How two fractional banking systems interact with each other when they have different savings rates. (unemployment, wages)

[newonecoming]

Let's start with one CU (Credit Union)
It is small. It has 10 costumers that have $100 each on deposit. That adds up to $1,000.
The CU has $100 cash on hand, in case someone wants some of their money and $900 in IOUs. This adds up to the $1,000 that is on deposit. It only takes $100 worth of cash to have $1,000 on deposit. The deposits are 10 times the cash supply. The other $900 are very real obligations to pay the CU money. The $1,000 exists as real money $100 in the form of cash and $900 in the form of debt. Debt is negative money. It is real but it exists as an obligation to pay not as cash. The $900 in IOUs isn't made up. (If you don't believe me just try telling someone that you own money to that the debt isn't real.)

[newonecoming]

So how two countries with fractional reserve banking systems interact with different savings rates.


Country A has a savings rate of 1% and country B has a savings rate of 10%. Both countries trade with out tariffs.


So in year one country A has 10 people in it and makes $1,000 worth of stuff. (pay matches the value of production) Country B has 10 people in it and makes $1,000 worth of stuff. Country A puts $10 in their CU and it turns into $100. So country A wants to buy $1,090 worth of stuff. ($1,000 worth of pay minus $10 worth of savings plus 10X $10 worth of new debt.) Country B puts $100 in their CU and it tries to turn into $1,000 This doesn't work so well because the 10% savings rate means that people are spending less money than in country A. So the CU in country B deposits the $100 in country A's credit union. More people are spending money in country A so it multiplies further and people in country A buy more stuff. (more loans = More consumption) The people in country A buy the excess stuff made in country B. (Remember they both made the same amount of stuff originally.)


Country A now has to much stuff so the work week is cut back by 10% to balance production with demand. Compensation also is cut back by 10% as well. This balances production with demand.


So year two.


Country A makes $900 worth of stuff and country B makes $1,000 worth of stuff.
Country A saves $9 in their CU and country B saves $100 in their CU. Country A's $9 turns into $90 and country B's $100 tries to turn into $1,000 It doesn't work any better this year as a posed to last year. So remembering what happened last year Country B's CU deposits the $100 in country A's CU. This tries to turn into $1,000 but doesn't quite. Country A spends that same amount of money this year as last year even tho they made $100 (10%) less this year. So another cut in production and pay. And country B gets more production and pay. More savings and less consumption. The rate of pay doesn't matter it is the rate of savings that drives export import imbalances.

[GuyNTexas]

Originally Posted by newonecoming

Let's start with one CU (Credit Union)
It is small. It has 10 costumers that have $100 each on deposit. That adds up to $1,000.
The CU has $100 cash on hand, in case someone wants some of their money and $900 in IOUs. This adds up to the $1,000 that is on deposit. It only takes $100 worth of cash to have $1,000 on deposit. The deposits are 10 times the cash supply. The other $900 are very real obligations to pay the CU money. The $1,000 exists as real money $100 in the form of cash and $900 in the form of debt. Debt is negative money. It is real but it exists as an obligation to pay not as cash. The $900 in IOUs isn't made up. (If you don't believe me just try telling someone that you own money to that the debt isn't real.)

This is the foundation of the fraud, and the basis for your skewed understanding. And until you grasp this, you'll not be able to get the rest.

Only counterfeiters, fraudsters, and fools believe that debt is actually money .. it is not money. It doesn't exist. It is a promise to pay based on future events that cannot be predicted. As we all know, promises are often broken ... sometimes purposely and sometimes due to inability to pay relative to circumstances, i.e. job loss, financial investments failed .. or what ever.

An old saying warns ... "don't count your chickens before they are hatched" could be applied here. And egg is an IOU for a chicken. It is not a chicken ... it is an egg. Handled properly it could become a chicken, but handled improperly will not become a chicken.

Now, back to what is real and fiction. In previous discussions you said I over simplified the "fractional reserve system" and how it works ... that would be an incorrect statement ... it's purely mathematics. In this country (it's even lower in others) a bank has to keep 10% of deposits in reserve. A deposit of 100, allows the bank to lend 90, keeping 10 in reserve, but in effect, that cycle can continue until a $1000 of debt it created. Simple math, 100 divided by 10% = 1000. You can argue with me, but you can't argue with math. My "oversimplified" statement was just a statement of fact, rather than the entire process leading up to that fact.

Now, the bank has created $1000 in debt, with only $100 in cash to show for it. That leaves $900 out there in IOUs for money that never existed in the first place. This is fraud, as surely as if I had a 1 acre parcel of land which sat adjacent to an additional 9 acres of wooded land (owned by someone else) and I pretended to sell you all 10 acres, expecting you to only use the 1 acre right away ... leaving the other 9 acres untouched. You assume you have 10 acres, so you're happy. I sold 1 acre and got paid for 10, so I'm even happier. Later, when you decide to finally use those other 9 acres, that's when the big problem seems to occur. But the problem didn't happen then .. it happened at the beginning, when I sold you 10 acres, when I truly only had 1 acre to sell. To you, the 10 acres existed, because you could see them. They are there (just like you can see the digits on your bank statement). But in reality, you only own and possess 1 acre, regardless of what you "THINK" you possess.

Now, with the monetary system, it's even a greater fraud. Because even the $100 cash doesn't actually exist. That too are just IOUs, with no actual value ... only perceived value, and they were created in the same fashion as the $900 ...the only distinction being that they were printed on paper instead of digits input to a computer.

If I owe you a dollar ... I can give you a 1 dollar bill ... you consider the debt paid. But in reality, you just have another IOU. On the other hand, back in the days of silver dollars ... when I handed you that silver dollar as payment .. you were in fact, paid in full at that moment because the silver dollar has intrinsic value, whereas the paper has none. I's like having a photograph of a can of beans versus an actual can of beans. You cannot "eat" the photograph. You can melt that silver and use it for jewelry or sell it for worth. The dollar is just a piece of paper.

This is the raw facts of the matter ... and you were not likely even born when "real money" was in circulation, so you have no personal reference.

You must rely on what others say, and not personal experience. I would caution you not to take at face value what "wikipedia" says (you've used this as a reference). Although some information is accurate and true, not all of it is ... in fact, a lot of it is totally false.

[GuyNTexas]

Originally Posted by newonecoming

So how two countries with fractional reserve banking systems interact with different savings rates.


Country A has a savings rate of 1% and country B has a savings rate of 10%. Both countries trade with out tariffs.


So in year one country A has 10 people in it and makes $1,000 worth of stuff. (pay matches the value of production) Country B has 10 people in it and makes $1,000 worth of stuff. Country A puts $10 in their CU and it turns into $100. So country A wants to buy $1,090 worth of stuff. ($1,000 worth of pay minus $10 worth of savings plus 10X $10 worth of new debt.) Country B puts $100 in their CU and it tries to turn into $1,000 This doesn't work so well because the 10% savings rate means that people are spending less money than in country A. So the CU in country B deposits the $100 in country A's credit union. More people are spending money in country A so it multiplies further and people in country A buy more stuff. (more loans = More consumption) The people in country A buy the excess stuff made in country B. (Remember they both made the same amount of stuff originally.)


Country A now has to much stuff so the work week is cut back by 10% to balance production with demand. Compensation also is cut back by 10% as well. This balances production with demand.


So year two.


Country A makes $900 worth of stuff and country B makes $1,000 worth of stuff.
Country A saves $9 in their CU and country B saves $100 in their CU. Country A's $9 turns into $90 and country B's $100 tries to turn into $1,000 It doesn't work any better this year as a posed to last year. So remembering what happened last year Country B's CU deposits the $100 in country A's CU. This tries to turn into $1,000 but doesn't quite. Country A spends that same amount of money this year as last year even tho they made $100 (10%) less this year. So another cut in production and pay. And country B gets more production and pay. More savings and less consumption. The rate of pay doesn't matter it is the rate of savings that drives export import imbalances.

First, personal savings rates have nothing to do with import-export balance. The "Country's" savings rates may .. but not necessarily. Your example ASSUMES that both countries have identical production "capacity" and that their cash on hand allows them to better negotiate upturns and down turns in supply-demand fluctuations. This is pure theory, and not reality. It also assumes that the two countries WANT to have a balanced trade position which is frightfully idealistic and false.

The simple question you fail to ask yourself is this ... irrespective of savings rates and cash on hand ... what does country "B" export if it doesn't produce anything? What if country "B" allows all of it's manufacturing companies to move it's production offshore to country "C" because the labor rates and profits are greater for the company?

The answer is this ... Country "B" lives off of their savings until those savings are exhausted. Then, it begins borrowing and living off credit (credit it established by being a thrifty, high production, high profit country in the past), until they wind up with intractable debt. Because they "allowed" all of their manufacturing to be moved outside the country, country "B" is now in debt up to their ears, with no production capacity to right the ship.

Sound familiar? It should. YOU LIVE IN COUNTRY "B".

[texdav]

Noi savings rates by indivdauls ahs everyhting to do with teh countries savings rate. Look at china and the 40% savings arte. that savings is not helf by te person ;it is deposited and invested. many times what really is happenig is that their savings buy our IOU's. They indirectly are the ones financing country B 's credit spending.Instead of country B going to those in country B to buy IOUs they go to the moeny source that has excess. But country A may decide not to invest all;which is what is happening;it decides to invest in the raw materials in future contracts. Then of sourse the people in country B decide that they don't need a repalcemnt of what they already have or can live without it. Country A in the meantime has growing demand becuase they never had the products and how can use country Bs payments to afford it. Country Bs real problem is that it needs o sell tot hisemand shifting to country A.This happen in outnry B at one time ;how is happening in count B because they became the banker.

[newonecoming]

Originally Posted by GuyNTexas

This is the foundation of the fraud, and the basis for your skewed understanding. And until you grasp this, you'll not be able to get the rest.

Fraud is based on a lie. If you tell the truth you have not committed fraud. Truth they only keep 10% cash reserves. In exchange for this they pay you interest. You loan them the money not put it in their trust for safekeeping. The terms of the loan are that you can walk in and withdraw all your money at any time. It is their problem to come up with more than the 10% if everyone comes in at once. There is an arrangement to cover this eventuality. The federal reserve bank will loan them the money to cover a run on the bank. There is no lie so there is no fraud.

Originally Posted by GuyNTexas

Only counterfeiters, fraudsters, and fools believe that debt is actually money .. it is not money.

M0, M1, M2, M3, there is a unit of exchange called “money”. Having this unit is convenient. As long as everyone treats what is called “money” as money it serves the purpose of being money. This is not a lie and so it is not a fraud.

Originally Posted by GuyNTexas

It doesn't exist. It is a promise to pay based on future events that cannot be predicted. As we all know, promises are often broken ... sometimes purposely and sometimes due to inability to pay relative to circumstances, i.e. job loss, financial investments failed .. or what ever.

This is quite literally true. How ever what is treated as money serves the purpose of being money. It doesn't actually have to be money to fulfill this function. It just has to be accepted as such.

Originally Posted by GuyNTexas

An old saying warns ... "don't count your chickens before they are hatched" could be applied here. And egg is an IOU for a chicken. It is not a chicken ... it is an egg. Handled properly it could become a chicken, but handled improperly will not become a chicken.

Yip and as long as everyone is told up front that this is so there is no lie and so no fraud.

Originally Posted by GuyNTexas

Now, back to what is real and fiction. In previous discussions you said I over simplified the "fractional reserve system" and how it works ... that would be an incorrect statement ... it's purely mathematics. In this country (it's even lower in others) a bank has to keep 10% of deposits in reserve. A deposit of 100, allows the bank to lend 90, keeping 10 in reserve, but in effect, that cycle can continue until a $1000 of debt it created. Simple math, 100 divided by 10% = 1000. You can argue with me, but you can't argue with math. My "oversimplified" statement was just a statement of fact, rather than the entire process leading up to that fact.

Last night I thought about this some more and came to a clearer way of saying what I was trying to say. Your belief that the banking system represents a lie in its totality makes it hard for you to hold it in your head and discus the nature of how the, as you see it, lie works. I have looked and have found no lie. I may have missed something but I have found no lie.

Originally Posted by GuyNTexas

Now, the bank has created $1000 in debt, with only $100 in cash to show for it. That leaves $900 out there in IOUs for money that never existed in the first place. This is fraud, as surely as if I had a 1 acre parcel of land which sat adjacent to an additional 9 acres of wooded land (owned by someone else) and I pretended to sell you all 10 acres, expecting you to only use the 1 acre right away ... leaving the other 9 acres untouched. You assume you have 10 acres, so you're happy. I sold 1 acre and got paid for 10, so I'm even happier. Later, when you decide to finally use those other 9 acres, that's when the big problem seems to occur. But the problem didn't happen then .. it happened at the beginning, when I sold you 10 acres, when I truly only had 1 acre to sell. To you, the 10 acres existed, because you could see them. They are there (just like you can see the digits on your bank statement). But in reality, you only own and possess 1 acre, regardless of what you "THINK" you possess.

The bank has not told you that they are keeping your money in the vault they have told you that they are loaning it back out and so paying you interest on your loan to them of the money in your account. (The money you have loaned to them by “depositing” the money in your account) No lie and so no fraud.

Originally Posted by GuyNTexas

Now, with the monetary system, it's even a greater fraud. Because even the $100 cash doesn't actually exist. That too are just IOUs, with no actual value ... only perceived value, and they were created in the same fashion as the $900 ...the only distinction being that they were printed on paper instead of digits input to a computer.

As I stated above what is called “money” doesn't actually need to be real money all it needs to do is to serve as a unit of exchange.

Originally Posted by GuyNTexas

If I owe you a dollar ... I can give you a 1 dollar bill ... you consider the debt paid. But in reality, you just have another IOU. On the other hand, back in the days of silver dollars ... when I handed you that silver dollar as payment .. you were in fact, paid in full at that moment because the silver dollar has intrinsic value, whereas the paper has none. It's like having a photograph of a can of beans versus an actual can of beans. You cannot "eat" the photograph. You can melt that silver and use it for jewelry or sell it for worth. The dollar is just a piece of paper.

A unit of exchange with intrinsic value has merit. I am not arguing with you there. It doesn't have to have intrinsic value to serve as a unit of exchange of wealth. Nice but not necessary.

Originally Posted by GuyNTexas

This is the raw facts of the matter ... and you were not likely even born when "real money" was in circulation, so you have no personal reference.

I have received real money as payment before. Not often but I have. The last of the real money was before my time.

Originally Posted by GuyNTexas

You must rely on what others say, and not personal experience. I would caution you not to take at face value what "wikipedia" says (you've used this as a reference). Although some information is accurate and true, not all of it is ... in fact, a lot of it is totally false.

The reason that our money was removed from the gold standered was we had more imports than exports and so decided to print money rather than to fix the problem.

Originally Posted by GuyNTexas

First, personal savings rates have nothing to do with import-export balance. The "Country's" savings rates may .. but not necessarily. Your example ASSUMES that both countries have identical production "capacity" and that their cash on hand allows them to better negotiate upturns and down turns in supply-demand fluctuations. This is pure theory, and not reality. It also assumes that the two countries WANT to have a balanced trade position which is frightfully idealistic and false.

Originally Posted by GuyNTexas

The simple question you fail to ask yourself is this ... irrespective of savings rates and cash on hand ... what does country "B" export if it doesn't produce anything? What if country "B" allows all of it's manufacturing companies to move it's production offshore to country "C" because the labor rates and profits are greater for the company?

Originally Posted by newonecoming

So in year one country A has 10 people in it and makes $1,000 worth of stuff. (pay matches the value of production) Country B has 10 people in it and makes $1,000 worth of stuff.

You miss read my assumptions.

Originally Posted by GuyNTexas

The answer is this ... Country "B" lives off of their savings until those savings are exhausted. Then, it begins borrowing and living off credit (credit it established by being a thrifty, high production, high profit country in the past), until they wind up with intractable debt. Because they "allowed" all of their manufacturing to be moved outside the country, country "B" is now in debt up to their ears, with no production capacity to right the ship.

Sound familiar? It should. YOU LIVE IN COUNTRY "B".

With misreading my assumptions the rest of your argument is meaningless. Sound familiar?

Edit=Read it correctly we live in country A. Japan is country B also china.

[newonecoming]

I get it you were trying to add another country into the mix. Country C. Well I was showing you how savings rates turns an initially identical situation into a situation where jobs are exported to country B as a result of the savings rate difference between country A and B. Pay rate differences don't matter savings rate does. Germany has a high pay rate and high export rate. Why is this so? We had a high pay rate and a high export rate in the 1950's. And now we don't what changed? 1920's we had a high savings rate and a high export rate. China is buying our debt. If they didn't have a high savings rate they wouldn't be able to do this. If people weren't buying our debt we couldn't spend money we don't have. When cash flows into a country goods tend to do so as well. When cash flows out of a country goods tend to do so as well. When cash flows into a country debt in that country is created. Beyond a certain point debt causes an economy to contract not expand. I think that in the 1970's we hit that point. The debt had risen to the point that we needed to have a depression to clear out the debt or to have a debt bubble. Our savings rate had been low.

[newonecoming]

P.S. As far as the pay in other countries being lower than it is here we need to ask them to raise their pay as this will make things better for everyone rather than tariffs as this tends to bring everyone down. And doing this will tend to make the worlds economy boom like we have never seen it boom before.

[GuyNTexas]

Originally Posted by newonecoming

I get it you were trying to add another country into the mix. Country C. Well I was showing you how savings rates turns an initially identical situation into a situation where jobs are exported to country B as a result of the savings rate difference between country A and B. Pay rate differences don't matter savings rate does. Germany has a high pay rate and high export rate. Why is this so? We had a high pay rate and a high export rate in the 1950's. And now we don't what changed? 1920's we had a high savings rate and a high export rate. China is buying our debt. If they didn't have a high savings rate they wouldn't be able to do this. If people weren't buying our debt we couldn't spend money we don't have. When cash flows into a country goods tend to do so as well. When cash flows out of a country goods tend to do so as well. When cash flows into a country debt in that country is created. Beyond a certain point debt causes an economy to contract not expand. I think that in the 1970's we hit that point. The debt had risen to the point that we needed to have a depression to clear out the debt or to have a debt bubble. Our savings rate had been low.

Very simply, it's manufacturing and low wages that allow that which is manufactured to be competitive. This is why China is buying our debt .. they have the money because they have the production and the associated exports. Low wages = increase in production - more competitive products for export. High wages = reduction of production as manufacturing moves to more competitive areas where costs of production (wages) are lower. High production/low cost = high export/low import. Why would one import what they can produce themselves, cheaper? They would not. China is a classic example of this.

You have it entirely backwards. You are confusing cause with effect. Plentiful jobs = increasing wages which leads to more disposable income and higher savings rates, until those costs begin pushing production to lower cost areas. This is the result of booms in manufacturing, and subsequent exports. Those higher costs (wages) leads to less competitive product costs, lower exports and higher imports of cheaper goods, and finally, reduction of manufacturing as movement of that manufacturing to lower cost (wages) areas. Less jobs for many workers means lowering of wages .. it's simple supply and demand ... you have a workers market and you have an employer's market. Many workers and few jobs are an employer's market where wages can be lowered. The reverse is also true ... many jobs and few workers leads to higher wages as employers have to compete for workers. How do they compete? With higher wages and benefits.

This is precisely why big business does not desire zero unemployment. It drives up their costs as they are forced to compete (pay for) workers. They love having a huge pool of out of work workers, desperate for work, as they will work for less pay out of necessity.

Try using common sense. When is it most likely that you'll save money:

1) when you are unemployed?

2) when you are employed but only making ends meet barely (low wages)

3) when you are employed and making a large salary with plenty of disposable income?

Look young man, this is not rocket science, it's common sense. Use your head, and think for yourself.

I was born in the 1950's. I was gainfully employed and self sufficient in the 1970's, and I had a decent income, and the ability to save money. The 1980's was the same way. The 1990's began to become more difficult, with more competition for jobs ... increases in costs of living and higher taxes.

I'll give you an example ... 1977, I made 14-15,000 per year. I bought a brand new pontiac Trans Am for $4,900. My rent was $200/per month, all utilities included. My car payment was $135. My groceries ran about $20 per week. I could attend a rock concert (lawn seat) for $3, and a beer was $.75. Both I and a date could go to that concert, have a few beers for about $12. So, my take home pay was around 1000/month while rent, car, insurance, and food totaled about 500/month. Half of my pay was left, and entertainment cost was (high rolling) 50-75 week, and I had a couple hundred bucks to stash in a savings account (1/5) of my pay (could have been easily 1/4, but I was young, and I spent a lot of money on cars women and booze ... and the rest, I wasted) ... no credit card, no credit card bills.

Fast forward to the 1990's, and I was making $55-60,000 per year, after taxes, about 3000 (800/m in retirement savings) per month. A new comparable car was 25,000. (I was making 3 x my 1970's take home income, and the car was 5x the cost). My rent was 1000/m plus utilities, phone, running close to 1100/m. Again, the rent was 5x my 1970's rent (though it was a nicer place) virtually all of the expenses out paced the gains in income ... including increases in taxes, fees, insurance, food, entertainment, etc. What was left over was much less proportionally, than I had in 1970. That trend continued to the present day, where we have very little left over after all of the bills are paid.

So I've lived it ... I didn't just read about it. After 15 years with a fortune 100 company (1982-1997) company that was taken over in a corporate raiding scenario, our retirement savings which were in company stock plummeted inside 12 months from $65 per share, to a low of $3.50 /share, converting about $150,000 into little more than 8k. That 800/m being saved for retirement over 15 years wound up being stolen, and I got back about $45 for every $800 put in as I was finally laid off.

You think this story is unique? I got news for you .. it's as common as a sunny day, and there are many many people out there who have lost way more in these corporate retirement scams. So instead of retiring in a few years, I'll be working till I drop dead ... IF I'M LUCKY.

Savings rates, INDEED.

[newonecoming]

Originally Posted by GuyNTexas

Very simply, it's manufacturing and low wages that allow that which is manufactured to be competitive. This is why China is buying our debt ..

If they didn't have a high savings rate they wouldn't have the money to buy our debt.

Originally Posted by GuyNTexas

they have the money because they have the production and the associated exports.

We had more exports than imports what changed?

Originally Posted by GuyNTexas

Low wages = increase in production - more competitive products for export.

It takes investment to produce things investment = savings.

Originally Posted by GuyNTexas

High wages = reduction of production as manufacturing moves to more competitive areas where costs of production (wages) are lower.

What part of Germany has High wages and more exports than imports don't you understand?

Originally Posted by GuyNTexas

High production/low cost = high export/low import. Why would one import what they can produce themselves, cheaper? They would not. China is a classic example of this.

See above what part of Germany having high pay and high exports don't you get?

Originally Posted by GuyNTexas

You have it entirely backwards. You are confusing cause with effect. Plentiful jobs = increasing wages which leads to more disposable income and higher savings rates, until those costs begin pushing production to lower cost areas.

China has a 40% savings rate. And close to a 10% growth in GDP annually. And they are low payed. They have high savings rate first more work second.

Originally Posted by GuyNTexas

This is the result of booms in manufacturing, and subsequent exports. Those higher costs (wages) leads to less competitive product costs, lower exports and higher imports of cheaper goods, and finally, reduction of manufacturing as movement of that manufacturing to lower cost (wages) areas. Less jobs for many workers means lowering of wages .. it's simple supply and demand ... you have a workers market and you have an employer's market. Many workers and few jobs are an employer's market where wages can be lowered. The reverse is also true ... many jobs and few workers leads to higher wages as employers have to compete for workers. How do they compete? With higher wages and benefits.

I give up I really do. 1929 who had the highest savings rate in the world? We did. Who had the highest exports in the world? We did. Today who has the highest savings rate in Europe? Germany Who has the highest export rate in Europe? Germany. Who has the highest savings rate in the world? China I do believe. Who is rapidly becoming the biggest exporter in the world? China. So where would we get the money to rebuild our manufacturing base? We would have to borrow it from China. Why? Because they have the highest savings rate!!!! And we aren't saving enough money to buy our own national debt!!!! Much less rebuild our economy. We need to save money

Originally Posted by GuyNTexas

Try using common sense. When is it most likely that you'll save money:

Try looking at who is doing what and why. China has a very high savings rate and very low pay, this violates your common sense. Germany has high pay and high exports. Why? Again this violates your common sense. Try looking at how two fractional reserve banking systems interact with different savings rates. Debt moves from the high savings country to the low one. And stuff (to buy) moves with the debt.