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Classical liberalism. The individual before the state, non-interventionist, free-market based society.
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By KlassWar
#14613516
Trying to have a semantic argument on the arcana of finance capital with our banker friend Lexington is a fool's errand. He's a professional and knows the field well enough to know what the terms actually mean .

A fractional reserve means that banks don't need to have reserves to cover the default of all their loans. Which means they can loan money they don't actually have: They're loaning virtual money. If banks must have (or borrow) actual hard money before they can lend it, only hard money is ever loaned and you have what's effectively a full reserve system.
By Truth To Power
#14613540
KlassWar wrote:A fractional reserve means that banks don't need to have reserves to cover the default of all their loans.

Ah, no.
Which means they can loan money they don't actually have: They're loaning virtual money.

No. It's real money. They create it.
If banks must have (or borrow) actual hard money before they can lend it, only hard money is ever loaned and you have what's effectively a full reserve system.

Nope. Wrong again.
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By QatzelOk
#14614446
Truth seems to be saying that normal people should forget about trying to understand the banking system. It's just so advanced and complicated that only 2% of the population can understand it.

The same elite group of super-humanoids (financiers) also understand what makes a movie entertaining. The rest of us can only gawk and eat our 12 dollar popcorn.
By Truth To Power
#14615454
QatzelOk wrote:Truth seems to be saying that normal people should forget about trying to understand the banking system.

If we define "normal" as 100 IQ, I'd say yes, they probably don't have the intellectual horsepower ever to understand the banking system. The monetary system, however, should not be beyond them. It's not that complicated:

"The process by which banks create money is so simple, the mind is repelled." -- John Kenneth Galbraith
It's just so advanced and complicated that only 2% of the population can understand it.

It's not that it's so advanced and complicated as much as that it is subtle and counterintuitive, and so much of what passes for information about it is not only wrong but deliberately confusing and deceitful. 2% might be approximately right, but it is a far higher number than the fraction who actually DO understand it, which is probably more like 0.02%.
The same elite group of super-humanoids (financiers) also understand what makes a movie entertaining. The rest of us can only gawk and eat our 12 dollar popcorn.

Paying $12 for movie theater popcorn might be a hint that you're not up to understanding much about money.
By Nunt
#14616088
KlassWar wrote:A fractional reserve means that banks don't need to have reserves to cover the default of all their loans. Which means they can loan money they don't actually have: They're loaning virtual money. If banks must have (or borrow) actual hard money before they can lend it, only hard money is ever loaned and you have what's effectively a full reserve system.


This is not entirely correct. Banks aren't loaning virtual money, they are loaning real money.

The process goes as follows:
1) Depositors give money to the bank.
2) The bank lends out most of the deposits to the borrowers.
3) The bank holds some of the deposits as a cash reserve

So banks don't hand out virtual money. They give real money that they receive from depositors to borrowers. What is factional is that the depositors have the illusion that they could go to the bank and ask for their money back. But of course the money isn't really there. They just can't fulfill their outstanding obligations to their depositors.
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By Harmattan
#14616125
Nunt wrote:What is factional is that the depositors have the illusion that they could go to the bank and ask for their money back.

Anytime I go to my bank and ask them for my money, they give it to me. This is not an illusion.

The fractional reserve system works, and it is a part of this wonderful system that led us to the two centuries with the highest growth since the dawn of mankind, and life conditions magnitudes more enjoyable than our ancestors' and far less work than they had to do. Science ^ capitalism = win.

Don't worry, it will still be time to get rid of capitalism once we all become so rich that economy does not matter any longer.
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By QatzelOk
#14616128
Harmattan wrote:The fractional reserve system works, and it is a part of this wonderful system that led us to the two centuries with the highest growth since the dawn of mankind, and life conditions magnitudes more enjoyable than our ancestors' and far less work than they had to do. Science ^ capitalism = win.

Do you actually believe this, or is it just something that has been repeated so many times by vested interests that it's an easy argument to make in a debate?

It's like saying that red meat has allowed us to grow into the perfect, happy, healthy creatures we have become. It's easy to say because the meat industry has beaten propaganda like this into our heads.

Cigarettes are totally safe: why, doctors smoke tons of them!

Image
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By Harmattan
#14616137
QatzelOk wrote:Do you actually believe this, or is it just something that has been repeated so many times by vested interests that it's an easy argument to make in a debate?

"Believe"? Do you deny that the last two centuries have been exceptional, or do you think this has nothing to do with the simultaneous shift to the capitalistic system, that it is a mere coincidence?
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By quetzalcoatl
#14616180
Harmattan wrote:"Believe"? Do you deny that the last two centuries have been exceptional, or do you think this has nothing to do with the simultaneous shift to the capitalistic system, that it is a mere coincidence?

It is not coincidence at all - the shift to modern capitalism was facilitated by the industrial revolution and easily-obtainable fossil fuel. Thus the last two centuries are "exceptional" in the literal sense. They are not reproducible. What we regard as capitalism is really an isolated spike in economic activity, now regressing to mean.

The 21st century will be a low/no-growth period regardless of the nominal ideology underlying the economic system. The percentage of earnings allotted to wages will continue to fall. These trends will be self-reinforcing. Declining wages will intensify an already demand-constrained economy. The evolution towards a no-growth environment will force capitalism to evolve in new ways. Most likely will be a revival of mercantilism with politically allocated market shares and cooperative limits on competition.
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By Harmattan
#14616213
quetzalcoatl wrote:It is not coincidence at all - the shift to modern capitalism was facilitated by the industrial revolution and easily-obtainable fossil fuel.

So why, suddenly, mankind would have started to innovate a lot after tens of thousands of years of very slow progress if not for the sudden availability of capital and the race to profit in the one region of the world quickly progressing?

Also what about the rest of the world? China and others knew about those technological advances, they replicated them, so why didn't their societies massively adopted them if not because of their vertical socio-economic structures?

I fail to see how the availability of cheap energy and mass production would have by itself caused capitalism. Care to provide a detailed explanation of your views? The commonly accepted trigger was the massive needs of capital for risky investments in the global trade and the exploration and colonization of the American continent. This led to financial systems able to direct large sums of money to those with profit opportunities, and therefore to capitalism.


The 21st century will be a low/no-growth period

Speculation.

For the start even if the West had already grabed all of the low-haning fruits already, many devoping nations are still grabing a lot of those fruits each year and will inevitably cause a lot of global growth. And I am convinced that the West still has a good lot of fruits to grab, starting with AI that will come true in the upcoming decades and will obviously bring major productivity improvements.

Maybe those productivity gains will not translate to growth in the west as we will probably dedicate a lot of this productivity to reduce our workloads rather than consume more, but this is fine too.


The percentage of earnings allotted to wages will continue to fall. These trends will be self-reinforcing. Declining wages will intensify an already demand-constrained economy.

Those speculations are possible, yet they look too narrowed: they smell like 2015. The pendulum tend to swing from one side to another.

That being said I am convinced that capitalism will become less important during this century as efficiency and economy will become less important. A lot of productivity gains will be used to address growing social concerns and make labor more often voluntary than today. Somehow this should form a transition to unknown socio-economic changes. I would still bet on capitalism and social-democracy, but with more sectors led by public structures.
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By QatzelOk
#14616248
After his question was already answered by another poster, Harmattan wrote:So why, suddenly, mankind would have started to innovate a lot after tens of thousands of years of very slow progress if not for the sudden availability of capital and the race to profit in the one region of the world quickly progressing?


Previously, quetzalcoatl wrote:the shift to modern capitalism was facilitated by the industrial revolution and easily-obtainable fossil fuel.

the industrial revolution
The enslavement of formerly independent and free agricultural workers

easily-obtainable fossil fuel
The destruction of the earth's air, water, land, and politics

The Federal Reserve is just the cancerous mafia that makes these kinds of atrocities seem normal, along with the stealing of national sovereignty and economic equality. Because we are governed by ethnic mafias who control banks, we are treated like lab rats who need to be managed by "the scientists.'
By Rich
#14616278
QatzelOk wrote:the industrial revolution
The enslavement of formerly independent and free agricultural workers
This is a filthy Marxist lie.The agricultural population increased by a million between 1780 and 1830. Industrialisation was necessary to support out spiralling population. We had to produce and export manufactured products, so as we could import agricultural products to support our expanding population. The industrial revolution in Britain happened with a revolution in social relations and prior to 1832 without a change in the political system that had endured since 1688. We the first industrailisers didn't get universal male suffrage till 1918. France with no industrialisation got it in 1792.
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By AFAIK
#14616294
The USA's central bank, renamed The Federal Reserve due to Americans' distaste for central planning, was created to save bankers from themselves by acting as a lender of last resort. Its mandate has expanded to include maintaining growth and full employment but it regularly fails to deliver in these areas.

Lending money at interest is hugely damaging to society and the environment and cannot be sustained without major checks and balances. The need to pay off debts as fast as possible leads to massive environmental destruction because slower, more sustainable exploitation of resources would burden the debtor with more interest payments. Those who are unable to keep up with payment schedules face the threat of incredible violence including debtors' prison, homelessness and indentured servitude.
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By QatzelOk
#14616335
Rich wrote:This is a filthy Marxist lie.The agricultural population increased by a million between 1780 and 1830. Industrialisation was necessary to support out spiralling population. We had to produce and export manufactured products, so as we could import agricultural products to support our expanding population. The industrial revolution in Britain happened with a revolution in social relations and prior to 1832 without a change in the political system that had endured since 1688. We the first industrailisers didn't get universal male suffrage till 1918. France with no industrialisation got it in 1792.

The closing of the commons?

The fact that no farmers WANTED to live in some urban stink hole..

You reject Marx because you prefer the Fairy tale version of history that slaves are supposed to buy into.

Farmers had been manipulated by the Church (used by elite for propaganda purposes) to have maximum babies (for farm productivity). And then, once the elite invented factories in which domesticated human slaves could toil away in, these farmers were forced into slavery by the Hateful and Classist policies of the governments that the same elites owned/managed/formed.

These new slaves were eventually put into schools where they could be manipulated into thinking they were "free" by a really bizarre interpretation of common history.

...

And while we're looking at how MONEY rewrites our history for us... The Federal Reserve was formed by a mafia from Austria, and a few years after they relocated their operation to the USA, they blew up Europe.

Safe at last.
By Truth To Power
#14616548
Nunt wrote:Banks aren't loaning virtual money, they are loaning real money.

Which they create.
The process goes as follows:
1) Depositors give money to the bank.
2) The bank lends out most of the deposits to the borrowers.

Nope. Flat false. That's what I call "the usual fairy tale" about fractional reserves creating money through re-lending of customer deposits. But that IS NOT how the modern monetary system works. Customer deposits are used primarily as reserves, not for lending. The money that is lent to borrowers is CREATED BY THE BANK FOR THAT PURPOSE.

We have been through this over and over again. Check out any of half a dozen threads on banking and money.
3) The bank holds some of the deposits as a cash reserve

It holds effectively all of them as reserves.
So banks don't hand out virtual money. They give real money that they receive from depositors to borrowers.

No. They DO NOT receive it primarily from depositors. Loan proceeds consist of deposits that THE BANK creates.
What is factional is that the depositors have the illusion that they could go to the bank and ask for their money back. But of course the money isn't really there. They just can't fulfill their outstanding obligations to their depositors.

That wouldn't be different with full reserve banking, because it's inherent in financial intermediation. The difference would be in the maturities of obligations.
Harmattan wrote:Don't worry, it will still be time to get rid of capitalism once we all become so rich that economy does not matter any longer.

That can never happen under capitalism, which inherently takes a larger and larger fraction of GDP and gives it to landowners in return for nothing. As Henry George demonstrated in "Progress and Poverty" (and we have seen repeatedly proven by the history of capitalist countries), the relentless depredations of all-devouring rent, if left unchecked by government, will beggar and destroy the landless working class and the economy. The more the economy advances, the greater the population and accumulation of capital and technology, the lower natural market wages are in absolute terms. It's the Law of Rent, and there is no escape from it. All we can do to save ourselves and our societies is stop giving the publicly created land rent away to privileged private parasites.
AFAIK wrote:Lending money at interest is hugely damaging to society and the environment and cannot be sustained without major checks and balances. The need to pay off debts as fast as possible leads to massive environmental destruction because slower, more sustainable exploitation of resources would burden the debtor with more interest payments. Those who are unable to keep up with payment schedules face the threat of incredible violence including debtors' prison, homelessness and indentured servitude.

No, it is CREATING money by lending it at interest that is so damaging. Lending at interest carries its risks, but it is a vital way of allocating purchasing power productively through time.
Last edited by Truth To Power on 06 Nov 2015 01:00, edited 2 times in total.
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By Harmattan
#14616679
Truth To Power wrote:That can never happen under capitalism, which inherently takes a larger and larger fraction of GDP and gives it to landowners in return for nothing. As Henry George demonstrated in "Progress and Poverty" (and we have seen repeatedly proven by the history of capitalist countries), the relentless depredations of all-devouring rent, if left unchecked by government, will beggar and destroy the landless working class and the economy. The more the economy advances, the greater the population and accumulation of capital and technology, the lower natural market wages are in absolute terms. It's the Law of Rent, and there is no escape from it. All we can do to save ourselves and our societies is stop giving the publicly created land rent away to privileged private parasites.

And yet since Henry George's book was published we observe that workers became far richer (in actual quality of life and labor), that many people no longer work at all (<25 and >65) or only a few hours a week.

Henry George was of course right regarding the inevitable rise of rents and their detrimental effects on the economy. But because this capital concentration destabilizes the system, the pendulum always end up swinging to the other side. The last time was 1928: it was the previous capital concentration peak, and it decreased for decades after that, until it started rising again. We currently are at the 1928 level.

So not only this is cyclic but, besides of that, productivity improvements offset this trend and make everyone richer year after year, almost every year.


No, it is CREATING money by lending it at interest that is so damaging. Lending at interest carries its risks, but it is a vital way of allocating purchasing power productively through time.

Who cares? How much are economic crises worth when this system managed to eliminate hunger and provide us with warm houses, cascades of hot water in the morning, plenty of enjoyments and intellectual stimulations.

Of course capitalism creates crises, of course traders are nothing more than dangerous gamblers, etc. But other systems are also cyclic and at least the average results of capitalism are nothing less than excellent. Look at the past two centuries!
By Nunt
#14616754
Truth To Power wrote:We have been through this over and over again. Check out any of half a dozen threads on banking and money.

Unfortunatly, only several threads with your claims unsubstatiated by evidence.
By Truth To Power
#14616783
Truth To Power wrote:That can never happen under capitalism, which inherently takes a larger and larger fraction of GDP and gives it to landowners in return for nothing. As Henry George demonstrated in "Progress and Poverty" (and we have seen repeatedly proven by the history of capitalist countries), the relentless depredations of all-devouring rent, if left unchecked by government, will beggar and destroy the landless working class and the economy. The more the economy advances, the greater the population and accumulation of capital and technology, the lower natural market wages are in absolute terms. It's the Law of Rent, and there is no escape from it. All we can do to save ourselves and our societies is stop giving the publicly created land rent away to privileged private parasites.

Harmattan wrote:And yet since Henry George's book was published we observe that workers became far richer (in actual quality of life and labor), that many people no longer work at all (<25 and >65) or only a few hours a week.

Because GOVERNMENT has over-ruled the capitalist market outcome through massive interventions: welfare, unemployment insurance, minimum wage laws, union monopoly privileges, labor standards laws, publicly funded health care, education and pensions, subsidized housing, workers' compensation systems, etc. In EVERY SINGLE COUNTRY where a capitalist system of private property in land is well established and well enforced, but government does NOT undertake those massive interventions to rescue working people from its effects, idle landowners are fabulously wealthy, while the wages and condition of typical landless workers are approximately equivalent to those of slaves: India, Bangladesh, Guatemala, the Philippines, Pakistan, El Salvador, etc. And it is not that those workers are unproductive. They are producing goods similar to those produced in wealthy countries, using similar capital. The difference is that their governments serve only landowners, rather than just mainly landowners, as the governments of advanced capitalist countries do.
Henry George was of course right regarding the inevitable rise of rents and their detrimental effects on the economy. But because this capital concentration destabilizes the system, the pendulum always end up swinging to the other side.

Tell it to the landless workers of Bangladesh, the Philippines, or any other country where capitalism unrelieved by massive government interventions to mitigate the effects of private landowning holds sway.
So not only this is cyclic but, besides of that, productivity improvements offset this trend and make everyone richer year after year, almost every year.

That claim is flat false, as the rapid capital accumulation in the countries identified above, combined with continued and even worsening poverty for working people, proves.
No, it is CREATING money by lending it at interest that is so damaging. Lending at interest carries its risks, but it is a vital way of allocating purchasing power productively through time.

Who cares?

Only people who care about liberty, justice, and prosperity (i.e., not you).
How much are economic crises worth when this system managed to eliminate hunger and provide us with warm houses, cascades of hot water in the morning, plenty of enjoyments and intellectual stimulations.

It didn't, as shown by the countries listed above, where your favored system is also in effect. It was governments serving all the people rather than just landowners in the advanced democracies that eliminated hunger, provided warm houses and hot water, etc.
Of course capitalism creates crises, of course traders are nothing more than dangerous gamblers, etc.

Traders aren't the problem, but rather rent seekers who find ways to force others (especially taxpayers) to shoulder the downside risks, while they pocket the upside rewards themselves.
But other systems are also cyclic and at least the average results of capitalism are nothing less than excellent. Look at the past two centuries!

In the last two centuries, I see a stark contrast between what happens where government lets landowning take its natural course under capitalist market conditions -- i.e., where landowners take everything but subsistence from everyone else -- and what happens where democratic governments try to mitigate the worst effects of capitalism on the landless through the kind of massive interventions I identified above (though of course they still shovel large fractions of GDP into landowners' pockets in return for nothing).

Your "argument" is logically equivalent to one that apologists for slavery made in the antebellum South: that the slaves' health, diet, safety, material living conditions, life expectancy, etc. were distinctly better than those of free people still living in West Africa. Sure. That's true. But that better outcome was largely the result of laws protecting slaves' interests, not of the institution of slavery, which would otherwise have reduced them to worse conditions than the free but less advanced peoples of West Africa -- as the appalling condition of slaves in West Africa proved.
Truth To Power wrote:We have been through this over and over again. Check out any of half a dozen threads on banking and money.

Nunt wrote:Unfortunatly, only several threads with your claims unsubstatiated by evidence.

That is flat false. Others as well as I have posted quotations from authoritative sources, including the Fed and other central banks and senior bankers. The de novo creation of money through lending in typical modern banking systems in advanced countries is a fact well known to economists. It is just a fact that is not known to you, because you do not know any economics.

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