Fractional-Reserve- Banking

[The G-Man]

Everyone who is wondering how Iraq can possibly afford a strong RV such as a $3,87 as predicted by George Robinson to happen by June 1, GOOGLE these words and scroll to Wikipedia "FRACTIONAL-RESERVE-BANKING". Then all you Vets can explain it to the Newbies.

[skepticaldinar]

Unfortunately, we have already ruled something that simple out.

[DaveJen]

Unfortunately, we have already ruled something that simple out.

Not sure who has ruled it out. Most economist friends of mine, whether invested, or not have ruled it in. I certainly do. In fact in the global market today you cannot leave fractional banking out of the mix in anyway. Not only our banking system, but the world banking system is very much a frational banking system and has been for over 100 years. And most exchanges between economies operate in this manner. In fact, without fractional banking there would be no banks operating and no economies.

And while it may seem simple on the surface it is truly very convoluted in practice. And it truly is the means that the wealthy keep the middle class at bay.

Edited May 21, 2011 by DaveJen

[speculatorsRIDE]

Unfortunately, we have already ruled something that simple out.

Not sure who the "we" is you are referring to, but fractional banking will definitely be in play here.

Fractional-reserve banking is a type of banking where depositors invest base money in a bank and have the ability to earn interest, rather than having to pay the bank to hold their money. The bank takes ownership of base money entering the bank, uses it to maintain highly liquid reserves to repay expected customer withdrawals and pay for bank operations, and in return gives the customer a credit to their account, which the bank ensures the customer can use as money to buy goods and services anywhere in the economy. The bank, generally speaking, does not retain all of a particular customer’s base money deposits within the bank. Instead, the base money now owned by the bank, is constantly being used in transfers to other banks as customers spend money and the bank settles the loans it offers customers. In turn, many other banks are transferring funds via the same process to customers of the first bank. This means that base money and other liquid assets held by the bank, are only a fraction of the quantity of customer credits at the bank. Because most bank deposits are treated as money in their own right, fractional reserve banking increases the money supply and banks are said to create money.

Bank runs (or when problems are widespread, a systemic crisis) can occur in fractional-reserve banking systems. To mitigate this risk, the governments of most countries (usually acting through the central bank) regulate and oversee commercial banks, provide deposit insurance and act as lender of last resort to commercial banks.

Fractional-reserve banking is the most common form of banking and is practiced in almost all countries. Although Islamic banking prohibits the making of profit from interest on debt, a form of fractional-reserve banking is still evident in most Islamic countries.

[easyrider]

Great post i do believe fractional rserve banking will come into play with this RV.

[wicked93gs]

Ok, lets clear this up, this scenario is very unlikely...since fractional banking is against Sharia law

http://en.wikipedia.org/wiki/Islamic_banking

The only exception being private banks(whatever is considered a private bank)

just pointing out something fractional banking pushers seem to forget, or just not mention

Edited May 21, 2011 by wicked93gs

[easyrider]

Ok, lets clear this up, this scenario is very unlikely...since fractional banking is against Sharia law

http://en.wikipedia....Islamic_banking

The only exception being private banks(whatever is considered a private bank)

just pointing out something fractional banking pushers seem to forget, or just not mention

you never know what will happen so no one can rule it out just like a LOP.

Edited May 21, 2011 by easyrider

[wicked93gs]

this is true...just saying it puts a major kink in the theory, it all depends who ends up in power and how strict an interpretation of Islam they have I would guess

[speculatorsRIDE]

Fractional-reserve banking is the most common form of banking and is practiced in almost all countries. Although Islamic banking prohibits the making of profit from interest on debt, a form of fractional-reserve banking is still evident in most Islamic countries.

Read more:

[drummerboy]

Here is a good description on how Fractional Banking works and how/why it can support a $3+ rate.

The below information is from a post some time ago. I think this explains it best:

CONCEPT EXPLAINED:

First off, I’ll use the exchange of a 10,000 IQD note as my example. To help explain the economics of this cash-in example, I will use a 1:1 cash-in ratio between the USD and IQD, that is given a two-tier payout, and a 2% bank spread.

What You Will Receive:

If you were to cash in your 10,000 IQD note with a bank that charges you a 2% spread, you would personally receive a net take-home of $9,800 credited to your bank account.

What Your Bank Will Receive:

Your Bank will receive a $10,000 credit to its Federal Reserve Account. They will also be able to add the $200 profit to their “capital account”.

If you don’t understand the “Fractional Banking“ concept that runs our country, you may want to, as that is what this is based on, and is what is behind this entire concept and plan. To learn more about this concept, I suggest you click HERE, and go to a video post I brought to the forum previously, and posted in my “Tidbits“ section.

Ultimately, the bank wins because they are able to gain $2,000 in lending power under the 10% “Fractional Banking“ model.

What the US Treasury Will Receive:

First off, the US Treasury will receive $3,500 in estimated taxes in the quarter after the exchange, because you are now in the “rich” category and get to enjoy the 35% tax bracket. This lowers the “net cost” of the IQD exchange to the US financial system to $6,500 USD (i.e. $10,000 out – $3,500 in). Furthermore, the US Treasury’s rate is higher than the banking rate (we will use in this example 1.25), thereby further reducing their “net cost” from $6,500 to $4,000.

Oil Now Enters the Picture:

At some point, a Fed-appointed agent orders $12,500 worth of oil from Iraq. Payment will consist of a $12,500 transfer from the Fed’s foreign currency reserve IQD account to the IRAQ Oil payment account at the CBI in a form otherwise known as PetroDollars/PetroDinar. Even though the world spot price of oil is defined in terms of USD, the actual transaction may take place in any internationally recognized currency agreed to by the parties. For example, Iran only accepts Yen from Japan for their oil orders, because they don’t want USD in their foreign currency reserves.

How the CBI “RECAPTURES” the Money:

The $12,500 order is filled with 250 barrels of oil based on the spot price on the date of the sale (for this example we used a $50 USD spot price). What does it cost Iraq to produce the oil to fill this order? Well they have negotiated productions agreements for approximately $1.50 USD/barrel. From that price $.50 USD goes to the national Iraqi oil company who is the partner in the field the oil came from. Out of the remaining $1.00 the other oil field partners have to pay the Iraq government a profit tax of $.35 USD (35%). The net cost to Iraq to produce a barrel of oil used in this scenario is $.65 USD. (i.e. $1.50 – .50 – .35)

What does all that mean? It cost Iraq $162.50 to bring back a 10,000 IQD note! Can they afford that? I think so! So, instead of paying out $12,500 for a 10,000 IQD note, they only pay $162.50! That doesn’t add to the money supply much at all does it! They receive their IQD back and place it in the CBI, or destroy it.

The transaction is completed with the Federal Reserve exchanging foreign reserve credits which are equal to $12,500 USD (which had a net acquisition cost of $4,000 USD for the US) for 250 barrels of oil (which has a TOTAL COST to produce of $162.50 USD for Iraq.

More completely explained, and simply put, it cost Iraq $162.50 USD from their foreign currency reserve accounts to redeem the value of 10,000 IQD, which goes into their operating accounts. At the same time the US got $12,500 worth of oil for a net cost of $4,000. That’s how it was originally planned for Iraq to RV at 1 IQD = 1 USD, with the variable being the political element (i.e. UN Sanctions, GOI actions, IMF actions, World Bank actions etc.)

Other Factors that Strengthen Iraq’s Position and Ability to RV:

■DFI Funds Returned & Other Assets: $280+ Billion USD, plus other frozen assets (estimated at $100 billion) will be returned back to Iraq and added to their foreign currency reserve, bringing it up to $430+ billion USD.

■CBI IQD Reserve Requirement Adjustment: The CBI will change the current fractional IQD reserve requirements from 100% to 15% at the appropriate time. As a result, the the total potential money supply will be raised in value to $2.8 Trillion (430 billion/15), while at the same time, the total physical IQD in circulation will be reduced by removing the large bills with the 3 zeros over a period of 2 years, as they have indicated.

■Oil Production Increased: Iraq will also execute the plan they announced to increase oil production from 2+ million barrels/day to 10 million barrels/day with the resulting revenues flowing directly to the Iraq treasury.

■Oil Futures & Forex Contracts Added: To further stir the pot, the CBI will continue to use it’s sales window to market oil futures and forex contracts. They have shown they can generate significant cash flow in the private market. Think of their impact in public markets.

There, my friends, is how this plan will be enacted and made possible. Taking NOTHING, and turning it into SOMETHING, then bringing it back to a “manageable and reasonable something” that is accepted and supported by seeming endless supplies of oil. This is how the world’s ENTIRE NEW MONETARY SYSTEM will be regenerated and supported and backed, given, in essence, a re-birth and renewed for most governments and economic regions… even by “Black Gold”.

So, here’s the summary for all the “players” involved, giving ballpark numbers, and not taking into account superfluous costs, fees, and other small details that don’t really affect the larger picture:

■Investor’s Net Gain: $10,000 – $200 = $9,800 x .65 = 6,370 for an investment that cost $10

■Bank’s Net Gain: $200 added to “capital account”, plus $2,000 they can use to loan out.

■US Treasury Net Gain: $2,500 from the .25 spread on top + $3,500 in quarterly taxes = $6,000

■CBI/GOI/Iraqi People Net Gain: $12,500 – $162.50 = $12,337.50 + Profits from “Other Factors”

■Overall Net Gain for All Involved: $6,370+$200+$6,000+12,337.20 = $24,907.20

This is the wealth that was generated from a single 10,000 IQD note that was given an original value of approximately $10! Is that amazing or what?! You tell me… can Iraq afford NOT to RV?!!! Will the IMF allow them to NOT RV their currency, but simply replace their large denoms for smaller ones?!!! LOL!!!

In this scenario, EVERYONE WINS… and the IQD is slowly (over 2 years) taken back in to the CBI… eventually destroyed, leaving a manageable M2 behind, having created HUGE WEALTH throughout the world to re-supply what was allowed to be destroyed in the “great bleed” over a period of just a few weeks a couple of years ago, even the greatest redistribution of wealth the world has ever seen. Believe it or not, it has happened for this very purpose, and it IS coming!

[easyrider]

Here is a good description on how Fractional Banking works and how/why it can support a $3+ rate.

The below information is from a post some time ago. I think this explains it best:

CONCEPT EXPLAINED:

First off, I’ll use the exchange of a 10,000 IQD note as my example. To help explain the economics of this cash-in example, I will use a 1:1 cash-in ratio between the USD and IQD, that is given a two-tier payout, and a 2% bank spread.

What You Will Receive:

If you were to cash in your 10,000 IQD note with a bank that charges you a 2% spread, you would personally receive a net take-home of $9,800 credited to your bank account.

What Your Bank Will Receive:

Your Bank will receive a $10,000 credit to its Federal Reserve Account. They will also be able to add the $200 profit to their “capital account”.

If you don’t understand the “Fractional Banking“ concept that runs our country, you may want to, as that is what this is based on, and is what is behind this entire concept and plan. To learn more about this concept, I suggest you click HERE, and go to a video post I brought to the forum previously, and posted in my “Tidbits“ section.

Ultimately, the bank wins because they are able to gain $2,000 in lending power under the 10% “Fractional Banking“ model.

What the US Treasury Will Receive:

First off, the US Treasury will receive $3,500 in estimated taxes in the quarter after the exchange, because you are now in the “rich” category and get to enjoy the 35% tax bracket. This lowers the “net cost” of the IQD exchange to the US financial system to $6,500 USD (i.e. $10,000 out – $3,500 in). Furthermore, the US Treasury’s rate is higher than the banking rate (we will use in this example 1.25), thereby further reducing their “net cost” from $6,500 to $4,000.

Oil Now Enters the Picture:

At some point, a Fed-appointed agent orders $12,500 worth of oil from Iraq. Payment will consist of a $12,500 transfer from the Fed’s foreign currency reserve IQD account to the IRAQ Oil payment account at the CBI in a form otherwise known as PetroDollars/PetroDinar. Even though the world spot price of oil is defined in terms of USD, the actual transaction may take place in any internationally recognized currency agreed to by the parties. For example, Iran only accepts Yen from Japan for their oil orders, because they don’t want USD in their foreign currency reserves.

How the CBI “RECAPTURES” the Money:

The $12,500 order is filled with 250 barrels of oil based on the spot price on the date of the sale (for this example we used a $50 USD spot price). What does it cost Iraq to produce the oil to fill this order? Well they have negotiated productions agreements for approximately $1.50 USD/barrel. From that price $.50 USD goes to the national Iraqi oil company who is the partner in the field the oil came from. Out of the remaining $1.00 the other oil field partners have to pay the Iraq government a profit tax of $.35 USD (35%). The net cost to Iraq to produce a barrel of oil used in this scenario is $.65 USD. (i.e. $1.50 – .50 – .35)

What does all that mean? It cost Iraq $162.50 to bring back a 10,000 IQD note! Can they afford that? I think so! So, instead of paying out $12,500 for a 10,000 IQD note, they only pay $162.50! That doesn’t add to the money supply much at all does it! They receive their IQD back and place it in the CBI, or destroy it.

The transaction is completed with the Federal Reserve exchanging foreign reserve credits which are equal to $12,500 USD (which had a net acquisition cost of $4,000 USD for the US) for 250 barrels of oil (which has a TOTAL COST to produce of $162.50 USD for Iraq.

More completely explained, and simply put, it cost Iraq $162.50 USD from their foreign currency reserve accounts to redeem the value of 10,000 IQD, which goes into their operating accounts. At the same time the US got $12,500 worth of oil for a net cost of $4,000. That’s how it was originally planned for Iraq to RV at 1 IQD = 1 USD, with the variable being the political element (i.e. UN Sanctions, GOI actions, IMF actions, World Bank actions etc.)

Other Factors that Strengthen Iraq’s Position and Ability to RV:

■DFI Funds Returned & Other Assets: $280+ Billion USD, plus other frozen assets (estimated at $100 billion) will be returned back to Iraq and added to their foreign currency reserve, bringing it up to $430+ billion USD.

■CBI IQD Reserve Requirement Adjustment: The CBI will change the current fractional IQD reserve requirements from 100% to 15% at the appropriate time. As a result, the the total potential money supply will be raised in value to $2.8 Trillion (430 billion/15), while at the same time, the total physical IQD in circulation will be reduced by removing the large bills with the 3 zeros over a period of 2 years, as they have indicated.

■Oil Production Increased: Iraq will also execute the plan they announced to increase oil production from 2+ million barrels/day to 10 million barrels/day with the resulting revenues flowing directly to the Iraq treasury.

■Oil Futures & Forex Contracts Added: To further stir the pot, the CBI will continue to use it’s sales window to market oil futures and forex contracts. They have shown they can generate significant cash flow in the private market. Think of their impact in public markets.

There, my friends, is how this plan will be enacted and made possible. Taking NOTHING, and turning it into SOMETHING, then bringing it back to a “manageable and reasonable something” that is accepted and supported by seeming endless supplies of oil. This is how the world’s ENTIRE NEW MONETARY SYSTEM will be regenerated and supported and backed, given, in essence, a re-birth and renewed for most governments and economic regions… even by “Black Gold”.

So, here’s the summary for all the “players” involved, giving ballpark numbers, and not taking into account superfluous costs, fees, and other small details that don’t really affect the larger picture:

■Investor’s Net Gain: $10,000 – $200 = $9,800 x .65 = 6,370 for an investment that cost $10

■Bank’s Net Gain: $200 added to “capital account”, plus $2,000 they can use to loan out.

■US Treasury Net Gain: $2,500 from the .25 spread on top + $3,500 in quarterly taxes = $6,000

■CBI/GOI/Iraqi People Net Gain: $12,500 – $162.50 = $12,337.50 + Profits from “Other Factors”

■Overall Net Gain for All Involved: $6,370+$200+$6,000+12,337.20 = $24,907.20

This is the wealth that was generated from a single 10,000 IQD note that was given an original value of approximately $10! Is that amazing or what?! You tell me… can Iraq afford NOT to RV?!!! Will the IMF allow them to NOT RV their currency, but simply replace their large denoms for smaller ones?!!! LOL!!!

In this scenario, EVERYONE WINS… and the IQD is slowly (over 2 years) taken back in to the CBI… eventually destroyed, leaving a manageable M2 behind, having created HUGE WEALTH throughout the world to re-supply what was allowed to be destroyed in the “great bleed” over a period of just a few weeks a couple of years ago, even the greatest redistribution of wealth the world has ever seen. Believe it or not, it has happened for this very purpose, and it IS coming!

wow, this was a great read i forgot about that post. thanks.

[gallinipper]

Not sure who has ruled it out. Most economist friends of mine, whether invested, or not have ruled it in. I certainly do. In fact in the global market today you cannot leave fractional banking out of the mix in anyway. Not only our banking system, but the world banking system is very much a frational banking system and has been for over 100 years. And most exchanges between economies operate in this manner. In fact, without fractional banking there would be no banks operating and no economies.

And while it may seem simple on the surface it is truly very convoluted in practice. And it truly is the means that the wealthy keep the middle class at bay.

without it, there would most certainly be banks operating, and there will always be economies. banks would simply do what they were intended to do...safeguard your money rather than lend almost all of it out to someone else. economies would be free. the system allows your money to be kept as a loan to the bank rather than a bailment and fractionally lent out multiple times. you are given a receipt for the amount of cash you have lent to the bank except it doesn't correspond to the amount of your cash the bank actually has. in any other case, this would be fraud. warehouse receipts for your grain at the silo (a fungible asset) or your favorite chair at the storage unit (a non-fungible asset) which purposefully state an incorrect amount would be fraudulent. the federal reserve was started with the intent of controlling inflation and preventing bank runs. it has failed miserably at curbing the rising cost of goods. in fact, all it has done is inflated the money supply causing the value of each dollar to decline. they do prevent bank runs, but i think runs on banks are healthy. they keep banks from leveraging too much. they are the check that is missing from the system. sure, banks would be more conservative with lending and investing, but they should be.

the real scam here is that the treasury bonds that banks including the fed buy are bought with our money some of which doesn't even exist. treasury bonds are just loans to the government. the government then funds programs (with our own money) thus giving it right back to us (and other countries) while paying the banks interest on the iou...with our tax money!

for more information, i recommend the case against the fed by murray rothbard.

Edited May 21, 2011 by gallinipper

[drummerboy]

wow, this was a great read i forgot about that post. thanks.

Thanks Easy. I was so impressed with it, I copied it onto my computer. I wish the original poster would have given the person who wrote that some credit because I would love to pass it on. I know it explained it to me so i could understand it.

I'm not sure about you, but today I woke up, smiled and got the over whelming feeling that today was a day that I could actually think about counting hours instead of days, weeks or months

Go RV..... Optimistically Excited!

[radar12354]

Everyone who is wondering how Iraq can possibly afford a strong RV such as a $3,87 as predicted by George Robinson to happen by June 1, GOOGLE these words and scroll to Wikipedia "FRACTIONAL-RESERVE-BANKING". Then all you Vets can explain it to the Newbies.

IMO, we will see an RV with Fractional Reserve Banking principals............but not that high in rates......why not? because we should want others to participate.....just saying

[wingsofhope]

It never ends.....does that come in sugar free strawberry flavor?

[radar12354]

Fractional-reserve banking is the most common form of banking and is practiced in almost all countries. Although Islamic banking prohibits the making of profit from interest on debt, a form of fractional-reserve banking is still evident in most Islamic countries.

Read more:

Democracy, the BOI is own by European interest..........................just saying

Edited May 21, 2011 by radar12354