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I'm going to be honest, if you put half as much effort into learning the very, very basics of how the system worked as you did into campaigning against it by fu

I'm going to be honest, if you put half as much effort into learning the very, very basics of how the system worked as you did into campaigning against it by furiously incorrecting everyone in this thread, you'd probably feel a bit embarrassed to be posting stuff like "there's no real cost of defaults" . The money was "created out of thin air" is the loaning bank's debt to the account the borrowed money is assigned to, not the bank's asset, so there's a very real cost to them if the borrower defaults and stops repaying them. Banks can become bankrupt, just like any other business, and no, they can't "print" their way out of it. If you're still struggling to believe there's no real cost of defaults to banks, I invite you to look up bank insolvencies. Perhaps someone could make a wtfhappenedin2007 website. I'm also chuckling away at you complaining that the current system means mortgages take too long to pay off a sentence after complaining that people who get into debt are rewarded! For the record, what you're actually advocating for with higher "free-market" interest rates is that poor people pay rich people more over the course of 25 years than they currently do over 35 or even 50 years to secure a house, which is less likely to appreciate in value. US home ownership rates were down at 40% before governments got involved in the mortgage market. It's impossible to pretend that anyone benefits from such a system other than people who are much, much richer than average home buyers.

Alpha3031 3y ago
Ugh, you know, I think what I hate most about the market fundies is that their perception of what interest rates would be is absolutely untethered from any semblance of empirical reality. Like, sure, it would be fucking nice if the long-run equilibrium rate were anywhere near where they think it would be, but believing r* is close to what it was back in the 70s is a bit like believing you can will the economy into having higher productivity growth through the magic power of wishful thinking. But nooo, it's definitely not having enough free market that's the problem, we should just finish what Reagan started, certainly the union busting had no contributions to the declining labour share at all. It would be funny if it wasn't fucking terrifying.
npoc 3y ago
> The money was "created out of thin air" is the loaning bank's debt to the account the borrowed money is assigned to, not the bank's asset, so there's a very real cost to them if the borrower defaults and stops repaying them. Banks can become bankrupt, just like any other business, and no, they can't "print" their way out of it. I think the confusion is down to the fact that I'm looking at the central banking system as a whole, rather than individual banks. You're not looking at the bigger picture. The point I'm making is that when the loan is made, fresh money is handed to the debtor, at no cost to the banking system (they simply change some electronic digits) and so if it isn't repaid, the banking system is no worse off than it was before. This is something you're blind to. Sometimes it's difficult to see the wood for the trees. This is the fundamental problem with Keynesian economics as we know it - for all the talk of elasticity of money, human nature determines that the elasticity only goes one way - expansion. The system is incentivised to keep increasing total debt (because of interest payments on money it doesn't really own) and because it doesn't have to work for the money it lends out, it can hold interest rates below the free-market rate, ensuring it has a monopoly on the money lending.. >I'm also chuckling away at you complaining that the current system means mortgages take too long to pay off a sentence after complaining that people who get into debt are rewarded! The two are not contradictory. They are punished with a long mortgage, but are still better off than the poor folk who try to save up for house instead and have the value of their savings stolen while they try.
- notahacker 3y ago
  You're not "looking at the bigger picture", you're just unambiguously and spectacularly wrong. The banking system is composed of banks, and being insolvent is bad for a bank, for a bank that is owed money by an insolvent bank, and for banks which are owed money by banks which are owed money by insolvent banks, for banks that aren't owed money by banks, and ultimately, for consumers that are owed currency. The fact the bank "freshly created" the IOU doesn't mean they don't owe anyone anything. Perhaps someone really does need to make the wfthappenedin2007 website. Someone with no understanding of how things works might say "but if it's true that banks can print all the money they like, can't the bank and its creditors just print themselves whole again", but that isn't because they've come up with some great economic insight that has thus far eluded everyone except a few random bloggers, it's because they have no understanding of how things work and what bank credit is (the hint is in the name, it's a debt, not an asset). Delinquent loans are removed as assets from banks' balance sheets, the liabilities they owe to other banks or the Fed remain, and that bank actually needs an external injection of non-"printed" money to make them whole again. Incidentally, this is no different to a "hard money" system, except that "hard money" systems don't have the systemic capacity to meet short term withdrawal rates for solvent banks in the event of a bank run either. And no, the elasticity of the money supply goes both ways. USD M2 went down last year, for example. Again, this isn't a very difficult fact to establish if you're not really, really determined to be wrong. Nor is it difficult to establish that there is nothing more inherently "market based" about a state arbitrarily tying its money supply to a particular commodity than a state deciding to to tie its money to the amount of lending generated by credit markets at a particular rate. > The two are not contradictory. They are punished with a long mortgage, but are still better off than the poor folk who try to save up for house instead and have the value of their savings stolen while they try. It's not difficult to find savings opportunities at above the average rate of inflation, unless you define "saving" as "bury money in the ground". But yes, if you think the purpose of the economy is ensure the unproductive maximize their returns, the existing system is definitely worse...

Alpha3031 3y ago

Ugh, you know, I think what I hate most about the market fundies is that their perception of what interest rates would be is absolutely untethered from any semblance of empirical reality. Like, sure, it would be fucking nice if the long-run equilibrium rate were anywhere near where they think it would be, but believing r* is close to what it was back in the 70s is a bit like believing you can will the economy into having higher productivity growth through the magic power of wishful thinking. But nooo, it's definitely not having enough free market that's the problem, we should just finish what Reagan started, certainly the union busting had no contributions to the declining labour share at all. It would be funny if it wasn't fucking terrifying.

npoc 3y ago

> The money was "created out of thin air" is the loaning bank's debt to the account the borrowed money is assigned to, not the bank's asset, so there's a very real cost to them if the borrower defaults and stops repaying them. Banks can become bankrupt, just like any other business, and no, they can't "print" their way out of it. I think the confusion is down to the fact that I'm looking at the central banking system as a whole, rather than individual banks. You're not looking at the bigger picture. The point I'm making is that when the loan is made, fresh money is handed to the debtor, at no cost to the banking system (they simply change some electronic digits) and so if it isn't repaid, the banking system is no worse off than it was before. This is something you're blind to. Sometimes it's difficult to see the wood for the trees. This is the fundamental problem with Keynesian economics as we know it - for all the talk of elasticity of money, human nature determines that the elasticity only goes one way - expansion. The system is incentivised to keep increasing total debt (because of interest payments on money it doesn't really own) and because it doesn't have to work for the money it lends out, it can hold interest rates below the free-market rate, ensuring it has a monopoly on the money lending.. >I'm also chuckling away at you complaining that the current system means mortgages take too long to pay off a sentence after complaining that people who get into debt are rewarded! The two are not contradictory. They are punished with a long mortgage, but are still better off than the poor folk who try to save up for house instead and have the value of their savings stolen while they try.

notahacker 3y ago
You're not "looking at the bigger picture", you're just unambiguously and spectacularly wrong. The banking system is composed of banks, and being insolvent is bad for a bank, for a bank that is owed money by an insolvent bank, and for banks which are owed money by banks which are owed money by insolvent banks, for banks that aren't owed money by banks, and ultimately, for consumers that are owed currency. The fact the bank "freshly created" the IOU doesn't mean they don't owe anyone anything. Perhaps someone really does need to make the wfthappenedin2007 website. Someone with no understanding of how things works might say "but if it's true that banks can print all the money they like, can't the bank and its creditors just print themselves whole again", but that isn't because they've come up with some great economic insight that has thus far eluded everyone except a few random bloggers, it's because they have no understanding of how things work and what bank credit is (the hint is in the name, it's a debt, not an asset). Delinquent loans are removed as assets from banks' balance sheets, the liabilities they owe to other banks or the Fed remain, and that bank actually needs an external injection of non-"printed" money to make them whole again. Incidentally, this is no different to a "hard money" system, except that "hard money" systems don't have the systemic capacity to meet short term withdrawal rates for solvent banks in the event of a bank run either. And no, the elasticity of the money supply goes both ways. USD M2 went down last year, for example. Again, this isn't a very difficult fact to establish if you're not really, really determined to be wrong. Nor is it difficult to establish that there is nothing more inherently "market based" about a state arbitrarily tying its money supply to a particular commodity than a state deciding to to tie its money to the amount of lending generated by credit markets at a particular rate. > The two are not contradictory. They are punished with a long mortgage, but are still better off than the poor folk who try to save up for house instead and have the value of their savings stolen while they try. It's not difficult to find savings opportunities at above the average rate of inflation, unless you define "saving" as "bury money in the ground". But yes, if you think the purpose of the economy is ensure the unproductive maximize their returns, the existing system is definitely worse...