The federal reserve creates money from nowhere by writing a check and it being deposited. Then the government pays a government employee $100. and this $100 is deposited in the employee’s bank.
He then says based on that $100 that the bank can loan up to $900 at 10% reserve. This seems somewhat simplistic as it assumes the bank itself can just type numbers in to create money to loan out.. Rather, I was pretty certain that arriving at the $900 limit would require some (infinite) number of iterations .. 90, + 81, + 73, etc. It is my understanding that the bank can’t simply loan $900, but must go through the motions of loaning 90% of what it has each time…
I would like to know also. In addition, about the historical correctness and economic/financial analysis of central banking in his book, “The Creature From Jekyll Island”. I’ve read some poor rewiews at amazon.com that question the books overall integrity.
Right.. the book is very “fringie”. I’ll buy the Lusitania being intentionally put in harm’s way on purpose and some of that stuff, but some of that Rothschild stuff is not the kind of stuff you want to be heard saying out loud from a respectability point of view.
The Rothschild stuff afaik is true. It may be fringie, but I have never seen it challenged as being untruthful.
The statists lie constantly, and don’t care one whit for self-censorship. I don’t think we should promulgate any information we know to be false, or even suspect may be false, but if we’re going to self-censor, then we’re making our job that much more difficult.
I haven’t read the book and thus I don’t recommend it. I usually recommend something by Rothbard on money.
He’s incorrect. You’re right, it would require an infinite number of iterations to get to the full 10x multiplication factor. Effectively, however, the Federal Reserve system of interbank loans approximates that 10x pretty well since the majority of the multiplication occurs up front and the rest is just asymptotical “in the limit.”
You’ve obviously never read that book, or didn’t understand it as Griffin NEVER makes that claim in the book; he goes into long detail about the correct way the process unfolds, which you have already identified.
And by the way, if you (or anyone) can disprove anything ‘fringy’ in the book, I’d like to see you try.
The book is fantastic. I’d just as easily recommend it to someone as I would The Mystery Of Banking which is saying a lot*.*
The original post is in response to what he says in his talk that I listened to. “They’re a little concerned because it was only $100, but the banker says don’t worry, we can loan you up to $900 on that.” I was explicit when I said it was in his lecture. And this is as I said, either wrong or over simplified depending on the audience. Either way it implies that things work in a way that’s not quite accurate.
And when I say fringie I’m mostly talking about the tone and the likely response of newcomers to the ideas and that all this at once would be overwhelming. Also the speech he gives and the intro on the audio contains fancy drama like “You’ve now entered the reality zone, once you start down this path you can’t go back…” and later using the terms New World Order. I believe that most half way intelligent people are conditioned to tune that type of marketing out and write it off as quackery. I’m commenting on the presentation. I Am reading the book, and much of it is quite good, and I assure you that you can let the hair on the back of your neck lie flat again.
Because he has been doing investigative journalism on the New World Order for decades. He has a particular constituency. What Alex Jones would call people who are “awake”.
Governments all over the world use the term NWO now. Referencing it has become even more powerful because people can conceptualize it in the form of the UN, IMF, World Bank, G20, Copenhagen Climate Summit etc now.
Good point - NWO can be defined in real, concrete terms and described as very scary considering how much less say “we the people” have in their rules and orders than even the federal govt.
You’re right. A bank doesn’t take $100 and lend $900. It takes $100 and lends $90. Some of that $90 is then put in a bank, and a portion of that is lent out.
Any Austrian (or any supporter of the free market for that matter) who does not consider himself a ‘conspiracy theorist’ is willfully cutting out half of the picture.
Austrian Economics, Anarcho-Capitalism and conspiracies theories are indelibly intertwined; trying to separate them can only hamper your analysis of the world.
Saying being a believer in the free market means you have to be a conspiracy theorist is like saying believing in natural selection means you have to believe in eugenics.
You pretty much asserted that anyone who is a free marketeer/anarcho-capitalist must believe in conspiracy theories in order to have a complete worldview. Plus, I’m pretty sure Mises, Hayek, Boettke, Kinsella, Reisman, Block, Kirzner, Boehm-Bawerk and Menger were Austrians, and none of them were conspiracy theorists.
Natural selection proposes that organisms with superior hereditary characteristics will spread these characteristics on to their descendants due to them, rather than organism with characteristics inferior as survival traits, living on. Eugenics proposes social engineering whereby desirable characteristics are idenitifed and selected for in an attempt to improve the survival rate and utility of the human species. Francis Galton published one of the earliest eugenicist books, and gave thanks to Darwin for his theory.