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#1 |
Illuminator
Join Date: Jun 2004
Posts: 4,051
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Fractional reserve vs. gold reserve banking
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#2 |
Master Poster
Join Date: Jul 2007
Posts: 2,703
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Valuable assets are scarce. Even securities like stocks and bonds which can in theory be reproduced infinitely, are still based on some underlying scarce asset or assets.
Central banks are in the business of creating money/credit out of thin air. When they monetize assets, they create money, buy assets and put them on their balance sheets. This has the effect of a) nationalizing the asset, which is controversial in it's own right, b) inflating the money supply, thereby devaluing all of the pre-existing money held by savers as well as worker wages, and c) artificially inflating the value of pre-existing assets with inflationary money. This acts as a central bank subsidy of rich asset-holders by savers and workers. In the context of this thread, it means that workers who want to become owners by purchasing stock shares will find themselves constantly left behind, as the inflated price of shares forces them to afford less and less actual equity in public companies. This is true for bonds as well, as the financial repression of interest rates is reflected in sky high prices for bonds. For instance, a worker who would like to become financially independent with an income of $40,000/yr by investing in US Government 10 year bonds at a 2% rate (it's actually 2.3% now, but we'll keep it simple) would need a whopping $2,000,000 worth of capital to invest ($40,000 / .02). It's impossible for people who actually work for and save money to compete with technocrats who can create arbitrary and unlimited amounts of money out of thin air, by pressing a key on a computer. Governments measure "inflation" by looking myopically at consumer prices, but rising asset prices are ignored because this benefits the super-rich. Any true effort to reverse the trend of global wealth condensation and enable workers to take part in ownership of the world's most powerful companies, would have to begin first with monetary reform. |
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"The issue which has swept down the centuries and which will have to be fought sooner or later is the people versus the banks." - Lord Acton |
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#3 |
Illuminator
Join Date: Jun 2004
Posts: 4,051
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I educated myself by reading the first paragraph (some 200 words) of this Wikipedia page:
https://en.wikipedia.org/wiki/Money_creation True. I don't see anything controversial in the state buying something that citizens are willingly offering for sale. (What comes to the inflation effect, that is discussed below, where I explain why I don't see anything controversial in that either.) Holding cash is a sure way to lose in this game, and a major reason for the state to create inflation: to make keeping money in sock the least attractive way to use your money, as it is also the least productive for the national economy. I see your idea, but to be more precise, the central bank does not cause the value of stock to rise. Theoretically it causes the value of everything to fall, including stock. Then it is a rat race between investors and workers, how stock and salaries are revalued through offer and demand. In my country, salaries are mostly based on nation-wide contracts, so the unions of employers meet with the unions of workers, and then the newspapers announce that everyone's salary is raised by 1.5% in February. In countries where workers are not so well organized, you might get no annual salary rise at all. If that is the case, inflation makes you poorer year after year, but not because inflation is evil, but rather because a failure to raise the salaries in sync with inflation is evil. So the evil one is the employer who earns more but fails to compensate the workers more. Theoretically the workers union might put thumbscrews in the annual negotiations to raise salaries more than there was inflation. That would devalue stock, as profits would fall. So the value of stock is merely based on an agreement between employers and workers, how the expected income will be shared between employers as profit (value of stock) vs. workers as salaries. I don't see inflation as the evil here. Yes if the power balance between employers and workers is such that every year the inflated extra value in economy gets distributed more heavily to employers than to workers. But again, I don't see inflation as the evil here. If something is evil, it is not the fact that extra value gets created, but how we distribute that extra value. Assuming that the central banks are state-owned, I don't see who these "technocrats" would be, or that they exist at all. Private central banks are not an interesting topic, because the discussion would contain one phrase only: They should be nationalized. It remains my feeling that money does not crucially need a reform, other than central banks should be state-owned, and preferably other banks too. Workers (or the state) should participate more in ownership of production capacity, but they have a tendency to favour immediate consumption rather than long-term ownership of something expensive that is abstract for them. Therefore state ownership, or legally obligatory private ownership, would be the best way to go. |
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#4 |
Master Poster
Join Date: Jul 2007
Posts: 2,703
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If you don't see a problem with the nationalization of private assets, then you may have to check your capitalist credentials. Capitalism is defined as the private ownership of the means of production, not the public. The state nationalizing private companies is antithetical to the essence of capitalism, and is in fact, communism. Then there is the matter of how the state pays for such acquisitions. It can either obtain the funds a) by direct taxation, or b) seigniorage (money creation), which functions identically as a tax. The only differences between direct taxation and money creation as taxes are that the latter is opaque, and guaranteed to be regressive.
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Imagine , for example, that your house is worth $400,000, and I counterfeit $500,000 and offer to buy your house. You will enjoy a bid that would not exist in a free market, and the market for savers and workers will see the supply of one less house which has been reserved for a parasitic, non-productive actor in the economy. I get a house for nothing, you get an overvalued bonanza sale, and everyone else is left poorer with devalued currency.
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So, in what can only be termed the greatest scam in human history, you have an institution which can create arbitrarily unlimited amounts of fiat money for private benefit. I do not think central banks should exist at all. But if they did, then I certainly agree that such power should be nationalized and under the full control of democratically elected politicians, and should not be allowed to transact with the public directly.
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"The issue which has swept down the centuries and which will have to be fought sooner or later is the people versus the banks." - Lord Acton |
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#5 |
Graduate Poster
Join Date: Nov 2006
Posts: 1,543
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Originally Posted by Tippit
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...Forever shall the wolf in me desire the sheep in you...
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#6 |
Illuminator
Join Date: Jun 2004
Posts: 4,051
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This description with sharp black-and-white colours is possibly true, in a sense. But I don't see its relevance, since no country (hardly even a political party) ever existed, which intended to practice 100.00% Capitalism with 0.00% Communism. The White House in Washington D.C. is owned by the state, not by private investors. Well this is a lamentable lost opportunity for private investors to make that little bit of extra profit, by owning the White House and renting it to Mr. President for profit, but the folks at Wall Street are perfectly OK with that. And with the extent of nationalization that the central bank does occasionally. It is a drop in the ocean, it does not matter for private investors. Nobody who politically matters something bothers to be ideologically opposed to all possible state ownership of everything.
I have pointed out that this is a designed feature, the government wants citizens to spend or invest rather than hide in a sock. You seem not to be concerned about that, as if such a concern is not a big deal at all. Let them save their money in a sock without inflation. It makes a difference in the economy, less stuff is bought by consumers. For the latter part, my preferable solution would be obligatory ownership of stock for all citizens. So it would benefit everyone, if everyone were owners. The negotiations begin by the employer side showing statistics and forecasts tailored to serve their interests, and the labour side showing statistics and forecasts tailored to serve their interests. CPI is among the factors, other factors are the forecasts of foreign trade. Then they have two very distant figures, so they start debating and bargaining. What comes to the stuff that the state gets in exchange for its newly-created money, it goes to the state, and thus theoretically to the benefit of everyone equally. I fully agree. "Unfair" is an interesting word to be heard in the context of Capitalism, the art of inequal laissez-faire private distribution of economic well-being. It is mostly the political Left who decry the "unfairness" of the economic status quo, while the Right tends to hush down such talk as mere envy. Reading the published political agenda of a few political parties in any multi-party country would produce much more hits for the word "fair" in the pamphlets of Leftist parties than in the pamphlets of Rightist parties. The extent to which you show concern for "fairness" and "the poor" is not typical for purely Capitalist political movements. Sounds more like Center-Left Social Democratic movement. Those people merrily mix 20% Communism with 80% Capitalism. Workers of this or that profession have grievances often enough, and the grievance is to get a higher salary (or other benefits or guarantees) for themselves (that is, to members of their own profession, not to all workers generally). This is the purpose of nearly every strike that I ever saw anywhere. I my world, workers would be legally obligatory owners, salaries would be equalized, and the right to strike would not exist. If you don't like your profession, find another job. If you don't like any job, found a political party to address the problem, or emigrate to another country. Counterfeiting and loaning have the remarkable difference that counterfeited money appears out of thin air, while a loan is a transaction of liabilities. If the loantakers will not pay back, the bank suffers and eventually goes bankrupt unless saved by the state (as famously happened to many banks in the 2008 crisis), while a counterfeiter never expects a payback to begin with, as he has no liabilities concerning the given sum of money. Banks giving loans is not equal to creating money out of thin air. It is a lot more complex than that, a risk investment process rather similar to any stock investment, and indeed often an indirect stock investment, as a bank loans money to a company trusting the value of their stock. Or to a house-buyer trusting the market value of their home. |
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#7 |
Master Poster
Join Date: Jul 2007
Posts: 2,703
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This is utter nonsense. The counterfeiting example is quite apropos, because ultimately there is little fundamental difference between money creation, and credit creation, particularly when there is infinite credit to be granted.
The fact that you're referring to money creation under the fractional reserve system as private bank credit and I'm referring to money creation under the issuance of fiat base money, is irrelevant. In both cases, someone or some thing is getting something-for-nothing. In the case of your example, the bank is getting a 30 year "death pledge" (mortgage) over which a multiple of the actual cost of the house will be repaid, with interest, in exchange for bank credit that was created out of thin-air in the fractional reserve system. In addition the seller of the house receives a bid that is not based on any real productive economic activity, but rather a subsidy that the entire system of money creation has created. This has created a perverse situation where asset owners (in this case, home owners) and mortgage bankers receive tribute from everyone else, and where there are television shows which extol the virtues of "house-flipping" for profit. At the end of the day, anyone who is rational cannot ignore the fact that when some can get some things for nothing in a scarce world, this must necessarily deprive everyone else. |
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"The issue which has swept down the centuries and which will have to be fought sooner or later is the people versus the banks." - Lord Acton |
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#8 |
Master Poster
Join Date: Jul 2007
Posts: 2,703
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The fact that we agree that the government needs buildings to conduct its business doesn't give the government a license to either monetize everything, or perpetually raise taxes in order to nationalize everything. The effects of national taxation and central bank money creation are most certainly not "drops in the ocean".
I'm not contending that the state should not own anything, I'm contending that there should be a clear limit, since I personally live in a constitutional republic.
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The "incentive to spend" that you're describing is merely an excuse for and consequence of confiscatory monetary policy, and could more accurately be described as an incentive to exchange the fruits of one's labor before the proceeds are all stolen/devalued.
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The reality is that the public can and will never catch up with the elites unless they abolish central banks.
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In this world, workers would be free and able to become meaningful shareholders over time, and everyone else would be free from the ability of wealthy elite shareholders to perpetually subsidize and socialize their capital losses via the monetary system.
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Do you see the problem that people who can either issue themselves unlimited money or unlimited credit cannot lose?
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"The issue which has swept down the centuries and which will have to be fought sooner or later is the people versus the banks." - Lord Acton |
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#9 |
High Priest of Ed
Join Date: Sep 2003
Posts: 18,827
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No. One huge difference is if you just print money, that money never goes away (unless detected and removed from circulation) whereas where the money supply is increased through extension of credit, that money goes away as the debt is repaid.
Who gets deprived? |
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Hamilton 68: Tracking Russian internet propaganda |
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#10 |
Graduate Poster
Join Date: Nov 2006
Posts: 1,543
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Originally Posted by Tippit
The private buyer accepts the terms of the loan and so does the private bank; and the private seller accepts the terms of the sale as well as the means of purchase by which his property changes ownership. Herein is nothing counter to free market principles or practices. You're just saying the market shouldn't be that free. |
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...Forever shall the wolf in me desire the sheep in you...
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#11 |
Master Poster
Join Date: Jul 2007
Posts: 2,703
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Yes, as loans mature money is destroyed. But if you have access to unlimited low-cost credit, as central bank cronies do, then there is little fundamental difference, as I said, because you can simply roll loans over, and/or double down if you lose and the loans go sour.
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"The issue which has swept down the centuries and which will have to be fought sooner or later is the people versus the banks." - Lord Acton |
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#12 |
Master Poster
Join Date: Jul 2007
Posts: 2,703
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I guarantee you that 99% of real estate buyers don't understand how the fractional reserve system works, and how that by entering into such an agreement they will essentially become slaves, paying off a multiple of their property's value over the course of the mortgage, to a bank which simply conjured the money out of thin air.
Equating what is patent fraud - fractional reserve banking - with freedom, is disingenuous. Banks, if they wish to engage in mortgage lending, should lend out their own paid-in capital under a 100% reserve system, or, at worst, act as loan brokers in such a system, instead of acting to perpetually inflate real estate and other prices. Either that or we enable everyone to engage in the special accounting rules enjoyed by banks under FRB. |
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"The issue which has swept down the centuries and which will have to be fought sooner or later is the people versus the banks." - Lord Acton |
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#13 |
High Priest of Ed
Join Date: Sep 2003
Posts: 18,827
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Central banks don't have access to unlimited credit. In the US system, they can borrow from the Fed, but what they can borrow is limited by the available assets of the Fed and must be paid back with interest.
Which is beside the point as typically they are the grantors of credit. "Scarce" in this context means the availability is less than infinity. This is not at all interchangeable with "fixed", which would mean there is a set amount and for one person to have more, another person would need to have less. The reality is that assets and resources can be created, and the availability of credit makes it possible to create a lot more which is good for everyone. |
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Hamilton 68: Tracking Russian internet propaganda |
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#14 |
Skeptical about skeptics
Join Date: Sep 2010
Location: 31°57'S 115°57'E
Posts: 12,469
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You are letting the true culprit off the hook.
It is unfettered use of the national credit card by the government that is at the root of all of our monetary problems. It makes it necessary for new money to be created (minimally to replace the money disappearing down the black hole of national debt interest) or the economy would grind to a halt due to bankruptcies. It is the government that is pumping up the price of assets, making housing unaffordable for the public and forcing the public to borrow massive amounts in an attempt to maintain their life style. They are giving the central banks the perfect excuse to print money and give it to their cronies. The money borrowed by the government never gets repaid. They just borrow more of it. Assets is no problem for the Fed. The market is awash with government securities galore. All the Fed has to do to get some of those securities is press a button and PRESTO! we have more base money. |
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"The process by which banks create money is so simple that the mind is repelled. Where something so important is involved, a deeper mystery seems only decent." - Galbraith, 1975 |
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#15 |
Master Poster
Join Date: Jul 2007
Posts: 2,703
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You don't understand how central banks work. The CBs create money ex nihilo and either lend it, or purchase assets in the open market with it. There is no limit to this process, other than the central banks themselves. That's why the US Federal Reserve has allegedly $4.5 trillion on its balance sheet, and at least $9 trillion off-balance sheet.
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If the goal is for workers to eventually become owners, then that goal is literally impossible without monetary reform. |
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"The issue which has swept down the centuries and which will have to be fought sooner or later is the people versus the banks." - Lord Acton |
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#16 |
Master Poster
Join Date: Jul 2007
Posts: 2,703
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No, it's fiat money that is at the root of our monetary problems. In fact, it's fiat money and the Fed which enables the government to "borrow" more than legitimately exists in credit markets, as you well know. And without fiat money and the Fed, it couldn't monetize pre-existing bonds in order to suppress interest rates. Absent this, government borrowing would be regulated and limited by available credit.
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The only securities the government holds, are intra-governmental debt (bonds). It does not hold equities, as far as I know. The government builds aircraft carriers, F35 jets, and pays entitlements. I agree that governments shouldn't issue debt. They shouldn't create money either. They should finance their (constitutionally limited) operations using fair and honest direct taxation. |
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"The issue which has swept down the centuries and which will have to be fought sooner or later is the people versus the banks." - Lord Acton |
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#17 |
Skeptical about skeptics
Join Date: Sep 2010
Location: 31°57'S 115°57'E
Posts: 12,469
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"The process by which banks create money is so simple that the mind is repelled. Where something so important is involved, a deeper mystery seems only decent." - Galbraith, 1975 |
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#18 |
Graduate Poster
Join Date: Nov 2006
Posts: 1,543
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Originally Posted by Tippit
Originally Posted by Tippit
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...Forever shall the wolf in me desire the sheep in you...
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#19 |
Illuminator
Join Date: Jun 2010
Posts: 3,666
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Despite all the asserted knowledge you preach in here re your one and only topic of interest, you still feel the need to tell lies. Such "errors" might be forgiven from inexperienced nuts such as Saggy, but we all know that you know that this money isn't conjured out of thin air, and that the bank is on the 'hook' for every penny "creates". Whether lending is fractional or full, the bank assumes the risk of the loans it provides; your insinuation here is dishonest bollocks.
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#20 |
Skeptical about skeptics
Join Date: Sep 2010
Location: 31°57'S 115°57'E
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It is more of a question of sloppy language than dishonesty as such.
Banks create new deposits out of "thin air". Since these deposits can circulate without necessarily requiring a matching circulation of reserves (or that the reserves just move backwards and forward), it is like "real" money money is circulating. The only time that the argument becomes dishonest is when you imply that fractional reserve banking creates new Federal reserve notes (or gold coins or whatever). |
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"The process by which banks create money is so simple that the mind is repelled. Where something so important is involved, a deeper mystery seems only decent." - Galbraith, 1975 |
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#21 |
Illuminator
Join Date: Jun 2010
Posts: 3,666
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I disagree. He states that the poor home owner has to pay back a "multitude" of the loan they borrowed, while implying that this loan has been created out of nothing, ie the bank providing it has assumed no risk from the transaction at all. We all (even Tippit) know this isn't true.
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#22 |
Illuminator
Join Date: Jun 2004
Posts: 4,051
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I hope this "everything" refers to "all sorts of" rather than "all". Governments many nationalize all sorts of things, a bit here and there, but not all of "everything". Meditate for a moment on the reality of how political power functions: You are Hillary Clinton, how do you get into the White House? By charming Wall Street investors to fund your election campaign. Government is on the side of private investors, their mission is not to nationalize any more than is necessary or practical, and acceptable in the opinion of the elite of private investors.
To me, such a limit would simply be a matter of opinion between Left-wing and Right-wing parties. Where I live, there is a constant public debate between Right-wing parties wishing to privatize state companies (and often doing that too), and Left-wing parties criticizing them for that. Any party that gets the majority of votes, has the democratic right to increase or reduce state participation in the economy, whatever seems correct in their opinion (and their voters). This is a bold claim. To put the E in JREF, or wait... to put the S in ISF, I am a bit skeptical about the truthfulness of that claim. What I read in the newspapers is that the government cares a lot about whether people spend or not. My proposal has been: a legally obligatory tax on the salary, a bit like I pay a legally obligatory tax for pension funds. Another tax would go to stock ownership funds. To keep private investors happy, we might set a cap that the state will not buy more than 49% of any company. Within that limit, this Workers Stock Ownership Fund would buy and own stock in whose stable profitability its analysts believe in. Your proposal, on the other hand, is merely a monetary reform. It would not solve the problem that a worker with 4 kids to feed does not feel like spending 100 EUR of his monthly income into anything which does not seem absolutely and immediately necessary. Many, probably most, workers would be left as much outside of the ownership circle as they are today. Only a legally obligatory universal system would make a remarkable difference in the statistical balance of owners vs. non-owners. Without going into the details, something a bit like that is happening, at least in USA. Big money funds politicians, and politicians serve the big money. This is not exactly news for any thinking person. Or nationalize them. The imperfect world includes sick or disabled persons, children, unemployed people etc. The hardcore Capitalist right-wing parties do their best to cut down the taxation, and therefore also any social benefits paid to these from tax money. Leftist parties try to raise taxes, so the state could afford to pay more acceptable social benefits to the afore-mentioned. And free health care and schools and universities, free meals at schools (all these are nationwide reality where I live, but not in USA). But other than that, the typical Leftist and Rightist parties would allow the economy to run as it is. So the main difference between political Left and Right is just the statistical share of income that they are willing to confiscate from workers and investors and be used for enhancing the lives of others than workers and investors. Also a balance between income taxation and profit taxation is part of the game. Left-wing parties are colloquially labelled as "Communist", but in fact both wings believe in the same type of economy, the difference is only in their perception of how much inequality between workers, investors, and the rest is "fair". If you call yourself a "Capitalist", in the light of everything else what you say here, I cannot get a grasp where you would be aligned in the political spectrum. Would you raise the taxes to offer free health care, free schools and universities, free meals in schools, and higher unemployment benefits and pensions, as the Left-Left parties would? Or cut down the taxes and minimize all the afore-mentioned, as the Right-Right parties do? The answer to this question would really tell where you stand. If we want to envy the bankers for their personal wealth, my solution would be nationalizing all banks, without essentially changing the way how they operate. Years ago, I meditated on the fairness of interest rates. My model to analyze was that two young adults own a gold ring each. At 20 years of age, one of them lends her gold ring to the other. 25 years later, the loantaker gives the ring back, and also another ring as interest. 25 years later, they both die (or get hospitalized long term) at the age of 70 years. Their lives have been equal, what comes to gold rings, as both of them have experienced a 25-year period of possessing two gold rings, and 25 years of possessing no gold ring at all. With this model I persuaded myself to believe that an interest rate is perfectly just between the loantaker and loangiver, if it doubles the value of the loan in 25 years. If the interest rate is lower than that (as can happen in Islamic banking, or in housing loans where I live), the loan benefits the taker more than the giver. If the interest is higher (as it usually is), it benefits the giver more than the taker. On top of this, we need statistical corrections for inflation and risk of the loantaker never paying back the loan. All in all, I arrived to the conclusion that 7% interest rate is OK, and 10% is highish but still tolerable, but anything above that starts to be remarkably unfair. As laws take care of fairness in so many ways, they might as well take care of fairness between a loangiver and loantaker, by setting a legal upper limit for interest rates. Such as 10%, for example. When politicians take debt, they artificially make the economic situation look better than it really is. The injust part of it is the fact that the next government, and the next generation of citizens, will have to live with the debt that the previous politicians and previous generation of citizens took. I don't say that governments should take no loans at all. Costly infrastructure projects can well be funded with loans. But the rule of thumb should be that each generation of citizens pay back the debts that their generation took. One generation of humans living in luxury, and leaving the bill for the next generation to pay, is not fair. |
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#23 |
Master Poster
Join Date: Jul 2007
Posts: 2,703
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I don't see how it's chicken and egg at all. Without fiat money and with a supply of relatively scarce money, there would be an upper limit on how much the bond market is willing to lend the Federal Government, period. I still wouldn't support government borrowing, but the bond market would be relatively sane, as opposed to what it is now.
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"The issue which has swept down the centuries and which will have to be fought sooner or later is the people versus the banks." - Lord Acton |
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#24 |
Master Poster
Join Date: Jul 2007
Posts: 2,703
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The public's ignorance of mortgages-for-nothing, and the total cost of mortgages doesn't excuse fraud. If the banks were lending their own paid-in capital as opposed to creating credit out of thin-air, the cost of the death-pledge would still be high, but there would be no fraud. In addition, the lack of inflation in the real estate market would enable more people to afford the purchase of real estate without mortgaging their lives.
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"The issue which has swept down the centuries and which will have to be fought sooner or later is the people versus the banks." - Lord Acton |
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#25 |
Skeptical about skeptics
Join Date: Sep 2010
Location: 31°57'S 115°57'E
Posts: 12,469
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Add words that weren't in Tippit's post like "no risk at all" and you can accuse him of all sorts of wooery.
![]() I'm sure that Tippit is aware that each new deposit the commercial bank creates increases the claims its customers have on its reserves. You didn't read the fine print. Who do you think convinced the politicians in the first place that it would be a good idea to switch to a totally fiat system and why wouldn't they when they can run permanent deficit budgets? |
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"The process by which banks create money is so simple that the mind is repelled. Where something so important is involved, a deeper mystery seems only decent." - Galbraith, 1975 |
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#26 |
Graduate Poster
Join Date: Nov 2006
Posts: 1,543
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Originally Posted by Tippit
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...Forever shall the wolf in me desire the sheep in you...
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#27 |
Master Poster
Join Date: Jul 2007
Posts: 2,703
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https://en.wikipedia.org/wiki/Fracti...eserve_banking
"Because banks hold reserves in amounts that are less than the amounts of their deposit liabilities, and because the deposit liabilities are considered money in their own right, fractional-reserve banking permits the money supply to grow beyond the amount of the underlying base money originally created by the central bank. I never claimed that banks don't assume the risk for their loans, except, in reality ultimately they don't because banks can simply borrow more from other banks or central banks when their loans go sour, (creating even more money) effectively forcing the public to socialize their losses. You are dismissed. |
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"The issue which has swept down the centuries and which will have to be fought sooner or later is the people versus the banks." - Lord Acton |
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#28 |
Master Poster
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"The issue which has swept down the centuries and which will have to be fought sooner or later is the people versus the banks." - Lord Acton |
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#29 |
Master Poster
Join Date: Jul 2007
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"The issue which has swept down the centuries and which will have to be fought sooner or later is the people versus the banks." - Lord Acton |
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#30 |
Graduate Poster
Join Date: Nov 2006
Posts: 1,543
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...Forever shall the wolf in me desire the sheep in you...
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#31 |
Master Poster
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"The issue which has swept down the centuries and which will have to be fought sooner or later is the people versus the banks." - Lord Acton |
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#32 |
Graduate Poster
Join Date: Nov 2006
Posts: 1,543
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So has dog teeth, beetle leg strings, salt, cowry shells, etc., etc. But even during such commodity monies, credit was still issued and elementary… so I really don't see the point you're making here.
Do we really want the growth of the economy to be dependent on the productivity of gold miners? |
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...Forever shall the wolf in me desire the sheep in you...
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#33 |
Skeptical about skeptics
Join Date: Sep 2010
Location: 31°57'S 115°57'E
Posts: 12,469
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Tippit's dream is that banks would neither be able to create new deposits nor lend money that has been deposited. They would only provide checkable deposit accounts (for a fee of course). Financial institutions would only be able to lend money from their own capital (eg as provided by shareholders).
I don't know about "we" but that would be Tippit's desire. In practice, with the rise of crypto-currencies and distributed ledgers, I doubt that it would be possible to implement such a policy anymore (if it ever was). "You don't have any gold? I'll take bitcoin". |
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"The process by which banks create money is so simple that the mind is repelled. Where something so important is involved, a deeper mystery seems only decent." - Galbraith, 1975 |
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#34 |
Master Poster
Join Date: Jul 2007
Posts: 2,703
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So you admit that fiat money enables the funding of perpetual budget deficits (as even Alan Greenspan admitted in Gold and Economic Freedom), yet I'm supposed to believe that debt issuance is the real issue.
Hmm, lets see. A finite money supply with finite debt issuance and limited government spending, or an infinite money supply with infinite debt issuance and unlimited government spending. Do you see the problem with the scenario that you're selling? |
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"The issue which has swept down the centuries and which will have to be fought sooner or later is the people versus the banks." - Lord Acton |
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#35 |
Skeptical about skeptics
Join Date: Sep 2010
Location: 31°57'S 115°57'E
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I have never denied that fiat currency enables budget deficits. I just point out that if it were not for these never ending deficits, there would be no government securities for the central bank to monetize and the subsequent problems that this causes with asset price inflation.
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"The process by which banks create money is so simple that the mind is repelled. Where something so important is involved, a deeper mystery seems only decent." - Galbraith, 1975 |
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#36 |
Master Poster
Join Date: Jul 2007
Posts: 2,703
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The point I'm making, is that if money isn't scarce, then money creators will defraud and steal from the rest of society. And the difference between gold and silver, and all of those things you just mentioned, is scarcity, not to mention a number of other properties that made it more desirable as money.
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"The issue which has swept down the centuries and which will have to be fought sooner or later is the people versus the banks." - Lord Acton |
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#37 |
Master Poster
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"The issue which has swept down the centuries and which will have to be fought sooner or later is the people versus the banks." - Lord Acton |
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#38 |
Master Poster
Join Date: Jul 2007
Posts: 2,703
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You're beginning to lose credibility. The never ending deficits are a function of unlimited money, and nothing else. There is no "chicken-or-egg" scenario. There is only cause and effect. Government deficits could be financed with fiat money and zero debt, by simply monetizing government expenses directly, in which case there would literally never be any deficits. Debt is simply a way for private creditors to extract rent from public taxpayers other than by creating money for their private benefit.
A "deficit" is a flow variable for a given period which only means a shortfall of tax revenue versus government spending for that period. Since the government has two other means of funding its perpetual spending spree, namely, fiat money creation, borrowing, or both, the term doesn't really describe anything useful. What should be focused on, are a) how much are elites benefiting from debasing the public's money supply, and b) how much spending is the government doing overall, and how is that benefiting the public, in that order. Nothing else really matters. |
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"The issue which has swept down the centuries and which will have to be fought sooner or later is the people versus the banks." - Lord Acton |
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#39 |
High Priest of Ed
Join Date: Sep 2003
Posts: 18,827
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Investment banks have different rules than lending banks.
The services provided by banks are not at all fraudulent. If you think they are and believe you would be more productive without them, give it a try and see how it works. Not at all. They just need to invest some of their productivity into ownership. |
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#40 |
High Priest of Ed
Join Date: Sep 2003
Posts: 18,827
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Technically it all gets repaid. Everytime a treasury bond is cashed, it's a debt repaid. Granted our government borrows more than it repays, but that's a choice our government makes and not a function of the system.
The Federal Reserve is limited in the ways it can make money. It can charge interest on the loans it grants to member banks, and it can charge transaction fees. When it makes too much money, the overage is paid to the US treasury. |
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