Banking, Cryptocurrency, and Fractional Reserve Lending
There is a lot of misunderstanding about banking and how things operate. Even when people understand, they bash things that they benefit from.
In this video , I discuss how fractional reserve lending is the way most currency is created. It also avoids the debasement of currency, at least from a monetary expansion perspective.
Here is the articles discussed in the video:
https://cointelegraph.com/news/why-isn-t-the-federal-reserve-requiring-banks-to-hold-depositors-cash
▶️ 3Speak
0
0
0.000
Thank you for opening our eyes, giving us the education and the insight, because this exact momentum should make us all ware that it's not just the banks or the crypto bear/volatility that can make us cry, it's also a first step of making the right decisions. And for that we need awareness and people like you to show us the What, Why and lead us to an effective How-to.
Why does it make a difference where the commercial bank creates the money? When they take the money from customer deposits, the bank conjures that money and puts it to the account of the depositor, just as if they conjured the money for the loan principal.
Either way, the bank is creating the money out of thin air. Why do you say it debases the currency when they conjure the loan principal, but not when they conjure the customer deposit?
Thanks!
When a commercial bank creates money, it is tied to economic productivity. That is ultimately what backs a currency. Why is the USD worth more than EUR or JPY? The answer lies in the economic productivity tied to the USD compared to the others.
Banks making loans expand economic activity, increasing the value of the economy it is tied to. Central banks printing money, those that do, end up just creating the currency without any increase in economic activity.
If an economy doesnt have the ability to expand, due to a lack of resources (natural, human, or whatever), then printing money is not going to do anything.
Posted Using LeoFinance Beta
Very enlightening to hear different perspectives on the intricacies of currency. We definitely need to take responsibility of learning about currency and passing it on to the next generation. When I say next generation I am really thinking of the pre-teens.
From here out I am putting my focus on how to create a crypto using the Hive Blockchain and am observing and participating to realize what systems are most effective in creation and growth of value.
Can Hive sustain a coin created by a very controversial group? That I do not know the answer too but I will be interested in seeing something like a ANTIFA token, BLM token, NatSoc token, etc. to put attacks and manipulations against Hive to the test.
I do like the decentralized approach but I am not an expert in DAOs or their vulnerabilities.
Thanks for the great content once again.
Posted Using LeoFinance Beta
From a base layer, decentralized node system, yet it can survive. As for other standpoints, things can be targeted.
For example, websites can be taken down. This means that unless someone is dealing with a web domain, hosting, and other things, it becomes difficult to not have vulnerabilities.
Posted Using LeoFinance Beta
I very much appreciate having someone around making posts and being followed by many here who knows this stuff.
Summary:
In this video, Task discusses an article from Cointelegraph titled "Why Isn't the Federal Reserve Requiring Banks to Hold Depositors' Cash?" Task argues that the article highlights a lack of understanding among people in the cryptocurrency space about how fractional reserve banking works. He goes on to explain the concept of fractional reserve banking, emphasizing how it allows banks to create money through loans which in turn drives economic productivity. Task delves into the importance of interest in banking, the implications of operating with 100% reserves, and the role of central banks in controlling money supply. He also touches on the significance of derivatives in banking and how they are used for both leveraging and hedging purposes.
Detailed Analysis:
Task starts by addressing the article from Cointelegraph, expressing his frustration at the lack of understanding about fractional reserve banking among many in the cryptocurrency community. He explains that fractional reserve banking allows banks to create money through loans, which in turn fuels economic growth and productivity as loans are used for various financial transactions like buying cars, houses, or investing in manufacturing companies.
He critiques the idea of operating with 100% reserves, emphasizing that it would hinder banks' ability to lend money and generate interest for depositors. Task highlights the importance of interest for depositors, as banks need to put money to work to generate returns for customers. He argues that eliminating fractional reserve banking would either lead to currency debasement or a shift towards investment banks, which do not deal with deposits in the traditional sense.
The discussion then shifts towards the role of central banks in controlling money supply and the risks associated with excessive lending. Task explains how banks have to adhere to regulatory requirements set not only by the Federal Reserve but also by other entities like the OCC and FINRA. He delves into the concept of value at risk (VAR) models that banks use to manage their risk exposure and the role of derivatives in hedging positions to mitigate risks.
Task touches on the importance of understanding the banking system for the cryptocurrency space, highlighting the need for education and awareness about how financial systems operate. He emphasizes the complexity of banking operations, criticizes simplistic solutions to banking challenges, and underscores the significance of informed discussions on monetary systems and banking practices. Task ends the video with a call for better understanding of financial systems to make more informed decisions and avoid falling for misleading narratives or oversimplified solutions.
Notice: This is an AI-generated summary based on a transcript of the video. The summarization of the videos in this channel was requested/approved by the channel owner.