Banking 12: Treasuries (government debt)
Filed Under (Education) by on 20-11-2009
Tagged Under : Federal Reserve, Federal Reserve Notes, Government Debt, Obligation, Treasuries
Introduction to government debt and treasuries. What it means when we say that Federal Reserve Notes are issued by the Reserve bank but are an obligation of the Government.
@draggeddownthehole
So, just to clarify, the treasuries are the government’s way of loaning money from the central bank? The treasuries become a promise to pay back more than is printed by the bank (with the extra coming through taxes)?
Sorry for posting, but well I hope to be lucky with MY angel)
i don’t usually believe in chain comments, but this one is pretty cool. u don’t need to do it, but when u read it, u might smile.
There are 20 angels in this world
10 are sleeping
9 are playing
1 is reading this
Yes!
fed is the most powerful institution in your country because it controls reserves, i have question. to who fed is responsible for…are they above everything?
I live in Canada. How I understand it, the government prints a bunch of paper called Treasury bonds (a sort of security) in exchange of canadian dollars (CAD or bank notes). Those dollars are then used to pay public workers. The dollars were created out of nothing by the banks (probably owned by english bankers) and the Govt pays interest on the treasuries, which are a form of loan. So the bank notes are backed by Treasuries.
thx dude i really learn a lot of information about bank from, keep them up sir!!!!
I understand the principle of ‘Treasuries’ , but as a non US citizen I’m not entirely aware of the context in which they work. How does the US government choose who it borrows money off? And are the ‘Treasuries’ literally bits of paper that you just keep until the government gives you your money back or somebody else buys the treasury off of you?
I’m sure i’ve fundamentally misunderstood something but I’d appriciate help from any Americans who can help me.
alas
They don’t. The currency mostly sits around in vaults because people use checks instead. The point is that for every note the bank has they are allowed to loan out two.
I was considering many loan cycles during the fractional lending money multiplier – it is capped at a reserve ratio of perhaps 10%. $50 can multiply to $500 at that reserve ratio – through multiple lending of a lessening portion of the $50.
The formula works like 100/.5 thus only 200 can be created. However that is the maximum. You are only taking into account one loan deposit cycle. The initial loan is $50 which will likely be a deposit of $50 which can become a $25 loan etc.
Hi All
Have a question, if all the national banks use a common currency issued by the Central bank and the resereve ratio is 50% i would like to know where do the national banks get the remaining 50%currency from to give loan to customers, because the Central bank is going to give these national banks money only proportionate to the gold reserves they deposite with the central banks?
Thanks – I finally came to that conclusion after much thouhgt. It seems that the loaning out of 90 of a 100 deposit still holds but after the multiplier effect it increases and is capped at the 10% reserve ratio which you explained. If the banks ever decide to loan out these billions that they’ve recently aquired -look out.
which really shows how risky our banks can be to our financial system since we have a 10 percent reserve ratio the federal reserve then only has to keep 10 percent so while a normal bank can loan out 10 times its reserves threw this method you could loan out 100 times the actual wealth drastically increasing the money supply which causes inflation
if you have to keep 50% if your demand accts on reserve and you have 100 gold pieces then by keeping that 100 gold pieces on reserve you could loan out 200 gold pieces because 100 is 50 percent of 200
Wait – I think I’m confusing fractional reserve lending with reserve ratio.
Let me watch the videos again.
If the bank has 100 gold and the reserve requirement is 50% how can it then lend 200? I thought it would be able to lend 50 (having to keep 50% in reserve). If the RR was 10% it could lend 90 etc..
this shows how the crual the system and our govts are.if privately owned central banks make a mess, its govt who has to clear it i.e. if you asks for you money back, they tax you more. Futhermore, the govt borrows the money from FED at interest and has to taz you for that.This system is flawed & needs to be completely changed.
Is there any way you could go over, puts, curency accumulators, options? Thank you so much your videos have helped me so much.
I think now it should be “I owned your money”
I thought the interviewers reaction to Sal’s suggestion that the government loan directly to businesses on CNN was humorous! Uh, you mean let irresponsible businessmen fail in business?
6:22 – “any surplus profits from this bank go back to the Federal Government” may sum up why the federal government is bailing out the banks.
IOU = I owe you. As in “I owe you money”. In the case of Treasuries, its a piece of paper from the government saying that they owe you money.
I’m not sure if I understand IOU, are those Obligations?
Sal I hope you’re ready to be called by President elect Obama to work on the economy. Get your bags ready because I sent him a response on your bailout idea. You might have to bring some warm clothes perhaps some thermal underwear and some LLBean “Herman Survivors” just in case it starts to snow. lol