I'm afraid this still doesn't make any sense, Arjay.

>>All the Aust govt need do is to produce what rightfully and lawfully belongs to the people of Aust visa the RBA.<<

When you say "produce", what do you actually mean? The Government does not "produce" anything. The RBA does not "produce" anything - I posted this link a while ago, do have another look.

http://www.rba.gov.au/about-rba/our-role.html

>>[Banks] can still loan out people's money and make profits,borrow from OS banks or the RBA whoever has the cheapest money,but will not have the wild loaning ratios of banked $1.00 for $9.00 created in their computers and loaned out.<<

But Arjay, if a Bank is only allowed to loan against deposits, then it is effectively barred from borrowing at all - RBA, overseas, whatever.

>>The least productive of our institutions will then be in proportion to what they are really worth, ie just agents of the medium of exchange<<

When you say "the least productive of our institutions", I assume you mean "Banks".

But exactly the opposite will happen.

When money is in short supply, the interest rate skyrockets. If I had funds in those circumstances, why would I put them in a Bank in the first place? I'd simply lend it to the highest bidder on eBay.

>>Then real producers will shine and our economy will also.<<

Not a chance. They would all be dreadfully short of working capital. They would not be able to afford to grow - even the tiniest increase in inventory levels would be prohibitively expensive.

>>Bank shares will take a bit of a hiding<<

No. Banks would simply disappear. How can you envisage any other outcome?

>>we will be able to pay for infrastructure with no debt and have reduced taxation.<<

Under your scheme, Arjay, who will pay for the infrastructure, "without debt"? Where will the money come from - especially if you plan to "reduce taxation".

It's back to the drawing board for you, I'm afraid.

*but will not have the wild loaning ratios of banked $1.00 for $9.00 created in their computers and loaned out.*

It seems to me, that you still dont' get what banks actually do,
Arjay. If I deposit money at a bank and you want to borrow it
from the bank, they need to keep some of it as reserves and lend
you the rest. Some of those reserves need to be Tier 1 Capital,
but we'll ignore that to keep it simple.

Now lets say that the RBA insists on 10% reserves, the bank lends
you 9 $ for every 10$ that I deposit. Now you spend it and Joe
Bloggs banks it at the same bank and the bank once again lends
out 90% of that figure. In other words, the money supply is
increasing, by the same money going around and around.

There is in fact a rumour circulating, that banks only need to
have 1 $ in deposits, which will let them lend out 9$. It is
incorrect.

Yabby and Pericles,let's face it,the fractional reserve banking system is "secret banking business".In reality nobody can define the actual mathematical formulae.

I think it works thus.The ordinary retail banks can create new loans equal to 9 times their deposits,however the banks get to keep the interest,but the capital repaid enters oblivian,ie It does not become part our economy.The interest then becomes part of deposits thus causing the inflation of our currency.

Using this formulae,our banks cannot fund the needs of inflation + increases in GDP so they borrow from the international reserve banks who create money in their computers to equal our inflation + GDP increases.It is a very insidious form of debt enslavement.

Sorry, Arjay. I've tried to explain it all in simple terms, but it is clear that you either do not listen, will not listen, cannot understand or do not want to understand.

>>Yabby and Pericles,let's face it,the fractional reserve banking system is "secret banking business".In reality nobody can define the actual mathematical formulae.<<

Two sentences. Both entirely, specifically and completely wrong, in every detail.

If pressed, I would accept the use of "the". And the full stop is reasonably accurate. But that's it.

Arjay: nul points.

*I think it works thus.The ordinary retail banks can create new loans equal to 9 times their deposits*

If they could Arjay, I would be selling my BHP and other shares
and just buying more bank shares!

Sadly they cannot and there is a simple proof, which you can verify
for yourself, if you do a little homework. All the banks have
investor websites. You can study their financials. You can see how
much they paid in interest on money borrowed and how much they
received in interest on loans.

We know roughly what they pay for borrowed funds and we know
roughly what they charge for various loans. If you were correct,
the difference would be a factor or 9, which is enormous! Sadly
that is not the case :)

Fact is that the banks work on a net profit of around 1%, after
all costs and charges and tax. Running banks is not cheap.
Yes, they make huge profits, because they lend out huge amounts
of money.

Now if your theory was correct, banks would be paying out hardly
any interest, for remember, you claim that for every 1$ in deposits,
they can lend out 9$. That is nonsense.

But check it out for yourself Arjay. The figures are there for
all to see.

OK Pericles since you seem to be so well versed,tell us how the mechanism of fractional reserve banking works.The ratio is 9:1.Do the banks here have only have the rights part of this ratio and the Global Reserve Banks create the bulk of the money? So Pericles when this new money is created as a loan,that is not someone's savings,what happens to the principal as it is repaid? We know the banks gets to keep the interest.

Now don't forget,we are only talking about increases in GDP and inflationary money.Where is this new money created and by whom? ie $78 billion pa.