Topic: Victoria Grant explains Fictional-Reserve Banking and why everything is crashing - page 2. (Read 6658 times)

So now the loans are big enough.  

Look, the concept is a proven one, it will work with large loans just as it does now with smaller ones. Of course today it's impossible to compete with FRB therefor large are largely their domain. I mean FFS you yourself admit that we will get there one day, all you need to do is admit why we aren't getting there today. Remove the fraud out-competing the honest lending and BOOM, we're there.

I agree with what you say; but "should" is different from "is".

What would your advice be to, say your daughter, who wants to buy a house, in this universe, right now?  "30 year loans are absurd", "good point Dad, but the house I want costs £120,000 and I can't afford £2,000 a month on the mortgage".

Incidentally, 30 year loans do benefit the individual -- they have somewhere to live for the 30 years.  Bastiat's "Essays on Politicial Economy" explains why lending is good for the receiver of the loan.  Anyway, if it isn't good for the individual, why are people taking them out?

Why am I getting sucked back in?


Oh yes; I'm sure too.  I'm sure it's nothing to do with people not being quite as generous lending money to people they don't know as you imply.


Erm.. the people lending are doing so in exactly the same devalued currency.  What does it matter what the units are?  Measure it in oz gold if you want.  Measure subscription as a percentage of total value if you like.  It doesn't change the fact that it's "one island's" worth of money that's being crowd-sourced.

You claim it's trivial to do so... great, I shall be happy to have my scepticism proved wrong, but you've not convinced me that my scepticism is unwarranted.

Maybe one day; bitcoin will indeed make it standard that we crowd fund our mortgages/company loans from the general public.  That day is not today though.

I wonder why that is huh? Could it be because of an artificially higher supply of loans then there is actual savings provided by FRB? Hmm...

Yea, you see that is the problem. The banks interest rates shouldn't be that low. They are, but they shouldn't be.

They won't be for long. So get it whilst you can.

Crowd funding has really entered the Individual Market to any extent. Lloyd's comes close, Kickstarter, Venture Capitalists, etc.. are others.

We do have a Lending Forum here, with the appropriate collateral something might be arranged but you would need to lock up that collateral for 30 years also. So it's not perfect for long term loans.

Personally, I think 30 Year loans are absurd anyways. They don't benefit the individual. You pay the bank way more than the value of the asset, especially now. 10 Year should be max and a nice compromise. If you have money, 5-7 years would be perfect for the individual.

http://www.kiva.org/

http://www.kickstarter.com/

Of course the loans and investments made just on these two sites I happen to know about naturally do not reach the billion dollar large loans banks make nowadays but I'm sure it's only because they can't compete with them due laws and regulations and other costs imposed by them and due to the fact that they are not allowed to do FRB.

Also you miss a crucial piece of fact: $125,000 is just a number. Who knows how much lower the number representing the same value would be in a non FRB system.

Please point me at this magical place that will crowd-source a 30 year mortgage for £250,000 (a fairly typical house price in the UK) at lower rates than I can get at a bank.

Please then point me at the people who have held other crowd-loans for 30 years and had no defaulters.

Edit: there is a thread going on right now about crowd-sourcing $125,000 to buy an island.  Care to predict whether they'll get it or not?  For comparison, UK mortgage lending is in the order of £130 billion; and you throw about facetious little "as if there were no crowd-loans"? Ha.

As if there is no way to crowd loan ..

I'm glad for you.  You are very lucky to have access to a previous generation to do so.

I also would like the world you describe where we borrow directly from people we know; bitcoin will help us get there.

Until then... FRB and banking is filling that gap.  Unless you seriously think that every current FTB has parents/friends/neighbours with enough saved cash to purchase a house?

It's worth remembering that bank lending should have the advantage that they can spread the loss.  If 1000 people deposit $1000 each, and 10 people borrow $100,000 then with your friends/neighbours scenario 10 people lose $1000 if someone defaults.  With a bank, 1000 people lose $100 (of course I've not included profit, which will cover a certain amount of default in a real system).

Of course not, it takes work to mine gold. It takes no work to convince people they have access to their money that they don't really.

It becomes robbery when people are forced to participate in said inflationary system.

Calling it robbing doesnt make it so. Do you feel robbed because bitcoins (or for that matter, gold) is constantly being mined?

Every market participant willing to accept a particular good as payment which makes a good money in the first place. Money wouldn't be money if it weren't a claim on good and services it would just be a good.


Ad hominem.


Ad hominem. Money wouldn't be money if it didn't fulfill the roll of money. Money without the roll of money would just be a good like anything else.

Correct. But I can own another good, S, which economically acts as a substitute of the rock of gold. If the production costs of S are below those of the rock of gold, the supply in that market will increase and the price will decrease. Again, this is not particular to money.

In order for a rock of gold to be some sort of claim, there needs to be a counterparty to that claim, with which you have a contract. People other than this counterparty cannot be held accountable if this claim is reneged upon. Who is this counterparty and when did they agree to a contract?

Non-sequitur.

There is no "point of money". Furthermore, it's a non-sequitur. You did not address why particular economic differences result in legal differences. It's like saying that it's ok to steal from the rich because rich are richer than the poor.

:shaking my head: what utter ignorance of history you display......

You're completely oblivious to the 2nd industrial revolution right? Robbing people is not a path to sustainable wealth, it's a path to tyranny with a few and a life on a treadmill barely getting by paying all your bills.

Indeed. The opposite is far worse; if just the simple fact of having money results in you getting richer and richer by sitting on your money because other people grow the economy and therefore grow the demand for money, what kind of idiotic system is that? Having inflation means that you will have an incentive to invest your money, spend your money or otherwise participate in the economy, I have no problem with that.

I just bought a house precisely because the previous generation lent to me and my fiance at a profit.... but there were no banks involved.  There is no need for FRB when you have a community.  Instead, many people choose to live in a cutthroat world without neighbors and friends.  No thanks.

And that is the fraud that FRB enables. Joe Bob and all the other depositors believe they have access to more money than they actually do and this belief reflects in prices robbing savers. If Joe Bob didn't believe he could have immediate access to his deposits he wouldn't be out there competing for goods or services and savers wouldn't get robbed. I don't care whether savers get robbed because of money actually being created out of thin air or just imagined it was created.

Joe Bob thinks he has his deposits available to spend immediately and so all the other depositors meanwhile the bank lent a fraction to someone else who again probably deposited their borrowed money with a bank and again believe they have immediate access to it while the bank loaned a fraction of it.

Even if the actual money supply hasn't increased it has increased in the minds of all the depositors which is what ultimately really matters when good and services are being competed for and how the savers get the shaft.

It's an unseen fraud hence why I'm not getting anywhere in this thread.

Bank A's reserves are made up of waaaay more cash than what they need to keep on-hand for Joe Bob. They're not just loaning to Joe Bob, but likely tens of thousands of other people who also make up Bank A's cash reserves. Let's say Bank A has $5b total of deposits. Bank A thus needs $450m in reserves, so they'll have no problem paying Joe Bob if he needs money right away, and if four other people withdrew $100m on the same day, Bank A would simply request an intra-bank loan (often called "overnight loans"). These short-term loans by banks to other banks ensure they're able to meet the reserve ratio for cash-on-hand enforced by government regulators. In this case, Bank A has -$50m and needs a ~$525m loan from another bank. These loans usually happen within a few hours because banks have established reputations with each other. We do something similar with Bitcoins. If I need to pay a depositor but don't have enough on-hand, I ask Patrick or someone along those lines for a short-term loan I pay a minimal % on. When I'm able to liquidate my investments, or loan repayments are made to me, I pay Pat.

Now we're getting somewhere, and that's why I think more options should exist. Banks which keep full reserves are essentially payment processors providing online banking and safe storage of money, and they'll charge depositors some annual % as well as much higher fees than we're used to.

If people want to get paid for depositing, they should commit to long-term loan contracts (CDs).

Maybe FRB isn't as much fraud as are demand deposits?