Topic: Junk Money Party will go on for 3 years (Read 6001 times)

Same example but only allow saving:

First year, A and B trade foods: A made fish pie and B made apple pie. Second year, A will create boats and B will create new cottages, so they have to save enough food for second year's consumption so that they do not need to worry about food production in second year

In such a case, A and B must find a buyer (in this case the bank) who are willing to purchase and store their food until next year. And if the bank knows these food is going to store for one year, they will lower the purchase price, since they have to take risk

After A and B sold those extra food and accumulated some saving, their second year's spending will be limited to their saving, suppose all those food worth 100 shells, then their spending can never be larger than those 100 shells next year. Actually those 100 shells were used to buy back their saved food for supporting their daily life, anything they created newly like boats and cottages will still need extra money to be able to trade. If loan is not allowed, then banks will have to create money and purchase A and B's products, and sell them to each other to get the money back, just acting as a merchant

So, saving in fact have the same effect as loaning, new money still needs to be created from somewhere - the bank

Take an extreme example, in the first year, A and B took loan to trade foods: A made fish pie and B made apple pie.  The next year, A will create boats and B will create new cottages, they need to take much larger loan to facilitate the trading of those high-valued products. Then, their interest payment from the first year can be ignored comparing with their loan from the second year, they will gladly payback their interest without even think about it


As shown in the example above, it is not the bank organized the shortage of money, it is the productivity and consumption increase caused the shortage of money

Of course it is an interesting thought that if we could just keep the economy scale constant and never make any new improvement, then we do not need to produce new money (In case the number of people stay unchanged). But I doubt it, since most of the people never spend everything they earned, they always want to save some of their income, and that saving action will dry out the liquidity eventually

In reality, since there are billions of people, even B won't buy equivalent worth of products from A, A might still be able to sell something to C, so the reduction in consumption from B will not be felt directly. But anyway, increased spending from C will require increased sale from C, thus B has to buy something from C to keep the whole system in balance

Besides, both A and B usually have high incentive to hold a little extra money, because they regard money as "wealth", they even want to give this "wealth" to their children and grandchildren...

Therefore, money supply does not only need to fulfill the requirement for transaction, it also need to fulfill the requirement for saving, that's the reason in a financial crisis, the money supply must increase dramatically, since lot's of people's behavior changed, they started to save more and spend less

When the ECB realizes it can leverage at 250%+ of the total Eurozone's GDP for decades without any reprecussions whatsoever (the upper leveraging limit for an entity as big as the Eurozone is very high, even higher than Britain's 200%+ GDP leverage for more than two decades), I will be a very, very rich man and you guys are going to lose everything betting the wrong way.  Anyone not long equities and financials is going to get the biggest hole they've ever experienced blown in their portfolio.  Call me crazy.  Save this post and put a reminder on your calendars to look at it in ten years.

Are you suggesting that A and B must borrow again to pay interests ? If THEY are not borrowing, then interests cannot be repaid without money coming from elsewhere.
In other words, if the bank does not organize a shortage of money, then all of a sudden we can think about another way of making decisions for our future..

BTW, on this topic, its worth visiting this site: metacurrency.org

Money is a tool for cooperation.  If B can not buy anything to A then the money he owns worths nothing.  So there is no problem.

China is another extreme. Chinese central bank is controlled by government, so their government will surely get free loan at the first place, thus increased purchase power for state-owned enterprises and organizations. But that does not necessary mean low efficiency, Chinese GDP is increasing by almost 10% per year

I think government can spend money more efficient than private corporation, since they have influence at much higher level, they can set higher and higher ISO standards, thus drive the quality of living forward. Chinese now can take high speed trains travel around in the country cheaply, due to government's investment in infrastructure

Apparently, it is easy to get into the private prison system in the USA.
http://www.buzzfeed.com/daves4/man-could-get-75-years-in-prison-for-recording-pol

Since 911, I am no longer wondering why Holocausts etc happen. Too many good men doing nothing....

really?


If you live in the US, there is a huge chance your jails are run by for profit corporations, and those very same corporations are bribing your government to get as many customers as possible. No country in the world has a higher % of its population behind bars.

imho partly suboptimal. ECB accepted all government bonds as collateral and this without any limits (as long as the rating was ok)
and this was wrong.

ecb did not distinguish between bonds from countries with low interests (i.e. germany) and higher interest (spain, greece) and since the risk was the same (both accepted by ecb) money went south. easy (not as cheap as in germany but still easy) credit for the governments and there you go, ECB was part of the problem all the time.

I won't scream nor claim I understand how it all works in detail. However I fail to see how banks/euro don't have  a large responsibility here.  The Euro as an "instrument" makes it possible for "lesser" governments to rack up huge debts without inflation to their currency. This also makes it possible for the productive/rich parts of the euro zone to sell tons of stuff to the countries  taking on tons of debt.  So what happenes? the rich , mostly companies, are left with all the money while the poor/stupid are left with all the debt.

When this imbalance becomes too large it threatens the stability of the whole system..
Enter taxpayers money to save the banks etc. What you see now is a scramble by the rich to keep their investments and the value of their money ( money which are somebody elses debt )

How can Greece accumulate this amount of debt without help from the Banks? My argument is that it's the Banks job NOT to lend tons of money to hobos who can never pay it back. If they do this they deserve to take huge losses and even fail.
That's what we have banks for, they are supposed to be the expert at knowing who to give loans to at what interest etc.
If they get bailed out they will never learn and just give out more loans. This feedback helps to keep them in check but it's now broken.

Euro as a system is doomed to fail too. Sure you can have Euro accepted at stores etc in all the EU countries, but each sovereign country must have it's government budget (and taxes) in their own currency. If they spend too much, the value of their own currency will fall and they can't but lots of stuff from abroad. At the same time their own industry becomes more competitive.  Another nice feedback loop providing stability which the Euro simply short circuits.

And why do they make systems undermining stability mechanisms? Well some people make tons of money, and a crisis is always good for those at the top.  While the weakest people have to take the austerity. Sure you could say it's their own damn fault for electing stupid representatives but a system designed for instability and inequality is pure evil.

It's time the debates on tv etc was about the monetary/financial system itself. It was invented in 1694.. I think we can do better today.

Let's make a case for some stupid things

On an island with only 2 people and one central bank, both A and B loaned 1 million dollar at the start of the day, the loan have 0 interest but must be returned at day end

A paid B 1 million dollar for B to sing a song, and B paied A 1 million dollar for him to dance in the court

A and B will be able to return the loan at day end. We could say that both A and B were doing stupid things but as long as they are doing it together, there will be no problem

What if only A paid 1 million for entertainment but B do not order 1 million entertainment from A? Then A will not be able to return the loan and B will have some saving, and B think A is a stupid guy: paying 1 million for a song

It's a typical "race of thrift", if one of them can live a low standard life by spending much less than the other, he will accumulate money and put the other into debt

This is what happened when US is doing business with China: Chinese can live a lower standard life by spending much less compared with US worker, this put US consumer/government into deep debt and chinese government into high surplus

So you would buy long-term bonds on the government of Italy below 7% interest? Then, by all means, do it.

It is not a good idea to construct any kind of money-printing feedback to government debt. How do you think the hyper-inflations happened? It was people constructing exactly this kind of genius plan, getting deadlocked into a position that produces ever-increasing amounts of paper with funny numbers on it.

The ECB model before 2008 was good. Don't go blame it for the "government==people" crew who considers creating trillions of dollars of debt a good plan. IMO, the ECB should cease buying bonds and return to doing its job. The people should focus on keeping public order and let the crappy governments implode. They are guilty of this debt crisis, not the banks or the Euro, and no amount of fancy blaming changes that.

Edit: before anyone starts screaming, I am aware some banks will disintegrate in the crisis, and I consider that acceptable. If the defaults are properly executed, people should still get a decent fraction of their accounts' contents.

I could not get that deep into everyone's private life, but I'm sure there are many young people who simply do not want to find a partner and have children

And, as the same as economy, they could always shift the potential partner to next generation if they could not find one in the current generation

That's not a question of organizational form, it's a question of power. Have a look at the East India Company. But then, they would indeed not have wasted their time with jailing you - there are other ways to treat you more cheaply. Shareholder value!

Corporations don't steal my money.
They do not put me in jail if I don't buy their products.


Corrected.

Some thing just work better if the motivation is not short term financial profit for a few, but long term advantages for the entire society. Public transport, healthcare and education are some examples of that. There are enough countries where this does works properly, Ive not seen one where a free market properly addresses it.

Of course, that doesnt mean anything if you have government which has no interest in advancing society at large, because it doesnt represent the will of the people, but is beholden to special interests on which its entirely dependent for election and finance (even on an individual level, particularly after a political career). This is the problem in the US imo; not that a government would be doing these things, the problem is your government is no longer representative, so no matter what it does, its not designed to benefit you.  The solution is not replacing government by corporations (to a large extend, you already have that!). Fix your electoral system first, and then worry about what thing are best  achieved by profit only motives.

If I were you, I would worry about the quality of these schools, hopitals and roads if those are built by just printing money on pieces of paper.


That's a huge "if".  The thing is that government is not wiser than free people.  Most of the time it just wastes the money into stupid things.

It's called exchange of ideas. And yes, better in plain view without a debt-element than the current system. But indeed, letting the market sort it out itself would be my favorite.

Did I just see people in favor of centralized control of a fiat currency posting on a bitcoin forum?

What the hell are you even doing here?