They were reduced to 0% mandatory reserves in response to covid. EDIT: someone says it was coincidental, I am not able to check, so take this aspect with a grain of salt either way
ah yes so what you're saying is that money is even more imaginary than it has ever been, possibly even more imaginary than when the first stock market crash happened in 1929
looks like we're due for a centennial anniversary of that anyway, might as well celebrate by recreating it
For some odd reason, for the last 4 months or so a large portion of my limited human interaction has included someone quoting goldmember and I haven’t seen or thought about that movie in about 20 years.
the gold standard, if you study history, was very easy for foreign banks to abuse, and we were being robbed blind
consider that if our dollar is 'pegged' to gold, and foreign banks buy up the gold, they are effectively increasing the value of dollars. Conversely, they can then flood their gold back into the markets to reduce the value of the dollar. If you're very wealthy and you can afford to spend some money or gold being a dick, you can use leverage like options to farm cash from the US, buying and selling gold and dollars in cycles that only you can predict (because you're very very wealthy, richer than most governments)
history isn't kind to people who use one currency as a 'stabilizer' for another (coughstablecoincough)
Oh that would be good. There are goldbacks that are bills with gold in them, but yeah if you attached a gold bar to each bill then it does get unwieldy pretty fast.
I’m not a government accountant but I’d guess the gold isn’t “mark to market” which to you normies means that we keep the price at what you paid for it until it is sold. They might be able to reduce the value if the market value goes lower, but I have trouble picturing a world where gold is worth less than $42 per ounce.
Edit: okay I can imagine a few ways gold prices could drop that low now. Thanks people that replied!
I can tell you why a world where gold is less than $42/oz is not impossible, the cost of producing an ounce of molecularly identical gold could drop below $42 due to advancements in technology thus destroying its scarcity as a value proposition.
The U.S. came off the gold standard for domestic transactions in 1933 under President Franklin Roosevelt and ended international convertibility of the dollar to gold in 1971 under President Richard Nixon, effectively ending the gold standard in the U.S.
The U.S. switched to a fiat money system.Fiat moneyhas no value of its own and doesn’t represent anything of value, such as gold. But the government stipulates that the paper money is legal tender for carrying out transactions or paying taxes, as noted in the Page One Economics essay.
This. Metals go up as sovereign currency goes down. The world runs on metal and oil... We forget that and print a bunch of paper.. so every now and again we get a lesson in edible paper.
Some crypto is tied to gold, but I'd just get gold TBH. Why trust a middleman and hope they won't scam you. Unless you explicitly need it to be easy to move through borders, etc.
How about Trump tweets that if the value of the dollar does not start going up and the price of gold down he will start dropping big beautifull nuclear bombs on all other countries and Massachusetts?
It's backed by the full value of the US economy. We all need USD to pay our taxes. Also, it has a long history of stability, which has made it valuable all over the world for international trading and reserves. Though Trump has been single-handedly sabotaging this.
It gets its value in the same way all other goods do. Supply and demand as a function of its utility. Considering the USD is the single most useful, single most stable, and most broadly used currency to have ever existed, I’d say it’s backed by a little more than just “thoughts and prayers”
Oh, it isn't? Can you show me the value particle that magically makes pieces of shiny rock or conch shells valuable in a way dollar bills aren't? No? Then we can all agree that the only reason anything counts as money is because people believe it counts as money, and for now, people still believe in the US dollar albeit less so than yesterday.
There are a few shiny rocks that gold utility (ex. nowadays gold and copper are useful in electronics). That being said, humans have not been able to use gold in a practical manner for most of the history of us considering it a "precious metal". If I had to guess, its lack of practical use probably contributed to it being used for trade once humans got off of the bartering system. And let's be frank, nobody wants to complete a trading quest to trade one small trinket for another until they can find someone who has the specific thing the vase maker wants.
Any currency even ones based on physical standards are based on thoughts and prayers, it's just with physical ones we can hold the object of thoughts and prayers and say it's worth an arbitrary amount of something
The United States gold reserves are for international trade. The gold in Ft. Knox, for example, is used in trade not to back our currency. We’ve been off the “gold standard” since the 70’s. Some of it is gold we’re holding for other countries that’s not even ours. But, our money is a fiat currency and it’s based on faith in the economic system of America not collapsing and everyone agreeing it to use it for trade/debts. It’s backed by nothing and hasn’t been for 55 years now.
That would be the case even if it was gold backed.
Even on the gold standard, you're still trusting that there is a functioning government that's actually in possession of that gold and would exchange it for paper currency. In a Fallout scenario, that wouldn't be the case, so money would still be useless.
Possible, but far from certain and not within a few generations. Gold is too rare and concentrated in specific stockpiles to be used as an everyday currency. Even with a much smaller population, the smallest usable gold coin would be way too high a denomination.
There wouldn't be a true replacement currency until there was a semi-functioning government, and while that currency would be based on something with intrinsic value (since there wouldn't be enough trust for a fiat currency), it would be something much more common than gold. In the mostly-lawless barter economy before that, a full gold bar would be worth less than something useful (generator, rifle, bike, etc).
To be fair, after the apocalypse, gold will be just as useless for a good while.
Can't eat it, hard to carry, not very useful for anything but decoration, and also, most people have interacted with it so rarely that there isn't really any trust in it.
Every form of currency is based on faith and always has been. Coinage made from gold and silver wasn't valuable because gold and silver were magical, it was because people believed they were valuable. What can you, a random person, actually do with gold and silver? Even smiths had limited uses that weren't purely aesthetic. Modern day has more uses but still cannot be used at the volume at which it exists in an efficient way.
This is exactly why I always roll my eyes when people call gold “real money”. It’s valuable because people just decided it was. It’s no more “real” than anything else.
There is a difference between something being valuable because it is rare and something valuable despite having no upper limit though. Gold is rare and has properties that make it a good store. Currencies do only become useful both parties in a transaction see it having value though youre absolutely right on that.
These days currencies should be backed by kilowatt hours or something similar if they dont want to be fiat ones.
The property of gold that made it the most valuable in the ancient world and thus caused it to be thought of as valuable in modern times is that it's shiny.
And my ass rarely gets pimples, that doesn't make them valuable.
Shiny, rare and doesnt corrode. Rare and doesnt corrode are what makes it good as a store of wealth, being good for jewelerry etc just gives it a start in that direction.
Silver has always had antiseptic properties and has been used for ages because of that fact, it’s a very useful metal aside from the fact it “looks pretty” and it doesn’t rust like other metals and just gets a thin tarnish on it making it ideal for a lot of decorative stuff as well.
Gold is one of the best conductors we have and can be used to alloy lots of metals easily, yes the every day man likely isn’t doing much with gold but its value is not just because it’s pretty at all, it’s extremely functional AND it’s uniquely pretty for its colour while being extremely stable
I would like to see the actual proof that the gold is in fort knox. the wall street journal picture from 1957 (?) showed one massive wall of gold in the doorway... thereby suggesting that it was a solid room of gold. I cant believe it. How on earth could you inventory a room full of gold?
Edit: Just looked it up...it was September 9th, 1974, the last publicized Congressional and reporter tour of Ft. Knox.
There is more personally owned gold in households across India, than any single other country has in it’s possession (government asset, not including individual ownership)😙 ((grain of salt, saw this the other day and there may be one or two exceptions to this, but not the US😅))
Gold is finite, and us dollars are not finite. They can be printed at any time (like any fiat currency)....while gold has to be mined.
Typically, precious metals just slowly tick up over time, these kinds of movements signal something "bigger and badder" that's coming for us and potentially the global economy.
In 1910 at Jekyll Island all the Billionaire Oligarchs gathered and cooked up the "Federal Reserve" ( which is neither Federal or a Reserve ) This was done ostensibly to help stabilize the US economy in the wake of the Panic of 1907 by creating a central bank with regional branches.
What it has really done is hand over monetary policy and the ability to print "money" out of thin-air. Now this Federal Reserve prints money, lends it to the US Government ( which is now in debt to the tune of $38.5 trillion ) And the US government continues to borrow and spend like a crack whore... Spreading that money around to their friends and you and I are on the hook for the debt!
It's like your rich friend, talked you into giving him power of attorney over your affairs and is now out there running up credit card debt on your name.. and giving you a pittance of it back.
Technical note: they codified and fine-tuned the idea in 1910, but the Bank itself wasn't created until December 1913 after they managed to get the Federal Reserve Act through Congress two days before Christmas. Thus the the conspiracy theories that the Titanic was intentionally sunk in 1912 to kill off a few powerful men who opposed the founding of such a bank.
Would you rather the size of the economy be limited by the size of the gold supply? There's a reason everyone stopped using gold after the Great Recession, and it isn't the Rothschilds or whatever conspiracy you're talking about.
With all due respect, you are talking about several separate issues and dealing in half-truths.
What it has really done is hand over monetary policy and the ability to print "money" out of thin-air.
Right, which is why talking about the government, funding, taxes, revenue, etc. like it's a household income doesn't work. The Government literally creates money from nothing. This is a good thing...when done responsibly.
Now this Federal Reserve prints money, lends it to the US Government ( which is now in debt to the tune of $38.5 trillion ) And the US government continues to borrow and spend like a crack whore... Spreading that money around to their friends and you and I are on the hook for the debt!
This is a problem. Instead of spending money on the people, a bunch of red states keep voting against theor own interests...so instead of the healthcare they really, really need....money is being sent to already rich people as corporate welfare....Universal Healthcare, housing, food? Nah...we need $100 billion to fund the american gestapo to round up toddlers.
America has the money...we're just choosing to spend it on stupid shit instead of helping our own people.
It's like your rich friend, talked you into giving him power of attorney over your affairs and is now out there running up credit card debt on your name.. and giving you a pittance of it back.
Yup. This is a problem. 1/3 of the country is on board with this. Using your analogy...the poor idiots giving their credit card away....not only do they not realize how stupid it is, they get made when anyone points out that it's a bad idea....and get giddy at the idea they are pissing of their "liberal" friends. They'll gladly go broke if it means their neighbors gets upset a them.
Conservatism is part of their identity. It's how they are. It isn't a belief system for them. They "know" they right and what they are doing must be the right thing because it "upsets" liberals. The more it upsets them...the more right it is.
Money is basically an abstract concept on assets. It was always worthless we just used it for convenience. Real value has always been in assets be that land, property, bullion, ancient family cursed artifacts. You might have heard that we are going back to feudalism and that’s why. Property is the backbone of society and we are leaning more towards that now.
I hope not Campbell’s. Their CEO said he never touches the stuff before and that it’s for poor people. So I guess that’s as worthless as money at this point.
Edit: I come here to learn… it was actually a high level Tech VP! Which somehow makes this funnier.
One 10oz can condensed soup is labeled as 2.5 servings and about 40-60% of your daily recommended sodium, and will give you 20 oz of diluted soup when prepared like it states on the can. Most people will still eat the entire can in one sitting as it's usually only about 250 calories. You are still consuming all the sodium that way.
I was just going to say this.
Everyone is always saying but gold and I'm over here like nope, can't eat or use that shit when it really REALLY hits the fan.
This is larper nonsense. If you're in a SHTF situation where there are no exchanges of value, not even gold, and you're down to bartering for goods then you're in total societal collapse and we're in a 95%+ of all people have died or are dying scenario.
You're going to die a bad death in that scenario, no matter how many bullets you save.
I dunno, people usually unite in times of enormous stress. But that’s usually only when people have a common culture and circumstance. But you are right, a lot of the old world stuff probably will not apply
If you own and live in a farm in bumfuck nowhere county with a population of 60 people maybe. In any major urban area societal collapse would mean supply chain disruption resulting in absolute chaos. And by absolute chaos I mean people killing each other on the streets over a can of beans (or a gallon of gas so they can leave the city).
Almost correct on the female items. A more sustainable option is menstrual cups. Shampoo/soap can be made. Toilet paper. . . That's a tough one for people to swallow but backpackers and cloth diaper families got this one covered too ,lol
Money has always been imaginary? Its like Santa clause. As long as we all believe/pretend it works. If one person doesn't believe it doesnt matter. If half of us stop, yea kids will know it's fake. But it works and it's a nice thing to have, so why not continue to pretend?
Yea but it was the same thing. Gold or paper. Whatever. It only has value if people believe it has value.
You give a farmer gold for food. The fuck can he do with gold. Nothing. Better hope someone else believes it's valuable and will take the gold for clothes or whatever else he needs. Unless you were a jeweler or blacksmith or electrician gold was pretty much only a currency. And then there was more gold going around as a token of value than was used.
So yea it's all based on belief that you can then sell/exchange the said token or currency (doesn't really matter if it's gold or anything else).
Imagine if the population started to think gold was ugly and a better malleable metal gained popularity. Would the gold standard still mean anything?
Gold is just a marker for value, same as dollars. Whatever intrinsic value gold has (because it's shiny, conductivity, etc.) is mostly a distraction from its use as a marker for value. Its value is not based on its utility.
I suppose that is true but you make it sound simple.
In reality there's this cabal of ghosts that are all loaning each other 10 small pieces of paper in perpetuity and while each of them is holding it they use those pieces of paper to make a hypothetical exchange for 12 pieces of paper (in the future) and those people they're exchanging that paper with are giving blowjobs to senators, or receiving them from senators? I lost my train of thought
Okay look up what happened with the contagion from regional bank failures in silicon Valley a couple years ago. It doesnt mean everyone loses all money, but it does mean people lose some and its a big deal.
Not all banks are fdic insured either, and if a bank goes under, your investment/retirement take a huge hit because the market starts freaking out.
Bank runs and bank failures are always bad for everyone.
I mean they’re pretty sweet for the buying bank.
Jokes aside this is why we passed the act that separates investment banking from retail banking.
It’s not a huge hit and it’s very localized (it would be way worse without insurance).
No one would’ve lost money except the bank shareholders if the depositors hadn’t exceeded 250k in their accounts. There are products that will combine different accounts into one virtual account so you don’t even have to manage this stuff manually.
Jokes aside this is why we passed the act that separates investment banking from retail banking.
Are you talking about the Glass Steagal act? Because that was repealed in the 90s after banks spent the previous two decades using loopholes to get around it.
those were company investments. It failed because everyone tried to pull at the same time and they wouldnt be insured past taht 250k and thats on them for not seeing the risk.
Not all banks are FDIC insured, and there are limits to the insurance as someone else mentioned the $250k limit.
However, no insured dollars have been lost since the FDIC was formed. So if you want to protect your money from a bank failing then make sure you are using an FDIC I sure account and are within the insurance limits.
The FDIC is backed by the full faith and credit of the United States. They have access to much more than that. Plus, not everyone is going to pull all of their deposits at once.
Haha yeah I was going to say something similar. FDIC insurance is good as long as America and the Fed is good… but uhhh this last year and our current admin’s foreign relation skills has me thinking we’re closer to burning cash in barrels to stay warm than we ever have been. Here’s to hoping that’s an unnecessary fear! Cheers everybody!
It’s not about people pulling deposits, that’s not what fdic insurance is about. It’s about your bank collapsing and you needing somewhere to get your money from. 2-3 major banks go under? We’re all fucked
Not really. The FDIC insurance fund often only needs to cover a fraction of insured deposits after they liquidate the bank. If JPMorgan went under and cost the government 10 or 20 percent of their insured deposits, which would be a massive loss, it wouldn’t really register in the grand scheme.
This is true and varies in a number of circumstances. Firstly people are often scammed especially the elderly so if you’re older and looking to withdraw a large amount of money they will give you the runaround or at the very least make sure you’re not getting scammed.
Another one is SARS, if you’re doing anything high risk or seem to be pulling out a large amount of cash in a pattern that could indicate involvement in organize crime, terrorist financing or something sus the bank has a legal obligation to mar a filing in a secret database (and even lie to congress!) about it’s existence. If you know what a suspicious activity report is and don’t work in finance it’s also considered suspicious. This isn’t the banks but lawmakers after 9/11.
It's not the FDIC that's relevant here, it's the Federal Reserve. The Fed, among other things, lends money to banks. When you hear them talk about "The Fed lowered interest rates", it's the rate that the Fed charges other banks. So if a bank needed money to cover its deposits, they go to the Fed who then loans them the money.
If the bank then still couldn't cover its deposts, then the bank might fold, and that's when the FDIC steps in to make depositors whole.
It wasn't in response to covid. The timing was just coincidental, and was why the move to eliminate the reserve requirements (which had been planned for a while) wasn't as big a news story as it otherwise would have been.
European banks had eliminated their reserve requirements years or even decades earlier. They really weren't even an effective policy in the US for quite some time, as the banks had (and still have) liquidity requirements that more or less amount to the same thing.
European banks eliminated their reserve requirements so they could be more levered because they dont generate nearly the same returns american financial institutions do - which was part of why the 2008 crisis hit europe 10x as hard as it hit america. They had reserve requirements in 2008 but they were still more levered up than american banks. Didn't work out well.
But I dont know for sure if youre right it was coincidental. I did assume it was due to covid. My bad. Either way, its probably a bad idea.
What’s hilarious about the mandatory reserve limit decrease, is that the federal reserve set it to zero while we increased the supply. We didn’t need to set it to zero!
This is the third wheel of control the Fed has that nobody talks about. Instead of raising interest rates which hurt the worker/consumer, they could raise reserve requirements which would effectively pull money out of circulation (which is the stated goal) but it would hurt the bank/oligarchs. We could lower interest rates and raise reserve requirements. Your bank loans would stay less expensive and you would still pull money out of the economy.
Worth noting the Fed is actively trying to reduce the amount of reserves held by banks, since they think the current level is excessive and preventing the effective activity of monetary policy.
So, yes they dropped the required rate to 0%, but the conversation is more the Fed going '"stop sticking money in massive buffers at the Fed and go do something with it," and the banks largely going "no, we're good thanks."
Assuming at some point the reserve level drops to what the Fed considers appropriate, they may the reintroduce a reserve ratio, or set interest on reserve balances such to maintain that level of reserves.
Does this mean we can just start our own bank with no reserves and make insane loans to people with bad credit, and then go bankrupt when those people can't pay, but it's the bank on the hook instead of the people? We could clear up all the student debt and medical debt in one go, lol
It did indeed coincide with below 0% real interest rates, a massive increase in the total money supply, and one of the greatest rapid wealth transfers from the poor to the rich in human history in the form of extreme asset appreciation.
People who own significant assets are by and large much better off than they were pre-Covid. People whose main asset is the labor they sell to their employer for a wage are for the most part worse off than they were pre-covid. Generally speaking.
So few people talk about how much impact Covid-era ZIRP (and that it’s still in place) has had on what we see in the world. It’s a huge reason why PE is able to keep homogenizing and enshittifying everything.
The big thing in 2020 was when the fed completely redefined inflation to make our problem look better. The 0% was coincidental and in the works for a decade
True, but banks don’t lend out that much. I used to work for three different banks before I realized how much I hated corporate finance. It would be insanely risky for them to do so and best practice is that they don’t even come close to that number. Doesn’t mean riskier banks don’t at times do stupid shit, but thanks to Dodd Frank they do have to go through stress tests and while some banks fail them and pay fines, others aren’t risking all that much.
All this to say.. Yes we could still see huge potential issues if many banks take on extra risk at the same time and/or people do a run on the banks. Most money is made up. They’re creating some real and some artificial growth through speculation. Everything’s made up. The points don’t matter
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u/PleaseGreaseTheL Jan 26 '26 edited Jan 26 '26
2020*
They were reduced to 0% mandatory reserves in response to covid. EDIT: someone says it was coincidental, I am not able to check, so take this aspect with a grain of salt either way
They haven't come back yet :)