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1-a
https://www.sciencedirect.com/science/article/pii/S1057521915001477
Professor Richard A Werner
A lost century in economics: Three theories of banking and the conclusive evidence
A Commentary
Stating that the "financial intermediary theory" is the current most accepted explanation of bank lending.
https://www.sciencedirect.com/science/article/pii/S1057521915001477
Professor Richard A Werner
A lost century in economics: Three theories of banking and the conclusive evidence
A Commentary
Stating that the "financial intermediary theory" is the current most accepted explanation of bank lending.
2- a
Multiple Deposit Expansion: This is an ext or root of the financial intermediary idea
Each bank is an intermediary but collectively banks are able to create money through MULTIPLE DEPOSIT EXPANSION - unclear how this occurs
Multiple Deposit Expansion: This is an ext or root of the financial intermediary idea
Each bank is an intermediary but collectively banks are able to create money through MULTIPLE DEPOSIT EXPANSION - unclear how this occurs
3-a
If individually banks can't create money, then how does it "magically" create money as a collective? There is no attempt to explain this.
If individually banks can't create money, then how does it "magically" create money as a collective? There is no attempt to explain this.
4-a
This paper is attempting to tackle this question. Do banks lend existing money or newly created money.
Are banks aggregators of deposits, or do they magically create new money like Central Banks?
This paper is attempting to tackle this question. Do banks lend existing money or newly created money.
Are banks aggregators of deposits, or do they magically create new money like Central Banks?
5-a
Historically banks did issue their own fiat, redeemable at a specific bank
It was non fungible w/ any other bank's fiat. They held Gold & Silver as collateral.
Historically banks did issue their own fiat, redeemable at a specific bank
It was non fungible w/ any other bank's fiat. They held Gold & Silver as collateral.
6-a
The "financial intermediation" theory says that banks & nonbanks have the same power.
They can collect funds & then lend out those same funds.
No magic is happening. We know this to be untrue.
The "financial intermediation" theory says that banks & nonbanks have the same power.
They can collect funds & then lend out those same funds.
No magic is happening. We know this to be untrue.
7-a
Prof Werner should have provided some examples of economists or notables who touted which theory.
Perhaps schools of economic thought, such as the Austrian, Chicago, Keynesian or other.
Prof Werner should have provided some examples of economists or notables who touted which theory.
Perhaps schools of economic thought, such as the Austrian, Chicago, Keynesian or other.
8-a
Why have economists not supported the proper theory of money creation, instead pushing false theories? If this premise is true, that is quite a mystery.
Was it intentional or ignorant? If so, how could that be? This isn't metaphysics, it is a working mechanical system.
Why have economists not supported the proper theory of money creation, instead pushing false theories? If this premise is true, that is quite a mystery.
Was it intentional or ignorant? If so, how could that be? This isn't metaphysics, it is a working mechanical system.
9-a
Admission that financial intermediation is the dominant held belief
Banks borrow short & lend long. I assume this also means that banks borrow from the FED & lend to customers
If this is NOT the correct theory, why does economics teach this? What is the counter argument?
Admission that financial intermediation is the dominant held belief
Banks borrow short & lend long. I assume this also means that banks borrow from the FED & lend to customers
If this is NOT the correct theory, why does economics teach this? What is the counter argument?
10-a
This is the 1% reserve requirement model.
Banks take $100 in deposits & lend out $99, keep $1 at the FED as reserve.
This is what we have all been taught. Stated to be untrue by Prof Werner.
This is the 1% reserve requirement model.
Banks take $100 in deposits & lend out $99, keep $1 at the FED as reserve.
This is what we have all been taught. Stated to be untrue by Prof Werner.
11-a
Names names of notable economists who subscribe to the intermediary theory of banking.
Keynes, Ben Bernanke, Von Mises
Names names of notable economists who subscribe to the intermediary theory of banking.
Keynes, Ben Bernanke, Von Mises
12-a
If someone who used to run the FED, like Ben Bernanke doesn't believe Banks can create money, but are financial intermediaries, who take customer deposits & loan them out, what are we plebeians to think?
If someone who used to run the FED, like Ben Bernanke doesn't believe Banks can create money, but are financial intermediaries, who take customer deposits & loan them out, what are we plebeians to think?
13-a
Is Bernanke lying or ignorant (which makes no sense)..
Can the very man who drove the race car, not understand the mechanics of the race car?
Raises more questions..
Is Bernanke lying or ignorant (which makes no sense)..
Can the very man who drove the race car, not understand the mechanics of the race car?
Raises more questions..
14-a
Refers here to an "LL Schedule", but I believe this is the first time I'm seeing this. Should've clarified what this means.
Even Nobel Prize winning Keynesian economist Paul Krugman believes banks are merely intermediaries & do not create money.
Refers here to an "LL Schedule", but I believe this is the first time I'm seeing this. Should've clarified what this means.
Even Nobel Prize winning Keynesian economist Paul Krugman believes banks are merely intermediaries & do not create money.
15-a
Hayek was apparently a believer in fractional reserve banking theory, whereby banks would lend out 90% of every $1 deposited at the bank.
This is theory (to me) doesn't create money, but is a distribution process, like the first theory.
Hayek was apparently a believer in fractional reserve banking theory, whereby banks would lend out 90% of every $1 deposited at the bank.
This is theory (to me) doesn't create money, but is a distribution process, like the first theory.
16-a
Fractional reserve banking believes that through a COLLECTIVE PROCESS, money is created (I don't see it however).
Strange that a core mechanical function of a bank is unknown & being debated.
Debated by the top economists & Fed chairman of our time.
Makes no sense.
Fractional reserve banking believes that through a COLLECTIVE PROCESS, money is created (I don't see it however).
Strange that a core mechanical function of a bank is unknown & being debated.
Debated by the top economists & Fed chairman of our time.
Makes no sense.
17-a
Paul Samuelson is said to believe in Fractional Reserve Banking. States that $1000 deposit can create $4000 in new money.
This is not explained exactly where this money comes from or how this magic is done.
Paul Samuelson is said to believe in Fractional Reserve Banking. States that $1000 deposit can create $4000 in new money.
This is not explained exactly where this money comes from or how this magic is done.
18-a
This also contradicts other fractional reserve banking ideas, namely that a $1000 deposit would create $800 in loans at the 20% reserve requirement scenario.
In the former, the $1000 became $5000.
This also contradicts other fractional reserve banking ideas, namely that a $1000 deposit would create $800 in loans at the 20% reserve requirement scenario.
In the former, the $1000 became $5000.
19-a
So even with fractional reserve banking theories, there seems to be disagreement as to the exact mechanics.
How this multiplier effect works isn't explained. Many jumps in conclusions that I do not buy.
So even with fractional reserve banking theories, there seems to be disagreement as to the exact mechanics.
How this multiplier effect works isn't explained. Many jumps in conclusions that I do not buy.
20-a
In this form of Fractional Reserve Banking @20% reserves It appears (to me) to be another form of distributed lending.
No NEW money is created through this process with one bank or via an aggregate of banks.
In this form of Fractional Reserve Banking @20% reserves It appears (to me) to be another form of distributed lending.
No NEW money is created through this process with one bank or via an aggregate of banks.
21-a
Deposit 1 - $1000
20% Reserves - $200
Loan - $800
Deposit 2 - $800
20% Reserves - $160
Loan - $640
Deposit 3 - $640
20% Reserves - $128
Loan - $512
Total of Aggregate: Reserves = $200+$160+128
Total Net Loan - $512
Total: $1000
Deposit 1 - $1000
20% Reserves - $200
Loan - $800
Deposit 2 - $800
20% Reserves - $160
Loan - $640
Deposit 3 - $640
20% Reserves - $128
Loan - $512
Total of Aggregate: Reserves = $200+$160+128
Total Net Loan - $512
Total: $1000
22-a
The same as the original Deposit.
No new money was created.
* Note - we do not count the prior loans for $800 & $640, since that would be double counting.
The same as the original Deposit.
No new money was created.
* Note - we do not count the prior loans for $800 & $640, since that would be double counting.
23-a
In the Fractional Reserve Theory that $1000 would create $4000, total of $5000, net $4000 of new money is created, but no explanation as to where this came from.
Whether the banks created this or if it's from the FED.
In the Fractional Reserve Theory that $1000 would create $4000, total of $5000, net $4000 of new money is created, but no explanation as to where this came from.
Whether the banks created this or if it's from the FED.
24-a
I must be missing something, I do not see any NEW money being created through the Fractional Reserve Process.
From a single bank or collectively in aggregate.
I must be missing something, I do not see any NEW money being created through the Fractional Reserve Process.
From a single bank or collectively in aggregate.
25-a
This is strange. Different theories of banking is taught at the undergraduate & post graduate levels?
(Continued in NEXT Thread Set Starting at 26-b)
This is strange. Different theories of banking is taught at the undergraduate & post graduate levels?
(Continued in NEXT Thread Set Starting at 26-b)
