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Sure, it helps to improve the aggregate well being of those who participate in the fake economy at the expense of those who participate in the real economy... G

Sure, it helps to improve the aggregate well being of those who participate in the fake economy at the expense of those who participate in the real economy... Great for crooks!

JumpCrisscross 4y ago
> it helps to improve the aggregate well being of those who participate in the fake economy at the expense of those who participate in the real economy This is financial Luddism. Just because something is unfamiliar doesn’t mean it’s bad. Private money creation is necessary for a growing, dynamic economic condition. (The problem is simpler in a static or simply cyclic economy.) Growth is heterogenous. To preserve price and bank stability, you want money created where it’s needed and not in excess where it’s not. In times past, this was largely geographic: banks in the West created money faster than banks in the agrarian South. Today, the divisions are more complex: a bank serving tech companies probably creates more deposits than one serving aging manufacturers. Centralising this function in a state apparatus has been proposed. But the central bank would have to run and then implement an economic model. Decide where and for whom to create money. This is central planning. It has a poor track record. (This is also the argument against bank concentration [1].) [1] https://fred.stlouisfed.org/series/DDOI01USA156NWDB https://fred.stlouisfed.org/series/DDOI01USA156NWDB
- cryptica 4y ago
  The way the banking system works now, it mostly creates money where it's not needed. That's why there is such high inequality which keeps growing. New capital is just deployed to chase old capital. It creates anti-competitive moats which prevent money from going where it's really needed and where it could be used most efficiently. It makes bureaucracy viable and economic efficiency non-viable. The vast majority of people who benefit from bank loans are not value creators, they are rent-seekers. Value creation necessarily requires taking calculated risks and banks these days aren't willing to take any risk.... They need full collateral. It's all about existing collateral. In the short term, the safest investment you can make is to build a moat around your existing investment... But if everyone in the economy is busy building moats (because that's the only activity which is sufficiency safe for banks to fund), there will be nobody remaining to do useful stuff which moves the economy forward.
  - slv77 4y ago
    This is less of a problem with the way that the monetary system operates and more about policy choices made by central banks and politicians after the 2008 financial crisis. Debt is a promise to return something if value tomorrow for something of value today. Too many promises have been made than will ever be able to be repaid and promises are going to be broken. Regulators and politicians have three choices on how to deal with broken promises. The first is through bankruptcy courts where a judge allocates losses according to the law. The second is through taxes where politicians take money from one group to honor promises made to another. The third is to drive inflation and break promises by returning dollars that have less value then promised. This choice that central banks made was the latter by trying to drive up inflation. The side effect of the policy choice however it has tended to favor speculators and the well connected versus other policy paths. I’m not entirely sure those other paths would have been better. Broken promises tend to be what drives revolutions and the best path is to not make promises that you can’t keep.
    - BoiledCabbage 4y ago
      It's a good comment, but you left off one important detail on option 3. When choosing the inflation route, there are two ways to inflate the economy by "providing" more dollars. One option is to provide more money to people/entities that primarily purchase investments/assers. The revenue stream of these investments will roughly remain the same, but their cost will go up permanently. Effecrively increasing "P/E ratios" or equivalent of all assets. This increases inequality in society. The second option is to provide money to people that primarily purchase goods/services. This increases the demand and thus the price on goods and services, the increased demand pushes up demand for labor, which increases wages and benefits that group. The increased prices of goods/services also increases the value of assets/investments that depend on those revenue streets - but due to the nominal increases in revenues there is no "bubble" increase in "P/E ratios" and equivalent metrics. 2008 did mostly the former and essentially none of the latter. Covid did a mixture of both, although it coincided with severe supply shortages and oil shocks making its impact unseparable for measuring and not controllable due to the external factors.

Sure, it helps to improve the aggregate well being of those who participate in the fake economy at the expense of those who participate in the real economy... Great for crooks!

JumpCrisscross 4y ago

> it helps to improve the aggregate well being of those who participate in the fake economy at the expense of those who participate in the real economy This is financial Luddism. Just because something is unfamiliar doesn’t mean it’s bad. Private money creation is necessary for a growing, dynamic economic condition. (The problem is simpler in a static or simply cyclic economy.) Growth is heterogenous. To preserve price and bank stability, you want money created where it’s needed and not in excess where it’s not. In times past, this was largely geographic: banks in the West created money faster than banks in the agrarian South. Today, the divisions are more complex: a bank serving tech companies probably creates more deposits than one serving aging manufacturers. Centralising this function in a state apparatus has been proposed. But the central bank would have to run and then implement an economic model. Decide where and for whom to create money. This is central planning. It has a poor track record. (This is also the argument against bank concentration [1].) [1] https://fred.stlouisfed.org/series/DDOI01USA156NWDB https://fred.stlouisfed.org/series/DDOI01USA156NWDB

cryptica 4y ago
The way the banking system works now, it mostly creates money where it's not needed. That's why there is such high inequality which keeps growing. New capital is just deployed to chase old capital. It creates anti-competitive moats which prevent money from going where it's really needed and where it could be used most efficiently. It makes bureaucracy viable and economic efficiency non-viable. The vast majority of people who benefit from bank loans are not value creators, they are rent-seekers. Value creation necessarily requires taking calculated risks and banks these days aren't willing to take any risk.... They need full collateral. It's all about existing collateral. In the short term, the safest investment you can make is to build a moat around your existing investment... But if everyone in the economy is busy building moats (because that's the only activity which is sufficiency safe for banks to fund), there will be nobody remaining to do useful stuff which moves the economy forward.
- slv77 4y ago
  This is less of a problem with the way that the monetary system operates and more about policy choices made by central banks and politicians after the 2008 financial crisis. Debt is a promise to return something if value tomorrow for something of value today. Too many promises have been made than will ever be able to be repaid and promises are going to be broken. Regulators and politicians have three choices on how to deal with broken promises. The first is through bankruptcy courts where a judge allocates losses according to the law. The second is through taxes where politicians take money from one group to honor promises made to another. The third is to drive inflation and break promises by returning dollars that have less value then promised. This choice that central banks made was the latter by trying to drive up inflation. The side effect of the policy choice however it has tended to favor speculators and the well connected versus other policy paths. I’m not entirely sure those other paths would have been better. Broken promises tend to be what drives revolutions and the best path is to not make promises that you can’t keep.
  - BoiledCabbage 4y ago
    It's a good comment, but you left off one important detail on option 3. When choosing the inflation route, there are two ways to inflate the economy by "providing" more dollars. One option is to provide more money to people/entities that primarily purchase investments/assers. The revenue stream of these investments will roughly remain the same, but their cost will go up permanently. Effecrively increasing "P/E ratios" or equivalent of all assets. This increases inequality in society. The second option is to provide money to people that primarily purchase goods/services. This increases the demand and thus the price on goods and services, the increased demand pushes up demand for labor, which increases wages and benefits that group. The increased prices of goods/services also increases the value of assets/investments that depend on those revenue streets - but due to the nominal increases in revenues there is no "bubble" increase in "P/E ratios" and equivalent metrics. 2008 did mostly the former and essentially none of the latter. Covid did a mixture of both, although it coincided with severe supply shortages and oil shocks making its impact unseparable for measuring and not controllable due to the external factors.