Money As Debt - Paul Grignon

But this only happens when the government runs out of suckers who will pay real money for bonds.

The only way they can pay back the old bonds is by issuing new bonds.

Just like Joe American getting a new credit card to payoff his old credit card!

 

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Not ALL money that exists was created as debt...but when a society has accumulated a certain level of debt relative to its GDP it reaches a tipping point that can only be resolved by deflation.

So a central bank's primary role is to keep debt creation within a sustainable range.

And because its influence on interest rates is limited the best way to do this is by establishing sound reserve requirements.

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Karl Denninger always does a great job of explaining the 'mathematically impossible'!

http://www.youtube.com/watch?v=8sEnz54ZyX8&feature=sub

 

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It doesn't necessarily involve the issuance of a new bond. The Fed just decides it wants to increase the money supply by whatever amount, and buys up that amount's worth of bonds from the public market with newly-created money.

 

Oh, its even worse than I thought according to the Fed's own website.

http://www.federalreserve.gov/monetarypolicy/reservereq.htm#fn1

Apparently, the reserve rate is 0% on accounts up to 10.3 million dollars.

Does this include savings accounts...???

 

It's not saying that each account under $10.3 million has no reserve. It's saying that the reserve requirement doesn't apply to the first $10.3 million of total accounts. For example, if the bank has 10 accounts that are each $10 million, the bank's reserve requirement will be calculated as if they had $89.7 million (so the reserve requirement would be $8.97 million, if the reserve requirement is 10%).

 

Ok, but does this apply also to total savings deposits?

Savings accounts are not listed in the description.

Why 89.7 million as opposed to 100 million?

 

There is no reserve requirement on savings deposits.

Because the first 10.3 million are exempt.

 

Hmm, any estimates on how deposits are typically divided between currant accounts and long term savings?

 

No idea, sorry.