slider: As far as arguments against socialism I completely agree that a free market is better but in the far future that will not likely be the case as automation obsoletes jobs some form of socialism seems inevitable.
February 17 - 1600 - Giordano Bruno is burnt alive by the catholic church. Aquinas : "much more reason is there for heretics, as soon as they are convicted of heresy, to be not only excommunicated but even put to death."
Jon Irenicus:I can't be bothered to read huge posts any more.
I find more and more, the longer the post, the less likely it has something organized and well considered to share. I just skim and pick out bits and pieces to respond to. Anyone looking to bludgeon me with the volume of their opinion, will get mostly ignored and mocked.
slider123456:Gold has very little inherint value and gains most of its value not from itself but from the goods and services the society provides without these goods it value would be considerably less.
It's statements like this that will eventually drive me to seppuku.
I am just trying to understand our monetary system and I am completely open to the fact that I may be wrong seems like very few other people are though. I wrote how I understand it and am not trying "to bludgeon " anyone just trying to get a better understanding. Instead of original thoughts though I get pointed to links of some important "economists" with a gradual degredation into insults. Wow
A)If the banks do spend the money into the economy then I am completely wrong though my understanding as of now is that is not the case.
B)My other argument is that if some 3rd world villagers can fulfill the services of a bank with pen and paper how much is the banking system as it is today really worth?
The whole gold argument is really a matter of perspective and does not really matter to me that much. Arguing different perspectives is a part of life and if everyone had the same perspective life would be pretty boring.
As to whether or not a type of socialism is necessary in the future it might not be but it seems better to keep the option open than shutting it down without rational thought. It is completely possible that there are solutions in the framework of capitilism I personally have no idea what soloutions entrepreneurs might come up with.
I have seen no arguments against the first 2 of these understandings but would certainly appreciate it.
Ok, if you're sincere, I wil try to address one point at a time.
slider123456: A)If the banks do spend the money into the economy then I am completely wrong though my understanding as of now is that is not the case.
The banks loan the money into the economy.
slider123456:B)My other argument is that if some 3rd world villagers can fulfill the services of a bank with pen and paper how much is the banking system as it is today really worth?
This goes back to an earlier issue with your posts. You do not have a good understanding of what money is. I think if you had a better understanding, it would automatically refute your other positions. The gold argument is not a matter of perspective.
Gold is/was money because it is scarce. Because it cannot be counterfeited. Because it is fungible, malleable and durable.
Paper is only money by fiat, or decree. It can only exist as a result of legal tender laws. Gold has proven in many cultures to exist as a store of weath and a means of exchange, completely independent of any legislation. The differences are enormous, documented and verifiable! It is not a matter of perspective!
Expansion of the monetary supply, or inflation is very easy with paper, very difficult with metals or tangible goods. Having a stable money supply, vs. an unstable or highly inflationary supply, is not a matter of perspective. It goes to the very fundamentals of the economic system.
Which was my point. You keep talking about interest, without understanding that the system is fundamentally flawed. It's like trying to treat symptoms and not the disease. Pointless.
Sorry if I was rude, but I don't believe you wrote the Rothbard book I linked you to. I think you probably searched it for the word "interest". Unfortunately, I'm a quick reader and it took me a couple days to work through it, and a few subsequent reads to get a good grip on it.
slider, i have tried to maintain a respectful attitude towards you, but if i have insulted you, i apologize. we're all learning here - if you read back a little ways, i was schooled in this same thread.
that said, please avoid long responses. people simply won't read them, and it will lead to general confusion. where possible, post about a single idea. i know how easy it is to end up turning a simple post into a huge essay when discussing this stuff. resist!
ok, let's discuss some more...
a) federal reserve banks create money by monetizing debt, typically gov't securities. commercial banks create money by lending out deposits up to their reserve limit. in both cases, banks do not simply buy anything of real value with new money. in the case of the gov't securities' interest earned, the federal reserve banks are required to pay most to all of these earnings to the government.
When banks debase the value of money to issue new loans, they also debase the return value of outstanding loans. Bankers advocated sound money, in opposition to the farmers who wanted paper money, when the issue was discussed during the creation of the constitution. Depending upon the conditions, banks may seek to contract artificial credit.
Your argument has consistently held that the inability to otherwise pay debts with interest has fueled money supply expansion. Well, look at what happens in a bust. Credit contracts, and yes, many people can't pay their debts. Yet, allowing credit to contract and bad debts to be liquidated quickly remedies the problem and gets the economy back on track. Further expanding the money supply is not a remedy. Look at Japan in the 90's. Also, expanding the money supply did not prevent the Great Depression, nor did it alleviate it.
Often, this problem is misunderstood. People want the booms that artificial credit spurs, but deny that busts must follow. They have invented a number of magical means to do this, such as suspending bank note redemption in specie, central banking, and fiat currency. All fail. A better solution is to avoid the problem altogether. To do this, simply get the government out of banking and money, or outlaw fractional reserve banking. The market polices against fractional reserve banking fairly well. Over-leveraged banks can be brought to bankruptcy on the whim of competitors or a wave of market fear. It is only when government protects or institutionalizes FRB that we can see economy-wide booms and busts. The best example of this is the roaring 20's and the Great Depression.
Without government intervention in money, the market most likely picks a form of money whose supply cannot be easily manipulated by any central source. If banks want to issue notes that are claims to that money, that's fine. as before, the ones who choose to issue unbacked notes are the most likely to fail, barring gov't intervention. While most people here advocate gold or silver, they most likely believe that individuals and private institutions should be free to choose what they define and accept as money. Perhaps the market favors a different form of money? We can't know for sure until true monetary competition is allowed. Legal tender laws, mint prohibitions, currency prohibitions, sales and capital gains taxes all prevent this.
b) i don't think our banking and monetary system is worth very much, considering I believe it is almost due for a complete collapse. that being said, I think being able to conduct non-local transactions and safekeep larger amounts of money that retain its value is a valuable service to society. true banking seems to be more than simply balancing accounts - it is also a means of depository investing (for time, not demand deposits) and money warehousing.
As far as socialism and technology, let's consider a situation. A new robotic factory design requires no humans to work in it, and it produces any good imaginable faster than older factories, using less raw materials and energy (even copies of itself). Industry leaders invest in these factories, they replace the old ones, and many millions of factory workers are laid off. Well, the laws of supply and demand still apply. If most people are hopelessly unemployed, how do they afford the goods the factory produces? If goods are still priced according to their old prices (which you might consider their "true value"), we produce FAR more goods than there are buyers and we have a surplus - billions of goods sitting in warehouses unable to be sold. If we follow supply and demand to price, we find the price of anything is pushed to barely anything, as there is very little demand (as expressed in a supply of something else). The capitalists who own the factories don't need to trade with the unemployed laborers. They can get their factories to meet their material demands. Thus, the market has a huge shift. Human labor isn't required anymore, as a cheaper form of labor is abundant. Yet human intelligence is still scarce. Scientific research is scarce. The capitalists would best serve themselves by creating capital for the laborers to use to develop their intelligent skills. Intelligence will allow more efficient factories, sources of energy, etc. Furthermore, there would be a huge art and entertainment industry, as factories can't write well-respected scripts, songs, or paintings.
If technology changes the economy in a manner that makes most everyone unfit to work, this same technology allows charitable efforts to effectively serve that many more people. Why don't the now unemployed laborers seek to build their own super factory? What if a charity got its hands on one? It could simply make copies of it for every town, or even every individual. The socialist doctrine relies on the argument that capital owners are competitive, greedy elitists who are most inclined to deprive others of possessions. Yet capitalism's entire mantra is based on competing to most efficiently create that which society most desires. If technology produces a situation where physical labor is of little value, then laborers must focus on intelligent labor, which should retain high value. In fact, technology should vastly increase the value of all labor, as it can now be traded for far more real goods. For example, if your neighbor is an intelligent laborer, he could easily afford 8 cars. If you weed his garden, you can be paid with an automobile. Your actual pay rate has increased.
Check my blog, if you're a loser
meambobbo:that said, please avoid long responses. people simply won't read them, and it will lead to general confusion. where possible, post about a single idea. i know how easy it is to end up turning a simple post into a huge essay when discussing this stuff. resist!
also, break your own rules, and reply to your own posts. that makes you look cool, LIKE ME
Slider, check this out:
http://hiwaay.net/~becraft/FRS-myth.htm#hd25
also, read the section following that one.
Keep in mind, I disagree with the author on other points, so feel free to respond to his argument.
liberty student:The banks loan the money into the economy.
liberty student:This goes back to an earlier issue with your posts. You do not have a good understanding of what money is. I think if you had a better understanding, it would automatically refute your other positions. The gold argument is not a matter of perspective.
My understanding is that the only thing that makes something money is that it can be used to buy goods and most people accept it if that is the case then that is money to me. The fact that it can buy goods basically means it is backed by goods and services and if it wasn't it would be worthless.
liberty student:Gold is/was money because it is scarce. Because it cannot be counterfeited. Because it is fungible, malleable and durable.
liberty student:Expansion of the monetary supply, or inflation is very easy with paper, very difficult with metals or tangible goods. Having a stable money supply, vs. an unstable or highly inflationary supply, is not a matter of perspective. It goes to the very fundamentals of the economic system.
liberty student:Which was my point. You keep talking about interest, without understanding that the system is fundamentally flawed. It's like trying to treat symptoms and not the disease. Pointless.[quote user="liberty student"]Sorry if I was rude, but I don't believe you wrote the Rothbard book I linked you to. I think you probably searched it for the word "interest". Unfortunately, I'm a quick reader and it took me a couple days to work through it, and a few subsequent reads to get a good grip on it.
I read for an hour or so a day for a few days and I understand what he is saying. I understand completely that the problem is that the money supply grows faster than goods and services which essentially lead to the money being worth less relative to the goods it is used to purchase. If as I keep saying interest serves to create that inflation then interest would end up being almost impossible (or would cause other obvious problems which would soon be realized) if inflation was no longer created so on the matter of inflation we basically agree and interest is really secondary. It could also easily be that in a fractional reserve banking situation where every dollar is loaned out as $10 that the amount of interest charged is considerably more. At current rates that would be an equivalent of %50 interest in a %100 reserve system. Since $1 is lent out 10 times at %5 interest that is basically $0.50 interest on the $1 equaling %50. That does contribute to probelems with interest.
Here is a very interesting book on money that most people don't know about, that covers the topic of lending money into circulation:
http://www.inspiredconstitution.org/popp_bonafide/chapter_5.html
Very fascinating how he covers the changing wording on the US dollar over it's revisions since the Fed was created.
Also, have you read any of E. C. Riegel? http://www.inspiredconstitution.org/riegel_naf/index.html
Ryan Henrie
DataProspecting.com - Mises.org books and articles on DVD!
meambobbo:slider, i have tried to maintain a respectful attitude towards you, but if i have insulted you, i apologize. we're all learning here - if you read back a little ways, i was schooled in this same thread.
meambobbo:that said, please avoid long responses. people simply won't read them, and it will lead to general confusion. where possible, post about a single idea. i know how easy it is to end up turning a simple post into a huge essay when discussing this stuff. resist!ok, let's discuss some more...a) federal reserve banks create money by monetizing debt, typically gov't securities. commercial banks create money by lending out deposits up to their reserve limit. in both cases, banks do not simply buy anything of real value with new money. in the case of the gov't securities' interest earned, the federal reserve banks are required to pay most to all of these earnings to the government.
meambobbo:When banks debase the value of money to issue new loans, they also debase the return value of outstanding loans. Bankers advocated sound money, in opposition to the farmers who wanted paper money, when the issue was discussed during the creation of the constitution. Depending upon the conditions, banks may seek to contract artificial credit.Your argument has consistently held that the inability to otherwise pay debts with interest has fueled money supply expansion. Well, look at what happens in a bust. Credit contracts, and yes, many people can't pay their debts. Yet, allowing credit to contract and bad debts to be liquidated quickly remedies the problem and gets the economy back on track. Further expanding the money supply is not a remedy. Look at Japan in the 90's. Also, expanding the money supply did not prevent the Great Depression, nor did it alleviate it.Often, this problem is misunderstood. People want the booms that artificial credit spurs, but deny that busts must follow. They have invented a number of magical means to do this, such as suspending bank note redemption in specie, central banking, and fiat currency. All fail. A better solution is to avoid the problem altogether. To do this, simply get the government out of banking and money, or outlaw fractional reserve banking. The market polices against fractional reserve banking fairly well. Over-leveraged banks can be brought to bankruptcy on the whim of competitors or a wave of market fear. It is only when government protects or institutionalizes FRB that we can see economy-wide booms and busts. The best example of this is the roaring 20's and the Great Depression.
meambobbo:Without government intervention in money, the market most likely picks a form of money whose supply cannot be easily manipulated by any central source. If banks want to issue notes that are claims to that money, that's fine. as before, the ones who choose to issue unbacked notes are the most likely to fail, barring gov't intervention. While most people here advocate gold or silver, they most likely believe that individuals and private institutions should be free to choose what they define and accept as money. Perhaps the market favors a different form of money? We can't know for sure until true monetary competition is allowed. Legal tender laws, mint prohibitions, currency prohibitions, sales and capital gains taxes all prevent this.
meambobbo:b) i don't think our banking and monetary system is worth very much, considering I believe it is almost due for a complete collapse. that being said, I think being able to conduct non-local transactions and safekeep larger amounts of money that retain its value is a valuable service to society. true banking seems to be more than simply balancing accounts - it is also a means of depository investing (for time, not demand deposits) and money warehousing.
meambobbo:As far as socialism and technology, let's consider a situation. A new robotic factory design requires no humans to work in it, and it produces any good imaginable faster than older factories, using less raw materials and energy (even copies of itself). Industry leaders invest in these factories, they replace the old ones, and many millions of factory workers are laid off. Well, the laws of supply and demand still apply. If most people are hopelessly unemployed, how do they afford the goods the factory produces? If goods are still priced according to their old prices (which you might consider their "true value"), we produce FAR more goods than there are buyers and we have a surplus - billions of goods sitting in warehouses unable to be sold. If we follow supply and demand to price, we find the price of anything is pushed to barely anything, as there is very little demand (as expressed in a supply of something else). The capitalists who own the factories don't need to trade with the unemployed laborers. They can get their factories to meet their material demands. Thus, the market has a huge shift. Human labor isn't required anymore, as a cheaper form of labor is abundant. Yet human intelligence is still scarce. Scientific research is scarce. The capitalists would best serve themselves by creating capital for the laborers to use to develop their intelligent skills. Intelligence will allow more efficient factories, sources of energy, etc. Furthermore, there would be a huge art and entertainment industry, as factories can't write well-respected scripts, songs, or paintings.If technology changes the economy in a manner that makes most everyone unfit to work, this same technology allows charitable efforts to effectively serve that many more people. Why don't the now unemployed laborers seek to build their own super factory? What if a charity got its hands on one? It could simply make copies of it for every town, or even every individual. The socialist doctrine relies on the argument that capital owners are competitive, greedy elitists who are most inclined to deprive others of possessions. Yet capitalism's entire mantra is based on competing to most efficiently create that which society most desires. If technology produces a situation where physical labor is of little value, then laborers must focus on intelligent labor, which should retain high value. In fact, technology should vastly increase the value of all labor, as it can now be traded for far more real goods. For example, if your neighbor is an intelligent laborer, he could easily afford 8 cars. If you weed his garden, you can be paid with an automobile. Your actual pay rate has increased.
meambobbo:Slider, check this out:http://hiwaay.net/~becraft/FRS-myth.htm#hd25also, read the section following that one.Keep in mind, I disagree with the author on other points, so feel free to respond to his argument.
slider123456:if a bank lends 5 people call them A-E a $1000 at %5 interest they owe $5250 if the $250 interest gets lent to someone else F and the first 5 A-E earn it from F he (F) owes $262.50 still. The bank lends $262.50 to someone else G and F earns it from G then he G owes $275.62. This will go on forever increasing forever until someone defaults. If the bank spent the $250 into the economy after the 1st loan there would be less of a problem but in our economy I do not think the banks spend all of the interest into the economy that would be alot of money especially when mortgages are considered.
You seem to mix money with wealth.
If A-E guys use the loan to produce goods worth more than $1050, then I see no problem with paying back the loan, they'll just pay part of the loan in cash and part in goods. In the end the bank is left with its money and some goods, and A-E are left with some goods and no money, which is still more than what they all started with. A win-win situation as I see it.
Exactly...
Also, the bank does not wait until it receives the returned principle plus interest before it spends money into the economy. For it to even be able to operate at all, it must hire employees, who are paid wages, who use that money to purchase goods in the economy. If all bank returns were re-lent out, this would literally mean that every member of the bank, from the mail guy to the ceo to the owners, would be working for free.
Also, look at the late 70's - interest rates were raised to incredibly high levels, yet the early 80's showed sharply diminishing price inflation. If you compare long-term moving averages of interest rates, price inflation, and money supply, you will see the correlation between money supply and price inflation, but not price inflation and interest rates. Of course, the rate is only half the picture - what % of the money supply is owed in bank debts?
Any phrases like "too much money chasing too few goods" are logical fallacies, because it assumes that money and goods have a fixed value, independent of their supply and demand. If there is simply a great supply of monetary units used to purchase a small amount of goods, this simply means the number of monetary units required to trade for a good will be high. The value of money is reflected by what it can secure in trade, not what its face value says.
simik: slider123456:if a bank lends 5 people call them A-E a $1000 at %5 interest they owe $5250 if the $250 interest gets lent to someone else F and the first 5 A-E earn it from F he (F) owes $262.50 still. The bank lends $262.50 to someone else G and F earns it from G then he G owes $275.62. This will go on forever increasing forever until someone defaults. If the bank spent the $250 into the economy after the 1st loan there would be less of a problem but in our economy I do not think the banks spend all of the interest into the economy that would be alot of money especially when mortgages are considered.You seem to mix money with wealth.If A-E guys use the loan to produce goods worth more than $1050, then I see no problem with paying back the loan, they'll just pay part of the loan in cash and part in goods. In the end the bank is left with its money and some goods, and A-E are left with some goods and no money, which is still more than what they all started with. A win-win situation as I see it.
meambobbo:Exactly...Also, the bank does not wait until it receives the returned principle plus interest before it spends money into the economy. For it to even be able to operate at all, it must hire employees, who are paid wages, who use that money to purchase goods in the economy. If all bank returns were re-lent out, this would literally mean that every member of the bank, from the mail guy to the ceo to the owners, would be working for free.Also, look at the late 70's - interest rates were raised to incredibly high levels, yet the early 80's showed sharply diminishing price inflation. If you compare long-term moving averages of interest rates, price inflation, and money supply, you will see the correlation between money supply and price inflation, but not price inflation and interest rates. Of course, the rate is only half the picture - what % of the money supply is owed in bank debts?Any phrases like "too much money chasing too few goods" are logical fallacies, because it assumes that money and goods have a fixed value, independent of their supply and demand. If there is simply a great supply of monetary units used to purchase a small amount of goods, this simply means the number of monetary units required to trade for a good will be high. The value of money is reflected by what it can secure in trade, not what its face value says.
First, to determine whether fractional reserve banking is unlawful or not, we must determine what is lawful and what isn't. Unless someone says otherwise, let's suppose that injustice is a violation of someone's person, property, or liberties. So if someone stole my property, that would be a violation of my property and thus injustice and what we institute govt for is to punish injustice in society, that is to establish justice. If I ask someone to house my money and that I might come and take it back at any time, then if he were to loan it out, that would be a violation of my property. It did not become his/her property by my merely asking them to house it. If they couldn't loan it out before I asked them to house it, then they cannot loan it out after. You can only loan out that which belongs to you or on behalf of someone with their consent. The natural market would determine an assessment fee for housing the money and you or I would be charged such.Now, if I asked them to loan it on behalf of me, and pay me such and such interest, with the understanding that I would not receive it back until the borrower paid in full, that is a different scenario altogether. CDs act in such a way. Here are the sets of arguments people bring up against this out of not thinking it through and a set of responses:
1) "But that would be stupid to have to pay to house your money somewhere."
You already do pay to house your money through inflation and taxes. You pay excessively more with the current system.
2) "But what if the person they loan my money to doesn't pay it off?"
There would be true free market insurances that would develop to counteract this. Sharing risk was developed in the free market in China back in 2000 B.C.(first recorded event of shared risk). Also, would you loan to a bank that made risky loans? Would that bank stay in business long? No, they would find the most safe people to loan to, much safer then you could ever find.
3)"Interest rates would be much higher under such a system. Would that be desirable?"
Of course they would be higher. This limits where money would get invested into. Society would be far more productive and less consumptive. People would not be funding every whim they desire on credit. Instead there would be incentive to save cash and pay in cash. This would accelerate a truly higher standard of living for all. As more production is financed or paid in cash, prices decrease on products and become more affordable to the masses.
What I see is that the game was never intended for them to make money but to extract capital. The set up is all about capital extraction from our country and every country they set up a central bank in. Their "Federal Reserve Notes" are worthless to them and only tools in the process of gaining control of all property and capital producers. They could print as many as they wish since they hold the international trademarks on them. Just look around you. How many of the buildings, the land, the businesses, the homes, cars, etc. are all used in collateral for loans which are then used as collateral (eventually) for bonds to be sold from banks to the federal reserve for more Federal Reserve Notes? The truth is, as the game continues, the amount of property and capital producers is ever increasingly in the ownership of the Federal Reserve. Some would say, "well, the government owns a lot too". But that's not true either because the government uses those things it owns as collateral for getting more Federal Reserve Notes. One of the most intriguing pieces of collateral are birth certificates. I don't have all the details, but from what I understand birth certificates are taken to the Dept. of Commerce which then assesses the income a person is projected to make in their lifetime and then is used as collateral for more loans(based on the future taxes they will pay). This happens in every country. Also, when something like this "banking crisis" like what recently happened takes place, the reality is that the process of capital extraction has either slowed or reversed and so the deck must be rearranged to continue "business as usual". The large players, such as AIG, would be too much of a set back to let go, and they can appeal to "the bigger picture" and play on the fears of Americans enough to subdue us into not caring that they are stealing our purchasing power to grant more capital to keep AIG in the game of extracting capital for them. Diversification of a centralized conglomerate is not in the plan. That's also why you don't see them bailing out smaller institutions. The more centralized the banking industry gets, the higher level of capital extraction that can take place. So buyouts are good, mergers are good, small banks going out of business is good, but letting a big one fail, you better believe those same slow officials can work pretty darn fast when it comes to getting this rescue underway. However, the free market will tend toward diversification and more even wealth distribution. This was what was occurring prior to 1910 that caused the "Trust" to meet together and plan out our Federal Reserve. The U.S. was paying off it's debt, smaller banks were popping up everywhere and many were in the business of loaning real money instead of fractional reserve banking. This was eating away at the gains the "Trust" made from certain legislation passed in the 1870s that gave them the upper hand. The game plan was formed in 1910 but in reality it has blossomed quite well for them over the last century. It is certainly a complex system, and intensifies in complexity every time they rearrange the deck, but if you see it in terms of capital extraction, it kind of unwinds a bit and makes a lot more sense. All of those who are set up to make the most profit are those who extract the most capital for them. And that's Wall Street in a wrap.
It is true, as you say, that fractional reserve banking is a free market invention. Fraud is a also a free market invention and, you could say, a natural thing that will go away only if we make it illegal. In fact, the only reason fractional reserve banking is not illegal, is that it serves the interest of heavily indebted modern governments that need the bankers to buy debt instruments used to finance their ill advised social programs and wars.
In ancient Greece, Babylon and later, Rome, when gold was deposited with the priest at the local temple, it wasn't considered a loan. It was considered a deposit for safekeeping -- like a car in a garage. The expectation was that the car would be returned, not that it would be loaned out to a total stranger in return for a bribe, so that the owner wound up assuming the risk some idiot he didn't even know would get drunk and run it into a ditch. It was only later, when the mediaeval gold dealers realized they could issue receipts for precious metal they didn't own, that the deposit relationship came to be transformed into a "loan". And why, pray tell, was this magical transformation countenanced by the princes and potentates who ran things in those days? Well, it wasn't to assist the rise of the bourgeoisie by improving the performance of the markets, I can tell you that much. It was because the princes and potentates had run out of gold, and they needed another way to finance their pointless wars.
Government can be good or bad. Natural impulse can be good or bad. The market can be good or bad. Learn your history. Get the facts.
To me, the most amazing thing is that people are so blinded by dogma they can't even see what's going on.