100% reserve banking
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Being economics, it might seem more boring than what is being discussed under 'group cohesion' or 'science for communists' but if people are going to argue private banks can create credit, then we should not duck from criticising this. Not enough of the case put these days is about economics anyway.
ALB wrote:Just occurred to me. DJP has identified the person spouting currency crank ideas as a UKIP MEP. If we get his name we can challenge him to debate and publically expose the bollox he's talking.According to the caption on the first few frames of the video, it's Godfrey Bloom.
I doubt he would be willing to engage in a public debate with us.But I do think we should produce a detailed pamphlet or at least an extensive dedicated on-line explanation and response because on my daily trawls of the internet for news to blog about i regularly come across variations of the money out of nothing banking myth. Sometimes it is along with the conspiracy theory of the Fed Reserve – i bet you didn't know they were the ones behind the JFK assassination ;-)Perhaps when creating the new website, it can be designed for an education guide section that can be easily updated. I know we have stuff on the topic but it is scattered about and some of it is dated such as Douglas Social Credit, but those can be updated to appear contemporary. Another two topics that i constantly come across is cooperatives and citizens wage. Again we have a lot of material on those but they aren't collated into a unified analysis.
Young Master Smeet wrote:Looks like it's bunkum: I can't see why using a public block chain would necessarily circumvent banks or put frational lending out of business, they could still register your loan/savings on an account, and only issue such block-chain coins as they can get their hands on. I can write an IOU on the back of a fag packet, they creates circulating money (as long as people are willing to accept the fag packet). Doesn't matter about block chains or paper money…You're write that using a block chain doesn't require laws prevent fractional reseve lending. But that's missing the point. The point is that it can be used to create a digital currency were fractional reserve banking is less profitable. There have been many attempts to create a fractional reserve bank for bitcoin and they all failed. They all used your old trick of using IOU's like on the back of a fag packet and all these banks have gone bankrupt. It seems in Bitcoin the money is too traceable for fractional reserve banking to work. It's harder in bitcoin to hide the fact that the bank is s ponzi scheme in essencse. The public receipt on the blockchain for money transferes meens the bank customer can see the bank reserves and judge how the bank is unsound. The non-public nature of capital cash dollars exchange reqeipts kept in the fractional reserve banking allows the fiction that the bank has "your" money in the vault and lent out someone elses money. That doesn't work in Bitcoin digital currency because anyone can look at the bank financials and realize quite quickly they aren't sound places to put your money. So the half life of a ponzi scheme in capitalism is generations as in the case of fractional reserve banking. BUT the half life of a ponzi scheme in bitcoin as a currency is just a few months becuase things play out faster on the internet and it's harder to create a financial fiction using bitcoin. What tends to happen with the bitcoin banks that have been tried is they 1) have no government enforcement powers or federal reserve to support them so they crash. So yes they can write an IOU on the back of a fag, but NO the people will not buy that IOU and the government will not enfoce the terms of the IOU. So the IOU is a worthless piece of paper backed only by the banks non-legally binding promise of payment 2) people just ignore the bitcoin banks because they don't need a bitcoin bank and bitcoin banks go out of business and are unsafe places to store value. Historically enough bright eyed capitalist have tried and failed to bring fractional reserve banking to the bitcoin currency. Capitalist bringing fractional reserve banking to bitcoin fare about as poorly as communist bring communism to the public after a revolution. It seems to work for a little while, then flounders in some way for one of several obvious reasons and then fails.
1: Banks are no pinzi schemes. If I have a contract with you to pay £100 tomorrow, you have an asset worth £100 that's as good as cash itself. I don't need to currently have£100 in my pocket, just a reasonable expectation that I could when the debt falls due.2: This is enforceable, as it's a matter of contract, and if deliberately denied, it amounts to fraud. Governments will, thus, enforce terms of an IOU (so long as the debt contract is suitably transfered).3:The point is that wealth is created in the real economy, and banks are not the problem: we are exploited because of wages, not because of money. We could be paid in apples and it would still be exploitation.
Young Master Smeet wrote:3:The point is that wealth is created in the real economy, and banks are not the problem: we are exploited because of wages, not because of money. We could be paid in apples and it would still be exploitation.Doesn't the word 'salary' come from use of salt as currency?
DJP wrote:According to the caption on the first few frames of the video, it's Godfrey Bloom.Oh him. He is no longer in UKIP but was kicked out by them in 2013 for making derogatory remarks about women. He isn't an MEP any longer either. He's not likely to be an antisemite.His wikipedia entry suggests he wouldn't really be a suitable person to debate with, though it sounds as if it might be an entertaining evening.
When i first saw his remarks i assumed him to be just some cavalier politician who had picked up the populist anti-banking trend, but i see that he does have an economics pedigree and is no novice on the subject. There is also much more to dislike about him…he applauded the French sinking of the Rainbow Warrior and he is a climate change denialist.But i see from the wiki entry that indeed he is a jovial and entertaining individual but if we do debate him, i hope we make him pay for all the drinks afterwards.
Co-op Bank up for sale…another bank that couldn't make money materialise fro thin air with the touch of computer keyboard and save itself http://www.standard.co.uk/news/uk/coop-bank-up-for-sale-amid-concerns-over-meeting-new-rules-a3465411.html
alanjjohnstone wrote:Co-op Bank up for sale…another bank that couldn't make money materialise fro thin air with the touch of computer keyboard and save itself http://www.standard.co.uk/news/uk/coop-bank-up-for-sale-amid-concerns-over-meeting-new-rules-a3465411.html And many co-op are being financed by banks. Several years ago several workers unions had co-op for their members including super-markets, but now they are financed by banks and they have failed. That will show to Richard Wolf that his proposal to create co-op is a total failure. A cancer known as capitalism can not be cured. Nobody can create money from thin air, it is only a conspiracionlst theory
Not sure if this is really the right thread but this was on Radio 4 this afternoon. Another "creationist" has written a book it seems…http://www.bbc.co.uk/programmes/b08gy87s
Came across this report on credit unions…turning away deposits because not enough folk are taking out loans! No magical stroke of the keyboard appears to be useful.http://www.independent.ie/business/personal-finance/credit-unions-turn-away-cash-as-bank-rules-force-change-35524415.html
Quote:For every €100 in savings, €10 has to be put into the reserves. The money that goes into the reserves comes from profits made on loans.alanjjohnstone wrote:Came across this report on credit unions…turning away deposits because not enough folk are taking out loans! No magical stroke of the keyboard appears to be useful.http://www.independent.ie/business/personal-finance/credit-unions-turn-away-cash-as-bank-rules-force-change-35524415.htmlQuote:For every €100 in savings, €10 has to be put into the reserves. The money that goes into the reserves comes from profits made on loans.Yes I stopped using my local credit union as every time I went to withdraw money I had saved for a particular purpose, they would suggest to me to take a loan instead which defeated my whole reason for savings in the first place, to avoid interest charges and debt in general. I had nothing like those sums in the article, just a few hundred quid for updating or renewing my ramshackle mobility equipment, laptop etc…Problem is now I have no damn reserves, bit my own nose off to spite my face.
I'm reading (or re-reading, can't remember) Rudolf Hilferding's classic Finance Capital from 1910. He clearly understood how banks work:
Quote:As a provider of credit, the bank works with all the capital at its disposal; its own and that of others. Its gross profit consists of interest paid on the capital which it has lent. Its net profit – after deduction of expenses – is the difference between the interest paid to it and the interest, which it pays on deposits. This profit is not, therefore, profit in the strict sense, and its level is not determined by the average rate of profit. Like that of any other money capitalist it arises from interest. The position of middleman that the bank occupies in credit circulation enables it to profit not only from its own capital, like any other money capitalist, but also from that of its creditors to whom it pays a lower interest than it demands from its debtors.(…) The level of interest depends upon supply and demand of loan capital in general, of which bank capital is only a part. This level of interest determines the gross profit. In order to attract the greatest possible amount of money for their use, the banks in turn pay interest on their deposits; and the amount of such capital at the disposal of any bank depends, ceteris paribus, upon the level of interest which it pays on deposits. Competition for deposits compels the banks to pay the highest possible rate of interest. The difference between the interest which the banks receive as creditors and the interest which they pay as debtors constitutes their net profit. (p. 172)Of course, some banks also make profits from other activities such as share flotations but this is the investment banking side of the activities and of investment banks, which Hilferding is more interested in.
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