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Gold/Mining/Energy : ECHARTERS
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To: grusum who wrote (3699)11/22/2011 5:46:56 PM
From: E. Charters1 Recommendation   of 3744
 
The Fed money supply and the fractional discount system makes it rigorous. A bank gets 100 dollars on account. It can under a 5% fractional reserve system lend out 95 dollars. This gets deposited and that bank or the same bank can lend out 95% of the 95 dollars, and so on. It goes all the way to $2000, as it can happen 100 times. Make a spreadsheet out of it and prove it to yourself. This is rigorously in the books. This rate of phoney money can be accelerated by lowering the interest rate and the government buying bonds from the Fed.

This was all referred to in my previous post. What makes it 'excess'. It depends on the quality fo the loan and the corruption of the banks. If you are monetizing the loan, then it makes it ten times worse, as the incentive to make loans and make money selling the CD's and shares - not to mention the loans themselves - increases. If you can easily monetize the loan by issuing shares and selling them, then the exit speed increases and the chance of corrupting the process increases. It is the Boesky-Milliken law of deal corruption.

All you have to have is a low percent fractional reserve system, a monopoly banking system, lax controls, a greedy top heavy government, etc and the money all gets bad. Fast.

EC<:-}
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