American Dream - The Film

[Restoman]

So, the first 1:30 we see that the home buyer is buying more than he can afford and ask how this happened? Okay?? I guess I'll watch a bit more.

[nickpro]

WHAT


WHAT


25:00

wow.



FUCK THE US. FUCK THE IRS. FUCK THE FEDERAL RESERVE

This was in the comments. You guys think this is true?

well actually, Ron Paul(Champion of the Constitution/Modern day Jefferson)is now chairman of the sub-committee that is going to overseer the fed reserve, this could lead to an audit of the fed, enabling us to see what they have been doing secretly, many believe an audit of the fed will help in bringing them down, but if that doesn't happen, the fed will still fall because it cannot sustain itself, once money becomes worthless from too much printing, everything will collapse.

[Jean]

nice

[z31maniac]

HarryPotter, for the love of God, quit posting the same damn link to independentamerican in every single thread.

[Restoman]

Okay, I'm finished watching. I just think the opening is a bit silly. Starting out with a guy loosing his house probably lured in all those that had it happen and got them to watch the whole video.

[HarryPotter]

[muppet]

My brother in-law sent me this video to watch looking for my input. I responded with the following and thought it might be useful to some here:


So I watched the American Dream film, it was good, though usually when something is provocative it's a good time to get skeptical.

I thought the history of money was pretty good though way to brief. Essentially they are correct, the original means of transfer was through bartering though it was extremely inefficient and that is why we moved to an agreed upon gold standard. Obviously the history of money is a lot longer, and probably pretty dry so I'll leave it there.

Anyway, they highlighted a major disadvantage of individuals holding on to their own money, theft, and loss. This is the appeal of storing your money in a bank, and enter the goldsmiths (where the jews get their name).

Goldsmiths did hold money and issue IOUs, and they quickly realized that while people deposit and withdraw money every day a large percentage of the gold that they were storing was sitting doing nothing. So the goldsmiths/banks (same thing) decide to do what any rational person would do, lend that money and earn a little extra. There really isn't anything wrong with this in theory, a bank charges you interest, pays interest to the depositor and takes a cut for themselves. The problems (historically) come into play when a bank run occurs.

A bank run doesn't just occur though, what usually happened and the video left this out, domes down to the difference between insolvency and illiquid. Insolvency is when the bank is losing money (making bad loans) illiquid is when a bank doesn't have enough funds to cover their short term obligations, this isn't a problem it just means that too many people came to withdraw and not enough deposits came in.

Now the problem is that prior to the 1930s depositors did not have any insurance (FDIC) and so if word/rumor got out that a bank was insolvent everyone would rush to get their money out. The problem being that the public did not have a way of telling the difference between insolvent and illiquid and so they would run to withdraw money out of their bank even if the rumor was another bank. Historically, most bank runs happened in the fall (when harvests were over and people were trying to pull money out to get through the winter) and a recession would result.

Anyway, this is all fractional reserve banking, i.e. the bank keeps a percent of their deposits on hand as reserves and lends out the rest. Fractional reserve isn't all bad, without fractional reserve banking it wouldn't be as easy to get home loans, student loans, or mortgages. You would have to find a person who was willing to lend money and negotiate all of the terms with them (huge transaction costs!).

Anyway, the panic of 1907 was essentially the last straw on bank runs. There were massive bank failures and J.P. Morgan stepped in to make good obligations for illiquid banks and clearly established how a central bank acting as a lender of last resort would be a good thing. Lender of last resort meaning that they would buy good loans from banks when they needed money to meet their short term obligations. To discourage banks from lending out everything and seeing the fed whenever they needed any cash the fed buys the loans at a discount, not dollar for dollar, or at least they are supposed to.

So the Fed was created with the best of intentions, not some shady agreement with code names. I agree that the Fed is risky, inflation and deflation are bad, and the problem is that the fed tries to do too much at once and we still don't fully understand which "tools" are most effective for the fed.

Anyway, the movie makes it seem as the fed has always bailed out banks encouraging banks to lend no matter what. This is more of a recent issue and it is actually a result of bad government policy mixed with bad fed policy. The fed held interest rates too low, and the government introduced policies making mortgages a sure thing...

This is getting really long, and probably boring.. so in summary there are pros and cons to having a central bank. I don't agree with what the fed is doing now, but I don't think that there is a conspiracy. The fed has been around for almost 100 years and it hasn't been a 100 year transfer of wealth from the poor to the rich.