B0ycey wrote:You have an annoying habit of breaking down paragraphs into sentences and then respond with an even smaller sentence.
I find it aids clarity. Most people don't want clarity. You are probably one of them.
In essence you are saying that Darwin has discredited philosophy?
In essence, he rendered much of philosophy obsolete by showing we need not look beyond natural selection for the explanation of ANY aspect of human nature.
I have actually read OTOOS and I can assure you he does nothing of the sort. All he does is use observations to reach a conclusion on a biology concept. There is definitely no human morality aspect to it and he also definitely doesn't address why human society has become what it is. The closest he gets to anything of a verdict is natural section. He does not, and I repeat this so you can understand properly, address human society, capital, social justice, the universe or rational thought.
He didn't do it intentionally, but that was the effect, just as the first measurements of the distances to stars were not performed to expose all previous cosmology as childish fabrications, but that was their effect.
But when I said create capital, I meant for the bank in the form of profits. Not new money. Only the central bank is able to do that as money is an IOU from the government (who also dictates the value of that IOU).
That's just flat false. Almost all our money is created by private banks through lending. Google "Positive Money" and start reading. Even MMT gets THAT much right.
You have also repeated the same mistake you did last time when you declared 'that deposits sit in a vault gathering dust'.
That is a baldly false claim about what I plainly wrote.
If deposits don't get used and are only a reserve,
They are used AS reserves.
what is a fractional reserve to you and why pay interest on something you don't need?
In practice, banks need reserves to meet their obligations in a timely fashion. If borrowers never took the loan proceeds out of their accounts, or only paid other customers of the same bank, banks would not need any reserves.
Anyways, this is how a loan works.
No it's not.
A bank has deposits. Using those deposits it can issue out a loan that becomes an asset on a spreadsheet.
<yawn> Wrong. Tell you what. Call up your local commercial bank and ask to speak to the accountant. Ask him or her which account loan proceeds are TAKEN OUT OF to be put into the borrower's account. If you are willing to know the answer, you may have an opportunity to learn something.
To you this is new money. It isn't.
It is indisputably new money, as you would know if you knew anything about economics or banking.
Because if every customer asks for their money back (a run in the bank), at some point the bank runs out of capital due to the loan assets it has created.
Wrong. It doesn't run out of capital. It runs out of reserves. Two different things. And it's not because they created loan assets, but because they created matching deposit liabilities.
When a payment is made from a borrower's account to another bank, the lending bank has to reduce the liability in his account by that amount. But obviously, it also has to make a balancing entry somewhere else: either an increased liability, or a reduced asset. Typically, it reduces its reserve asset because that is what it is for. THAT'S what it has to give the other bank, which consequently has more reserves to match the increased liability in its customer's account.
Just go to any good public or university library and find a textbook that describes banks' bookkeeping entries. It's all there.
So it needs a fractional reserve to protect themselves from such dangers.
Right. Its reserves are for PRUDENCE, not a fund to be lent out to borrowers.
Whether all countries require a fractional reserve is irrelevant.
No, because it proves you wrong.
It just means that banks in those countries are more toxic if they don't use one.
Funny, the Canadian banks that weathered the GFC so much better than American ones didn't have any statutory reserve requirement.
Also, banks in the form of very large loans will borrow from each other to limit the liability on themselves.
No, to provide themselves with liquidity.
Again why do this if they can 'create money'?
They can only create money if someone else will undertake to pay it back with interest.