not something that is concealed by central bank officials.

    @leo25 posted this last week. It is an interview with Fed Reserve Governor Chris Waller. In it he explains that the digital money we use ie non-cash is a commercial bank liability, whereas cash is a central bank liability. In other words, we use government money for cash transactions and private money for digital transactions. It's important to understand though that commercial banks do so with the authority of government which guarantees that for every privately issued AUD, the RBA will back each one with government issued AUD.

    The RBA has education material explaining the two types of money used in the Australian economy and how money is created, here:

    https://www.rba.gov.au/publications/bulletin/2018/sep/money-in-the-australian-economy.html

    And in a speech by RBA Assistant Governor Kent here:

    https://www.rba.gov.au/speeches/2018/sp-ag-2018-09-19.html#how-is-money-created

    Unfortunately the author of the video concludes by going off in the wrong direction. It's not a criminal cartel that controls the sovereignty of nations and nowadays banks can't fail because they are fully backed by the central bank.
     
    Last edited: Aug 8, 2021
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  4. mmm....shiney!

    mmm....shiney! Administrator Staff Member Silver Stacker

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    So if banks can’t go bust, from an investor’s point of view they make a sound buying opportunity. Naturally, you’d have to consider what the fair value is per share though.

    Anyone with any opinion on what they’re worth from that perspective!

    Do the Big4 offer corporate bonds for retail investors?
     
    Last edited: Aug 8, 2021
  5. 66rounds

    66rounds Well-Known Member Silver Stacker

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    John Titus is a lawyer by trade and is currently suing the Federal Reserve. You should watch his other videos, they are an abundance of information.
     
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  6. mmm....shiney!

    mmm....shiney! Administrator Staff Member Silver Stacker

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    Lehman Brothers was an investment bank. We're talking about commercial banks.
     
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  7. mmm....shiney!

    mmm....shiney! Administrator Staff Member Silver Stacker

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    On the topic of Lehman Bros, there has been a shift in regulatory/political opinion nowadays. Lehman Bros was allowed to fail.

    https://www.investopedia.com/insights/too-big-fail-banks-where-are-they-now/
     
  8. leo25

    leo25 Well-Known Member Silver Stacker

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    Yep, Lehman Brothers failing was a choice. There was no fundamental reason why it had to fail. My guess is Richard Fuld wasn't playing ball and became a sacrificial lamb.

    From the looks of it, 2008 was just as orchestrated as 1929.
     
  9. alor

    alor Well-Known Member Silver Stacker

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    the borrower refused to pay up, hence it failed misserably
    it was by design
    remember that banks could not trust each other at that time
    one party borrow all that is available without the need and keep it for their plan...
    the rest is his-story
     
  10. TreasureHunter

    TreasureHunter Well-Known Member

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    No much different from crypto: also made out of thin air!

    Just that it's trendy cool and people like to fool themselves.

    If they are sold a good story that brings hope, they will hook onto it. It's like soap operas.
     
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  11. alor

    alor Well-Known Member Silver Stacker

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    extreem-ordinary popular delusions and the madness of crowds
     

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