7 Comments

I had posted this comment on another article and will post this here also because I was sent here from the other article and it pertains to this article, which is great read, thank you.

A lot of people do not realize that when a bank creates a mortgage, they are creating new money out of thin air and then charge interest off that money. For the average working person they will have to work approximately 15 years of their life to pay interest to a bank who creates the money by typing a few keys on the keyboard.

If the banks are creating a lot of loans then inflation will shoot up. And on top of that if the FED is performing QE, buying the mortgages from the banks with new money they create out of thin air, it creates even more inflation, it's a double whammy.

I know banks perform functions that people want and need like safely holding their money and wire transfers and other services but are those services worth the cost of inflation, the cost of working 15 years more of your life to pay off a mortgage?

Banks used to be fractional reserve and they did not have to keep much, but in 2020 the reserve was set to zero. https://www.federalreserve.gov/monetarypolicy/reservereq.htm

Banks still need to adhere to the capital adequacy ratios but they have the person applying for a loan pay for that.

For example, a person gets a loan for $500,000 for a house. The banks creates the loan, which creates the $500,000 in new money out of thin air. The bank ask the person for 20% down and then the banks has to keep 7% of that to cover the capital adequacy ratios and then they can use the rest to cover the ratio on other loans they make where they do not ask for a down payment.

It is mind blowing that the banks are this entrenched and have been doing this for so long and 99.9% of the population have no idea how this works, they think that banks lend out the money they have saved.

How banks create money:

https://www.youtube.com/watch?v=Q-3MEQnLbAk

Expand full comment

Very interesting. The whole debt-based economy is contingent on providing loans to individuals would not otherwise afford it from lenders with zero risk of default. It turns economic incentives completely on its head and destroys the principles of supply and demand. It’s some kinda distorted socialism where purchasing power is taken from good creditors and given to bad ones while the banks profit off the interest from capital they don’t posses. Full reserves would restore the economic relationship between credit and asset appreciation. Home prices would be more affordable and the economy would grow at the same rate as the money supply

Expand full comment

100% agree, good to find like minded people. I emailed DOGE and Trump with all this information.

"purchasing power is taken from good creditors and given to bad ones while the banks profit off"

exactly! it is so strange. The bankers must have lobbied night and day to get this corrupt system passed through.

Expand full comment

Banks should back reserves 100% and have to use their own capital to make loans. I don’t know that’s such a stretch for our modern banking system. Zero risk loans backed by the tax payer is the main reason for inflation. If you or I did the same thing we’d go to jail for counterfeiting.

Expand full comment

I am still learning about our monetary system and what would be better than this inflation nightmare we have now. From everything I have read, "Full Reserve Banking" sounds like the best option to me, what do you think?

Below is a talk I had with ChatGPT on the subject:

If we had Full Reserve Banking, how would people get loans to buy a house?

ChatGPT said:

In a Full Reserve Banking system, banks would not be able to create money by lending out customer deposits, so the process of obtaining loans would need to be fundamentally different. Here’s how people could still get loans to buy a house in such a system:

1. Loan Financing through Investment Accounts

Banks could offer investment accounts separate from regular deposit accounts. Customers would voluntarily invest their money in these accounts, knowing it will be used for lending.

Mechanism: Instead of lending from deposits, banks would act as intermediaries between borrowers (homebuyers) and investors (those who want returns on their money).

Interest: Investors would earn interest on the loans, similar to bonds or other fixed-income securities.

Impact: Borrowers would still have access to credit, but the money would come from willing investors rather than newly created funds.

2. Non-Bank Financial Institutions (NBFIs)

Entities like credit unions, mutual funds, pension funds, or insurance companies could provide mortgage loans using existing capital or pooled funds from investors.

Mechanism: These institutions would lend money that they’ve accumulated from premiums, contributions, or investments rather than creating new money.

Impact: Borrowing would still be possible, though the availability of loans might be more limited and dependent on investor willingness.

3. Peer-to-Peer (P2P) Lending and Crowdfunding

Platforms that directly connect borrowers and lenders could play a larger role. Borrowers would raise money from multiple individual investors, who each contribute a portion of the loan.

Mechanism: Similar to modern P2P platforms like Prosper or LendingClub, individuals seeking a mortgage would post their needs, and investors could fund the loan in exchange for interest payments.

Impact: This could democratize lending but might involve higher interest rates or more stringent requirements.

4. Government or Public Lending Institutions

The government could establish public banks or lending institutions that provide loans for essential needs like housing.

Mechanism: These institutions could be funded by taxes, bonds, or government resources rather than deposits.

Impact: Such lending would be tightly regulated and might be more focused on public good rather than profit.

5. Equity-Based Financing

Instead of traditional loans, buyers could enter into shared equity agreements where investors provide funds in exchange for a share of ownership in the property.

Mechanism: Investors would earn a return based on the property’s appreciation when it’s sold.

Impact: This model allows people to buy homes without taking on traditional debt but may limit full ownership.

Consequences of Full Reserve Banking on Loans

Higher Interest Rates: Since the supply of loanable funds would be limited to what investors are willing to provide, interest rates could be higher.

Limited Credit Availability: Loans would depend on existing savings, making credit less abundant.

Stability vs. Flexibility: The system would likely be more stable, with reduced risk of bank runs or financial crises, but less flexible in terms of rapid credit expansion.

In summary, lending in a full reserve system would rely heavily on existing capital, voluntary investments, and alternative financial structures rather than money creation through fractional reserves.

You said:

To me "rapid credit expansion" sounds like a bad idea

ChatGPT said:

ChatGPT

Memory updated

You're right to be cautious about rapid credit expansion. While it can stimulate economic growth in the short term, it often comes with significant risks:

Why Rapid Credit Expansion Can Be Problematic:

Asset Bubbles: Easy credit can inflate prices in sectors like housing or stocks, creating bubbles that may burst.

Debt Overhang: Excessive borrowing can leave individuals and businesses overleveraged, making them vulnerable to economic downturns.

Financial Instability: Too much credit expansion can lead to banking crises, as seen in the 2008 financial crisis.

Inflation Risks: Rapid increases in the money supply can contribute to inflation, eroding purchasing power.

A more cautious, balanced approach to credit can promote sustainable growth and financial stability.

You said:

I have studied the monetary system and for the average working person who saves dollars the "Full Reserve Banking" system sounds like the best system. I feel like the current system where banks can create money out of thin air and then lend it out and collect interest seems like a scam where the bankers are the ones making all the money.

ChatGPT said:

Your perspective aligns with a growing critique of the current fractional reserve system. Many people share the concern that money creation by banks disproportionately benefits financial institutions, often at the expense of the average saver. In a system where banks can lend out far more than they hold in reserves, it can feel like:

Wealth Concentration: Banks and financial elites accumulate wealth by charging interest on money they effectively created.

Risk Socialization: When things go wrong, such as during financial crises, the public often bears the cost through bailouts, while banks profit in good times.

Erosion of Savings: Traditional savers see the value of their money diminish due to inflation and low interest rates, while borrowers and speculators benefit from easy credit.

A Full Reserve Banking system would address some of these concerns by prioritizing the protection of savers' money, reducing systemic risk, and ensuring that lending is backed by real savings rather than newly created credit. It offers a vision of a more transparent and stable financial system, though it would come with trade-offs in terms of credit availability and economic flexibility.

Expand full comment

100%

Expand full comment

Mr. DeHart,

Hello and I hope you are doing well and thank you for getting awareness out on monetary reform.

I made some videos on how banks create money out of thin air and loan it out for profit to also bring awareness. When I talk to people about this they look at me like I am crazy :)

Why Do Banks Make So Much Money?

1) https://youtu.be/WPDwExNVw8Q

How Banks Create Money Out of Thin Air and Profit from it

2) https://youtu.be/Q-3MEQnLbAk

I think the majority of the public love banks and if you say anything negative about banks they get offended. Have you run into this and if so why do you think this is?

For the banks, this is beyond perfect, they can create money out of thin air and then profit from it and people like it and support it. It reminds me of that part in the Matrix where Morphis is talking about the system and how people are so dependant on it they will defend it.

https://youtube.com/shorts/F0NB4J9Uw8Q

Best regards,

John Daniels

Expand full comment