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Forum Post: It's not that hard to understand if you do a little research.

Posted 11 years ago on June 5, 2012, 3:15 p.m. EST by TrevorMnemonic (5827)
This content is user submitted and not an official statement

"It's not that hard to understand if you do a little research." - 12 year old girl explains the financial crisis and how the banks defraud the people.

Almost identical to the problem we see in our country with the federal reserve and the "too big to fail" banks that are committing fraud.

Interview with RT after her first video went viral - http://www.youtube.com/watch?v=7qBG8hheSOY&feature=share

53 Comments

53 Comments


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[-] 2 points by DemandTheGoodLifeDotCom (3360) from New York, NY 11 years ago

America has enough problems with ignorance. Now they are going to get their economic education from a 12 year old who got her education from watching videos on the internet?

Uggh.

[-] 0 points by TrevorMnemonic (5827) 11 years ago

If you're suggesting something she said is not factually accurate... please use facts to back your claims.

Everything is online. If I watch the moon landing on the internet and read about it on a NASA website, does that mean it's less true than if I read about it offline?

Is this less true because it's online? - http://www.youtube.com/watch?v=oUpXDZFtEHw

Have you seen Inside Job? The doc about Wall Street? It uses factual information. I saw it online. It's really good and explains a lot. It's great when great minds make docs and use facts to inform others. It's like teaching.

[-] 1 points by DemandTheGoodLifeDotCom (3360) from New York, NY 11 years ago

She said when you get a loan from a bank, the bank doesn't give you money, they click a key on a keyboard and create the money out of thin air.

That is factually false.

A bank is prevented by law from loaning out any more than roughly 90% of what it has on deposit. If their reserve falls below 10%, they are required by law to borrow money from another bank that very night, who has excess reserves, to bring their reserves back up to 10%.

[-] 1 points by TrevorMnemonic (5827) 11 years ago

lol banks abiding by laws... what is all this fraud about?

[-] 0 points by DemandTheGoodLifeDotCom (3360) from New York, NY 11 years ago

We don't have to make up non-existent reasons why our system is wrong. Banks are not able to print money. Claiming that banks do when they don't just hurts our legitimate claims against the system. There are plenty of legitimate reasons why capitalism is unfair and unjust.

It is based on theft. Capitalism is based on privatization of the planet and its resources which means you are claiming control over a portion of the planet for your own private benefit to the exclusion of everyone else and using whatever force is necessary to maintain your control. When you privatize a part of the planet, you are stealing that part of the planet from everyone else. Every single good and service we produce in our economy are produced using these stolen resources.

It is based on luck. Half the income workers produce is paid to investors which is just welfare for the lucky. It allows guys like Mitt Romney to get paid $20 million per year every year without working a single day merely because he got lucky in the market a few decades ago. Workers produce that $20 million every year, not Mitt Romney. Workers shouldn't have to work 6 months every year just to pay off the gambling winnings of investors.

And capitalism is based on exploitation. It allocates income based on how much bargaining power you have in the market which allows the 3% who have bargaining power to use that power to exploit the 97% who do not. It allows a tiny minority to unfairly take most of the income the workers in our economy produce. Even though the average worker produces $65 per hour in income, which amounts to $135k per year, they are only getting paid $26k per year.

This is all explained in this post here.

[-] 1 points by TrevorMnemonic (5827) 11 years ago

It's about Canada... and she never says the banks are printing money.

Central Banks create money from nothing. Banks create money from nothing. What happens when Bank of America gets a trillion from the fed? They put it on deposit. And it gains interest which creates money. FROM NOTHING. Then they pay huge CEO bonuses.

Where did the trillions come from? Created from nothing.

I don't know why you are arguing against this video. You are over analyzing the word "print" ... Watch the video. The word "print" is not even in the video.

[-] 0 points by DemandTheGoodLifeDotCom (3360) from New York, NY 11 years ago

"she never says the banks are printing money"

She did.

She said, "When a bank gives you a mortgage ... or a loan, they don't actually give you money, they click a key on a computer and generate the fake money out of thin air."

That is factually false.

.

"Banks create money from nothing"

They can't.

A bank is prevented by law from loaning out any more than roughly 90% of what it has on deposit. If their reserve falls below 10%, they are required by law to borrow money from another bank that very night, who has excess reserves, to bring their reserves back up to 10%.

.

"What happens when Bank of America gets a trillion from the fed"

The Fed instituted a temporary program to prop up the banks and prevent the economy from going into another great depression. That temporary program is now closed.

Banks don't normally borrow from the Fed because the Fed charges above market rates.

The way the Fed controls the money supply is by buying Treasuries that people are selling on the secondary market. The only way a bank benefits from that is if the person who sold their treasuries then deposits that money at their bank.

.

"I don't know why you are arguing against this video"

Facts matter and her claim that banks click a key on a computer and generate fake money out of thin air whenever someone gets a loan is not factually correct.

It is difficult enough combating our current system. It is not going to help our cause to make claims that are not true.

[-] 1 points by geo (2638) from Concord, NC 11 years ago

Banks don't directly print money, they create debt through loans. By doing so they have a very strong potential to expand the money supply. When there is a run on banks, as what happened to many in 2008... they didn't have the cash on hand to cover the debts.

As a result the Federal Reserve is called in to fulfill the banks debt obligations to their savings customers. This requires the Fed to either use money that is on deposit from when the bank in question joined the Federal Reserve system, or print money to keep the bank a float, via FDIC regulations.

[-] 0 points by DemandTheGoodLifeDotCom (3360) from New York, NY 11 years ago

Saying a bank loans out a portion of its deposits is quite a bit different than what that girl said. That girl said when you get a mortgage, the bank hits a key and makes that mortgage money out of thin air. That is untrue.

In order for a bank to make $90k mortgage, it has to have $100k on deposit. It doesn't create that $90k out of thin air.

[-] 2 points by MattLHolck (16833) from San Diego, CA 11 years ago

but the bank can make ten loans based on one deposit

[-] 0 points by DemandTheGoodLifeDotCom (3360) from New York, NY 11 years ago

If a bank has $100 on deposit, it can only loan out $90 of it.

It can make 1 $90 loan or it can make 10 $9 loans. But the point is that it can only loan out a portion of the money it gets in deposits. It cannot make money out of thin air and loan out that money.

[-] 1 points by TrevorMnemonic (5827) 11 years ago

And mortgage fraud is supposed to be illegal

[-] 0 points by DemandTheGoodLifeDotCom (3360) from New York, NY 11 years ago

What do you mean by mortgage fraud?

Borrowers and loan officers who fudged numbers so they can get a mortgage they normally wouldn't?

How do you think that would play politically if the government started prosecuting borrowers on behalf of the owners of capital?

[-] 1 points by notaneoliberal (2269) 11 years ago

If you deposit $100 and the bank loans out $90 of that money, the loaned money, is treated as money. You still think you have $100 in the bank, and the person who borrowed $90, thinks they have $90. It's only $100, but it now functions as $190. Thus the expansion in the money supply.

[-] 1 points by DemandTheGoodLifeDotCom (3360) from New York, NY 11 years ago

Correct, but that is quite a different claim than saying banks just create money out of thin air when they loan money which is what the girl in the video is saying.

[-] 1 points by notaneoliberal (2269) 11 years ago

Yes, it is a bit different from that.

[-] 1 points by MattLHolck (16833) from San Diego, CA 11 years ago

I see

Some of the funds lent out are subsequently deposited with another bank, increasing the reserves and deposit liabilities of that second bank, and allowing further lending.

http://en.wikipedia.org/wiki/Fractional_reserve_banking

[-] 1 points by geo (2638) from Concord, NC 11 years ago

I didn't disagree with you, I just explained the mechanism that banks use. However, those debt obligations created by bank loans on savings assets creates a real problem with money supply expansion.

Using your example, they may originally have needed $100k on board to start loaning but in the end they only have $10k left, with $90K worth of debt obligations. A savings account customer of that bank believes all of his money is there when he calls up his account information... the truth is that his money is NOT there.

[-] 1 points by TrevorMnemonic (5827) 11 years ago

Where did the trillions of dollars come from?

Did the trillions of dollars exist back in 1901?

I trust the words of Dennis Kucinich more than I trust you.

http://www.youtube.com/watch?v=oUpXDZFtEHw

[-] 0 points by DemandTheGoodLifeDotCom (3360) from New York, NY 11 years ago

He doesn't say banks printed new money. He said the Fed did.

The banks buy that money from the Fed and sell it to their customers for a higher price. That is the way all businesses operate. They buy inputs and hope to sell outputs for more money.

You will better make your case by just linking to the Kucinich video and just saying we can get our investment money directly from the Fed for free, we don't need to pay any fees to any banks.

That is reason why we don't need capitalism at all. We don't need people to invest their private money and then have to pay them half our income in the form of rent, interest, profit, dividends and capital gains for investing that money. All our investment can come from the Fed for free and we should all be equal owners in the means of production that the Fed is funding.

[-] 1 points by TrevorMnemonic (5827) 11 years ago

"He doesn't say banks printed new money. He said the Fed did."

I never said the banks printed money. I said the fed did.

Go reread all my previous comments and my original post.

Also notice the word "almost" in the OP when comparing our situation to that in canada which the girl is talking about.

[-] 0 points by DemandTheGoodLifeDotCom (3360) from New York, NY 11 years ago

But you are linking to a video that says the banks print the money and not the fed. And the title is that you can understand it if you do research. If the research people do is the video you link to, they will not understand it. They will be getting wrong information.

And I would disagree that the banks are committing fraud. People know exactly what they are getting when they do business with a bank.

We should get rid of the banks not because they are committing fraud, but because half the income workers produce each year is paid to investors. Workers are losing half their income to investors which the economy does not need. Investors provide an entirely useless service to society. A public bank can provide the economy with all the investment money it needs for free without requiring workers to give up half their income.

[-] 1 points by TrevorMnemonic (5827) 11 years ago

It's about Canada... and she never says the banks are printing money.

Central Banks create money from nothing. Banks create money from nothing. What happens when Bank of America gets a trillion from the fed? They put it on deposit. And it gains interest which creates money. FROM NOTHING. Then they pay huge CEO bonuses.

Where did the trillions come from? Created from nothing.

I don't know why you are arguing against this video. You are over analyzing the word "print" which is not even used once in the video.

[-] 1 points by DemandTheGoodLifeDotCom (3360) from New York, NY 11 years ago

"she never says the banks are printing money"

She did.

She said, "When a bank gives you a mortgage ... or a loan, they don't actually give you money, they click a key on a computer and generate the fake money out of thin air."

That is factually false.

.

"Banks create money from nothing"

They can't.

A bank is prevented by law from loaning out any more than roughly 90% of what it has on deposit. If their reserve falls below 10%, they are required by law to borrow money from another bank that very night, who has excess reserves, to bring their reserves back up to 10%.

.

"What happens when Bank of America gets a trillion from the fed"

The Fed instituted a temporary program to prop up the banks and prevent the economy from going into another great depression. That temporary program is now closed.

Banks don't normally borrow from the Fed because the Fed charges above market rates.

The way the Fed controls the money supply is by buying Treasuries that people are selling on the secondary market. The only way a bank benefits from that is if the person who sold their treasuries then deposits that money at their bank.

.

"I don't know why you are arguing against this video"

Facts matter and her claim that banks click a key on a computer and generate fake money out of thin air whenever someone gets a loan is not factually correct.

It is difficult enough combating our current system. It is not going to help our cause to make claims that are not true.

[-] 1 points by timirninja (263) 11 years ago

i dont think that story with father and daughter was to show how a little banks operates. Most likely it was laughs and envy at american banking system which being broke and still refusing to claim bankruptcy because it is to big to fall on world economy.

[-] 1 points by MattLHolck (16833) from San Diego, CA 11 years ago

the Trans-Pacific Partnership (TPP) will be in san diego July 2-10 2012

[-] 1 points by timirninja (263) 11 years ago

im glad to occupy anything outside NYC. But im stuck with shity job and im on my way to get another shity job, cause i gota pay my bills. San Diego way to far from me. This is your turn to take a wall, Matt ;)

[-] -2 points by DemandTheGoodLifeDotCom (3360) from New York, NY 11 years ago

It was a story with a mother and daughter. And the little girl was trying to explain how any bank operates (large or small) and what she said was incorrect. She was just repeating incorrect information she found on the internet. Her parents should have taught her not to believe everything you read and how to verify information with credible sources.

[-] 1 points by TrevorMnemonic (5827) 11 years ago

What about when the federal reserve creates trillions pretty much from nothing and gives it out to the banks? The fact is, money has been and continues to be created from nothing and given to the banks to give to people owed back at interest.

Side note: Are you from Nebraska? We have The Good Life deal here but it's for clothing and hats.

[-] 1 points by niphtrique (323) from Sneek, FR 11 years ago

You should not try to debate this issue. It is a definition type argument. Economic theory states that banks create money but definitions do not change reality.

"A bank is prevented by law from loaning out any more than roughly 90% of what it has on deposit."

Fact is that when everybody demands the money in deposit the system collapses because the money is not there.

But as long as that does not happen you can think of the number in your account as if it is money. If some brilliant minds on this forum change definitions then it still does not change facts.

So the created money is imaginary. But money itself is imaginary. If everybody sees the euro or the dollar as worthless piece of paper tomorrow then it is a worthless piece of paper.

So what is the difference? Banks create imaginary items that are used like money but some think they differ from the other imaginary items called money.

[-] 1 points by TrevorMnemonic (5827) 11 years ago

My problem is with who has the money creating power.

The current system has been corrupted.

[-] 1 points by DemandTheGoodLifeDotCom (3360) from New York, NY 11 years ago

The federal reserve can create new money, but a bank cannot. That is a big difference.

Banks can borrow money from the Fed and also from other banks if they want to make more loans than they have money to lend. But they cannot just print their own money like that girl said. That would put the bankers in jail.

I am from New York.

[-] 0 points by TrevorMnemonic (5827) 11 years ago

The Federal Reserve is the central banking system. Which creates money from nothing and gives it to the banks which give it to people owed back at interest... giving the banks the ability to profit greatly pretty much from nothing. They work together. She is simplifying it for sure - She's 12.

The banks always have the "legal bare minimum" because the fed keeps giving them money. Trillions of dollars created from nothing and given to the banks.

"Unlimited resources for the banks... nothing for the people. Does there exist a more graphic example of how thoroughly rotten this financial system is? We're bailing out banks while the banks are accelerating foreclosures on millions of American homes. 14 million out of work! 50 million without real healthcare (no public option for anyone) ...and Endless wars. The Federal Reserve creates money out of nothing, gives it to the banks, banks keep it on deposit, gain interest, pays high CEO bonuses, fat cat city... all while the rest of America falls apart." - Dennis Kucinich

Fed creates 7.7 trillion out of nothing for their own private interests - it doesn't get any clearer than this - PLEASE WATCH - http://www.youtube.com/watch?v=oUpXDZFtEHw

About the fed - "twelve regional Federal Reserve Banks located in major cities throughout the nation, numerous privately owned U.S. member banks and various advisory councils."

This girl's example of what's going on in Canada is a great parallel to what we see here in our country.

[-] 1 points by DemandTheGoodLifeDotCom (3360) from New York, NY 11 years ago

The federal reserve is nothing like a regular bank.

She did not just simplify it, she made a claim which is not accurate. Banks do not get the money they loan out by creating it out of nothing. That is against the law.

Banks can only loan out money that people deposit at their bank. If they wind up loaning out more money than they have on deposit, they are required by law to borrow that money that very night from another bank. They borrow that money at market interest rates. They do not print the money out of thin air like the girl claimed.

If the bank cannot borrow from another bank, they can borrow directly from the fed. But they will be charged a higher interest rate.

The Fed did not loan out $7.7 trillion. They only insured that much on loans. They loaned out far less than that amount. It is true that they loaned that money at below market rates. But that was in response to a historic crisis. That is not the way banking normally works. That program where they insured that money was temporary, in response to the crisis, and no longer exists.

We could have let all those banks fail. That is exactly what the Fed was convinced to do in the 1920s. And that turned their recession into the Great Depression. So if the Fed did not institute that program our Great Recession would have likely been as bad as the Great Depression.

Capitalism does not work. It never has. It requires constant bailing out by government in order to prevent its total collapse. But don't be fooled by the media hype over this latest banking crisis. There has been a Great Depression for at least half the population, who are forced to live in poverty or close to it, for our country's entire history.

We need to replace capitalism, a system which works great for a few at the top, with democracy, a system that works great for everyone as a right.

However, we don't need to rely on inaccurate statements from a 12-year old to get people to embrace change. The real facts paint an ugly enough picture.

[-] 1 points by TrevorMnemonic (5827) 11 years ago

This is a true statement.

I trust Dennis Kucinich more than a guy on the internet.

"Unlimited resources for the banks... nothing for the people. Does there exist a more graphic example of how thoroughly rotten this financial system is? The Federal Reserve creates money out of nothing, gives it to the banks, banks keep it on deposit, gain interest, pays high CEO bonuses, fat cat city... all while the rest of America falls apart." - Dennis Kucinich

You seem to know what you're talking about mostly... but this is a true statement.

[-] 1 points by DemandTheGoodLifeDotCom (3360) from New York, NY 11 years ago

Kucinich made a political statement meant to incite, not to teach people the way banking works. So although what he says is correct, it can be misleading and taken out of context.

"Unlimited resources for the banks... nothing for the people. Does there exist a more graphic example of how thoroughly rotten this financial system is?"

The capitalist system is rotten, not just the financial system. Even without a banking crisis, we would still have unlimited resources for a few at the top, nothing for the vast majority of people below them.

"The Federal Reserve creates money out of nothing"

This is true. But that is something completely different from a private bank or private individual creating money. The Fed is a govt agency responsible for the money supply. They have to create new money in order to keep the money supply in line with the growth of the economy.

Nobody at the Fed profits off of money creation. They are paid federal salaries. Any profit the Fed makes is handed over to the Treasury.

"gives it to the banks"

They do give it to banks. But the banks have to buy that money from them. They don't give it to them for free. A bank can only get money from the Fed by borrowing it at above market rates.

However, the primary function of the Fed is its open market operations. That is how it controls the money supply. Very little money is borrowed from the Fed. If the Fed wants to increase the money supply, it buys Treasuries from someone in the secondary market. That money is then deposited at some bank. So in order for a bank to get that new money, it would have to get that customer to deposit their money that they got from selling their Treasury at their bank.

"banks keep it on deposit, gain interest"

Banks can only gain interest from their deposits by loaning them out. The Fed does pay interest on their reserve balance but this is a small percentage of their deposits and banks do everything they can to avoid that because they make little money off of it.

"pays high CEO bonuses, fat cat city... all while the rest of America falls apart"

That is capitalism, not just the financial system. That happens in every industry.

[-] 1 points by notaneoliberal (2269) 11 years ago

There are a number of inaccuracies in your post. "Nobody at the Fed profits off money creation". Not Quite true. The Fed gets to keep 6%. of its' member banks' capital investment. In 2010 the Fed made a profit of $82 billion and returned $79 billion to the treasury. "a bank can only get money from the Fed at above market rates." The current rate is about 0.25 % [not exactly "above market rates".]

[-] 1 points by DemandTheGoodLifeDotCom (3360) from New York, NY 11 years ago

Everyone at the Fed gets paid a federal salary. None of them take any of the Fed's profits. All its profits are turned over to the treasury.

And the Fed always loans at above market rates. If the discount window rate is .25% then the bank overnight rate is less than that.

[-] 1 points by notaneoliberal (2269) 11 years ago

According to the Board of Governors, the Federal Reserve is independent within government in that "its monetary policy decisions do not have to be approved by the President or anyone else in the executive or legislative branches of government." Its authority is derived from statutes enacted by the U.S. Congress and the System is subject to congressional oversight. The members of the Board of Governors, including its chairman and vice-chairman, are chosen by the President and confirmed by the Senate. The government also exercises some control over the Federal Reserve by appointing and setting the salaries of the system's highest-level employees. Thus the Federal Reserve has both private and public aspects.[17][18][19][20] The U.S. Government receives all of the system's annual profits, after a statutory dividend of 6% on member banks' capital investment is paid, and an account surplus is maintained. In 2010, the Federal Reserve made a profit of $82 billion and transferred $79 billion to the U.S. Treasury.[21] This was followed at the end of 2011 with a transfer of $77 billion in profits to the U.S. Treasury Department.[22 http://en.wikipedia.org/wiki/Federal_Reserve_System

[-] 1 points by DemandTheGoodLifeDotCom (3360) from New York, NY 11 years ago

The Fed doesn't keep 6%. The Federal Reserve bank is all public. None of it is private. The 6% is paid to the private commercial and investment banks that are members of the federal reserve system like Citibank and Bank of America in exchange for them keeping their account balances at the Fed.

[-] 1 points by notaneoliberal (2269) 11 years ago

Perhaps you didn't read the above. The 6% does indeed go to the Fed. The Fed is is not "all public." Furthermore, !/4 % interest is not, by any stretch of the imagination,above market rates. Sorry, no offense. but your fact are in error. "Federal Reserve System has both private and public components, and was designed to serve the interests of both the general public and private bankers. The result is a structure that is considered unique among central banks. It is also unusual in that an entity outside of the central bank," This last paragraph from the link provided.

[-] 1 points by DemandTheGoodLifeDotCom (3360) from New York, NY 11 years ago

The private part of the federal reserve system is the private banks like citigroup and bank of america. That is who the 6% is paid to. It is not paid to the people who work at the fed.

And they pay that 6% on whatever money those banks deposit at the federal reserve bank.

.

"Furthermore, !/4 % interest is not, by any stretch of the imagination,above market rates. Sorry, no offense. but your fact are in error"

The current federal discount rate (the rate banks can borrow from the fed) is .75% which is higher than the .25% fed funds rate (the market rate which banks lend to each other).

http://www.bankrate.com/rates/interest-rates/prime-rate.aspx

[-] 1 points by TrevorMnemonic (5827) 11 years ago

Connect the dots

The Federal Reserve creates money out of nothing, gives it to the banks, banks keep it on deposit, gain interest, pays high CEO bonuses, fat cat city... all while the rest of America falls apart.

All in the number of TRILLIONS! We're not talking about a couple million dollars here. This is trillions.

What a trillion dollars looks like - video from 2009 - http://www.youtube.com/watch?v=GNFb6qe7Tmg

The big banks and the federal reserve manipulate the government on a massive scale.

[-] 2 points by DemandTheGoodLifeDotCom (3360) from New York, NY 11 years ago

Every industry manipulates the government to make sure the people at the top stay there, well above everyone else. Capitalism exists because we have a government that enforces it.

[-] 2 points by TrevorMnemonic (5827) 11 years ago

No argument there.

[-] 0 points by hchc (3297) from Tampa, FL 11 years ago

Right, so you just do a few more clicks and everyting is good...

[-] 1 points by DemandTheGoodLifeDotCom (3360) from New York, NY 11 years ago

A bank having to buy money from some other bank and then selling that money to a customer at a higher price is not the same as creating money out of thin air.

They bought that money that they loaned out. They didn't create it out of thin air.

When home depot buys lumber from a lumber company and sells that lumber for a higher price to its customers, we don't say Home Depot created that lumber out of thin air.

[-] 0 points by hchc (3297) from Tampa, FL 11 years ago

Don't compare durable goods to stuff that is essentially created out of thin air at the top level.

[-] 1 points by DemandTheGoodLifeDotCom (3360) from New York, NY 11 years ago

Don't compare a government agency having control over the money supply to a private bank that has to buy the money it wants to resell.

[-] 2 points by JadedCitizen (4277) 11 years ago

Imagine a congress full of twelve year olds - it would probably be more mature than the current bunch.

[-] 1 points by TrevorMnemonic (5827) 11 years ago

lulz is this place full of people defending Wall Street bailouts and the federal reserve now?

[-] 0 points by hchc (3297) from Tampa, FL 11 years ago

Might as well be at this point....