A Collection of Facts About The Economy to Trigger Your Cognitive Dissonance & Disbelief: Reserve Ratio, How Money is Created, Global Wealth Statistics and How People Go Broke

in informationwar •  19 days ago

I'm writing this post after a conversation I had with @crypto.piotr because these are some extremely important information about the global economy that nobody seems to know. Not knowing the facts I mention here is the equivalent of not knowing that the planet is a globe. If you want to be a monk, you don't have to know these things. If you ant to live like a 21st century equivalent of a serf, you can skip this knowledge. If not yo need o know these stuff or you can easily end up making some terrible economic decisions. I'll start with something light.

Reserve Requirement

The reserve requirement (or cash reserve ratio) is a central bank regulation employed by most, but not all, of the world's central banks, that sets the minimum amount of reserves that must be held by a commercial bank. The minimum reserve is generally determined by the central bank to be no less than a specified percentage of the amount of deposit liabilities the commercial bank owes to its customers. The commercial bank's reserves normally consist of cash owned by the bank and stored physically in the bank vault (vault cash), plus the amount of the commercial bank's balance in that bank's account with the central bank.

The required reserve ratio is sometimes used as a tool in monetary policy, influencing the country's borrowing and interest rates by changing the amount of funds available for banks to make loans with. Western central banks rarely increase the reserve requirements because it would cause immediate liquidity problems for banks with low excess reserves; they generally prefer to use open market operations (buying and selling government-issued bonds) to implement their monetary policy. The People's Bank of China uses changes in reserve requirements as an inflation-fighting tool, and raised the reserve requirement ten times in 2007 and eleven times since the beginning of 2010.

What this basically boils down to is banks loaning out money that doesn't exist. While the economy is booming, this is actually a great thing. Let's take some random numbers. Banks loan money at 5% interest and pay 4% interest for deposits. If a bank had 100 million USD in deposits they make 1 million USD for themselves from loans. Eurozone has a reserve requirement of 1% which means the bank can lend out 10 Billion USD on 100 million worth deposits and collect 500 million USD in interest and just pay 4 million USD to those who deposit the money resulting in 49,600% revenue for the bank.

This is hypothetical scenario and reality has more moving parts. But anything close to 49,600% revenue is a something huge.

Now Something Serious: Federal Reserve

  • The Federal Reserve is a private institution. It is owned by the 12 regional Federal Reserve banks, which are each in turn owned by a combination of regional banks, commercial banks, foreign banks, and miscellaneous individuals who have inherited pieces passed down through generations. (Rockefellers, Rothschilds, etc.)
  • The Federal Reserve holds a monopoly on the issuance of currency in the USA. In essence, this is the power to borrow an infinite amount of money at 0%. The dollar bill in your pocket is a 0% loan to the Federal Reserve. The Federal Reserve then uses these 0% loans to purchase income-producing assets. Before 2008, the assets purchased were primarily Treasury debt, which is backed by the taxation power of the US Government. In other words, we are exchanging the property rights to our valuable assets (land, labor, entrepreneurship) for little slips of green paper to buy trinkets with. The government can then tax these valuable assets to pay for our excess. The more we spend, the more the Fed owns.
  • If all money created is debt and counts as principal, where does the money come from to pay interest on this debt? It comes from the money that gets printed in the future. This is why inflation is a natural result of our current monetary system.
  • Much of the Fed's activity is not made public because of the use of off-balance sheet vehicles.

U.S. Government Actually Has The Power To Issue Debt-Free Money



U.S. government has the power under the U.S. Constitution to issue debt-free money and JFK issued such money and some of it is still in circulation. The founding fathers were against the central banks and never wished to see and abomination like FED which has massively eroded the value of USD which was supposed to be pegged to 1/20th of an ounce of gold. If an ounce of gold is over $20 you have paid an invisible tax with the erosion of the value of your funds.

100 Reasons To Shut It Down Forever

I'll just quote some of the interesting reason which you probably didn't see coming. Click on the link for a full set of reasons.)

  • __According to an official government report, the Federal Reserve made 16.1 trillion dollars in secret loans to the big banks during the last financial crisis. The Federal Reserve also paid those big banks $659.4 million in “fees” to help “administer” those secret loans.

__

  • #27 Within 20 years of the creation of the Federal Reserve, the U.S. economy was plunged into the Great Depression. The Federal Reserve created the conditions that caused the stock market crash of 1929, and even Ben Bernanke admits that the response by the Fed to that crisis made the Great Depression even worse than it should have been.

  • During the quantitative easing era, the value of the financial securities that the Fed has accumulated is greater than the total amount of publicly held debt that the U.S. government accumulated from the presidency of George Washington through the end of the presidency of Bill Clinton.

  • The Federal Reserve is supposed to look out for the health of all U.S. banks, but the truth is that they only seem to be concerned about the big ones. In 1985, there were more than 18,000 banks in the United States. Today, there are only 6,891 left. #53 The five largest banks now account for 42 percent of all loans in the United States.

  • When the U.S. government decides that it wants to spend another billion dollars that it does not have, it does not print up a billion dollars. Rather, the U.S. government creates a bunch of U.S. Treasury bonds (debt) and takes them over to the Federal Reserve. The Federal Reserve creates a billion dollars out of thin air and exchanges them for the U.S. Treasury bonds.

Read How Dollars Are Actually Created

Here are few more infographs to expand your understanding regarding the global economic situation. I hope I'm not overloading you with information. Even if I am, just take you time to gothrough all the links. If you want to deal with the economy, you need to know what it is.

Few Statistics on Wealth



I won't give much credit to some YouTuber talking about finance because most of them are wannabe idiots or scammers. But Alex Becker is someone with a real business who has gone through the real process of being n entrepreneur. He is also and introvert (INTP to be exact) and despite having some aggressive language he is simply the most authentic and straight YouTuber talking about finances I've seen upto this day. So Check out his video:

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A few months ago I wrote a post about it, a bit conspiranoic, I must say. According to my deductions, we are living an era in which the economy is the most important for society, everything revolves around the market, science, art, religion, everything has a commercial connotation, so, I think the best way to study and understand the current reality, part of an analysis of the economic issue. Understanding the economy, and how it works, can give us a very clear understanding of the situation, and part of the truth, is in what you say here.

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I'd say there is an even deeper layer of memetics. What I'm referring to is what is discussed in Metal Gear Solid 2: Sons of Liberty and Ghost in the Shell: Stand Alone Complex. There is no grand scheme behind how people's biology work. It's just genetics. You can influence genetics. But nobody can control it. I've repeatedly stated the impossibility of any global conspiracy. What we actually have is constant attempts at global conspiracy. The golden age was supposedly when wisdom was treated as the highest ide and the central root/trunk of the society that hold the branches. Later it because leaders/heroes/warriors etc. Obviously these things included some level of violence. We are sort of valuing money as the centerpiece of society but we are merely transitioning to something worse. We are transitioning to destruction of value itself in an atlas Shrugged-esque future. This is far worse than violence or vanity and all of these are in the memetics of the society.

Here are 2 clip from a PS2 game from 2001


Here is about GitS:



Several shootings have been associated with Salinger's novel, including Robert John Bardo's murder of Rebecca Schaeffer and John Hinckley Jr.'s assassination attempt on Ronald Reagan. Additionally, after fatally shooting John Lennon, Mark David Chapman was arrested with a copy of the book that he had purchased that same day, inside of which he had written: "To Holden Caulfield, From Holden Caulfield, This is my statement".

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Pretty interesting...I knew the game, it's quite famous, but I've never played it. The conversations that the characters have are very interesting, much more elaborate than I expected, however, it seems to me that, if I understood correctly, what the Patriots do is not at all different from the financial control that exists today, where through the control of money various institutions can, in turn, create an economic "context", which translates into the way in which society is organized.

When I said a bit conspiranoic, I said it because in the post that I did I raise that perspective, although I finally explained that the idea (information if you prefer) is what governs us, similar to what is said in MGS videos. So if we want to see a change in society, then the answer lies in what we decide to believe as true and what we decide to defend.

On the other hand, it is quite interesting the clown issue, I remember seeing several of those videos a while ago, but did not know the origin of the matter. It's curious how everything is related.

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hi @vieira

I will follow you closely. Hope you didn't give up on posting (your last post is almost 3 weeks old)

Yours
Piotr

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Yeah, I've been a little disconnected because of Christmas and all that, but in a couple of days I'll post again for sure. Thanks for worrying.

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hi @vieira

Thx for sharing that link with us and your mature comment. Will check your old post before bedtime.

Yours
Piotr

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This actually gets worse when you start to consider that the US is creating money at a much faster rate than what they produce. Add in the Cantillon effects and now you have an economy where people are struggling to make living wages.

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hi @snoreball, @vimukthi

Great comment. Just one question: US can print as much as they want and cause inflation (like any other country could). But in case of US this inflation would hit entire world, so in a way US is quite safe because (knowing reality) many other countries will do everything to avoid US economy collapsing. Am I right?

Basically what Im trying to say, is that it US do not have to worry so much because they are still in charge of international used currency, so their problem = everyones problem.

Yours
Piotr

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You are correct. All the other currencies used to be pegged to USD during the time the gold standard was still a thing. But Nixon changed this and you can no longer redeem gold for USD. But all the other countries just left their currencies pegged to USD because during the mid 20th century USA had more gold than rest of the world combined and their economic dominance was unchallenged.

When it comes to fiat currency, USA has the least to worry about.

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US isn't safe from an economic collapse. Furthermore, we are in a globalized world. Your doomsday scenario can be applied to other superpowers like China, Germany, Russia and UK.

A world collapse can start from anywhere. And if we can, we will try to bail them out.

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I dont think we ever had a chance to get to know each other. Great comment @snoreball

Have a great upcoming weekend
Piotr

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We also have our incentive systems messed up. People are more focused on the short term instead of the long term when it comes to not just economics but everything in life. The economic activities have turned into a charade of hookups.

It is The Creature From Jekyll Island...

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Thank you!

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