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Calling All Hackers: How money works (2024)

phrack.org

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Re: Calling All Hackers: How money works (2024)

#11

Post by staplers »

jbs789 wrote: post #8
huijzer wrote: post #6

How money works? Well look into fractional reserve banking and do the math. If you’re a bank, you can just loan out 10-100 times what you have in assets and ask say 5% interest. Then 5*10 to 5*100 is your annual interest to the bank. That’s why the Bible and Quran are against usury.

This is not correct. For starters, loans are assets. Banks start with some capital, borrow in the form of deposits, and lend in the form of bonds, mortgages etc. The regulatory capital ratio determines how much capital they must hold to support the assets.

  Loans are assets
-1 = 1

And people wonder why finite natural resources skyrocket in value.

Re: Calling All Hackers: How money works (2024)

#13

Post by staplers »

01HNNWZ0MV43FF wrote: post #9
huijzer wrote: post #6

How money works? Well look into fractional reserve banking and do the math. If you’re a bank, you can just loan out 10-100 times what you have in assets and ask say 5% interest. Then 5*10 to 5*100 is your annual interest to the bank. That’s why the Bible and Quran are against usury.

You can't loan more than you have, but fractional reserve means you can loan most of your assets while only keeping some liquid: https://en.wikipedia.org/wiki/Fractional-reserve_banking

  You can't loan more than you have
You can when you control the ledgers. Even more easily when digital. Over 90% of all currency is digital.

Re: Calling All Hackers: How money works (2024)

#14

Post by staplers »

Imustaskforhelp wrote: post #10
huijzer wrote: post #6

How money works? Well look into fractional reserve banking and do the math. If you’re a bank, you can just loan out 10-100 times what you have in assets and ask say 5% interest. Then 5*10 to 5*100 is your annual interest to the bank. That’s why the Bible and Quran are against usury.

I recently discovered narrow banking ( https://www.narrowbanking.org/ ) which basically states the idea of narrow banking which can only make it so that the bank doesn't have the issues with fractional reserve banking if you are worried about it Stablecoins feel the most practical way I suppose for narrow banking although there is this UK bank and this Danish bank as well which are the two examples of narrow banking.…

  There already are some gold pegged stablecoins
Which require blind faith in reserve numbers.

Re: Calling All Hackers: How money works (2024)

#15

Post by CraigJPerry »

huijzer wrote: post #6

How money works? Well look into fractional reserve banking and do the math. If you’re a bank, you can just loan out 10-100 times what you have in assets and ask say 5% interest. Then 5*10 to 5*100 is your annual interest to the bank. That’s why the Bible and Quran are against usury.

> fractional reserve banking and do the math

all models are wrong but some are still useful. This model isn’t useful at all since the fraction was legislated to be 0 years ago.

Re: Calling All Hackers: How money works (2024)

#16

Post by dghlsakjg »

huijzer wrote: post #6

How money works? Well look into fractional reserve banking and do the math. If you’re a bank, you can just loan out 10-100 times what you have in assets and ask say 5% interest. Then 5*10 to 5*100 is your annual interest to the bank. That’s why the Bible and Quran are against usury.

That’s not how banking works. Banks cannot lend “10–100× their assets.” Loans are assets. Deposits are liabilities. What limits lending is capital, not reserves, and leverage is tightly regulated at roughly 10× equity, not 100×.

The interest math is wrong too. Banks pay interest on deposits, absorb defaults, cover operating costs, hold capital, and meet liquidity rules. Net margins are about 1–3%, not 50–500%.

Fractional reserve banking does not mean infinite money or risk free profit. It means deposits are not 100% cash backed (because they have loaned out a portion of your deposit).

This is a popular myth, not “doing the math”.

What you’re describing only works in an absurd edge case where people borrow money just to park it and pay interest without spending it. That’s not fractional reserve banking, that’s a broken thought experiment.

Re: Calling All Hackers: How money works (2024)

#20

Post by msla »

staplers wrote: post #14
Imustaskforhelp wrote: post #10

Earlier quoted context omitted.

I recently discovered narrow banking ( https://www.narrowbanking.org/ ) which basically states the idea of narrow banking which can only make it so that the bank doesn't have the issues with fractional reserve banking if you are worried about it Stablecoins feel the most practical way I suppose for narrow banking although there is this UK bank and this Danish bank as well which are the two examples of narrow banking.…

There already are some gold pegged stablecoins Which require blind faith in reserve numbers.

Hey, so does gold-backed currency!

How do you know how much gold the government is holding? Ask them!

How do you know the government isn't lying? Ask this question loudly enough and meet people with guns!

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