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The whole western bank system is a confidence trick. Never head off fractional-reserve ? https://en.wikipedia.org/wiki/Fractional-reserve_banking https://en.wik
by s17tnet 10y ago
The whole western bank system is a confidence trick. Never head off fractional-reserve ? https://en.wikipedia.org/wiki/Fractional-reserve_banking https://en.wikipedia.org/wiki/Fractional-reserve_banking
- ZenoArrow 10y agoIt's worse than just fractional reserve banking. The vast majority of the money supply is based off debt. Would recommend watching the 4 minute introduction on the Positive Money homepage for a quick overview of the current situation with money creation: http://positivemoney.org/ http://positivemoney.org/
- blahi 10y agoThe world's population in the 1900 was 1,5B people. By 1970, it was twice that. By the year 2000, it was twice that again! And by 2050 it will be 9B. Where does the money for all those people would come from if not from borrowing (money from the future)?
- ZenoArrow 10y agoMoney does not need to be based on debt. Money is just a medium of exchange. There is no requirement for the creation of money to generate profit for the money creators, especially as the cost of creating digital money is near zero. If you want to look into it more, I'd suggest taking a look at debt-free money. https://en.m.wikipedia.org/wiki/Monetary_reform https://en.m.wikipedia.org/wiki/Monetary_reform http://positivemoney.org/2011/10/debt-free-money/ http://positivemoney.org/2011/10/debt-free-money/ http://positivemoney.org/2016/03/debt-free-money-brief-reply-randall-wray/ http://positivemoney.org/2016/03/debt-free-money-brief-reply...
- blahi 10y agoThis requires a perfectly just world. We do not live in such a world and we probably never will.
- ZenoArrow 10y agoIt doesn't. There's a few different ways of creating debt-free money. Government-created debt-free money has existed in the past, and can exist again. Using the UK system as an example, the minimum that would be required would be to update the Bank Charter Act of 1844 to include bank credit, so that private banks couldn't create money: http://positivemoney.org/how-money-works/how-did-we-end-up-here/ http://positivemoney.org/how-money-works/how-did-we-end-up-h... It would then be the sole responsibility of the government to create money and spend it into the economy. In order to prevent hyperinflation, you could create an independent body responsible for setting how much new money could be created, which would be separate from the those who decided what the money was spent on. As for other forms of debt-free money, cryptocurrencies like Bitcoin also qualify. You do not owe interest to Bitcoin miners, when you own a Bitcoin it is debt-free, and it cannot be destroyed by paying off a debt.
- blahi 10y agoOh but it does. Because you will essentially be destroying the wealth of the rich people. They will not agree to that.
- ZenoArrow 10y agoAll it requires is for people to choose democratic representatives that stick up for the interests of the masses. Even if a few rich people disagree with the policy, it doesn't matter if the masses have decided what they want to happen.
- Dylan16807 10y agoYou can just print more money in proportion to population growth. While keeping a stable minimum reserve percent.
- deleted 10y ago[deleted]
- blahi 10y agoThe rich people will be less rich in that situation. They are in a similar situation now with the current inflation, but growth of money has to be tied to economic growth or otherwise the rich will feel screwed. I'm not saying it's good, but you cannot screw the rich. The current situation is a compromise and a very sensible at that I might add, despite all the noise from tin-foil hatters. There are also other, practical consideration which will make what you are proposing impossible to put in practice for a prolong period of time.
- adventured 10y agoThe rich do better than everyone else in times of inflation. Their assets are heavily liquid and easily moved. They have very little to fear from higher rates of inflation, it enables them to outperform everyone else that is more income dependent and less asset rich. The poor have the most to fear, by far. That's also why the rich have done so well since the year 2000, the Fed's policies have been heavy on dollar debasement since then, which has eroded the median while the rich have been able to benefit from the Fed's monetary support of asset prices. The Fed's asset inflation policies are a prime driver of the growth in wealth inequality in the US.
- naveen99 10y agoI would say it's not a rich vs poor issue. The people who lose money with inflation are the ones who are over exposed to their currency: pensioners close to retirement, forex traders or foreign governments who bet on that currency, black market players who have to hold large amounts of cash without investing it, banks with a lot of fixed 30 year low interest rate mortgages outstanding. Forex players, banks, and foreign governments can be rich, pensioners and black market players can be poor. Banks actually sell most of the mortgages back to the federal government in the us. Maybe that's the reason us government isn't inflating the dollar too much. They themselves hold most of it through mortgages.
- mac01021 10y agoWhy does additional population require additional money?
- ZenoArrow 10y agoBecause deflation is seen as more risky than inflation. In principal prices could drop to stretch the spending power of money, so that the money supply didn't need to increase along with population. In practice this is seen as risky as during the period of transition to lower prices you risk going through a period of economic slowdown and reduced spending power of the population. These problems are especially problematic in a system of globalised trade, as foreign investors can take advantage of the deflationary period to gain further control of local assets. In other words, inflation is required because the world's economy is based on growth, and inflation and deflation are not equal in this scenario. If the world's economy was based on a steady state economic system, then we wouldn't need to create more money.
- js8 10y agoTo add to your (correct) answer, world's economy has to based on growth for physics reasons. In the real world, almost all things that we produce slowly depreciate due to entropy. So to even maintain the living standard, you need constant production, and thus constant investment. Deflation doesn't incentivize investment (which is an irreversible decision), so the only alternative is, in the face of risk, (small) inflation.
- dredmorbius 10y agoWhere do cricket points come from? Money comes from the same place. It's not substance. It's not energy. (Though yes, it's exchangeable for both. And time. And space.) It's information. About obligations and demand rights. It can be created as fractional reserve. Or simply issued into existence (thogh market ops make pricing more transparent). While we're at it, I'm not entirely certain of that 9 billion figure either.
- blahi 10y ago>(Though yes, it's exchangeable for both. And time. And space.) Yeah, that's kind of a big differentiation though. Isn't it?
- dredmorbius 10y agoSorry, I don't grasp your point.
- kybernetikos 10y ago> The vast majority of the money supply is based off debt. That's because of the money supply measure you choose, so it's a pretty meaningless thing to complain about. M0 for example is a measure of the money supply that is not based off debt. Most of the other measures include demand deposits in fractional reserve banks which are primarily debt.
- simonh 10y agoCan you name a banking or finance system that has ever existed that wasn't? Are there non-western banking systems that are better?