3 ms·

Maybe the fact that you need the physical, manufactured goods to live a comfortable life unlike 'financial services', that won't cloth you, won't transport you

Maybe the fact that you need the physical, manufactured goods to live a comfortable life unlike 'financial services', that won't cloth you, won't transport you and definitively won't feed you.

IdiocyInAction 3y ago
Those manufactured goods partially get enabled through these services
- pi-e-sigma 3y ago
  Somehow we did just fine without fractional reserve system. And historically loaning money with interest was considered a great sin. So manufacturing can exist without any modern finance but modern finance can't exist when it's not backed by the 'real' economy.
  - eru 3y ago
    The industrial revolution was (partially) enabled by finance. Especially Scotland managed to catch up so much with England during that time, because it had a better and more robust financial system. I bring up the industrial revolution, because manufacturing before the industrial revolution existed, but with such low productivity that I am sure you wouldn't want to go back to that state. I'm not sure the notion that interest was considered a sin by some people at some point in time carries much weight. First, have a look at all the other things considered great sins. Second, banks in the European middle ages did functionally earn interest income, they just used techniques that should be familiar to any modern tax optimiser or even sanction buster to officially call is something else. One technique was to charge late fees. Technically as a debtor, you could pay your loan back on time at 0%, but if you ever wanted another loan, you better be fashionable late and pay your interest disguised as a late fee. Another technique was to give you the loan in one currency and have you pay back in another. Then you can disguise the interest payments in the exchange rate. There's also plenty of examples involving shenanigans with derivatives. Have a look at modern Muslim finance for more examples. So that golden age of no interest never really existed to begin with.
    - pi-e-sigma 3y ago
      I don't buy your arguments that industrial revolution wouldn't happened without banking system. Industrialization of the Soviet Union is a prime example, Soviets pulled it off on a massive scale without any shenanigans with the debts and whatnot. You yourself actually proving this stating that the semi-modern banking with loans with interest already existed in the Middle Ages yet the industrial revolution only really kicked off in the XIX century. Industrial revolution was driven by the progress of science (steam machines, electric motors etc) and would have happened without any modern banking anyway. Pooling money of individual investors for great infrastructure projects like railways or factories etc. doesn't require any debt or bank mediation, in fact the entire idea of a corporation as we know know where investors are shielded from the liability doesn't need banking system at all to function just fine. And such investments were the most common of financing industrial projects during the peak of the industrialization, along side with the direct government subsidies, not banking loans
      - eru 3y ago
        Be careful: are we talking about The Industrial Revolution, or later copy-cats? Unlike the inventions of agriculture which happened multiple times independently, The Industrial Revolution happened only once and then spread. It's still debated amongst historians and economists what factors caused The Industrial Revolution to happen in Britain when it did, and not earlier or later or elsewhere. We know a bit more about what factors help or hinder copy-cat industrialisers. Just because we have more examples to study. You bring up a few yourself. Btw, I never made the argument that you absolutely need a reasonable financial system to have any kind of industrialisation. I would argue that such a system helps with prosperity, but is not absolutely required. (One good example that you didn't mention is actually the US. They got quite prosperous despite absolutely hobbling their financial system throughout all of their short history. See eg their bans on branch banking, and obsession with unit banks.) But all else being equal, I'd rather live in a more prosperous society than the Soviet Union, which barely managed to industrialize at great cost and largely thanks to oil money. > Maybe the fact that you need the physical, manufactured goods to live a comfortable life unlike 'financial services', that won't cloth you, won't transport you and definitively won't feed you. Thanks to the division of labour, the tailor doesn't have to drive a car, nor does the bus driver have to make her own clothes. Similarly, people can work in a bank and trade to acquire clothing and transportation. If they are particularly good at providing banking services, they will be able to acquire a bigger bundle of those manufactured resources than if they worked the factories themselves. Just like the tailor can get more bus rides with less hassle by selling clothing, then by getting behind the wheel herself. Btw, what do you have against fractional reserve banking? It seems to universally spring up in anything remotely resembling a free market. Systems with 100% reserves only ever exist when governments interfere, and even then only briefly, because they are brittle. See eg https://www.cato.org/blog/friday-flashback-state-100-percent-reserve-banking https://www.cato.org/blog/friday-flashback-state-100-percent...
eru 3y ago
Thanks to trade, you can transform one into the other. The complaint seems to be that foreigners are willing to give you those ingredients for the comfortable life cheaper than you could produce then yourself. I don't really see what's wrong with that generosity.

Maybe the fact that you need the physical, manufactured goods to live a comfortable life unlike 'financial services', that won't cloth you, won't transport you and definitively won't feed you.

IdiocyInAction 3y ago

Those manufactured goods partially get enabled through these services

pi-e-sigma 3y ago
Somehow we did just fine without fractional reserve system. And historically loaning money with interest was considered a great sin. So manufacturing can exist without any modern finance but modern finance can't exist when it's not backed by the 'real' economy.
- eru 3y ago
  The industrial revolution was (partially) enabled by finance. Especially Scotland managed to catch up so much with England during that time, because it had a better and more robust financial system. I bring up the industrial revolution, because manufacturing before the industrial revolution existed, but with such low productivity that I am sure you wouldn't want to go back to that state. I'm not sure the notion that interest was considered a sin by some people at some point in time carries much weight. First, have a look at all the other things considered great sins. Second, banks in the European middle ages did functionally earn interest income, they just used techniques that should be familiar to any modern tax optimiser or even sanction buster to officially call is something else. One technique was to charge late fees. Technically as a debtor, you could pay your loan back on time at 0%, but if you ever wanted another loan, you better be fashionable late and pay your interest disguised as a late fee. Another technique was to give you the loan in one currency and have you pay back in another. Then you can disguise the interest payments in the exchange rate. There's also plenty of examples involving shenanigans with derivatives. Have a look at modern Muslim finance for more examples. So that golden age of no interest never really existed to begin with.
  - pi-e-sigma 3y ago
    I don't buy your arguments that industrial revolution wouldn't happened without banking system. Industrialization of the Soviet Union is a prime example, Soviets pulled it off on a massive scale without any shenanigans with the debts and whatnot. You yourself actually proving this stating that the semi-modern banking with loans with interest already existed in the Middle Ages yet the industrial revolution only really kicked off in the XIX century. Industrial revolution was driven by the progress of science (steam machines, electric motors etc) and would have happened without any modern banking anyway. Pooling money of individual investors for great infrastructure projects like railways or factories etc. doesn't require any debt or bank mediation, in fact the entire idea of a corporation as we know know where investors are shielded from the liability doesn't need banking system at all to function just fine. And such investments were the most common of financing industrial projects during the peak of the industrialization, along side with the direct government subsidies, not banking loans
    - eru 3y ago
      Be careful: are we talking about The Industrial Revolution, or later copy-cats? Unlike the inventions of agriculture which happened multiple times independently, The Industrial Revolution happened only once and then spread. It's still debated amongst historians and economists what factors caused The Industrial Revolution to happen in Britain when it did, and not earlier or later or elsewhere. We know a bit more about what factors help or hinder copy-cat industrialisers. Just because we have more examples to study. You bring up a few yourself. Btw, I never made the argument that you absolutely need a reasonable financial system to have any kind of industrialisation. I would argue that such a system helps with prosperity, but is not absolutely required. (One good example that you didn't mention is actually the US. They got quite prosperous despite absolutely hobbling their financial system throughout all of their short history. See eg their bans on branch banking, and obsession with unit banks.) But all else being equal, I'd rather live in a more prosperous society than the Soviet Union, which barely managed to industrialize at great cost and largely thanks to oil money. > Maybe the fact that you need the physical, manufactured goods to live a comfortable life unlike 'financial services', that won't cloth you, won't transport you and definitively won't feed you. Thanks to the division of labour, the tailor doesn't have to drive a car, nor does the bus driver have to make her own clothes. Similarly, people can work in a bank and trade to acquire clothing and transportation. If they are particularly good at providing banking services, they will be able to acquire a bigger bundle of those manufactured resources than if they worked the factories themselves. Just like the tailor can get more bus rides with less hassle by selling clothing, then by getting behind the wheel herself. Btw, what do you have against fractional reserve banking? It seems to universally spring up in anything remotely resembling a free market. Systems with 100% reserves only ever exist when governments interfere, and even then only briefly, because they are brittle. See eg https://www.cato.org/blog/friday-flashback-state-100-percent-reserve-banking https://www.cato.org/blog/friday-flashback-state-100-percent...

eru 3y ago

Thanks to trade, you can transform one into the other. The complaint seems to be that foreigners are willing to give you those ingredients for the comfortable life cheaper than you could produce then yourself. I don't really see what's wrong with that generosity.