You guys are missing the only point. As Abe Lincoln put it, "the hand that gives is higher than the hand that takes". When governments are in a ton of debt to banks and all they have to do is raise a little the interest rate and the country goes bankrupt... the governement (we) is at mercy.
Even if the actual economic system was the best possible (its not), it would be worth totally destroying it and starting with something new only for the fact that it gives way too much power to a very small group of people.
Now of course... I wouldn't expect an economist to understand that. It's nowhere in the books.
Topic: Fractional Reserve Lending IS NOT bad - its unavoidable - page 4. (Read 12751 times)
I don't think that the creation of money is just a side effect: is an intended effect that directly support the profit of banks.
Anyway, being the main effect or a side effect is not the point: the point is that it's a soverign function that should be entrusted to a public independent entity, not the Government, but the central bank (well, in the USA the FED isn't exactly a public entity, but its status in one of those absurd things of the USA). And not conceded to private corporations. We all have to pay more taxes to support that aspect of the "free market".
Anyway, being the main effect or a side effect is not the point: the point is that it's a soverign function that should be entrusted to a public independent entity, not the Government, but the central bank (well, in the USA the FED isn't exactly a public entity, but its status in one of those absurd things of the USA). And not conceded to private corporations. We all have to pay more taxes to support that aspect of the "free market".
Even if you believe that, which I feel has little to do with rational thinking and more to do with principle (I don't mean that personally), no one has proposed a reasonable solution. Destroying the economy based on principle is pretty foolish. FRB is how things work, you actually have to intervene in the economy to prohibit it. Why do you feel that a government continually fails at almost everything it does is better suited to money creation and than a free economy? You might not like FRB but the reality is it works, and massive piles of red tape will only make things worse for everyone.
So, basically there are two ways new money is created: through bank lending and through deficit spending.
So the answer to this question:
So the answer to this question:
Quote
So at which point is the "money" to repay the interest on a debt created?
is "when government runs fiscal deficit".Besides having effects on the banking multiplier that can increase the M3 (these issues, as we all know, are controversial and divide schools of economic thought), running a public deficit only resolves the problem if the deficit is monetized (supported on the liquid creation of money by the central bank that is transferred without debt to the State) and that was one of the solutions that I quoted, as one solution that usually creates inflation. If the States goes to the financial market to borrow money to pay for the new deficit, the debt just keeps growing.
Government debt is de facto monetary instrument. It's a way to avoid 'monetization' which you mention (which is believed to be inflationary) and allow for monetary policy to control interest rates.
Deficit spending is one of the ways to add net monetary assets to the private sector. Bank lending, as a horizontal transaction, doesn't add net assets (as every loan is backed by a liability).
The highlighted bit is a lie: http://mpra.ub.uni-muenchen.de/53385/
Loanable Funds vs. Endogenous Money: Krugman is Wrong, Keen is Right
From the paper you provided (page 7):
Quote
In order to reduce the monetary phenomena to the essentials it is supposed that
all financial transactions are carried out without costs by the central bank. The
stock of money then takes the form of current deposits or current overdrafts. Initial
endowments can be set to zero. Then, if the household sector owns current deposits
according to (11) the current overdrafts of the business sector are of equal amount
according to (13) and vice versa if the business sector owns current deposits. Money
and credit are symmetrical. The current assets and liabilities of the central bank are
equal by construction.
It's quite opposite to being a lie all financial transactions are carried out without costs by the central bank. The
stock of money then takes the form of current deposits or current overdrafts. Initial
endowments can be set to zero. Then, if the household sector owns current deposits
according to (11) the current overdrafts of the business sector are of equal amount
according to (13) and vice versa if the business sector owns current deposits. Money
and credit are symmetrical. The current assets and liabilities of the central bank are
equal by construction.
To be precise, the paper discusses household sector balances, while I mean private sector, which includes both household and business sectors.The fact that you highlighted is empirical and doesn't need thorough analysis. It's basics of accounting, double-entry accounting principle.
I don't think that the creation of money is just a side effect: is an intended effect that directly support the profit of banks.
Anyway, being the main effect or a side effect is not the point: the point is that it's a soverign function that should be entrusted to a public independent entity, not the Government, but the central bank (well, in the USA the FED isn't exactly a public entity, but its status in one of those absurd things of the USA). And not conceded to private corporations. We all have to pay more taxes to support that aspect of the "free market".
Anyway, being the main effect or a side effect is not the point: the point is that it's a soverign function that should be entrusted to a public independent entity, not the Government, but the central bank (well, in the USA the FED isn't exactly a public entity, but its status in one of those absurd things of the USA). And not conceded to private corporations. We all have to pay more taxes to support that aspect of the "free market".
^Was your pop a banker, Ozziecoin?
So the answer to this question:
is "when government runs fiscal deficit".
Quote
So at which point is the "money" to repay the interest on a debt created?
is "when government runs fiscal deficit".
When you say "government" you're referring specifically and exclusively to federal government are you not?
Is this real in your opinion?
http://i.imgur.com/WJNzV69.png
http://www.usdebtclock.org/
Federal government of course.
I feel it's an important distinction as only federal government can conjure currency from thin air.
Not true. Private sector is creating money out of thin air. I can go ten rounds. Loving this.
http://www.ft.com/intl/cms/s/0/7f000b18-ca44-11e3-bb92-00144feabdc0.html
Quote
Printing counterfeit banknotes is illegal, but creating private money is not. The interdependence between the state and the businesses that can do this is the source of much of the instability of our economies. It could – and should – be terminated.
I'm not able to read your link as it appears to be a subscriber service. Do you have another source?
The conversation you're referencing was in regards to US federal government spending vs state and local government spending. Obviously private banks can and do contribute to the currency supply which is the topic of this thread.
Sure mate: http://www.washingtonsblog.com/2014/04/conservative-economist-wants-basically-ban-banking.html
The article refers to the ability of private instos aka BANKS to create money out of thin air.
Quote
Opponents will argue that the economy would die for lack of credit. I was once sympathetic to that argument. But only about 10 per cent of UK bank lending has financed business investment in sectors other than commercial property. We could find other ways of funding this.
Our financial system is so unstable because the state first allowed it to create almost all the money in the economy and was then forced to insure it when performing that function. This is a giant hole at the heart of our market economies. It could be closed by separating the provision of money, rightly a function of the state, from the provision of finance, a function of the private sector.
Our financial system is so unstable because the state first allowed it to create almost all the money in the economy and was then forced to insure it when performing that function. This is a giant hole at the heart of our market economies. It could be closed by separating the provision of money, rightly a function of the state, from the provision of finance, a function of the private sector.
FR isn't only the right to lend out money someone lent to us, in the end it's the right to create money by lending the same amount of money several times.
Technically, isn't fraud, but it's risky and concedes a public function (a sovereign one) to a corporation, the right to create money, crowding out as unnecessary the same amount of public money. If the bank can lend the same money, it doesn't have to ask for credit from the central bank. We all lose.
Technically, isn't fraud, but it's risky and concedes a public function (a sovereign one) to a corporation, the right to create money, crowding out as unnecessary the same amount of public money. If the bank can lend the same money, it doesn't have to ask for credit from the central bank. We all lose.
The problem with that argument is that money creation is not the purpose of FRB, but a side effect. Also, I'd rather have banks create money in a limited fashion than have governments printing unlimited amounts.
FRB works with dollars and with Bitcoins. Contrary to being incompatible with a free market, the only way to prevent FRB is by regulating the free market and making it less free.
The way to avoid it is to treat all coins on the blockchain as money. If on blockchain = money. Not on blockchain = NOT money.
So the answer to this question:
is "when government runs fiscal deficit".
Quote
So at which point is the "money" to repay the interest on a debt created?
is "when government runs fiscal deficit".
When you say "government" you're referring specifically and exclusively to federal government are you not?
Is this real in your opinion?
http://i.imgur.com/WJNzV69.png
http://www.usdebtclock.org/
Federal government of course.
I feel it's an important distinction as only federal government can conjure currency from thin air.
Not true. Private sector is creating money out of thin air. I can go ten rounds. Loving this.
http://www.ft.com/intl/cms/s/0/7f000b18-ca44-11e3-bb92-00144feabdc0.html
Quote
Printing counterfeit banknotes is illegal, but creating private money is not. The interdependence between the state and the businesses that can do this is the source of much of the instability of our economies. It could – and should – be terminated.
I'm not able to read your link as it appears to be a subscriber service. Do you have another source?
The conversation you're referencing was in regards to US federal government spending vs state and local government spending. Obviously private banks can and do contribute to the currency supply which is the topic of this thread.
FR isn't only the right to lend out money someone lent to us, in the end it's the right to create money by lending the same amount of money several times.
Technically, isn't fraud, but it's risky and concedes a public function (a sovereign one) to a corporation, the right to create money, crowding out as unnecessary the same amount of public money. If the bank can lend the same money, it doesn't have to ask for credit from the central bank. We all lose.
Technically, isn't fraud, but it's risky and concedes a public function (a sovereign one) to a corporation, the right to create money, crowding out as unnecessary the same amount of public money. If the bank can lend the same money, it doesn't have to ask for credit from the central bank. We all lose.
The problem with that argument is that money creation is not the purpose of FRB, but a side effect. Also, I'd rather have banks create money in a limited fashion than have governments printing unlimited amounts.
FRB works with dollars and with Bitcoins. Contrary to being incompatible with a free market, the only way to prevent FRB is by regulating the free market and making it less free.
Wrong.
Fractional reserve lending is fraud.
Prices transmit information in a free market.
"Some holder(s) of a larger amount of this currency lend currency out to individuals, to collect interest. This creates a fractional reserve banking phenomenon"
lending money at interest is not fractional reserve banking.
You have your definitions mixed up.
Fractional reserve lending is fraud.
Prices transmit information in a free market.
"Some holder(s) of a larger amount of this currency lend currency out to individuals, to collect interest. This creates a fractional reserve banking phenomenon"
lending money at interest is not fractional reserve banking.
You have your definitions mixed up.
In what world is fractional reserve banking fraud? When you take your money to the bank and they agree to hold it for you and pay interest, you know that they are doing so in order to lend it out. If they didn't lend it out, you would have to pay THEM interest.
Also, the benefit of fractional reserve banking is that it allows multiple people to use the same money at the same time. You can have your money in a rainy-day fund, and I can use it to buy stuff until you need it back. Locking money in a vault and doing nothing with it for years is not productive.
One to one lending is higher risk unless your are very careful, and it takes a lot more risk. It also doesn't prevent FRB since I can borrow money from you and loan it out (pretty much the same thing). FRB is a fairly safe and efficient system.
http://www.ft.com/intl/cms/s/0/76b6f332-2133-11e3-8aff-00144feab7de.html?siteedition=intl#axzz31kP0HLZH
Quote
But as investors try to fathom what the Fed will (not) do next, it is worth pondering a timely speech made recently by former UK regulator Lord Turner*. As he told Swedish economists last week, and repeated to central bankers and economists in London this week, the real story behind the recent dramatic financial sagas – be that the market dance around QE or the crisis at Lehman Brothers five years ago – is that western economies have become hooked on ever-expanding levels of debt.
Until this situation changes it is delusional to think that anyone has really “fixed” western finance with post-Lehman reforms, or created truly healthy growth, Lord Turner insists. Put another way – although he did not say so bluntly – one way to interpret this week’s dance around QE is that policy makers are continuing to prop up a financial system that is (at best) peculiar and (at worst) unstable.
Some non-investment finance is socially useful, Lord Turner admits; but much is not. In real estate, for example, most credit just “funds the purchase of already existing houses” rather than investment in new homes (ie construction). And what is really striking about the non-investment piece of this financial picture is that it has exploded; as a result, as the Bank of England’s Andy Haldane also pointed out in a debate in London last week, the size of private credit, relative to GDP, has doubled to 200 per cent in the past 50 years.
This makes a mockery of existing textbooks and official policy assumptions. But the explosion in credit has another peculiar implication, both Mr Haldane and Lord Turner note: since total credit keeps rising inexorably, even as growth remains flat, the “productivity” of money is falling, even as the propensity of the over-leveraged system to have booms and busts, amid investor sentiment swings, has risen.
Until this situation changes it is delusional to think that anyone has really “fixed” western finance with post-Lehman reforms, or created truly healthy growth, Lord Turner insists. Put another way – although he did not say so bluntly – one way to interpret this week’s dance around QE is that policy makers are continuing to prop up a financial system that is (at best) peculiar and (at worst) unstable.
Some non-investment finance is socially useful, Lord Turner admits; but much is not. In real estate, for example, most credit just “funds the purchase of already existing houses” rather than investment in new homes (ie construction). And what is really striking about the non-investment piece of this financial picture is that it has exploded; as a result, as the Bank of England’s Andy Haldane also pointed out in a debate in London last week, the size of private credit, relative to GDP, has doubled to 200 per cent in the past 50 years.
This makes a mockery of existing textbooks and official policy assumptions. But the explosion in credit has another peculiar implication, both Mr Haldane and Lord Turner note: since total credit keeps rising inexorably, even as growth remains flat, the “productivity” of money is falling, even as the propensity of the over-leveraged system to have booms and busts, amid investor sentiment swings, has risen.
So, basically there are two ways new money is created: through bank lending and through deficit spending.
So the answer to this question:
So the answer to this question:
Quote
So at which point is the "money" to repay the interest on a debt created?
is "when government runs fiscal deficit".Besides having effects on the banking multiplier that can increase the M3 (these issues, as we all know, are controversial and divide schools of economic thought), running a public deficit only resolves the problem if the deficit is monetized (supported on the liquid creation of money by the central bank that is transferred without debt to the State) and that was one of the solutions that I quoted, as one solution that usually creates inflation. If the States goes to the financial market to borrow money to pay for the new deficit, the debt just keeps growing.
Government debt is de facto monetary instrument. It's a way to avoid 'monetization' which you mention (which is believed to be inflationary) and allow for monetary policy to control interest rates.
Deficit spending is one of the ways to add net monetary assets to the private sector. Bank lending, as a horizontal transaction, doesn't add net assets (as every loan is backed by a liability).
The highlighted bit is a lie: http://mpra.ub.uni-muenchen.de/53385/
Loanable Funds vs. Endogenous Money: Krugman is Wrong, Keen is Right
So the answer to this question:
is "when government runs fiscal deficit".
Quote
So at which point is the "money" to repay the interest on a debt created?
is "when government runs fiscal deficit".
When you say "government" you're referring specifically and exclusively to federal government are you not?
Is this real in your opinion?
http://i.imgur.com/WJNzV69.png
http://www.usdebtclock.org/
Federal government of course.
I feel it's an important distinction as only federal government can conjure currency from thin air.
Not true. Private sector is creating money out of thin air. I can go ten rounds. Loving this.
http://www.ft.com/intl/cms/s/0/7f000b18-ca44-11e3-bb92-00144feabdc0.html
Quote
Printing counterfeit banknotes is illegal, but creating private money is not. The interdependence between the state and the businesses that can do this is the source of much of the instability of our economies. It could – and should – be terminated.
...
I rebut you with David Suzuki
http://mmoffatt1.typepad.com/blog/2012/10/david-suzuki-how-economics-became-a-science-of-destruction.html
...
I rebut you with David Suzuki
http://mmoffatt1.typepad.com/blog/2012/10/david-suzuki-how-economics-became-a-science-of-destruction.html
...
WTF am I reading?
Weirdass extrapolation from statements made by the guy who wrote The Population Bomb in the '60s (mostly shown wrong since), and an ex-chairwoman of some Canadian agency disbanded in the early '90s (had to look both of them up).
What are you trying to say? Say it in your own words.
LOL this ozziecoin guy has been constantly dropping names of economists and famous traders who don't support his position about FRB. I don't know WTF he is saying either. I think he's just trolling but I have some sick compulsion to keep replying him
Of course you don't know what I'm saying. Otherwise you'd be smart.
...
I rebut you with David Suzuki
http://mmoffatt1.typepad.com/blog/2012/10/david-suzuki-how-economics-became-a-science-of-destruction.html
...
I rebut you with David Suzuki
http://mmoffatt1.typepad.com/blog/2012/10/david-suzuki-how-economics-became-a-science-of-destruction.html
...
WTF am I reading?
Weirdass extrapolation from statements made by the guy who wrote The Population Bomb in the '60s (mostly shown wrong since), and an ex-chairwoman of some Canadian agency disbanded in the early '90s (had to look both of them up).
What are you trying to say? Say it in your own words.
Here you go:
Economists live in a land of make-believe. They aim at steady growth in consumption, material goods, wealth and profit as if it can be sustained indefinitely. And they have faith that human ingenuity will open up new frontiers for steady expansion while providing endless solutions to problems we create.
So, basically there are two ways new money is created: through bank lending and through deficit spending.
So the answer to this question:
So the answer to this question:
Quote
So at which point is the "money" to repay the interest on a debt created?
is "when government runs fiscal deficit".We were talking about the creation of money, including "through deficit spending". I just pointed that deficit only determines creation of money if there is monetization.
That's what my post content (that you removed from quote) was about.
No doubt, even democratic systems allow for abuses. The so-called political economic cycles, where in years of election there are expansions of the economy to grab votes, are proof of that. But in other systems things are worst.
And I think macro-economic policies are essential. If you think we should just wait for hard times to pass, with no intervention from Government, well we disagree on that. I'm not american, but I would gladly had exchanged the Trichet guy, that almost killed the euro, for Barnanke.
Numbers are abstractions. It's not important the exact number for my point, we know things were harder on the USA than they are now.
If you had Trichet, you would be worst. The capacity to make predictions about what would happen if some policy wasn't adopted or what will happen if it's adopted is a precondition of every science. Economics is a weak science, with lots of incertitude, but if we reject completely that capacity, we would be recognizing that it isn't a science at all, but a collection of cook receipts.
And I think macro-economic policies are essential. If you think we should just wait for hard times to pass, with no intervention from Government, well we disagree on that. I'm not american, but I would gladly had exchanged the Trichet guy, that almost killed the euro, for Barnanke.
Numbers are abstractions. It's not important the exact number for my point, we know things were harder on the USA than they are now.
If you had Trichet, you would be worst. The capacity to make predictions about what would happen if some policy wasn't adopted or what will happen if it's adopted is a precondition of every science. Economics is a weak science, with lots of incertitude, but if we reject completely that capacity, we would be recognizing that it isn't a science at all, but a collection of cook receipts.
I favor free market solutions which is the opposite of government interventionism. Keynesian economic theory is a serial proven failure at this point. The fact that governments continue to doggedly follow these failed principles indicates that there's no scientific methodology being employed. The bernanke is the jackhole that admitted that the fed caused the great depression. That's his excuse for massive monetary expansionism...because he seems to be convinced that monetary inflation and monetary deflation will cancel...again with no scientific methodology to support such a conclusion. Surely the man has heard of monetary velocity measurements by now? You cannot just fix decades of ridiculously stupidly easy credit policy with more stupidly loose monetary policy.
Governments do not create wealth, they only re-distribute wealth. The notion that racking up massive piles of debt to "prime the pumps" during economic downturns is remarkably irresponsible, but that's the behavior you get when you're throwing around other people's "money".
Disagree. Our current monetary system encourages excesses in nearly every form and at nearly every level of government.
No doubt, even democratic systems allow for abuses. The so-called political economic cycles, where in years of election there are expansions of the economy to grab votes, are proof of that. But in other systems things are worst.
And I think macro-economic policies are essential. If you think we should just wait for hard times to pass, with no intervention from Government, well we disagree on that. I'm not american, but I would gladly had exchanged the Trichet guy, that almost killed the euro, for Barnanke.
Numbers are abstractions. It's not important the exact number for my point, we know things were harder on the USA than they are now.
If you had Trichet, you would be worst. The capacity to make predictions about what would happen if some policy wasn't adopted or what will happen if it's adopted is a precondition of every science. Economics is a weak science, with lots of incertitude, but if we reject completely that capacity, we would be recognizing that it isn't a science at all, but a collection of cook receipts.
So, basically there are two ways new money is created: through bank lending and through deficit spending.
So the answer to this question:
So the answer to this question:
Quote
So at which point is the "money" to repay the interest on a debt created?
is "when government runs fiscal deficit".We were talking about the creation of money, including "through deficit spending". I just pointed that deficit only determines creation of money if there is monetization.
I agree with your sentiments about credit worthiness. Just don't see what that has to do w fractional vs full reserve lending. I'm arguing that FRB is necessary when demand exceeds supply.
Plainly if banks actually had to have the assets to loan them then they'd be a whole lot less prone to gambling. I'm not comfortable with loan officers at banks having the authority to add to the nation's currency supply with a signature. These are just private citizens with no public accountability or transparency. If I did the same I'd be tossed in the can for counterfeiting and fraud.
We've also seen on numerous occasions that when banksters do go too far and gamble themselves into the poor house, their mistakes are forgiven and their losses are socialized by .gov authority. I'd have less of a problem with this if their nominal gains weren't privatized, but it cannot be both.
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