But this is FRB, still a small trick comparing with the fact that they could create deposit numbers backed by shell, which is a double spending of shell's purchasing power. Without double spending, the banks ability to create credit money is limited by their shell reserve and multiply ratio, but with double spending, the banks can literally create as much money as they wish. With maybe only one ounce of gold they could acquire the whole world by repeating the process, no FRB needed
This, I don't understand. Their ability to do what you call double spending, is exactly the fractional reserve ratio.
They are not really double-spending it. They are issuing IOU, which are deposits.
It is the fact that people consider deposits to be money, that makes that banks create money.FRB is a practice similar to insurance, as long as there are not so many people withdraw the money at the same time, banks can lend out some of the money to other clients, that is perfectly fine and has been statistically working very well. (Although a little bit cunning) But FRB does not solve a basic problem: Where is the money originally come from
You can open a bank and practice FRB, but with an empty bank you can not do anything, you must first have some customer deposit (real money) before you start to do FRB
Suppose a bitcoin banker have 100 bitcoin, then under a 10% reserve ratio, by lending the same coin out again and again, the maximum checkbook numbers he could create will never exceed 1000 bitcoin, anything beyond that is impossible. In another word, he can not issue IOU endlessly without increasing the base money supply
The only way for him to generate more checkbook money is to get more real bitcoin. If he get another 100 coins, then his check book money could reach 2000 bitcoin maximum, and these extra 100 coins must be mined by the miners with real cost
But in today's financial system, those extra 100 bitcoins are not mined, they are created as base money by using Real Bills Dorctrine principle that I described in detail throughout this thread. With RBD, there is no limitation on how much money that you can create, because it is effectively a double spending, creating purchasing power out of nothing
The difference here: FRB have a limit of 10x more money creation under a 10% reserve ratio, but RBD has no limit
If you look at the M0 money supply of US, it has been increasing very slowly following GDP until 2008, and it suddenly exploded following the start of QE, now it is 5x more than pre-crisis level
If you look at M2 (which measures chekbook money plus base money), the change is quite consistant, thus many people think that the QE works well. But under the hood, the components of M2 has changed: The increase of checkbook money has mostly been stopped following the deleveraging effort from the banks, now their reserve ratio might be as high as 60%. On the other hand, the number of base money increased by more than 3 trillion, if you consider the M2 increased only 4 trillion during this years, that means most of those increase comes from the increase in M0, and when that 3 trillion base money when muliplied later on, can become 30 trillion M2