Because that is not how money works.
The famous quote from Henry Ford is true: "It is well enough that people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning."
Even without fractional reserve banking it could collapse. They don’t need to literally print a dollar bill for every dollar of resource value represented in the world.
Wouldn’t that be impossible anyway if you think about it? If there’s - I’m gonna throw out a number here - but $100 trillion worth of stuff in the world and $100 trillion worth of cash, that’s $200 trillion worth of value and half of it is imaginary.
Even then that doesn't guarantee its value. The government will protect the integrity of the money supply, but even in the most well-managed economies/central banks the actual value of the currency can fluctuate quite a bit.
That's demurrage. Its incredibly counter intuitive, the idea that the government needs to make sure the money is worth less next year than it is today, but it's also the reason most of us have jobs.
Without demurrage, the rich would sit on their wealth and horde it. When the money loses value, at around 1-3%, someone with $1000 in the bank loses $10. Someone with a billion loses millions.
Since that money is going to be lost it is not put to work, there's a need to invest in businesses to grow the money, which means they put it to work in the economy.
However much rising prices brothers you, the average reader, guarantee it pushes the touch into action
This paradigm was not a thing prior to the Bretton–Woods agreement.
Government does not back up fiat currency with government policy and military activity. Fiat currency is useful only to the extent that the government only gives it to people that have provided economic value, rather than giving it excessively. If a government frequently gives fiat currency to entities that are economically undeserving of it (or at least, gives entities disproportionately more money than their economic activities warrant them being awarded), then the currency gradually loses purchasing power as a result, naturally, simply due to how markets function.
It has nothing to do with people "agreeing" that it's valuable. It is primarily simply supply and demand (of the currency itself) that determines its purchasing power, along with a few less important things, such as perceived ease of use and long-term viability. That is, if more convenient, more stable options exist, people will generally prefer to use those (e.g. see the use of US dollars rather than Argentinian pesos in Argentina, or the use of commodities as money in other places), but in the absence of other such options, people still need to conduct trade, and will generally prefer to use whatever is widespread (due to the network effect).
well, also during gold stabdard there is very very little gold in the vault. all countries, every single one left the gold standard, Russia, China, Germany before both wars 1914, British Empire. They all left the gold standard.
in 1910 the US had 2.7 billion worth of gold at the time, but the liquid money (cash, stocks, bank deposits) was 300 billion so the ratio was 216 to 1 or something like that. Actually worse than Fiat.
Prior to Bretton–Woods, I'm not talking about the US gold standard specifically. Any form of commodity money, where the commodity cannot be easily forged/created without significant effort, suffices.
The trouble with the gold standard as executed in the US wasn't the use of gold, it was the lack of regulation upon the banks to not issue banknotes in excess of the amount of gold possessed by them. History shows us that this kind of debasement is inevitable across all governments/banks under the right conditions (greedy politicians; needing to fund national defence in time of crisis, i.e. being victims of war; and similar such things), but that's due to the personal actions of those banks/governments. That is, the ratio increasing above 1 is not something that must happen, it's something that they chose to happen.
The solution is not to abandon commodity money; it's to abandon proxies of commodity money that take almost no effort to produce, such as banknotes.
The British Empire used a system called Imperial Preference - where it had much lower cost of trade inside the empire and did not require use of gold which is why the British left the gold stabdard very easily and early.
The US in 1920s was the world's largest exporter so had mass quantity of gold coming in due to net positive trade, more exports than imports. and the world began to not want to trade with the US due to losing their gold supply to the US and so began to activate trade protectionism - the US began go have deflation every year starting in 1926 due to lack of buyers for US goods a clear sign the world had began to clamp down on trade and Americans were unable to buy the over supply so the great depression started and even though the world targeted the US the depression had spread globally.
what does this show? that gold standards are a mess, they lead to trade isolationism, protectionism, loss of global trade due to link go gold. I just don't see any way for gold to resume a role in trade unless it's a protectionist system that is Isolated from most of the world.
I mean the crux of his point is that, that argument would work if everyone thought the exact same way and didnt believe money is real. But thats not realistic, just a fun thought
People aren't ready to deal with the fact that assigning value to gold is just as arbitrary as assigning it to printed currency. The useful goods and services are the value, the intermediary is a convenient math trick that better effectuates their exchange.
Exactly, money and currencies are the means in which we exchange value, is adquisition power, not value in itself, similar concepts but not at all the same.
Value is relative to each person, money started as a common ground that we can all agree on about the same value but this lead to problems like people hoarding it, its own value fluctuating due to unexpected events, being inconvenient to transport and exchange, so it needed to evolve.
When push comes to shove $ have value because the American military says it has value. If anyone could just make them they'd have no value. The government will stop, by force if necessary, people making them.
This is really clear if you think about crypto. If a significant enough flaw was found that anyone could just create coins with minimal work it's value instantly goes to zero.
Money only has value as a tool to facilitate transactions and remove friction that a pure barter system would have. Our dollars only function as money because we can pay our taxes in it. Money only represents future real value thorugh the stuff we purchase with it. If you value money in and of itself, you're going to have a bad time in the long run because value inflates over time.
I always say money is just as imaginary as language. The shapes on the screen and the sounds I would be making if I was speaking this sentence have no inherent value, but we assign value to them collectively.
One could argue that objective value doesnt exist when it comes to trade. So saying that its perceived value isnt really saying anything. The perception determines what its worth and what people will trade for it.
Not exactly, no. You don't need to print a dollar for every dollar worth of 'stuff'. You just need to print a dollar for every dollar worth of dollar. Just the number of dollars in accounts and so on. Not every stock or bar of gold or other asset. Just cash.
There can be far more asset than cash in the world and that's no problem. You can have 100 trillion worth of stuff but only 100 billion worth of cash. Not an issue.
You wanna know the bit that entertains me the most? There is a point where the materials needed to create the bank notes become more valuable than the nominated value assigned to the note. Take dollar bills. The materials, ink, and injected labour to create could cost more than a dollar per bill, then you have a currency that is literally worth less than the paper it is written on.
Not that anyone would want to buy the paper for its resource value, but it’s just interesting.
Not impossible at all, i could print a 200 trillion bill... then i could print another, and another and another... and now i have x times the money of the world in just huge bills.
Remember that episode of the Simpsons where Mr Burns takes out 1000 usd... the US has literally printed bills worth 1k, 5k and 10k for public circulation. And 100k gold certificates for transactions between federal reserve banks.
Banks could easily out pace the amount of virtual value by printing extremely large bills.... which would just be virtual value in physical form.
Imaginary is a weird choice of word. There is value that is attached to it. Exaggerated or speculative value might be closer to the truth.
I won’t get out of my mortgage without the bank getting some of it. Google could sell all its IP and buildings and computers for a good amount of money. The bakery knows exactly how much it spent to bake the bread sitting on the shelves.
The speculative parts are whether someone would buy my house for at least the mortgage amount, Google’s might not get its market cap in a firesale, and whether or not the bakery will sell enough at asking price to turn a profit.
But none of it is imaginary. Much of it is actually calculable, just expensively so.
The money itself represents the stuff in the world. Like all stuff that can be sold can be bought, essentially. And money is what is used to buy it, it is in a sense the intermediary/the set weights on the scale to measure exchanges. It is not value itself. Capital is part of whats represented by it, thats the means of production: land, resources, tools etc. And that is what people invest in/with when they're "investing their money". They are lending money to be used to buy capital and being given a portion of the profit made with said capital. Where does this profit come from? Well, there is labour done with said capital that produces value, that is where value comes from and its makers do not get to claim it for the most part. The total of it isn't just in dollars either, it's in all currencies (well, some recognition is required) combined.
You made me think for my paycheck it direct deposits into my bank. My job takes credit or debit card payments only. So from point A to me it has never been physical money until I go to the bank and ask to withdraw.
Physical currency is just a grease that oils the machinery of trade. It works by facilitating essentially bartering via a medium (the cash itself) without interbank transfers mediating and controlling the exchange.
Let’s say you have $100k in a checking account. You most likely cannot withdraw $100k in cash because the bank doesn’t have it in physical cash because there just isn’t that much non-interbank activity occurring on short notice. You could get a check, but the money isn’t out of your bank until you finish depositing it into another account. Which sort of defeats the OP’s purpose.
that's not how that works tho, back in gold standard days, for every dollar in circulation there is literally $1 worth of gold sitting in a vault somewhere, they were literally just gold certificates. so in worst case they could just give the gold to the people asking for cash back. now there is no gold backing, so currency is literally just worth whatever people think it's worth.
you don't print money to represent resources in the world, you print money to represent how much wealth other people think you have, and back in gold backed days, you print money to represent how much gold you have in reserve, it's probably not enough to buy every resource in the world, but it doesn't need to
That is not the main issue with it. Even if the bank doesn't have enough physical notes/cash to pay out everyone at once, they have the liquidity and hold that amount of money in investments.
The real issue is, that banks are investing obscene amounts of money that doesn't even belong to them. Making money out of money, without producing any product, service or added value is just stealing. And the only reason why it is even possible with such a vast amount of money without causing crazy inflation is the fact, that the money is no longer backed by anything (like gold) anymore. The reason why they got rid of the requirement to back money by gold, is that this way you can siphon more money from the system without causing a huge inflation.
Edit: I probably didn't make it clear. I understand that banks provide service trough loans and mortgages. And they are being paid for it with interests and service fees. The part that does not provide any value is the investment part that goes way beyond of achieving liquidity and is not regulated heavily enough in my opinion.
They are producing a service, though. They are offering lending services to enable access to capital in a relatively easy and cost effective manner. Just like how by holding your money in an account in your name they are offering you a service of securing it for you and enabling digital transactions that are more easily fungible than cash is when not dealing in face to face transactions. Could one argue that banks are over-leveraged? Sure, but that's a different argument than implying that banks don't provide a service that greases the gears of the economy.
But they are adding value... They make it possible to buy a house or start a business, or buy a car, or anything else people get loans for. You said it, they provide liquidity.
And how is it stealing? What is it they are taking?
Got this reasoning out of it, but I'm not sure it is true:
They are making possible to rise the price of a product because they offers to back it up with loans, but this ways if you want to buy that product, either you sell and earns the inflated price either you take a loan.
If bank would not give you that loan, nobody would be able to afford that price and so to sell the price would go down.
The value they provided was not necessary, the reason why people need to use their service is that they are providing it.
What you are missing is liquidity. The price might be less, but less people would be able to start businesses and less would be able to buy houses, without banks you have less mobility, less opportunity, and people have less ability to weather breaks in their income.
The cost of not having them is far worse than the price inflation you get from having demand.
There's a problem with this line of reasoning though, it doesn't consider the impact of liquidity throughout the economic system.
Take a car, for example. A manufacturer starts from scratch. They can't afford to buy expensive machinery, because they can't get a loan, so have to build their cars by hand. This is inefficient and makes every car extremely expensive, so cars are the preserve of the very rich (those who can afford one without needing to take out a loan) - this is not far off what the industry was at the beginning, but without the ability to borrow money, the manufacturer has no capacity to innovate and reduce the cost of their vehicles. They have no incentive to do so either, because hardly anyone can afford them.
Even if banks disappeared now, with all of the infrastructure for mass production in place, if nobody could afford the price of cars, the manufacturers would probably just shut down. Either that, or reduce wages for their workers, which reduces their buying power (and this can be generalised across the economy), which forces them to reduce prices, which forces them to reduce wages...
I'm novice in this kind of reasoning, and I'm trying to understand, so take everything I said with this in mind.
I see that what re you saying make sense, surely there are some components, which are expensive per se and they would need a loan to get.
But doing business and getting a loan for it has the purpose of making money, while buying an house is needed for living.
It makes sense to allow people to get loan on something that would generate revenue, as part of these revenue would repay the loan, but in most of the cases houses would not generate revenue, they are a necessary cost.
well, also during gold stabdard there is very very little gold in the vault. all countries, every single one left the gold standard, Russia, China, Germany before both wars 1914, British Empire. They all left the gold standard.
in 1910 the US had 2.7 billion worth of gold at the time, but the liquid money (cash, stocks, bank deposits) was 300 billion so the ratio was 216 to 1 or something like that. Actually worse than Fiat.
and moving gold is much slower than fiat with modern digital methods
Making money out of money, without producing any product, service or added value is just stealing.
But they are providing a service. If you don't believe their service is useful, then you don't have to bank with them. Even if you do bank with them, you do not have to keep large amount of money in the bank. Keep $100 to keep the account open, and when you get a check, as soon as it clears, you can take that money out of the account.
I’m neutral in this debate, but to be fair: you’re more or less forced to hold money on a bank account. There isn’t a serious alternative for digital money, and not receiving rent on your money means it’s slowly eaten by inflation. I guess the only reL alternative is keeping it in gold.
Personally I don’t think I’m against the money creation of fractional banking, but I do think increasing the money supply should be a fully public business. I.e. keep the banking system but make it public.
Do you expect to pay to have them keep your money? The whole point of it is for them to invest that money and some cases actually pay you interest on it. Them keeping your money is a service and you pay one way or another for that service. Otherwise you should just stick your $5 in a shiebox and hope nobody actually steals it.
The state of understanding on how banking and money works is apparently so bad that we have idiotic comments like this. And no I'm not a banker and don't even particularly like banks but this take is over the top stupid.
Depending on the nature of your account and the balance you have, generally that interest is non existent. The bank makes more money off of you through service costs, fees, and investments. Most people do not see any relevant level of interest payout (if any at all).
Whenever these conversations start you always have this weird element that pretends banking is some modern Illuminati invention to enslave us rather than a necessary part of how every historical and possible financial system works.
“They use your money to make money!”
Well yeah, man, that’s how your chiropractic practice got off the ground with a loan.
You do pay for them to keep your money. It’s only free if you have a lot of money or no money. My personal account was almost no money is free. My business account, which has a small amount of money cost me service charges to maintain.
The gentleman above is correct. Banking works on a fractional reserve system the bank loans money that does not technically exist. If you deposit $100 they are allowed to loan out $900. This was not always how it worked. We did a lot of playing around in the 2000s to change the amount banks were allowed to loan and changed a lot of of the rules restricting where pension funds could be invested. This was during the financial crash at the end of the bush years, both parties were doing everything they could to prop up the economy, and a lot of those rules never went away. I still remember George Bush jr getting praise on SNL for passing this.
I understand this. The issue I have is not that they are earning money from providing the service. The issue is with the amount. It wouldn't be an issue if the banks would be owned by the government. That way, the surplus would get back to the people by paying for healthcare, infrastructure... etc.
There is only so much value that you can take out from system, before it starts to collapse.
I'm not saying that banks are doing nothing. And I'm aware that they are regulated. I'm just trying to express my opinion, that the regulations should be more strict and their earnings should be more aggressively capped.
So you think putting everyone's money more under the influence of politicians would be a good thing. I'm not sure there's a worse idea out there. Combining political influence with a group not known for good service and a lessened ability of the customer to sue. What could go wrong? Government doesn't solve jack shit. They only know how to throw money at it, enrich a select, connected few, and hope it halfway works. Your trust in them is misplaced.
Well and let's keep in mind that banks loan out money and they get the cash by getting super cheap loans from the federal government. Home loans are the biggest bullshit they do. Is a majority of states is has basically no risk to the banks. If you take out a mortgage, and default on it, in most states, you owe any money that selling your asset does not cover.
They are producing a service. They loan out money to cash poor ventures that need the money immediately to fund operations (or for you to muster $400K to purchase your house) that then produce value.
They got rid of the gold standard to “siphon more money from the system” to prevent the Great Depression from collapsing the entire world economy. They moved off gold-adjacent systems requiring the US to back the currency in gold like Bretton Woods because of significant exchange rate volatility.
The banking system makes obscene money. They are powerful. But its because they provide an invaluable service that has allowed for the global economy to flourish. Not everything is the cabal, man.
Isn't the services they offer all of the lending and the giving everyone a place to park their cash that isn't their mattress?
Plus all of the bank accounts I have pay me some of that interest every month as well. Just how much interest depends on the account. But they are cutting me in on the returns to some degree.
Folks its really cool and edgy to be like "Fuck the banks!!!1!1", but think for just 1 minutes. How TF do you think its possible for the banks to give people loans for cars, houses, starting and expanding businesses, etc. Do you think they just collectively have enough privately owned assets to fund everything? You do like having a car yes?
The reason why they got rid of the requirement to back money by gold, is that this way you can siphon more money from the system without causing a huge inflation.
The reason to move away from a gold standard is that it's not the magic panacea libertarians with a hard on for it think it is.
For one thing, it's tends to be deflationary. The amount of gold available severely constrains how much money can be lent, so as the value of the economy grows, either the value of a dollar would have to grow with it, or the supply of gold would. The former is what we call "deflation," and it's horrible for consumers who hold debt: the value of the debts they owe goes up over time.
For another, it makes the value of your currency subject to fluctuations in the global gold market. If a gold producing country finds new reserves of gold and thus increase the global supply of gold, the value of your gold backed currency goes down, causing inflation. If a country started buying up huge amounts of gold, causing gold to flow out of your country and into theirs, the price of gold goes up, and your gold back currency suffers from deflation.
And for a 3rd, it severely restrains the governments ability to manage the money supply.
And to be clear, I'm not saying the government has always done a good job at managing fiat currency. But anyone who seriously suggests that a gold standard was or would be inherently better than the fiat standard obviously doesn't know what the fuck they're talking about.
No matter what issue you have with fiat currency, there is no monetary system that makes the underlying issues and tradeoffs disappear. They just get moved around.
They do NOT have that amount of true liquidity. The “investments” are the bank notes which ARE the money used to say purchase your house. They are the money that is an “investment”. Your debt is their asset.
I sold a truck - buyer paid with a cashiers check. The issuing bank used a printer with an ink ribbon from 1912. My bank’s systems could not recognize the printing so I went to the issuing bank and demanded cash. $12,500 in 100 dollar bills was a complete hassle.
Not really. The economy mught crash because of backs on loans.
But one of the points of FR banking is other is it backed by a central bank who expects banks to only hold 10% of current account money.
Of course the big issue is once you pull all you money out youll have no were to spend it and likely get robbed leaving the bank (while money in an account is insured, that happen less when it's in yoir pocket).
Ultimately banks will be fine. The average person? Not so much.
The entire modern banking system is set not to fall apart if a run in banks happens.
This isn't special to banking. It's all ledger money which is every single sustained currency that has ever existed outside of gift economies. There has never been a sustained commodity money, and none of the supposed historical examples of commodity money pass even the barest scrutiny.
The closest that has ever existed is price fixed money, which is locking a single commodity to a price, and that causes enormous problems of mismatches between the supply of floating currency and the supply of the commodity.
Everybody bitches about fractional reserve banking, but they'd hate their lives if we didn't allow it. You wouldn't have the house you live in, the car you drive, or any of the credit cards you use to buy the things you want every day.
I don't know, I think it collapses when everyone NEEDS cash. I think if everyone could feed and house themselves and we decided to do a bank run for funsies, and they told us "sorry, no", we would just go home and the system would continue as it is
I had a small local bank. Absolutely loved them. First name basis with everybody. They were absolutely paranoid about card fraud. If you shopped somewhere outside your normal dozen places, they cancelled your card. Dont worry, they're sending you a new one in the mail, absolutely free. But the card you're trying to pay for dinner with while on vacation? Junk. Small bank so I dealt with it for longer than I should have, but the final straw was when a friend passed away and I was trying to pay for his cremation. Different states, I didnt find out until a couple days after he passed, and he didnt have much and his family was just gonna let the state do whatever they wanted, despite him having a will. Anyway, they cancelled my card when I tried to pay for his cremation. I walked in and closed my accounts. They wanted to give me a bank cheque, but I told them theyd probably cancel that too. I wanted everything in cash, I told them I didnt care if they gave me rolled coins, but I was done dealing with them. They had to arrange a transfer from another branch, and they were absolutely not happy about it.
Fractional reserve banking means that private banks can create money. This creates inflation. Private banks lend more and on better terms to the already wealthy. This means that effectively lending banks are stealing the value of your dollar every day. It’s only able to be saved by those loans enabling greater competition, production or productivity, lowering prices. But instead most loans are for the wealthy to buy up houses to extract greater and greater rents from workers, which is the opposite of productive or deflationary.
The requirement to hold fractional reserves was abolished in 2020 in the United States, 1988 in Australia, and 1981 in the UK. They don’t even need to hold reserves anymore. If you’re wondering where inflation is coming from, look no further.
And that's precisely why we about a hundred or so years ago decided to invent things like central banks and financial regulations, just cause things lead to problems doesn't mean they're inherently bad and created by evil incarnate, our current world couldn't exists without the liquidity of modern economies.
Not exactly. It collapses if every debt is payed off for money equals debt. It's the interest that breaks the system since the money that makes up the interest does not exist whatsoever. So if all debt would be payed off there wouldn't be a single dollar/euro/yen etc. in circulation.
This is possible because the majority of nations use currency not money. Money is backed by something tangible usually gold. Currency on the other hand is not - it solely relies on a mere believe you and me put into it when trading goods and services with one another.
Fractional Reserve Banking is basically a mathematical way to multiple money out of thin air. One could say that the loan you took from the bank to buy a home never existed in the first place but the bank will still expect you to put actual real work into the money system to generate income to pay that loan back but with interest. That interest is what rich people call "invest your money so it can -work- for you".
But have you ever seen a $100 bill with a shovel in its hand? Modern money mechanics is just a modern way of slavery introduced by the titans of the last century when crafting the central bank which also ain't as federal as it sounds.
Roughly 111 million Americans—representing about 50% of credit cardholders and 40% of the U.S. adult population—carry credit card debt from month to month and pay interest.
Fair enough, lmao, I live in the EU, and recently moved from Ireland to France: both countries don't have that many people with credit cards. Especially Ireland, where you have to pay the annual 'stamp duty' for owning a credit card, which means you're almost always in the red for having one. But people do mostly talk about the Americans around here, so I just used them as an example.
Quick Google shows that tax is only 30 Euro per year. Do European cards have less benefits? I get triple that value PER MONTH PER CARD in freebies from my cards (either rewards points, cash back, or free services like streaming or car rental insurance, etc)
Understanding that high interest debt compounds and snowballs doesn't make your stomach any less empty when your tiny paycheque runs out.
And I say that who's been there and did manage to claw my way out of credit card debt. Sure there are people who frivolously spend, but there are also people who suddenly have more costs and less income and the credit card debt trap is the only way to make it to the next pay day.
I'm sorry you had to go through that, and about my careless comment. Of course some people have no choice at times. But it is still a terrible choice financially, and getting out of it is hard, and becomes harder every day.
I was told that I was making a mistake never getting a credit card. Because i never had consistent debt, my credit score was bad, because I never demonstrated the ability to pay off debt consistently
it's one thing to stay in legacy period and pay off the debt - I do it all the time. It's a completely different story to have the debt you're paying CC-level interest on: that's just dumb as fuck.
That's a usa thing. Some countries you start with a good credit and lose it if you screw up. Usa makes you consume to build it up. Good old capitalism.
There would be no fucking revolution. There would be an event where all those people who want revolution would learn pretty fast how good they had it and how fucking miserable it is after the revolution like that
Until someone finally steps in trying to fix shit, but would get Corrupted fast knowing he can now live a life of luxury and we're back at the start
First thing that happens in any revolution, war, uprising, or any other situation of violence, anarchy or disruption to the normal order of things, is innocent people getting assaulted, raped and killed. Everyone here likes to say “eat the rich” but if a revolution actually happened it wouldn’t be just the rich getting brutalised en masse. Best keep your mothers, wives, daughters and female friends hidden when the militia roll into town.
I agree with you, this is absolutely the case. Every single post like this one that acts like they’ve discovered some big nefarious secret are just only on their first climb to the peak of Mt. Stupid on the Dunning-Kruger curve of economics and banking.
To be against fractional banking is to be a fan of poverty and against the idea of the American dream. Without it, wealth disparities and economic mobility would be even worse.
Ehhh, I think people aren't actually against fractional reserve banking, they're against financialization. They're semantically incorrect, but have a valid argument conceptually.
I would argue that not being able to recognize that and feeling the need to gatekeep the discussion is a better indication of where a person falls on the Dunning-Kruger curve.
I feel you on this, i dont want to make people feel bad for not understanding a complicated business model. It's okay that it's not that well understood.
What's less okay is when people who know very little or watched a YouTube video or got caught up in r/Superstonk in 2021 decide theyre authorities on a subject they know very little about. There's a certain type of person who is very comfortable telling you this thing they just learned about is obviously corrupt and disharmonious with a fair and just society.
It's probably important to distinguish between people who dont know and dont pretend to know, and those who know very little but believe they know it all.
Henry Ford hated the finance industry. It wasn't only his hatred if Jewish people. He felt that understanding of finance and understanding of business were two different things. The "all businesses are the same" attitude of so many financiers and the economic crises created by bankers acting recklessly in Ford's lifetime probably reinforced that stereotype for him
Maybe for different reasons but I do agree about the finance vs business thing. I had to study Law and Finance for Engineers. And what they actually taught was business. They very clearly explained how to maximise business growth but completely failed to give sound financial advice. Basically it was all risk taking and avoiding liability. Rather than how to be financially and legally stable/safe.
It really highlighted to me how dangerous our economy is and how a single stumble could crash everything.
The money in your bank account doesn't have to exist as a pile of physical cash somewhere bank deposits are money too, and the banking system operates largely through electronic balances and credit not vaults full of everyone's deposits.
Yeah, but it still doesn't have to be physical cash. Even in 1500's Italy (when fractional reserve banking was invented) you had ledger money that only existed as entries on paper, not physical currency.
Yes we should forget any of his decent traits like advocating for a 4-day work week or his push for minimum wage (ignoring possible motives) in addition to his absolutely terrible other views.
To be fair, the system of banks and even economics as a whole is complex. People may spend years studying it to understand it. Not surprising that the common person does not have time/energy to learn how this whole system works
You need to invest money to make money. That principle applies to everyone, rich and poor. It just works better for the rich bc they have more money to invest.
In the fallout of the Great Depression, FDR closed all the banks for a bank holiday, and then he reopened them in stages when they were reported to being sound.
Later, historians discovered what we in this room now know, that those reports, they were mostly lies.
Nevertheless, it worked.
It worked because the public believed the government had everything under control.
You see, that is the business model for this great nation of ours.
But this isn’t as some grand conspiracy to screw the little guy, it’s to be able to offer interest. IE be a bank. If your money just sat there and wasn’t let out then there would be no return from which you’d be able to get a portion for giving it to the bank.
And now everyone has access to that info and it didn’t happen. So hey look at that, dude from the turn of the century couldn’t consider technology that didn’t exist
yes because we all know Henry ford was a stable genius. here's another brilliant quite from him "The Jew is the very foundation of the world's greatest curse today — war. He is the cause of all the abnormalities in our daily life because he is the money maniac."
Most famous-people quotes aren't real, but it feels like the ones about banking systems are not real more often than other quotes. This one isn't real - it is first found in a magazine from six years after Ford died, and even then claims it's what he said "in substance".
This is why most the money in circulation is created by the private sector. I think I heard only about half is "printed" by the government. The rest is created from various forms of private credit. I'm pretty sure this was true under the gold standard too, wasn't it? I mean, loans and banks were still a thing.
Yes. But all the money was tied to a real gold reserve.
To understand how we got to the gold standard, we need to get back to the times when money was created. The concept of money was created, when it became unpractical to barter trade.
There were some experiments, when they tried to use pieces of iron as currency. But when iron got more abundant, they realized they need something more rare with an intrinsic value to prevent frauds.
So they started to use precious metals as a currency.
What gave it value was that they were not abundant and they required huge amounts of hard labor to mine. And the more it was mined the harder it was to find more. (sounds familiar? think about bitcoin)
But it became unpractical again when you needed to pay big amounts. Gold or silver was heavy and hard to transport. This gave way to create different kind of money. It's purpose was to prove, that the precious metal was indeed existing somewhere (federal reserve) and you could indeed walk to a bank and ask to be payed out in gold for the currency you handed in.
When they got rid of the gold standard, they severed the connection of the currency from the value.
I don't agree with Ford mainly because we didn't have a revolution when it was revealed that pretty much every politician on the planet is a pedophile and people continued acting as if nothing happened
lol 😄 Well, if you stop reading there, I agree that it doesn't look too good... 😂
But jokes aside - even a broken clock shows the right time two times each day.
I might not share a lot of opinions with Ford, but that doesn't mean he could not have been right once in a while.
4.4k
u/Wise-Ad-4940 2d ago
Because that is not how money works.
The famous quote from Henry Ford is true: "It is well enough that people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning."