But I did, Grim.

>>I find it incomprehensible that a gentleman of your obvious intellect didn't bother to scroll down to the bottom of your own wikipedia link<<

And what did I find?

>>no new money was physically created in addition to the initial $100 deposit<<

Which has been my point all along.

I have been trying to explain, to Fickle Pickle and others, that Banks cannot create money “out of thin air” whenever they feel like it. There is always an obligation to repay.

I have not been denying “Fractional Banking”, although I think it is a misleading term.

“The requirement to maintain prudent reserves” says the same thing.

I fully understand that there is a chain of transactions that expands the economy through the use of debt instruments, underpinned by reserve requirements.

But at one end of that chain there is a real asset deposited (that $100), and at the other, there is government policy.

Ultimately, if the debt isn't available from the government's coffers – that is, created by the government through Treasury Bonds, Bills etc. that borrow against future tax revenues – it won't be available at the Bank counter.

That's what monetary policy is all about.

Fickle Pickle asserts:

>>The problem is that some (most) of the new credit money is not actually backed by a real asset. It is backed by other credit money.<<

If you mean “it is backed by money the government has borrowed from us”, then yes, we can agree.

Banks cannot create it. The lending capacity has been created at government level.

Once and for all, that wretched $100 does not turn into $357 of new cash. But it can be turned into $357 of obligations to repay.

So if we can now get past the emotion-laden rhetoric of “evil Banks who create money out of thin air”, we can move on to addressing the real issue.

Governments' monetary policies.

This is becoming like arguing about how many angels can dance on the head of a pin.

If we keep firmly in our minds that money has no inherent value of its own, then it will make things much simpler. When we talk about creating money out of thin air, we essentially mean creating nothing out of nothing.

If any of us were to suddenly find ourselves on our own in the middle do the Sahara Desert, a long way from any water or food sitting on top of a large pile of bank notes, we would very quickly understand that point.

If Pericles won't acknowledge that money is created out of thin air by banks, then quite a few other authoritative sources cited in this thread have. This includes that 1969 US court ruling in favour of Jerome Daly, based on the admission of a Bank Manager, which has not been overturned and John Kenneth Galbraith.

The real issue, once again, Pericles, is whether Governments or private secretive banking cartels should have the right to create money out of thin air so that the rest of us can trade goods and services which have real tangible value.

---

I have shown above that when Governments do their economies prosper.

No, Pericles, printing money during the Civil War did not indebt the US to future generations as you wrongly assert. Where is your evidence to the contrary? That certainly would have been the case if Lincoln had done what the bankers wanted him to do and borrowed from them (and that is almost certainly why he was assassinated as I have shown).

Instead printing money allowed productivity to occur that otherwise would not have. It was inflationary to a degree, but that was a very small price to pay considering the circumstances.

The experience of Lincoln getting the US through the US Civil War and massively expanding the US's infrastructure is good reason to believe that Governments creating money as a service, as James Robertson advocates, can work.

I am perfectly willing to concede that "money" has no inherent value, daggett.

>>If any of us were to suddenly find ourselves on our own in the middle do the Sahara Desert, a long way from any water or food sitting on top of a large pile of bank notes, we would very quickly understand that point.<<

I'm equally sure you would freely accept that precisely the same observation could be made if you were sitting on a pile of gold ingots.

So we can forget that little sidetrack.

And you do seem to have some odd heroes in your corner.

>>1969 US court ruling in favour of Jerome Daly<<

Jerome Daly was a disbarred lawyer and a convicted tax cheat.

(The official record of his disbarment hearing is useful background. It makes great reading, although unfortunately I don't have a URL. "...respondent has persistently and perniciously used his position... to subvert the processes of justice" Priceless.)

One of the grounds he put forward for failing to pay was that "the only 'Legal Tender Dollars' are those which contain a mixture of gold and silver". This was rejected - quite reasonably, I think - by the Eighth Circuit of the US Court of Appeals.

Their verdict. "This contention is clearly frivolous."

http://cases.justia.com/us-court-of-appeals/F2/481/28/292674/

For additional colour, the Eighth Circuit earlier had this case involving Mr Daly to handle. It makes fun reading.

http://openjurist.org/397/f2d/124

But doesn't help your case a great deal.

I'll see your John Kenneth Galbraith, and raise you a Friedrich von Hayek:

"So long as we make use of bank credit as a means of furthering economic development we shall have to put up with the resulting trade cycles. They are, in a sense, the price we pay for a speed of development exceeding that which people would voluntarily make possible through their savings"
(Hayek, Business Cycles and Fractional Reserve Banking: Block/Garschina 1996)

http://mises.org/journals/rae/pdf/RAE9_1_3.pdf

Acceptance. By a pupil of Ludwig von Mises, no less.

Grudging acceptance, I'll grant. More of an admission, I suppose.

But practical, as opposed to dogmatically idealistic.

I'm sorry, Pericles, what was that?
“Once and for all, that wretched $100 does not turn into $357 of new cash. But it can be turned into $357 of obligations to repay.”
But hang on, wasn't a bloke named Pericles who said:
“Simply calling all money "debt" makes not the slightest difference. It is still money. The fact that it is money that is owed to someone else does not diminish its ability, in the hands of competent business people, to generate economic growth.”
So a debt is still money, but an 'obligation to repay' is...what? Not cash? Not debt? Perhaps we could give it a new name like oh, I don't know, maybe M1, to distinguish it from Mzero, or fiat currency.
Which, oddly enough, is fully exchangeable for a wretched (fiat) note, of the same colour, and same denomination, as 'real' money.
Whenever you get sick of arguing about the theory of money, I'll be happy to argue about the physical reality; like how bankers are all filthy stinkin' rich, despite not producing, creating or building anything...
Just for the record, Wing ah Ling/Peter Hume is/are about the only proponents of Hayek/Mises on this thread, and he/they bowed out about a week ago.
They like the gold standard, and commodity money, as does Rothbard, whom I mentioned.
We simply agree that fractional banking is fraud.

* I'll be happy to argue about the physical reality; like how bankers are all filthy stinkin' rich, despite not producing, creating or building anything...*

So the problem is revealed once again Grim. Envy. I thought so.

So lets clarify a few things. If a bank was broke and on its knees,
nobody would trust them, savers would run a mile. So a bank doing
well is a good thing, not a bad thing.

Yes, those who work in the banking industry are generally well paid.
As we saw with Westpac recently, having employees pop 10 million
into the wrong account, can be expensive for the bank. So it pays them
not to employ dimwits.

So who profits from all those bank profits? Firstly taxpayers,
for a third of bank profits go straight to the treasury as taxation.

Next we have literally hundreds of thousands of grey nomads, mums and
dads etc, who own bank shares directly. Even you can buy them if you
wish.

Thirdly the largest shareholders, Australian Super Funds. If you
worked and have money in a super fund, as do nearly all Australians,
then you too benefit from bank profits, through your super fund.

So virtually every single Australian gains in some way from bank
profits.

Not a bad system at all really.

Judge not, lest ye yourself be judged, Yabby.
Far from being envious, I honestly can't understand how such people live with themselves. How can any person believe they are 'worth' a million dollars a year (and much, much more) when there are millions of children starving for want of one dollar?
As to your assertion that 'everybody benefits', where does the money come from, Yabby? Are you now suggesting money comes from 'thin air'?
Have you seriously not noticed there are a handful of people in the world who collect interest, and several billion who pay interest? For the record, I am semi retired, and have no debt.
You may also want to watch your super funds balance levels. You might be in for a little shock.