Imagine you and 99 others each deposited $10,000 ($1,000,000 total) into the First Hypothetical Bank of Texas. Under fractional reserve banking the local bank need not keep the full $1 million in the vault. Instead the banks might only have to keep a relatively small percentage (say, 5% or less) of gross deposits on hand for withdrawals while the other 95% was loaned out. The percentage of funds kept at the bank is based on statistical predictions of how many depositors might want to remove some or all of their deposits on any given day. So long as depositors are confident in the bank and the economy, they tend to leave their deposits in the bank and keeping 5% of the gross deposits on hand is sufficient to satisfy their daily withdrawal needs.
Monthly Archives: February 2010
Opium of the Masses: Fiat Currency
Just last October, the euro replaced the dollar as the reserve currency preferred by foreign central banks. That preference was recently shaken by the Greek “sovereign debt” crisis which created a rush from the fiat euro (euro-bubbles) to the fiat dollar (dollar-bubbles). As a result of the decline in the purported “value” of the value-less euro-bubbles, the purported “value” of the value-less, fiat dollar-bubbles increased—and the price of gold fell.
Greece violated European Union (EU) agreements to hold deficits to 3.4% of national GDP by allowing its deficit to reach 12.8%. The resulting economic turmoil threatens the validity of the euro-bubbles and even the integrity of the EU, itself.
The Greek Crisis: When Thieves Fall Out
Last week (in “The Mutha of All Bubbles”), I explained that the recent fall in the price of gold was primarily caused by the rising threat of a Greek default on debt . . . which threatened the euro . . . which caused people holding euro’s to run to fiat dollars . . . which increased the apparent value of the intrinsically-worthless paper dollar (dollar-bubbles) . . . and thereby caused the fall in the price of gold as measured in “dollar-bubbles”.
Article, Radio & Video Links of interest
Faber: Sovereign Debt Crisis Will Spread World-Wide, U.S. Debt Is Unsafe
Video Marc Faber says that the GOVERNMENTS of the US, Europe and of the entire developed world WILL DEFAULT on their debt:
http://www.informationclearinghouse.info/article24652.htm
Promises, Promises (and Arguments)
The following case touches on issues of PROMISES (unilateral contracts?) and ARGUMENT and offers a surprising amount of insight in a relatively few pages: 100205 USA v Reagan ARGUMENT
The Mutha of All Bubbles
The meaning of the term “bubble” as applied to stocks in the late 1990s and then to homes the early 2000′s meant an investment vehicle that’s been hyped and manipulated to a price that is so “inflated” that it bears little resemblance to the investment’s true, free market value.
What do you “believe” about “belief”?
The following curious email exchange took place in December between myself and a friend who prefers to remain unnamed. The exchange touches on the difference between “The State” (of the Union) and “this state” (the unincorporated association/territory/implied charitable trust of the singular United States) and especially on the bizarre importance of “belief” in our legal system.
The conclusions (or at least suspicions) about “belief” are somewhat challenging to understand and hard to “believe”. Nevertheless, I think those conclusions/suspicions may be roughly correct.
In essence, I’m using this email exchange to explain what I “believe” about “belief”.
God-given, unalienable Rights repudiated by Supreme Court
The American Revolution was fought to validate and secure the two, extraordinary, unprecedented principles advanced by the “Declaration of Independence”:
1) That it is both true and self evident that all men are created equal and endowed by their Creator with certain unalienable Rights; and,
2) “That to secure these rights, governments are instituted among men . . . .”
