Devising the best taxation

That would do the trick!- Or consumer debt. For the first time in my life, I carried over part of my credit card bill to this month -- that means a vendor somewhere has $300 that didn't exist a month ago. (That will disappear, though, when I pay it all off this month.)

---

If it's truly good and powerful, it deserves to engender a thousand misunderstandings. -- Ben Ratcliffe

That's what I get paid for!Added by edit:In retrospect, I may not have been very clear, either.Edited by Chiroptera, : No reason given.

---

If it's truly good and powerful, it deserves to engender a thousand misunderstandings. -- Ben Ratcliffe

So the next war that comes up we will tell the folk to just hold on until we raise the funds to fight it ...or ...Congress can just print up an unlimited supply of phuny money.Sounds like a plan to me. LOL

---

Immigration has been a problem Since 1607!

No, you were clear. Even with the negatives (I did get that part). I was just an idiot and guesstimated the math. The spanking was necessary.On the other hand, you did say you get paid for "that". You weren't very clear regarding what that was... spanking, math, both? Are you a dominatrix mathematician? Perhaps your salary would be the best clue. Heheheh.

---

h
"Civilized men are more discourteous than savages because they know they can be impolite without having their skulls split, as a general thing." - Robert E. Howard

I am almost positive that bans cannot lend out imaginary money.The money they pay have to come from their reserves, or else they must cover the loans by borrowing money from other actors, before paying them out.If they can just make up money, then why don't we see a lot of banks competing on interest rates? Why are we seeing a crisis because so many people are defaulting their loans? If the money is imaginary, then the bank can just write of bad accounts with no loss.

They must keep a certain percentage of their outstanding loans on hand (or deposited with the Federal Reserve Bank in their district). That percentage is determined by the Federal Reserve. If, for example, the Federal Reserve requires that you have on hand (or deposited) the cash to cover 25% of outstanding loans, and if you have $100,000 deposited with the Federal Reserve, then you can lend up to $400,000.This is what makes bank panics so dangerous, and why so many banks failed during the depression when there were no requirements at all. If the bank has loaned out $400,000, which it acquires though, say, savings deposits, and it has only $100,000 on hand, and suddenly all the savings depositors want their money back all at once, the bank is short $300,000 and goes bankrupt. This is what FDIC (in the U.S.) is for, to make sure all the depositors get their money back if the bank goes bankrupt.Edited by Chiroptera, : typos

---

If it's truly good and powerful, it deserves to engender a thousand misunderstandings. -- Ben Ratcliffe

I think we are in agreement.Before the bank can loan you any money it has to get the money from somewhere, the bank doesn't issue loans with funds created out of thin air, so no money is created by banks giving out loans. (the federal or licensed issuers of currencies not withstanding)How many funds the bank has to have as security is another issue.

I guess I don't understand your post.People deposit a total of $100,000 in a bank. The bank then loans out $400,000. To me, that says the bank has created $300,000 -- out of "thin air" as you put it.Am I not understanding what you are saying?

---

If it's truly good and powerful, it deserves to engender a thousand misunderstandings. -- Ben Ratcliffe

Lets make a scenario like you describe:
I have 0 $I start a bank, and people deposit 100 dollars in my bank.I then give out loans to the amount of $400. Since I can create money out of thin air, I still have the $100 people have deposited.There is a financial crisis and the people want their money back. I take the $100 and give them back, I then call in all the loans, and - unluckily for me, only 25% pay back, so now I have $100.Now how I think it is:I start a bank, people deposit $100, and I have people wanting to loan $400. So I go on the money market at take out loans for $300, which I then pay out in loans. I now have $30 in debts, my customers have $100 in their accounts, and have customers owing me $400.This won't do, because if people want their money bank, the bank is without funds, so I actually have to hold back some fund, so that I can cover if some of the people I owe money (the ones making the deposits) want their money back, just like you described.Am I misunderstanding something fundamental here? Which of th two scenarios is what you describe?

Pretty much the first one. Except lets modify it.Our economy has 10 people in it. Bill runs the mint, so he prints off $1000 and gives everyone $100. Sally runs the bank, and everyone deposits their money with her. So the bank is holding $1000, but everyone gets to write checks on the money in their accounts, so there is $1000 in circulation.Now everyone (including Sally herself) decides to borrow $400. Sally just adds the $400 to each person's account. If everyone just writes checks, then each person has an account containing $400 and their original $100, so each person has $500 to spend. In other words, there is actually $5000 in circulation (I made an error in my earlier example). So, Sally created, out of thin air if you will, $4000.Now suppose that when Tom, Mary, Edith, and Larry take out their loans, they decide to each take $250 in cash and $150 credited to their accounts. So each person still has $500 - the $400 in loan and their original $100 -- except it is all on deposit in their accounts, except for Tom, Mary, Edith, and Larry, who have $250 in their accounts $250 in cash.But Sally now has no cash on hand. So when Greta decides to withdraw her money, Sally tries to stall -- to no avail, Greta demands cash now! So now Sally goes bankrupt. She can try to stall until someone makes their loan payments, but if the payments aren't enough to cover Greta's $100, or if too many people default, then that's it for Sally. If no one buys the loans, then suddenly $4000 disappears, and only Tom, Mary, Edith, and Larry have any money left.Real life is a bit more complicated than this, but this is essentially how it works.Edited by Chiroptera, : No reason given.

---

If it's truly good and powerful, it deserves to engender a thousand misunderstandings. -- Ben Ratcliffe