5 ms·

How about we just abolish fractional reserve banking? Fractional reserve system causes credit to grow with booming population but causes deflation when populati

by NTDF9 7y ago

How about we just abolish fractional reserve banking? Fractional reserve system causes credit to grow with booming population but causes deflation when population/production declines. The root cause of all economic problems are man made. Lets fix the root cause because its totally in our control.

Nasrudith 7y ago
Isn't that how it should be essentially given currency is a medium of value exchange? If the production grows shouldn't credit grow with it for reasons similar to why national debt is listed as GDP percentage?
- NTDF9 7y ago
  Not when currency is also a medium of wealth storage. Currently, when deflation happens, the rich don't suffer losses immediately. Instead they fire their works and reduce investments. So the poor are on the streets or have to suffer first. The rich may or may not lose later (they don't lose because by then they get bailed out or the tide turns). If we're truly going to use currency as a medium of exchange then we have no choice but to let the rich suffer, perhaps they suffer first.
  - selectodude 7y ago
    that assumes that currency was ever intended on being a store of wealth, which it really wasn’t.
    - NTDF9 7y ago
      But it is. Anything that has to be earned and saved over time to make a purchase is a store of wealth. Think saving cash(or putting in bonds) for a down payment.
      - selectodude 7y ago
        Bonds are an asset class. Cash is not.
        NTDF9 7y ago
        I cant tell if you are naive or just ignoring the conveniently that cash is also an asset. In deflation, it is a better asset than stocks. In negative interest rate environment, it is a better asset than bonds. Please end this discussion
        selectodude 7y ago
        Deflation is an economic failure. NIRP is, in my opinion, an economic failure. If cash is only a good asset class when shit is hitting the fan, that probably implies it’s not a very good store of wealth!
        NTDF9 7y ago
        > If cash is only a good asset class when shit is hitting the fan, that probably implies it’s not a very good store of wealth! Why do you think the same about any other asset that relies on inflationary monetary system?
    - cheeseomlit 7y ago
      Then why is my employer paying me with it? Why do savings accounts exist at the bank? Are we supposed to go out and buy bonds and gamble on stocks when we receive a paycheck? Maybe the stuff we use for currency shouldn't be printed out of thin air and have no inherent value
      - selectodude 7y ago
        Not all of it, but sitting on cash is not smart. Cash is for very short term spending. It’s not a long term store of wealth. It never has been. Currencies that become a store of wealth inevitably fail. Source: actual real life economist.
        ryacko 7y ago
        Cash is for liquidity. I don’t know what you define as very short term, but emergency funds should be in cash, so should money set aside that is meant to be spent in a few months.

by NTDF9 7y ago

Nasrudith 7y ago

Isn't that how it should be essentially given currency is a medium of value exchange? If the production grows shouldn't credit grow with it for reasons similar to why national debt is listed as GDP percentage?

NTDF9 7y ago
Not when currency is also a medium of wealth storage. Currently, when deflation happens, the rich don't suffer losses immediately. Instead they fire their works and reduce investments. So the poor are on the streets or have to suffer first. The rich may or may not lose later (they don't lose because by then they get bailed out or the tide turns). If we're truly going to use currency as a medium of exchange then we have no choice but to let the rich suffer, perhaps they suffer first.
- selectodude 7y ago
  that assumes that currency was ever intended on being a store of wealth, which it really wasn’t.
  - NTDF9 7y ago
    But it is. Anything that has to be earned and saved over time to make a purchase is a store of wealth. Think saving cash(or putting in bonds) for a down payment.
    - selectodude 7y ago
      Bonds are an asset class. Cash is not.
      - NTDF9 7y ago
        I cant tell if you are naive or just ignoring the conveniently that cash is also an asset. In deflation, it is a better asset than stocks. In negative interest rate environment, it is a better asset than bonds. Please end this discussion
        selectodude 7y ago
        Deflation is an economic failure. NIRP is, in my opinion, an economic failure. If cash is only a good asset class when shit is hitting the fan, that probably implies it’s not a very good store of wealth!
        NTDF9 7y ago
        > If cash is only a good asset class when shit is hitting the fan, that probably implies it’s not a very good store of wealth! Why do you think the same about any other asset that relies on inflationary monetary system?
  - cheeseomlit 7y ago
    Then why is my employer paying me with it? Why do savings accounts exist at the bank? Are we supposed to go out and buy bonds and gamble on stocks when we receive a paycheck? Maybe the stuff we use for currency shouldn't be printed out of thin air and have no inherent value
    - selectodude 7y ago
      Not all of it, but sitting on cash is not smart. Cash is for very short term spending. It’s not a long term store of wealth. It never has been. Currencies that become a store of wealth inevitably fail. Source: actual real life economist.
      - ryacko 7y ago
        Cash is for liquidity. I don’t know what you define as very short term, but emergency funds should be in cash, so should money set aside that is meant to be spent in a few months.