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abitare (99.38)

Corrupt Banking System - How Money is Created?

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February 05, 2009 – Comments (13) | RELATED TICKERS: UDN , GLD

Surprize Quiz!

That is right Fools, it is quiz time!

The reason for todays quiz is help fight the constant stream of misinformation on the US Depression. If you are investing going forward it might help to know a little about the US Depression, right?

So lets take 5-10 minutes to demonstrate our knowledge on the US Depression to ourselves and the world! WE ARE FOOLS, but we know what the Great Depression was about! Right?

The following quiz was created by Vox Day, who has run a series of questions on the Depression.

Powered By ProProfs: Create A Quiz

Post your score on the comments. Don't lie, I am watching you from your webcam. j/k...OR AM I! no, j/k...BUT MAYBE NOT! no, seriously post your score, we won't laugh...or maybe we will!

Now that we feel dumb lets take ten minutes to get smarter!

The following video can help you answer the following questions:

1. Why are the biggest buildings in any US cities banks?

2. Why is there a bank every half mile in the US instead of some other productive business?

3. Why does Ron Paul wants to end the Central Banking system and return to some form of gold standard?

4. Why does Mish Shedlock wants to end fractionial reserve lending? He says it is fraud...why?

5. How is money created?

Ten minutes to answer these questions: Part 2 How is money created?

FYI - This video has been seen 200k times with a 5 star rating.  Now who says economics is boring?

13 Comments – Post Your Own

#1) On February 05, 2009 at 5:40 PM, abitare (99.38) wrote:

I scored a 72% and got a certificate!

 

 

 

 

But it was the second time I have taken the quiz!

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#2) On February 05, 2009 at 5:58 PM, 100ozRound (30.42) wrote:

60% but I had burritos for lunch

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#3) On February 05, 2009 at 6:22 PM, icesword2 (50.91) wrote:

48% but I skipped the video, and I misspelled one of the write-ins.

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#4) On February 05, 2009 at 6:29 PM, Lenokis (< 20) wrote:

nice post. as usual. I got a 72%. I did not have burritos for lunch.

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#5) On February 05, 2009 at 6:44 PM, abitare (99.38) wrote:

Actually, there is an outstanding series on PBS about the Depression. It is definately worth your time, the correlation to today is amazing.

1929 Stock Market Crash

 Part 1 and Part 2

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#6) On February 05, 2009 at 6:45 PM, abitare (99.38) wrote:

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#7) On February 05, 2009 at 8:46 PM, anchak (99.83) wrote:

I scored 88% ....and I made a lot fo guesses on Keynesian stuff - because I just know the generalist theory

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#8) On February 05, 2009 at 10:20 PM, abitarePERFECT (29.75) wrote:

FYI -Jim Rogers: Currency Crisis is Coming this Year (05.02.09)

 

 

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#9) On February 05, 2009 at 10:20 PM, abitarePERFECT (29.75) wrote:

FYI -Jim Rogers: Currency Crisis is Coming this Year (05.02.09)

 

 

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#10) On February 05, 2009 at 10:42 PM, Option1307 (30.51) wrote:

Sh!t, 68%. But hey, at least thats above average according to the test. Woo hoo!

 I guess we all better get studying our past...

Thanks for another good post.

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#11) On February 05, 2009 at 10:56 PM, briyan (31.55) wrote:

I felt like I had missed something, I just went right for the test, I got 44%.   Was I supposed to watch a video first?

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#12) On February 06, 2009 at 12:34 AM, angusthermopylae (41.33) wrote:

abitare,

I watched the video, and agree with pretty much everything it presents; as far as I can tell, it's all true.

I would, though, extrapolate a few things:

--Runs on banks:  From the video, you can see why everyone is so afraid of runs on banks.  If people start pulling out their money, then the whole "ring of debt" starts to collapse...at least, at that particular bank.  If the cash is pulled out, the bank falls even further below its fractional reserve requirements, and the Feds move in.  It's happened more since Jan 2008 than all of 2000-2007.

--"Principal payments eliminate the debt"  a.k.a "time is money":  The video alludes to, but doesn't explain, that the "arbitrary" value of the money is backed by the workers/producers in the country.  For example, Farmer Joe takes out a $1 million loan for this year's corn crops.  That's seed, fuel, fertilizer, equipment, and wages to his workers/family to bring in the next crop.

    By harvest time, Farmer Joe has to produce $1 million in crops, plus interest.  Again---Joe has to produce $1 million in crops and an additional amount to pay the interest.   That's not created out of thin air--it's a growing season's worth of blood, sweat, and tears.  When the money is put in the bank to pay off the loan, it is being paid back by Joe's work--he has put in $1 million plus interest in work.

 That's why the system doesn't just collapse at the drop of a hat.  It's backed by the productivity of the workers.  That's why the old phrase "time is money" is so important:  It's not that your time is so important; rather, it's that your productive time produces the money.

Lots of other ways to approach this...good video.

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#13) On February 06, 2009 at 2:24 PM, Harold71 (28.80) wrote:

"When the money is put in the bank to pay off the loan, it is being paid back by Joe's work--he has put in $1 million plus interest in work."

Two comments, the first being more important:

Where does the interest come from that Joe needs to pay to the bank?

It appears to come from other people who are also borrowing money.  Every dollar that exists is borrowed out by someone.  That's quite an operation.  When you take out a loan, you are depending on everyone else to take out a loan.  Otherwise, there would be no chance of paying off your loan PLUS interest.  If everyone paid off their debt, the system would theoretically collapse.  (It's also theoretically impossible for everyone to pay off their debt.)

Second point: It is certainly wise that you qualified your statement that "productive" time produces money.  The housing bubble was great for producing gobs of new money from debt, but the problem is that houses are not wealth PRODUCING assets.  The money (far too much) was spent, and no similar income stream exists.  Obviously this is one small part of the fundamental problem in the crisis.

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