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pooltchr
01-27-2011, 08:10 AM
How can this possibly work?
Let's assume that everyone in the country was at a 20% tax rate, just for the simple mathmatics.
Economists tell us that a dollar introduced into a local economy will circulate through 7 different people before it leaves.
OK
One person has a dollar which he paid .20 in taxes on.
He spends it and now person 2 made a dollar and must pay .20 in taxes, so he really only has .80.
Person 2 spends his .80 with person 3 who must pay .16 in taxes.
Person 3 now has .64 to spend with person 4, who pays .13 in taxes.
Now person 4 has .51 cents to spend with person 5, who pays .10 in taxes.
Person 5 spends with person 6 who pays .08 in tax on his .40 income
Then he spends his .32 with person 7 who pays .06 in taxes.

At this point, the government has collected .93 in taxes on that single dollar, which should mean there is only .07 left in the economy. But person 7 still has .26 left.
Where did the other .19 come from?????????????????
And how did the government manage to collect .93 in taxes on a single dollar??????

Just something interesting to think about. At what point has the government taken more in taxes than the value of the original dollar? And how can they collect more than is actually there to begin with???

Steve

Sev
01-27-2011, 08:22 AM
Because they are constantly making change. /forums/images/%%GRAEMLIN_URL%%/smile.gif

LWW
01-27-2011, 11:08 AM
That's some mathematical gymnastics ... but it all comes dow to fractional reserve banking.

Let's say 1st National of El Dubb makes you a loan of $100K and the fed requires me to keep 10% in reserves.

That means that Sev's $10K, as soon as it is deposited, is magically the $100K I loaned you.

When you deposit it in your account, rather than carry the cash, it magically becomes $1M in fractional reserve money.

You write a check for the house, I pay the seller when they present the chjeck to me, and I give Sev $10K that afternoon because he wants to hit Vegas for the weekend.

$1,000,000 - ($100K + $10K) and I have $890K in fiat money that was created from nothing.

Any more questions about why the dollar has lost most of it's value since we came off the gold standard?

LWW

Soflasnapper
01-28-2011, 12:09 AM
<div class="ubbcode-block"><div class="ubbcode-header">Originally Posted By: LWW</div><div class="ubbcode-body">That's some mathematical gymnastics ... but it all comes dow to fractional reserve banking.

Let's say 1st National of El Dubb makes you a loan of $100K and the fed requires me to keep 10% in reserves.

That means that Sev's $10K, as soon as it is deposited, is magically the $100K I loaned you.

When you deposit it in your account, rather than carry the cash, it magically becomes $1M in fractional reserve money.

You write a check for the house, I pay the seller when they present the chjeck to me, and I give Sev $10K that afternoon because he wants to hit Vegas for the weekend.

$1,000,000 - ($100K + $10K) and I have $890K in fiat money that was created from nothing.

Any more questions about why the dollar has lost most of it's value since we came off the gold standard?

LWW </div></div>

There was fractional banking during the time of the gold standard. It's effects FORCED us off the gold standard, so you have the causation backwards.

But I agree in general that this debt-based method of creating money is a Frankenstein monster with regard to its effects on the nation as a whole. However, it's immensely profitable for the insiders running the banking system. Using comparable ideas of leverage, those banksters created a derivatives market with a value in the thousands of TRILLIONS (quadrillions of dollars). Many orders of magnitude greater than the world's economic output. A house of cards, and then a bit of a breeze-- catastrophe.

LWW
01-28-2011, 03:53 AM
Fractional reserve banking did exist under the gold standard ... however the reserve amount required had to be in gold.

IOW ... if Sev deposited the same $10K in gold, I could still make the same $100K loan from that. It ended there. That $100K couldn't be redeposited and counted as "RESERVE" because it wasn't a gold deposit, it was a paper deposit.

Today's standard is that reserves must be in dollars ... and dollars are routinely created from thin air.

LWW

Soflasnapper
01-29-2011, 04:15 PM
<div class="ubbcode-block"><div class="ubbcode-header">Originally Posted By: LWW</div><div class="ubbcode-body">Fractional reserve banking did exist under the gold standard ... however the reserve amount required had to be in gold.

IOW ... if Sev deposited the same $10K in gold, I could still make the same $100K loan from that. It ended there. That $100K couldn't be redeposited and counted as "RESERVE" because it wasn't a gold deposit, it was a paper deposit.

Today's standard is that reserves must be in dollars ... and dollars are routinely created from thin air.

LWW </div></div>

This is a complicated subject, but from what I've looked at, what you're saying isn't correct. Pre-'33 it may have been, but even at that time it seems the reserve-in-gold only applied to the Federal Reserve itself, with the member banks able to hold FRNs instead of gold themselves (not clear on that).

But we went off any strict gold standard as of the depression year 1933, and didn't return to a different kind of gold standard until post-war in the Bretton Woods agreement. There, although we agreed to redeem dollars for gold, it is quite clear that we didn't keep statutory reserves, because when France began to demand gold for US dollars, we couldn't keep up the pretense any longer and Nixon (and Connally) took us off even that weaker version.

LWW
01-29-2011, 04:18 PM
Bretton Woods was not a gold standard ... but was another example of the French repaying our generosity with a slap in the face.

LWW

Qtec
01-29-2011, 05:38 PM
<div class="ubbcode-block"><div class="ubbcode-header">Quote:</div><div class="ubbcode-body">Today's standard is that reserves must be in dollars ... and dollars are routinely created from thin air.

LWW </div></div>

Too true, but why knock it. The USA has a huge advantage over the rest of the world in that respect. Then again, there are limits to how much the rest of the world can and will continue to finance the US debt.

Not long ago there was an uproar when the US announced they were going to print another $600 B.

Q


<div class="ubbcode-block"><div class="ubbcode-header">Quote:</div><div class="ubbcode-body">The rest of the world goes West when America prints more money
Last Wednesday was a hinge point in history. The United States decided to drop all pretence of being interested in leading – or even being part of – a coordinated global policy response to the most serious economic crisis in more than 70 years.

America is now isolated and the rest of the world is furious. The widespread use of capital controls and even a lurch into 1930s-style protectionism are both far more likely than just a few days ago.

The Federal Reserve's words may have been anodyne. "We will adjust the programme as needed to best foster maximum employment and price stability," said the US central bank's Open Market Committee. But by announcing another round of "quantitative easing", America is rightfully incurring the wrath not only of the emerging giants of the East, but the eurozone too.

The US had hoped China would use the forthcoming G20 summit in Seoul to accept America's proposal that net exporters should limit their current account surpluses to 4pc of GDP. Any prospect of that is now gone.

In the aftermath of the Fed's QE2 announcement, rather than agreeing to measures that would ease pressure on the US economy, China gave the States a public tongue-lashing. Measures to cap trade surpluses would "hark back to the days of planned economies", said Cui Tiankai, who will be one of China's lead negotiators in Seoul.

"We believe a discussion about a current account target misses the whole point, not least because if you look at the global economy, there are many issues that merit more attention – such as quantitative easing"

Germany also waded in, using industrial-strength language to describe the Fed's latest move. "With all due respect, US policy is clueless," remarked the finance minister, Wolfgang Schäuble.

"It's not that the Americans haven't pumped enough liquidity into the market … for them now to pump even more is not going to solve their problems."

The Fed's plan to expand QE by $600bn (£370bn), on top of the $1,700bn already implemented, caused the diplomatic fur to fly – from Thailand to Australia. An official statement from South Africa, a key member of the G20's powerful emerging market bloc, said America had "undermined the spirit of multilateral co-operation that G20 leaders have fought so hard to maintain". </div></div> link (http://www.telegraph.co.uk/finance/comment/liamhalligan/8114818/The-rest-of-the-world-goes-West-when-America-prints-more-money.html)

Q

sack316
01-29-2011, 05:46 PM
<div class="ubbcode-block"><div class="ubbcode-header">Originally Posted By: Qtec</div><div class="ubbcode-body"> <div class="ubbcode-block"><div class="ubbcode-header">Quote:</div><div class="ubbcode-body">Today's standard is that reserves must be in dollars ... and dollars are routinely created from thin air.

LWW </div></div>

Too true, but why knock it. The USA has a huge advantage over the rest of the world in that respect. Then again, there are limits to how much the rest of the world can and will continue to finance the US debt.

Not long ago there was an uproar when the US announced they were going to print another $600 B.

Q </div></div>

Yep, if/when the world decides another currency... such as a Yuan... is more stable and viable than the dollar, we'll be in big trouble.

Sack

Soflasnapper
01-29-2011, 06:20 PM
<div class="ubbcode-block"><div class="ubbcode-header">Originally Posted By: LWW</div><div class="ubbcode-body">Bretton Woods was not a gold standard ... but was another example of the French repaying our generosity with a slap in the face.

LWW </div></div>

Because Bretton Woods called for all currencies to be maintained within a narrow band of valuation to the US dollar, the US at that time returned the dollar to a gold standard at $35/ounce (when we'd been off any gold standard since '33).

Qtec
01-29-2011, 07:28 PM
So 7 people have had a $100 in their hands and spent it and in doing so they made $100 into $700 that stimulated the economy and generated taxes for the general welfare?

Q.

pooltchr
01-29-2011, 09:26 PM
<div class="ubbcode-block"><div class="ubbcode-header">Originally Posted By: Qtec</div><div class="ubbcode-body">So 7 people have had a $100 in their hands and spent it and in doing so they made $100 into $700 that stimulated the economy and generated taxes for the general welfare?

Q. </div></div>

Except there never was 700....there was only the same 100 getting passed around. And every time it changed hands, the government took a chunk of it.

Do I actually see a hint of daylight coming through in your posts??


Steve

LWW
01-30-2011, 05:14 AM
Hope springs eternal.

It is these brief moments of lucidity in Q that keeps me motivated to keep trying.

LWW

JohnnyD
01-31-2011, 02:01 AM
You have always taught your followers to never give up.

LWW
01-31-2011, 06:49 AM
And we never should.

LWW

JohnnyD
01-31-2011, 01:32 PM
<div class="ubbcode-block"><div class="ubbcode-header">Originally Posted By: LWW</div><div class="ubbcode-body">And we never should.

LWW </div></div>I will spread the word.