Regarding Fractional Reserve Banking

I read a page linked today from Facebook which asserted the proposition that banks create "money ... from something called the Fractional Reserve Banking system.... This scam creates money out of thin air."

“Ahhh,” I said, “the old ‘fractional reserve banking’ misunderstanding.” MISunderstanding. (To avoid, ah, misunderstanding.)
 
Here’s what “fractional reserve banking” really is:

Banking law (the Federal Reserve Act in the US) requires that for each $100 dollars of deposits banks have received from customers, they have to keep 10% on deposit with the reserve bank (those deposits are called, you guessed it, "reserves" they are a form of safety net.) That requirement has the natural consequence or, better yet, corollary that they can only lend out up to 90% of the deposits they have accepted.

One way this reserve requirement is sometimes characterized is by saying “banks can loan up to 9 times the amount they have on reserve.”  Which is true, but incomplete.  And describing it in that incomplete way is what leads to the misunderstanding on the subject.

The folks all worked up about "fractional reserve banking" see the 10% reserves and they see the "9 times that" in loans  they can make -- but they don't see or understand is that a bank cannot loan out any money which hasn't already been loaned to them - that the 10% is 10% of deposits of real money people have  made with them, as is the remaining 90%.  They haven't "created" one penny.

But they think the bank has somehow created money out of thin air: as in the FB post’s proclamation "This scam creates money out of thin air."

They simply aren't “creating money out of thin air." .  This idea is simply wrong.

I've been trying to think of an analogy.  How about this? In US football, the last 20 yards before the goal line is called "the red zone."  That is "20% of the field.  The rest of the field is "4 times that," right?  Claiming "fractional reserve banking" means the banks "create money out of thin" air is like arguing that the football teams have created that other 80% of the field ("4 times the red zone!") out of thin air.  (Not a perfect analogy, but maybe it'll help conceptualize the issue.)

How do I know this about reserve banking?  I practiced regulatory compliance for a couple of the country's largest banks during the last century.  I had to know and, sometimes, work with the reserve requirement of the Federal Reserve Act, as amended over the years.

Does that mean I'm somehow in the tank for banks?  Because I worked for them?

Nope, but it does mean I know a lot more about some of the shitty stuff banks do than most people know.

Our banking system needs major reform, but we simply can't do it effectively if we believe nonsense like this "fractional reserve banking" lets banks "create money" idea.

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Religious Beliefs And Piercing Corporate Veils

Some religious folks claim they have a right to intermix their personal religious views with their corporations' commercial activities.

But there is a long standing legal principle that when the owners of a corporation intermix their finances with those of the corporation, the owners lose their limited liability* for the corporation's obligations and debts.

This principle is called "piercing the corporate veil."

It seems to me that the same principle should apply when thew owners of a corporation intermix their personal beliefs with the business of the corporation - deny them the limited liability of stock ownership.

= = = = * A bit of history: before corporations were "invented," one could do business as a sole proprietorship or as a partnership. Under either, as an owner one was personally liable for all of the obligations of the business. (That rule still holds true today.) As the industrial age developed, people were reluctant to take such huge risks necessitated by industrialization. I might be willing to take the business risk of losing the amount I have invested, but I don't want the risks of, say an industrial accident or of the purchase price for a 747 should I own one share in an airline. So the idea of limited liability of owners of a corporation was developed and became part of the laws which govern us. Each shareholder's liability is limited to the "par value" of the shares owned. And the liability is for the obligation for that par value to have been paid into the corporation when the shares were issued. So when I buy a share of a corporation from someone else, as the general rule, I have and can have no financial obligations arising from the corporation's activities. That limited liability is lost when the corporate veil is pierced.

The No Fly List And Firearm Purchases

Many folks (including all of the liberals I know) think it is absurd to allow folks on the federal No-Fly lists (supposedly of suspected terrorists) to purchase firearms.

As a liberal, I have some concerns with the idea they should be barred from exercising any constitutional rights.

My concern starts with the "no fly list" itself. How has it been created? What sorts of checks and balances are there regarding people who get listed? Are there any due process protections? Say, a right to know the evidence on which the listing is based? (Those charged with crimes have the right to "be confronted with the witnesses against him;" should those on the no-fly list have lesser rights?)

Let's look at the use of the no-fly list when it comes to other constitutionally protected rights*

Let's say 'you' somehow end up on the no fly list. Should your right to free speech be negated? Your rights against unreasonable searches and seizures? Your right to peaceably assemble with others? Your right "to petition the Government for a redress of grievances."

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* Note, I personally don't think the constitution confers an individual right to own arms, but the Supreme Court has declared otherwise.
And I recognize a certain absurdity with not allowing some folks to fly because they are potentially dangerous but letting them buy whatever firearms they want.

As 'they' say, "hard cases make bad law."

Perhaps this is an example?

Starbucks War On Christmas. Real Or Fantasy?

Regarding the Perceived Starbucks War On Christmas.

Some of my fellow Christians are upset about the 2015 Starbucks “Christmas” cup - a plain red cup with just their logo.  Apparently they feel this choice is an attack on Christianity.

I am mystified by the idea that this choice (1) is seen as an attack on Christianity and (2) that Christians could possible be afraid of this perceived attack, this perceived shadow of death.

Come on folks, you’re embarrassing the rest of us.  Scripture repeatedly tells us: “Be not afraid, I am the Lord.”

As a refresher, let's run through the 23rd Psalm again:

23 The Lord is my shepherd; I shall not want.

2 He maketh me to lie down in green pastures: he leadeth me beside the still waters.

3 He restoreth my soul: he leadeth me in the paths of righteousness for his name's sake.

4 Yea, though I walk through the valley of the shadow of death, I will fear no evil: for thou art with me; thy rod and thy staff they comfort me.

5 Thou preparest a table before me in the presence of mine enemies: thou anointest my head with oil; my cup runneth over.

6 Surely goodness and mercy shall follow me all the days of my life: and I will dwell in the house of the Lord for ever.

King James Version (KJV)

Seasons greetings to all.

Regarding the Perceived Starbucks War On Christmas.

Some of my fellow Christians are upset about the 2015 Starbucks “Christmas” cup - a plain red cup with just their logo.  Apparently they feel this choice is an attack on Christianity.

I am mystified by the idea that this choice (1) is seen as an attack on Christianity and (2) that Christians could possible be afraid of this perceived attack, this perceived shadow of death.

Come on folks, you’re embarrassing the rest of us.  Scripture repeatedly tells us: “Be not afraid, I am the Lord.”

As a refresher, let's run through the 23rd Psalm again:

23 The Lord is my shepherd; I shall not want.

2 He maketh me to lie down in green pastures: he leadeth me beside the still waters.

3 He restoreth my soul: he leadeth me in the paths of righteousness for his name's sake.

4 Yea, though I walk through the valley of the shadow of death, I will fear no evil: for thou art with me; thy rod and thy staff they comfort me.

5 Thou preparest a table before me in the presence of mine enemies: thou anointest my head with oil; my cup runneth over.

6 Surely goodness and mercy shall follow me all the days of my life: and I will dwell in the house of the Lord for ever.

King James Version (KJV)

Seasons greetings to all.

Texas Teacher Self-defense Bill

I was prepared to go all liberal-postal, and figured if I read the actual Texas bill, I'd get some really good stuff.

But I found that the Texas bill just clarifies that existing Texas "self-defense" law also applies to teachers on the job - a clarification that doesn't really seem to be needed, although one would have to look to how the courts have actually applied the existing law

(If you read it, note that each section of the bill laying out the availability of the self-defense rule cross-references existing Texas law as applicable to teachers.)

http://www.capitol.state.tx.us/tlodocs/84R/billtext/pdf/HB00868I.pdf#navpanes=0

OTOH - to the extent that Texas law already allows use of deadly force to defend property strikes me as pretty strange values.


The existing Texas law is what should have people alarmed, IMO.

Also- some observations regarding 'Stand Your Ground' laws: see, http://rjw-progressive.blogspot.com/2014/02/stand-your-ground-laws.html.

Stand Your Ground Laws

I ran across this post in a Facebook conversation:

"Self defense is a God given right."

I agree, but the way we implement that right is critical - literally a matter of life or death.

Today's "stand your ground laws" seem to reflect a value that a person's pride is more important than a human life.

Through centuries of Anglo-American experience and development, we came to a collective, societal  decision that two criteria are needed to prevent self-defense principles from becoming a killing field, a license for murder.

The first was requiring retreat before using lethal force - I believe based on the idea that human life is more important than pride.

The second was the development of use of an objective standard in deriding whether the 'defender' acted reasonably - whether the defender was truly acting in self-defense.  With the objective standard we ask - "would the 'reasonable person' in the shoes of the defendant have felt his life was in danger?"

These "stand your ground" laws mostly use a subjective standard - "did this defendant feel his life was in danger?"

The trouble with the subjective standard is that, in the real world, it is no standard at all - all we have is whatever the defendant decides to say.  In operation, that is no standard at all.

Yes, an objective standard is, in the real world, somewhat hazy and difficult to establish - but it is still better than a meaningless subjective standard at all, which factor is neglected by these "stand your ground" laws. 

Again, today's "stand your ground laws" seem to reflect a value that a person's pride is more important than a human life.

And I think that is huge step back into lawlessness within our society.

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Note: These thoughts are based mainly on what I remember from my one crim law course in 1978.  There are details I'm sure I have forgotten, and nuances I've passed over.

I believe, however, that these two issues are at, should be at, the center of the discussion.