Fractional reserve banking
category: general [glöplog]
independent of its services, thank you and good night.
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If the government issue money, why do they need to borrow them ever? think about it for a minute.
There is NO risk involved with dealing with people thats a fucking lie. they make up the money, how can there by a risk, a risk of what?
that they dont pay back the money they just made up?
well that's not obvious, but it is true as I said. The reason is: INFLATION! That's what happens if the government just prints money.
Why on earth you think they haven't printed EUR 10bn more to buy medical equipment when some kids are dying in hospitals?
because then those medical manufacturers would spend that money: buy more accessories for the machines, from the profit they would renovate their houses, buy a new car etc. - so a lot of additional demand would materialize on the market, rising the prices of goods. And: rise of prices === inflation.
if the state would print way too much money, things would get totally out of control. i think you know what an inflation crisis is like, eg. in WW2. it can be caused by many things apart from state money printing, but state money printing definitely leads to that.
High inflation is, proven by history, volatile inflation. It can not be kept under control. Otherwise, "Inflation tax" would be a way of taxation, but you can not say that "the inflation will be 20%." It will instead end up 16% or 34% - maybe punishing some people randomly more than others. Also unsustainable when international business comes into play. (There would be a "my inflation is higher - my products are cheaper" game.)
A typical use of money printing is to finance wartime military production. (there's no time to issue taxes when some people want to shot you down.) some strange cases can also happen: eg. around 1940 in hungary, you could literally earn money by taking a debt... inflation was higher than the interest.
So, state money printing used to happen a lot all around... but this door is not open anymore, due to the now-ubiquitous requirement of the independence of central banks from the government. The central bank is simply not willing to give money for the ministry of economy because its CEO is paid for keeping the currency right.
Well personally you're doing what's possible to not lend money - which is a good thing (I do the same - this will change if I want to buy real estate of course)
But I still don't see how this problem will be solved in any way, since people/business' will always be interested in lending money to development that could earn back more money.
Let's say the that the "standard" implementation was full-reserve (I don't know if this is what you want?). This could potentially lead to some business moving into bankruptcy faster than usual (because there's a limit to the amount of cash that can be administrated by the bank) - this could be good if the company is rotten - but it could also put a lot of people on the street, even though the company could do well in a few years.
In short - factional reserve can lead to overheating - full reserve can lead to less risk-taking, which often is bad for business.
But I still don't see how this problem will be solved in any way, since people/business' will always be interested in lending money to development that could earn back more money.
Let's say the that the "standard" implementation was full-reserve (I don't know if this is what you want?). This could potentially lead to some business moving into bankruptcy faster than usual (because there's a limit to the amount of cash that can be administrated by the bank) - this could be good if the company is rotten - but it could also put a lot of people on the street, even though the company could do well in a few years.
In short - factional reserve can lead to overheating - full reserve can lead to less risk-taking, which often is bad for business.
baah I *want to fix up my typos*! why can't we have a feature to modify our posts slightly? i don't mind if people can trace my changes like in wiki... so shot=shoot, give money for = give money to, etc. me goes to sleep...
just one more example: if the state doesn't care whether i pay back credit or not, then i'll take a credit of EUR 100k, buy a lambo, and when it comes time to pay back I just won't... after all, money is just pieces of paper, isn't it? ;)
just one more example: if the state doesn't care whether i pay back credit or not, then i'll take a credit of EUR 100k, buy a lambo, and when it comes time to pay back I just won't... after all, money is just pieces of paper, isn't it? ;)
Was this already posted somewhere? Some economists would probably object to many of the conclusions in that video, but it does explain some of the basic issues with debt money that most people aren't aware of.
Ger: Money = debt = contracts. The government cares about contracts.
yeah i stumbled upon it some weeks ago and threw it in the one liner, it is really good for a simple explanation of a quite complex problem. But i too think you could find economist that doent agree with it, but then again, i can find those that get 58million christmas bonuses out of it, so if I was in their shoes, i perhaps wouldnt talk smack about it either, i am no better than they are, im human, im just standing on the top of a hill looking down on something where they are down there where the earth shakes atm. our perspectives on the situation and our reasons for speaking on the issue at all would be, not quite the same.
add do this the religious nature some people have not only to financial system, but the system as a whole. It must be infallible for their world to work. for some reason. Im not looking for perfect, im just looking for "reasonable" and "honest" thats all.
add do this the religious nature some people have not only to financial system, but the system as a whole. It must be infallible for their world to work. for some reason. Im not looking for perfect, im just looking for "reasonable" and "honest" thats all.
Iblis: Reasonable is ok
The current system is also reasonable if the market force learn that you can take from the (non-existing) reserve forever. Wouldn't it be better for everyone to learn that, other than letting a few people trying to administrate the entire wealth? - I mean, a lot of people wouldn't like tht kind on central control of the wealth.
Also, what would a full-reserve system do in times when a lot of money (say, loans) is needed? (there could be many reasons; war (yeah it sucks.. but still), disasters, epidemics, etc.)
Still I am tired of your way of discussin - you're setting up images of fear, where no fear is - I'm still wondering you put of inflation as a thiefs word of stealing and still not answering me WHO you think that are stealing? Also you tell that "our grand-dad's lived much cheaper than we do", yeah true, if you measure in amount of money, bure surely NOT true if you measure in actual value of the money.
Nevertheless you keep saying that I don't know shit, because clearly I'm not aware of what the fractional reserve is. Could it be, that you are not aware of what the inflation is?
The current system is also reasonable if the market force learn that you can take from the (non-existing) reserve forever. Wouldn't it be better for everyone to learn that, other than letting a few people trying to administrate the entire wealth? - I mean, a lot of people wouldn't like tht kind on central control of the wealth.
Also, what would a full-reserve system do in times when a lot of money (say, loans) is needed? (there could be many reasons; war (yeah it sucks.. but still), disasters, epidemics, etc.)
Still I am tired of your way of discussin - you're setting up images of fear, where no fear is - I'm still wondering you put of inflation as a thiefs word of stealing and still not answering me WHO you think that are stealing? Also you tell that "our grand-dad's lived much cheaper than we do", yeah true, if you measure in amount of money, bure surely NOT true if you measure in actual value of the money.
Nevertheless you keep saying that I don't know shit, because clearly I'm not aware of what the fractional reserve is. Could it be, that you are not aware of what the inflation is?
doh.. stupid typo.. "that you can take from the (non-..", should of course be "that you CAN'T take from the (non-..."
Ger, yes today is is ONLY a piece of paper, backed by your personal belief in it. I dont share it, thats where we differ, i dont belive in air, promises or paper as value.
the idea to loan out something you dont have and collect interrest on it (where are those money supposed to come from? what produce are they backed by) is dishonest, there is no way around this. Just because it works, does not make it less dishonest, the human trade on kosovo altso "works" but it sure as hell is not "right".
Puryx, ofcourse full reserve does not make people any less risk takers, unlesws you are implying that people will only tak risks with monopoly money. And if thats the case...whats the risk taken? what value was lost, all that was lost was promises and expectations, because if a project fails, the "value" expected was never created! But the expected value was allready passed into circulation. there is no risk there, only that people on large figure out this....scam!
the idea to loan out something you dont have and collect interrest on it (where are those money supposed to come from? what produce are they backed by) is dishonest, there is no way around this. Just because it works, does not make it less dishonest, the human trade on kosovo altso "works" but it sure as hell is not "right".
Puryx, ofcourse full reserve does not make people any less risk takers, unlesws you are implying that people will only tak risks with monopoly money. And if thats the case...whats the risk taken? what value was lost, all that was lost was promises and expectations, because if a project fails, the "value" expected was never created! But the expected value was allready passed into circulation. there is no risk there, only that people on large figure out this....scam!
my assumption on your knowledge on fractional reserve puryx, was a mistake on my part., the things you wrote made it seem like it.
about inflasion, i know what were told it is. My reason to conclude as i do is the result of a lengthy process, which i could write down, thats why people write doctorates, make lectures, because sometimes it is the process that leads to a conclusion that proves its validity. So I can either ignore it, or tell people to take a look at it and see where they end up after spending the time on it that one should with a governing factor of outside ones influence. You want a simple answer, but there isnt one. Inflasion is the stealing of real value, and just because its the system itself that is the theif and not any single peter longfinger doesnt mean it isnt so.
To even claim that more demand is what creates inlfation is moronic, and im sure you can see why that is. Prices go up, there is a bigger demand, thus a bigger need for money, ERGO there should be a supply of money to accomodate the trade people want to perform, if they arent there someone either hogged them, or the system does not work as it should
the current system is reasonable if you live in THE WEST! to the majority of the world the system and its consequences are unbearable. So if 15% are really gaining form the system, to claim that reasonable must surely be you either jesting or an err on your part. Just because you dont feel the direct heat doesnt mean its not there. Dont make conslutions on a global system based onw hat denmark and the west is like, were not "the world".
about inflasion, i know what were told it is. My reason to conclude as i do is the result of a lengthy process, which i could write down, thats why people write doctorates, make lectures, because sometimes it is the process that leads to a conclusion that proves its validity. So I can either ignore it, or tell people to take a look at it and see where they end up after spending the time on it that one should with a governing factor of outside ones influence. You want a simple answer, but there isnt one. Inflasion is the stealing of real value, and just because its the system itself that is the theif and not any single peter longfinger doesnt mean it isnt so.
To even claim that more demand is what creates inlfation is moronic, and im sure you can see why that is. Prices go up, there is a bigger demand, thus a bigger need for money, ERGO there should be a supply of money to accomodate the trade people want to perform, if they arent there someone either hogged them, or the system does not work as it should
the current system is reasonable if you live in THE WEST! to the majority of the world the system and its consequences are unbearable. So if 15% are really gaining form the system, to claim that reasonable must surely be you either jesting or an err on your part. Just because you dont feel the direct heat doesnt mean its not there. Dont make conslutions on a global system based onw hat denmark and the west is like, were not "the world".
Iblis: but how does the Un-industrialized counties get their foot inside in "the business" then? - I'm pretty sure they do by loans... If we had a full-reserve I'm pretty damn sure that only a very very tiny amount of these money would go to help un-industrialized countries. Of course contries could work up themselves, but this could take ages and leave such kind of nations behind.
Again you are telling me that my opinion is an "error" - it might be compared to YOUR opinion!
Inflation would most probably also exist in a full-reserve system because people like mine and your grand-dad arre willing to pay more more for eg. their real-estate. When people want something, they're willing to work more and/or pay more, and thus the actual value of the money spent on real-estate in the last end becomes less and less. This is a dangerous situation - and we have that in Denmark right now. However I don't think that any bank-system could change this, since it's (like said before) a kind of stupid human behaviour.
Again you are telling me that my opinion is an "error" - it might be compared to YOUR opinion!
Inflation would most probably also exist in a full-reserve system because people like mine and your grand-dad arre willing to pay more more for eg. their real-estate. When people want something, they're willing to work more and/or pay more, and thus the actual value of the money spent on real-estate in the last end becomes less and less. This is a dangerous situation - and we have that in Denmark right now. However I don't think that any bank-system could change this, since it's (like said before) a kind of stupid human behaviour.
and im not raising fear where there are none to be found. Im pointing out unfair business and rules, and you dont care that they are because youre not affected,just like everyone else.
Well, then I'll stop now, since the only thing YOU have to tell ME is that I am wrong...
Well, if that is what you want, then, here you go - you "won"... sheez..
Well, if that is what you want, then, here you go - you "won"... sheez..
So why are these nations not making their own money to facilitate their own internal trade and creation of value to trade with countries outside?
because they are told not to!
because they are told not to!
Puryx, stop sobbing, what do you want me to conclude when youre stating that im raising unfaounded fear, and then you go on to agree with me that the situation in denmark atm is actually un fruitfull and potentially dangerous, then you conclude that any system would be like that,....how many systems do you know? because i disagree with the machanics behind inflations as described by you.
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the current system is reasonable if you live in THE WEST! to the majority of the world the system and its consequences are unbearable.
fact 1: there's a fractional reserve banking system with "credit money".
fact 2: people live poorly in some places (eg people live better in Denmark than in Hungary, people live better in Hungary than Thailand, etc.)
where's the link? i think that poverty (or wealth difference) is about business environment, resources, infrastructure, trade regulations and capital markets. it's not really about the monetary system. in fact people tend to live better in countries with a stable currency ("ceteris paribus"). you can't solve the problem of poverty with the change of the monetary system.
Iblis: I'm just saying that these kind of situations are unavoidable - that's what I said from the very start - and I also admitted from the very start that the current system is NOT unfailable - look at my posts way back.
What I disagree is that your proposal will fix these problems, and what I propose is that the humans should learn that there IS a limit before the sky - and how they learn?... well, when the market crash, which it does now and then. Also economic crashes seem to become smaller during time (which could lead to the thought, that people are actually learning!)
I'm not sobbing - in almost every thread you're telling me that I'm wrong (by writing it), which is VERY tiresome in a discussion.
What I disagree is that your proposal will fix these problems, and what I propose is that the humans should learn that there IS a limit before the sky - and how they learn?... well, when the market crash, which it does now and then. Also economic crashes seem to become smaller during time (which could lead to the thought, that people are actually learning!)
I'm not sobbing - in almost every thread you're telling me that I'm wrong (by writing it), which is VERY tiresome in a discussion.
im not selling it as the be all solution, but there are somethings you need to take into the equation. The system we have is today an international one, and my concern is that it has reached a point where the only "production" left to accomodate for the need of an ever growing production cycle will be war. Humans are a practically endless resource unlike say,,,gold, so it can be used in a "production cycle" in more ways than just as work.
Ger...are you any les intelligent than we are in denmark? any less productive or creative? i take it the answer is a loud NO ofcrouse not. Now do the math yourself. If you have the basic resource for production, human creativity, why are you being rewarded less than we are?
Ger...are you any les intelligent than we are in denmark? any less productive or creative? i take it the answer is a loud NO ofcrouse not. Now do the math yourself. If you have the basic resource for production, human creativity, why are you being rewarded less than we are?
puryx, that is because you fail to explain to me how a system controlled as i have written would be subject to the same dangers that we have now. You are still debating money as a commodity where im debating them as nothing but a tool of exchange that has to be avaible to accomodate for the actual amount of creation of value that is going on.
avavible in equal amounts to.....
Iblis: I have argumented that risks, inflation, overheating will still exist in the system you suggest - that you do not agree is your own opinion, which is fair, but saying that I'm not explaining why "your" system would have (the same) dangers too is not right...
It's a quite some of posts ago since I mentioned the money vs. favours thing - where are you going with this Iblis?
It's a quite some of posts ago since I mentioned the money vs. favours thing - where are you going with this Iblis?
pyrix, how will those things come about. that you claim there can just aswell be overheating etc.. is a statement, so explain to me how you see that happen when the government at any point will adjust the money level to meet the demand for money to be used in the exchange of good or services.
im not asking you to explain "my system", you raise concerns about it, and im asking you how you see them come about, so far you havent. You have just keept telling me what the current situation is, and the current mechanism.
im not asking you to explain "my system", you raise concerns about it, and im asking you how you see them come about, so far you havent. You have just keept telling me what the current situation is, and the current mechanism.
ok ill cut to the point. Our ecenomy is litterally fuelled by blood atm. And that fucking sucks, and just because i dont have bullets flying all around me does not mean i doesnt care, and as the problem is rooted directly in the our monetary system, obviously, so it must change. buying forgiveness for our sins at the red cross every now and then, is offering the real victims of our predator ecenomy to piss in the pants to stay warm.
Someone else than me is paying my bill, and it doesnt make me feel very good. I like pulling my own weight.
Someone else than me is paying my bill, and it doesnt make me feel very good. I like pulling my own weight.
Iblis: what? - I mentioned how I think inflation would still exist under your system:
Also I asked what your system would do in times, when "quick" money is needed:
Also, if the banks are full-reserve, why bother putting your money in the bank? - you could as well keep them in your home, since they wont gain any value in the bank (ie. they will not be invested in the bank)
I'm not saying that I'm right, but at least I'm rtying to explain why I'm not agreeing with you, but somehow you're still telling me that I'm explaining nothing...
Also one should note that the banks in the fractional reserve system do not issue MONEY directly, but contracts - and those contracts are worth the agreement between the parties involved. Also the banks most often gets security (real estate, machinery, whatever), when issuing notes, to ensure that the contracts are also backed with actual physical value.
Quote:
Inflation would most probably also exist in a full-reserve system because people like mine and your grand-dad arre willing to pay more more for eg. their real-estate. When people want something, they're willing to work more and/or pay more, and thus the actual value of the money spent on real-estate in the last end becomes less and less. This is a dangerous situation - and we have that in Denmark right now. However I don't think that any bank-system could change this, since it's (like said before) a kind of stupid human behaviour.
Also I asked what your system would do in times, when "quick" money is needed:
Quote:
Also, what would a full-reserve system do in times when a lot of money (say, loans) is needed? (there could be many reasons; war (yeah it sucks.. but still), disasters, epidemics, etc.)
Also, if the banks are full-reserve, why bother putting your money in the bank? - you could as well keep them in your home, since they wont gain any value in the bank (ie. they will not be invested in the bank)
I'm not saying that I'm right, but at least I'm rtying to explain why I'm not agreeing with you, but somehow you're still telling me that I'm explaining nothing...
Also one should note that the banks in the fractional reserve system do not issue MONEY directly, but contracts - and those contracts are worth the agreement between the parties involved. Also the banks most often gets security (real estate, machinery, whatever), when issuing notes, to ensure that the contracts are also backed with actual physical value.