How is M1, not the Fed balance, M1, expanded?

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presidentbyamendment's picture
presidentbyamendment
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How is M1, not the Fed balance, M1, expanded?

?

strabes's picture
strabes
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Re: How is M1, not the Fed balance, M1, expanded?

commercial bank loans

Thomas Hedin's picture
Thomas Hedin
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Re: How is M1, not the Fed balance, M1, expanded?

Bank investments can also expand the M1 supply.  Also (though I know very little about the M1 thing) I believe if you convert your savings account (M2?) into demand deposit (checking account) you can expand the M1 that way as well.

presidentbyamendment's picture
presidentbyamendment
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Re: How is M1, not the Fed balance, M1, expanded?

OK, thanks muchly.

How does M1 increase premanently?

Commercial bank lends Jones $10k, which goes in Jones's checking account. M1 increases.

But Jones has to pay interest, and return the principle. Which will be a net reduction of M1 over the

life of the loan.

It seems the way M1 increases permanently is by defaulting on loans.  And possibly the only way.

 

 ??

Rick Hohensee

 

 

strabes's picture
strabes
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Re: How is M1, not the Fed balance, M1, expanded?

but Jones can't repay that principle and interest unless other people have borrowed from the banks in order to pay him wages so he has money to pay back.  

that's sometimes hard to grasp.  the easiest way to see it is in real estate:  Jones borrows $100k for a house.  Sells it 5 years later for $150k and pays off the bank (M1 down).  But whoever bought it from him most likely borrowed that $150k from a bank (M1 up).

 

Thomas Hedin's picture
Thomas Hedin
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Re: How is M1, not the Fed balance, M1, expanded?

It seems the way M1 increases permanently is by defaulting on loans.  And possibly the only way.

This isn't true.  On the surface it would appear to be true but when a person defaults on a loan the bank has to write off the "loss" off of the books.  The banks takes it's interest income and applys it to the remaining principle (destroys that money).  When the bank doesn't have enough interest income to keep up with the loss of the interest income they go insolvent.  This is the short version but there is a little more that goes on.  When we have massive foreclosures it actually dries up the money supply even faster.

One should note though, that although none of the big boys are talking it would appear that this accounting rule of having to write off a loss on the book only applys to most banks and the big banks at the top are excempt.  Another version of massive double think here.  The big banks claim they are taking huge losses when they are stealing all the things of real value (the peoples property) when all the loaned the people is a promise to pay them.

 

The only way we are going to get any permanant money into circulation is to put money into circulation that is not a liability to anyone and only an asset to the people.  What money should be, an asset.  Demand passage of the Minnesota Transportation Act.

presidentbyamendment's picture
presidentbyamendment
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Re: How is M1, not the Fed balance, M1, expanded?

Simplest case:

Jones borrows 10K and blows it in Vegas. M1 increases, banks take a loss. MB, M1+bank capital,

stays the same. Banks write a loss off of their capital.

???

 

RH

 

Thomas Hedin's picture
Thomas Hedin
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Re: How is M1, not the Fed balance, M1, expanded?

The bank wouldn't show a loss as long as Mr Jones continued to pay on his promisory note.  Yes the M1 would increase but as that debt was paid back by Mr. Jones that money would be extinguished and the end result will always be the same.  Mr. Jones or someone else will have to give up their collateral to the bank in order to pay off the debt.

These two videos help to show the process more clearly right at the heart of the problem.  Unpayable interest.  It's not so much what we use for money it's the principles under which our monetary system functions. 

 Part 1

 Part 2

strabes's picture
strabes
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Re: How is M1, not the Fed balance, M1, expanded?

RH, banks don't take a loss if Jones blows it in Vegas.  When Vegas was run by the italian version of the mafia, sure the anglo banks and the measurable M1 would take a loss.  But now that Vegas is run by the anglo mafia (banks/corporations), Jones losing 10k just shifts the M1 from his bank to the bank behind the casino.  

Brings up an entirely separate topic: what was the mafia?  It was an alternative establishment...partially just an anti-anglo-bank organization.  They didn't want to pay elitists like Rockefeller/Rothschild...back in those days people were aware of how the elite screwed them.  Wanted to keep their money in their own establishment that fed back to their roots in Italy/Sicily.

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