PSA: Fractional and Federal reserves

aeroripper

<!--quoteo--><div class='quotetop'>QUOTE </div><div class='quotemain'><!--quotec-->I don't see the difference between the government believing that money and gold have value and thus promising to give you gold in exchange for money and vice versa, and people believing that money and food/clothes/materials have value and promising to give you one in exchange for the other, except for the fact that food/clothes/materials can be used and not just traded, whereas gold cannot.<!--QuoteEnd--></div><!--QuoteEEnd-->

The idea of money itself, specifically paper money is nothing more than an abstraction of something of value. Paper money is used as a convenient way of transporting a medium of exchange. Instead of hauling around the objects of real value the money represents (donkies, food, weapons, gold, etc...), you can exchange the paper money with the other party to make the transaction, and organize the transfer of the goods later.

In simple villages for instance, bartering can be used to directly exchange a comparable value of goods with each other. Although when you're talking about using bartering across larger and larger groups of people, it becomes much more difficult. Some agreed upon medium of exchange is needed to represent these transactions, while the actual transfer of goods will happen later once it becomes feasible to get them to the other person.

Gold (or even silver, but moreso gold) is useful to represent this medium of exchange, since it has historically been agreed upon as being valuable. You can make beautiful sculptures, make jewelery, use it in manufacturing processes, and melt it down and divide it into weighted coins for smaller transactions. It's intrinsically valuable for these reasons, and it is fairly rare. It also takes much time to mine it from the earth, so its quantity does not increase very rapidly which is useful to keep its worth relatively constant over long periods of time.

<!--quoteo--><div class='quotetop'>QUOTE </div><div class='quotemain'><!--quotec-->Money for gold is just a currency swap. The only reason it's useful is if you wanted to spend the money in another country because other countries might think gold is more valuable than your currency, and if everyone goes and does that then the economy has still collapsed because everyone just took the stuff you back your currency with and went abroad, it does nothing to protect the economy of the country using it. It would also mess with the economy of any other country which backed its currency with gold if everyone took their gold there because it would inflate the gold-currency of that country which I'm sure isn't a good thing.<!--QuoteEnd--></div><!--QuoteEEnd-->

If a country has its medium of exchange (the dollar, peso, yuan, whatever) backed fully in gold (and its banking institutions by extension), it is considered a very dependable currency. Citizens and corporations alike flock to use it because it will retain the value of the fruit of their labor with very little inflation. It is also predicatable, as an example:

I have been working for the past 30 years, and saved up $100. I am now an old man, and have no need for the pleasures of life beyond my own sustinance, so I desposit this $100 safely in a bank vault. I pay a small fee to this good banker for storing the money in his vault for 20 years, and in my will I stipulate that my son on his 20th birthday shall receive this $100 desposit as a gift from me. 20 years pass and my son goes to the good banker and withdraws the $100. That $100 he just withdrew has roughly the same purchasing power it did 20 years ago, and he buys a beautiful house with it. There is very little to no inflation with fully backed gold dollars.. I am also assuming that $1 = 1oz. of gold. Being able to go to the teasury or bank and demanding those $100 be converted into 100oz of gold is used to keep them honest, because that 100oz of gold is ultimately more valuable than a few $20 bills made of paper used to represent it.

It is rare occurance for there to be massive increases in the amount of gold introduced into the money supply due to golds relative rarity. If there is, there is a bit of inflation until the free market adjusts (assuming there is no gov't interference) to its new value after everything settles down. The currency becomes predictable again and it business as usual.

Some government's HATE gold backed currencies, because it is a strict disclipnarian on spending. They can't wage war (typically) or pursue any other expensive venture without directly raising taxes on their citizens to pay for it. In a sense, fully gold backed dollars gives the citizens leverage over their own government. This is not the case in countries with fiat currencies, whereas the population is often unaware and uninformed that their currency is losing purchasing power due to government spending. They do not realize that it takes 2 full time jobs just to purchase a car that used to take just 1 full time job 30 or 40 years ago. Instead they blame the 'economy', the retailer, or their employer for not making enough money or for raising prices to much.

Draco_2k

<!--quoteo(post=1767329:date=Apr 16 2010, 08:40 PM:name=aeroripper)--><div class='quotetop'>QUOTE (aeroripper @ Apr 16 2010, 08:40 PM) <a href="index.php?act=findpost&pid=1767329"><{POST_SNAPBACK}></a></div><div class='quotemain'><!--quotec-->Draco, its not a boring subject to those who understand how it works, and how it impacts their everyday life.<!--QuoteEnd--></div><!--QuoteEEnd-->
It quickly ceases being boring once you piece the puzzle together. Until then, however, it hides well under the mask of confusing and irrelevant economical statistics and confusing jargon we've all grown to accept we'll never understand, no matter how much of our lives we dedicate to chasing the elusive papers.

Hopefully I did lift that mask a tiny bit.

<!--quoteo(post=1767329:date=Apr 16 2010, 08:40 PM:name=aeroripper)--><div class='quotetop'>QUOTE (aeroripper @ Apr 16 2010, 08:40 PM) <a href="index.php?act=findpost&pid=1767329"><{POST_SNAPBACK}></a></div><div class='quotemain'><!--quotec-->For those who are interested in this topic, I highly recommend you read G. Edward Griffen's book "The Creautre from Jekyll Island: A Second Look at the Federal Reserve". It filled most of the gaps in knowledge I had about the history of gold backed currencies and our current, near global fiat currencies. He makes a very strong argument against the use of fiat currencies as they encourage war, grow government, enable confiscationary inflation of the lower classes, and allowing manipulation of the currency to primarily benefit the banking elite.<!--QuoteEnd--></div><!--QuoteEEnd-->
I've been making a point to read that for a long while.

Unfortunately gold isn't without its problems: its value can be manipulated simply by withdrawing or pouring it into circulation, and indeed it's how things were done before fiat. Worse yet, it can easily be transferred to gold-backed currency or just loans where the resulting credit can, again, be inflated beyond original value of gold itself and, again, that's pretty much where fractional reserve originates.

<!--quoteo(post=1767353:date=Apr 16 2010, 10:38 PM:name=Chris0132)--><div class='quotetop'>QUOTE (Chris0132 @ Apr 16 2010, 10:38 PM) <a href="index.php?act=findpost&pid=1767353"><{POST_SNAPBACK}></a></div><div class='quotemain'><!--quotec-->That's my point though, you <i>can</i> exchange it for valuable goods, you do it every day.<!--QuoteEnd--></div><!--QuoteEEnd-->
I was hoping you wouldn't bring that up, means I haven't explained it quite right...

Is a loaf of bread backed by silver because you can trade one for another in certain conditions? Certainly not: it's trade, they're not simply interchangeable. Exchanging our paper money for goods is part of usual trade, not backing. Backing would mean that you can exchange your paper money - for, say a loaf of bread, a portion of land, a piece of machinery, a bullion of gold - at any time, without buying it from someone, without negotiating prices, without any conditions at all, instantly.

You should probably know this is how gold-backed currency works: you don't buy gold with it from someone, you just exchange it. "Backing" means the paper you have is only a representation of something tangible you do own, used for convenience. Fiat money neither represents nor entails you to nothing, that's what the word means.

The actual line I was hoping to explain is actually the one between imagination and reality: between tangible goods and abstract faith. When you get down to it, it doesn't matter how much faith you have in a loaf of bread, you still need to eat: it's the very literal meaning of value that we've grown to ignore because we always have it. Faith represents exactly nothing just like the word implies: believing in something does not make it true.

<!--quoteo(post=1767353:date=Apr 16 2010, 10:38 PM:name=Chris0132)--><div class='quotetop'>QUOTE (Chris0132 @ Apr 16 2010, 10:38 PM) <a href="index.php?act=findpost&pid=1767353"><{POST_SNAPBACK}></a></div><div class='quotemain'><!--quotec-->I don't see the difference between the government believing that money and gold have value and thus promising to give you gold in exchange for money and vice versa, and people believing that money and food/clothes/materials have value and promising to give you one in exchange for the other, except for the fact that food/clothes/materials can be used and not just traded, whereas gold cannot.<!--QuoteEnd--></div><!--QuoteEEnd-->
Backing doesn't go in so far as objective value - clothing, food, water, etc. - it only denotes being a representative of anything at all. Backing by gold is indeed pointless, beyond ensuring new money isn't just printed into existence on a whim. Ultimately the best form of backing is just... Owning the things you own.

And that's sort of where you get to the back-bone of it, since ownership itself is a fictitious concept. As a sum, the foundation of our economy is laid entirely on thin air, on one void concept on top of the other, so it should be of no wonder that it's so heavily exploited.

Things mentioned in OP might be some of the most egregious representations of it, but they're still merely symptoms. I really wish I could explain that point properly, so I wouldn't have to confuse people with economical jargon and boring legalities...

<!--quoteo(post=1767396:date=Apr 17 2010, 12:35 AM:name=aeroripper)--><div class='quotetop'>QUOTE (aeroripper @ Apr 17 2010, 12:35 AM) <a href="index.php?act=findpost&pid=1767396"><{POST_SNAPBACK}></a></div><div class='quotemain'><!--quotec-->Some government's HATE gold backed currencies, because it is a strict disclipnarian on spending. They can't wage war (typically) or pursue any other expensive venture without directly raising taxes on their citizens to pay for it. In a sense, fully gold backed dollars gives the citizens leverage over their own government. This is not the case in countries with fiat currencies, whereas the population is often unaware and uninformed that their currency is losing purchasing power due to government spending. They do not realize that it takes 2 full time jobs just to purchase a car that used to take just 1 full time job 30 or 40 years ago. Instead they blame the 'economy', the retailer, or their employer for not making enough money or for raising prices to much.<!--QuoteEnd--></div><!--QuoteEEnd-->
Pretty much the gist of the thread. Good job.

Sops

<!--quoteo(post=1767353:date=Apr 16 2010, 03:38 PM:name=Chris0132)--><div class='quotetop'>QUOTE (Chris0132 @ Apr 16 2010, 03:38 PM) <a href="index.php?act=findpost&pid=1767353"><{POST_SNAPBACK}></a></div><div class='quotemain'><!--quotec-->Well it doesn't tarnish easily which is helpful, but it's heavy as hell and very weak structurally.

I would imagine in most situations it would be easier to just use aluminium or stainless steel, both of which are lighter, stronger, mass producable, and have similar nonreactive properties as far as most things are concerned.<!--QuoteEnd--></div><!--QuoteEEnd-->
Gold has far better conductive properties then aluminium or stainless steel and doesn't corrode like copper and silver (and stainless steel can corrode)
Even with the expense its still pretty highly used in manufacturing
<a href="http://geology.com/minerals/gold/uses-of-gold.shtml" target="_blank">http://geology.com/minerals/gold/uses-of-gold.shtml</a>

aeroripper

<!--quoteo--><div class='quotetop'>QUOTE </div><div class='quotemain'><!--quotec-->It quickly ceases being boring once you piece the puzzle together. Until then, however, it hides well under the mask of confusing and irrelevant economical statistics and confusing jargon we've all grown to accept we'll never understand, no matter how much of our lives we dedicate to chasing the elusive papers.

Hopefully I did lift that mask a tiny bit.<!--QuoteEnd--></div><!--QuoteEEnd-->

That is actually intentional, as it obscures the truth that a private bank is legally counter-fitting our currency and getting flithy rich on the interest payments.. Not to mention how unethical it is that commercial banks are allowed to charge interest on large amounts of fiat money that took nothing more to create and loan than entries into a computer. The Fed. Reserve and our large banking institutions represent the highest form of usury. A new definition of usury should be made that states "no interest should be charged on loans created with fiat money". In my opinion, most of the large bank loans already in existence represent a large amount of excessive interest, namely in the more long term loans.

Draco_2k

<!--quoteo(post=1767533:date=Apr 17 2010, 04:05 PM:name=aeroripper)--><div class='quotetop'>QUOTE (aeroripper @ Apr 17 2010, 04:05 PM) <a href="index.php?act=findpost&pid=1767533"><{POST_SNAPBACK}></a></div><div class='quotemain'><!--quotec-->That is actually intentional, as it obscures the truth that a private bank is legally counter-fitting our currency and getting flithy rich on the interest payments.. Not to mention how unethical it is that commercial banks are allowed to charge interest on large amounts of fiat money that took nothing more to create and loan than entries into a computer. The Fed. Reserve and our large banking institutions represent the highest form of usury. A new definition of usury should be made that states "no interest should be charged on loans created with fiat money". In my opinion, most of the large bank loans already in existence represent a large amount of excessive interest, namely in the more long term loans.<!--QuoteEnd--></div><!--QuoteEEnd-->
Well, it might be intentional, or it might be just how the things developed, and people just don't care. Either by our nature or by our development, we're extremely apathetic species, even going so far as to ignore things that directly influence our survival... As long as the tube doesn't tell us to care about them, that is.

But yes, it's extremely convenient. Both for the bankers and mega-corproations as it exists right now, and for the people in that the resulting house of cards can be blown away with no more than a couple of spoken words.

Chris0132

<!--quoteo(post=1767498:date=Apr 17 2010, 09:22 AM:name=Sops)--><div class='quotetop'>QUOTE (Sops @ Apr 17 2010, 09:22 AM) <a href="index.php?act=findpost&pid=1767498"><{POST_SNAPBACK}></a></div><div class='quotemain'><!--quotec-->Gold has far better conductive properties then aluminium or stainless steel and doesn't corrode like copper and silver (and stainless steel can corrode)
Even with the expense its still pretty highly used in manufacturing
<a href="http://geology.com/minerals/gold/uses-of-gold.shtml" target="_blank">http://geology.com/minerals/gold/uses-of-gold.shtml</a><!--QuoteEnd--></div><!--QuoteEEnd-->

Meh conductors are easy, give it twenty years and we'll have somthing better and cheaper than gold, or we won't be using conventional circuitry for those things.

lolfighter

We do have something that conducts better for cheaper. It's called copper. Or better yet, silver. Problem with those is that they tarnish, which is pretty bad if they coat the contacts of your RAM with it. I don't think metallurgy experts share your optimism in regard to finding an alloy that conducts as well as gold, is as easy to work as gold, is as resistant to corrosion as gold, and yet is cheaper than gold. And yes, it has to be an alloy - we've kind of run out of elements by now.

aeroripper

<!--quoteo--><div class='quotetop'>QUOTE </div><div class='quotemain'><!--quotec-->Well, it might be intentional, or it might be just how the things developed, and people just don't care. Either by our nature or by our development, we're extremely apathetic species, even going so far as to ignore things that directly influence our survival... As long as the tube doesn't tell us to care about them, that is.

But yes, it's extremely convenient. Both for the bankers and mega-corproations as it exists right now, and for the people in that the resulting house of cards can be blown away with no more than a couple of spoken words.<!--QuoteEnd--></div><!--QuoteEEnd-->

Draco if you're interested in reading that book, the author gives lectures to audiences on the subject. Here is a brief, hour long overview he gave of his book on youtube:

<a href="http://www.youtube.com/watch?v=F3TAh1gy6rc" target="_blank">http://www.youtube.com/watch?v=F3TAh1gy6rc</a>

Lemme know what you agree with\don't agree with if you check it out.

snooggums

<!--quoteo(post=1767353:date=Apr 16 2010, 02:38 PM:name=Chris0132)--><div class='quotetop'>QUOTE (Chris0132 @ Apr 16 2010, 02:38 PM) <a href="index.php?act=findpost&pid=1767353"><{POST_SNAPBACK}></a></div><div class='quotemain'><!--quotec-->Well it doesn't tarnish easily which is helpful, but it's heavy as hell and very weak structurally.

I would imagine in most situations it would be easier to just use aluminium or stainless steel, both of which are lighter, stronger, mass producable, and have similar nonreactive properties as far as most things are concerned.<!--QuoteEnd--></div><!--QuoteEEnd-->

You don't use gold in the same applications as other metals.

Stainless steel is used in kitchens because it doesn't rust. Aluminum is used on planes because it is resistant to rust, lighter than steel and has the properties that planes require. Car bodies are made from rubber, steel, carbon fiber, etc because the properties of the metal or compound fit the use.

Gold actually has uses. Satellites and spacecraft often have thin gold coatings on parts as the metal is the appropriate metal for the job. While Monster cables with gold tips are a waste for the consumer market there are applications in electronics where the properties are useful such as in sensors. Gold's lack of a strong structure makes it more flexible and so on.

No one would suggest making structural supports for buildings out of gold, there are many other uses for it.

Draco_2k

<!--quoteo(post=1767741:date=Apr 19 2010, 02:53 AM:name=aeroripper)--><div class='quotetop'>QUOTE (aeroripper @ Apr 19 2010, 02:53 AM) <a href="index.php?act=findpost&pid=1767741"><{POST_SNAPBACK}></a></div><div class='quotemain'><!--quotec-->Draco if you're interested in reading that book, the author gives lectures to audiences on the subject. Here is a brief, hour long overview he gave of his book on youtube:

<a href="http://www.youtube.com/watch?v=F3TAh1gy6rc" target="_blank">http://www.youtube.com/watch?v=F3TAh1gy6rc</a>

Lemme know what you agree with\don't agree with if you check it out.<!--QuoteEnd--></div><!--QuoteEEnd-->
That is brilliant, thanks a lot.

Pretty much all of the speech coincides with my research into and knowledge on the matter. Indeed the only single point of contention I can think of is him pointing out that banks can directly loan out 10 times the amount of money they have rather than having to jump through hoops of redeposit, but that could be a simplification on his part, as is needed to talk about subject at all. The NWO talk at the end also, unnervingly, checks out.

The one thing I can add from myself - not entirely surely why it wasn't mentioned in the video, actually - is the effect created by the virtue of all money being created through loan: when you charge interest on all money in circulation, there is never enough to pay back, unless you create new money from yet new loan. There's an official term for that, and a number of implications, but figuring these out on your own, I think, would be a lot more valuable.

Highly recommended lecture to everyone else.

aeroripper

<!--quoteo--><div class='quotetop'>QUOTE </div><div class='quotemain'><!--quotec-->Pretty much all of the speech coincides with my research into and knowledge on the matter. Indeed the only single point of contention I can think of is him pointing out that banks can directly loan out 10 times the amount of money they have rather than having to jump through hoops of redeposit, but that could be a simplification on his part, as is needed to talk about subject at all.<!--QuoteEnd--></div><!--QuoteEEnd-->

I'm not sure I understand what you mean. The banks are required by law to have a minimum 10% reserve of deposits to cover any withdrawls, which works for a while until for whatever reason, a lot of people want their deposits back immediately. Say the bank has $100.00 in its vault John deposited. Larry comes to the loan window, and they approve him for a loan of $900 with interest. Since the bank still technically has 10% of John's original deposit to cover any normal bank withdrawls. From my understanding, the bank can loan out however much they want to, as long as their total deposits make up 10% of the total amount of all the loans made from the bank.

The math doesn't add up, but I believe the feat is accomplished by an accounting gimmick by recording the loan as an asset and a liability. If they borrower isn't able to pay, they have to write it off, but the majority of the time they pay the entire loan back to the bank, even though they just created the money out of nothing for them. It's all a fraud essentially, and it works as long as everyone keeps enough of their desposits with the bank.

I think I explained it correctly, the book covers this much better than I can but that is how I understand it.

<!--quoteo--><div class='quotetop'>QUOTE </div><div class='quotemain'><!--quotec-->The one thing I can add from myself - not entirely surely why it wasn't mentioned in the video, actually - is the effect created by the virtue of all money being created through loan: when you charge interest on all money in circulation, there is never enough to pay back, unless you create new money from yet new loan. There's an official term for that, and a number of implications, but figuring these out on your own, I think, would be a lot more valuable.<!--QuoteEnd--></div><!--QuoteEEnd-->

The comercial banks aren't able to charge interest on every dollar in circulation, just loans. The Federal Reserve does charge interest to the government when it creates money for Congress though. If the government, corporations, and citizens decided to just pay back all their loans and debt to the banks and the Fed, all those dollars would simply vanish from the money supply. But since we are forced to use Fed notes to pay back these debts, there is always a demand for more of them.

<!--quoteo--><div class='quotetop'>QUOTE </div><div class='quotemain'><!--quotec-->The NWO talk at the end also, unnervingly, checks out.<!--QuoteEnd--></div><!--QuoteEEnd-->

He touched on it well enough in the lecture, but the book lays it out pretty meticulously in the last section. It makes an impact by the time you understand the technical underpinnings of it in the preceding sections. He wrote the book with the same kind of humor used in the lecture, which helps to lighten the otherwise complex subject matter. I know Ron Paul has read this book, and now I understand where he is coming from on the importance of minimal government and having money backed by gold. I also know people have gone to court to get their bank loans challenged and written off, usually citing information from this book. Although I disagree with that (and apparantly so does the author) since the taxpayer is the one holding the bag if those banks fail.

Draco_2k

<!--quoteo(post=1767943:date=Apr 20 2010, 06:08 AM:name=aeroripper)--><div class='quotetop'>QUOTE (aeroripper @ Apr 20 2010, 06:08 AM) <a href="index.php?act=findpost&pid=1767943"><{POST_SNAPBACK}></a></div><div class='quotemain'><!--quotec-->I'm not sure I understand what you mean. The banks are required by law to have a minimum 10% reserve of deposits to cover any withdrawls, which works for a while until for whatever reason, a lot of people want their deposits back immediately. Say the bank has $100.00 in its vault John deposited. Larry comes to the loan window, and they approve him for a loan of $900 with interest. Since the bank still technically has 10% of John's original deposit to cover any normal bank withdrawls. From my understanding, the bank can loan out however much they want to, as long as their total deposits make up 10% of the total amount of all the loans made from the bank.<!--QuoteEnd--></div><!--QuoteEEnd-->
This is the ultimate outcome, but it's not like that directly: the bank can't just loan X times the amount it has, rather, it's required to keep 10% of its money as a reserve and loan the rest. The catch is, however, that the loaned money does not come out of its pockets when loaning, and the mathematical average of re-depositing and adding the remaining 90% in the system and then 90% of those 90% and so on creates, as a whole, exactly nine times the original amount.

My understanding might be incorrect, or the first might be further simplification - as my explanation ultimately is as well - but both describe the exact same outcome.

<!--quoteo(post=1767943:date=Apr 20 2010, 06:08 AM:name=aeroripper)--><div class='quotetop'>QUOTE (aeroripper @ Apr 20 2010, 06:08 AM) <a href="index.php?act=findpost&pid=1767943"><{POST_SNAPBACK}></a></div><div class='quotemain'><!--quotec-->The math doesn't add up, but I believe the feat is accomplished by an accounting gimmick by recording the loan as an asset and a liability. If they borrower isn't able to pay, they have to write it off, but the majority of the time they pay the entire loan back to the bank, even though they just created the money out of nothing for them. It's all a fraud essentially, and it works as long as everyone keeps enough of their desposits with the bank.<!--QuoteEnd--></div><!--QuoteEEnd-->
I believe it actually works at all because of the concept of bankruptcy. If the bank HAD to take back money, they'd never accomplish it, because they're ultimately asking for more money than there is in existence. What this doesn't cover are the bank runs, people trying to extract more money from the bank than it ultimately has.

Bail-outs also go in category of damage-control here, but they're more about book-keeping than anything tangible, just some more hidden tax on imaginary concepts to keep the books clean.

<!--quoteo(post=1767943:date=Apr 20 2010, 06:08 AM:name=aeroripper)--><div class='quotetop'>QUOTE (aeroripper @ Apr 20 2010, 06:08 AM) <a href="index.php?act=findpost&pid=1767943"><{POST_SNAPBACK}></a></div><div class='quotemain'><!--quotec-->The comercial banks aren't able to charge interest on every dollar in circulation, just loans. The Federal Reserve does charge interest to the government when it creates money for Congress though. If the government, corporations, and citizens decided to just pay back all their loans and debt to the banks and the Fed, all those dollars would simply vanish from the money supply. But since we are forced to use Fed notes to pay back these debts, there is always a demand for more of them.<!--QuoteEnd--></div><!--QuoteEEnd-->
Quite right. I'm fairly sure the situation would exist even without the fed: even assuming the government can just freely create money, it would still have to battle banks creating money on their own through fractional reserve or similar in effect book-keeping, and in that produce even more inflation. The thing to keep in mind is that it doesn't matter what you use as money, as long as loan statements, checks, notes and so on are also used to pay for things, the money creation will be a possibility. Indeed that's where the system originates, among gold-backed paper money.

As I pointed out earlier, it might be mind-bending at first, but ultimately convenient to think of money as form of debt: if there's no debt, there's no money, if there's no money, there's no debt, because money is created out of an *as* a debt, ultimately a debt to the bank that produced it.

Draco_2k

PS: I'm getting the impression that the next wave of current financial crisis might hit in a month or so, housing bubble as the origin point yet again.

Update: Looks like I'm not the only one suspecting that.

<!--QuoteBegin-Unreliable source+--><div class='quotetop'>QUOTE (Unreliable source)</div><div class='quotemain'><!--QuoteEBegin-->This afternoon a local radio talk show host reported that he had been in contact with a member of the military. This military source stated that the armed forces have been alerted to the strong possibility that civil unrest may occur in the United States this summer, prior to the midterm elections of 2010.<!--QuoteEnd--></div><!--QuoteEEnd-->

Chris0132

That's clever, how they can see into the future like that.

Draco_2k

It's an easy feat when you're the one making it.

snooggums

An unreliable source said something to a radio talk show host about a possibility of civil unrest? My guess:
Host: Republican shill
Source: The host's writer
The source of the unrest: Lies told on the radio show by the Republican shill host about a grassroots outrage about something illogical like protesting the raising of taxes when taxes are at a record low.
Odds of any unrest: Zero, but some people in costumes might make public fools of themselves.

Draco_2k

That's why I noted it's an unreliable source. A rumour, frankly.

Still, I'd like to note I believe a similar scenario - more precisely something that you'd normally expect to lead to it - in US, EU and formations with financial ties to them is a distinct possibility, for anyone interested. Whether or not there's any public reaction depends on how well-informed the public is as to what's going on, which we aren't.

Again, no sources, don't take my word for it.

aeroripper

<!--quoteo--><div class='quotetop'>QUOTE </div><div class='quotemain'><!--quotec-->This is the ultimate outcome, but it's not like that directly: the bank can't just loan X times the amount it has, rather, it's required to keep 10% of its money as a reserve and loan the rest. The catch is, however, that the loaned money does not come out of its pockets when loaning, and the mathematical average of re-depositing and adding the remaining 90% in the system and then 90% of those 90% and so on creates, as a whole, exactly nine times the original amount.
My understanding might be incorrect, or the first might be further simplification - as my explanation ultimately is as well - but both describe the exact same outcome.<!--QuoteEnd--></div><!--QuoteEEnd-->

John deposits $100.00. Larry wants a loan, the bank approves him for $900. I'm not sure why its 9x the amount of the deposit beyond the limitation of the 10% reserve. It seems a bit arbitrary. Just doing the basic math itself, the bank would only be able to loan Larry $90, since then they would still have their 10%, $10.00 reserve left in the bank to handle a small withdrawl from John. I do remember my head exploding reading that portion in the book, but I don't recall the exact details of how that feat is accomplished mathmatically. I'm assuming it doesn't work out at all if the depositor actually withdrew more than his $10.00 reserve the bank actually has, and the whole practice is an accounting fraud, and similar to gambling with money you don't have. The whole thing collapses if the depositor gets wise and demands more than $10.00 back from the bank, assuming there is no intervention by the state or national central bank.

<!--quoteo--><div class='quotetop'>QUOTE </div><div class='quotemain'><!--quotec-->I believe it actually works at all because of the concept of bankruptcy. If the bank HAD to take back money, they'd never accomplish it, because they're ultimately asking for more money than there is in existence. What this doesn't cover are the bank runs, people trying to extract more money from the bank than it ultimately has.
Bail-outs also go in category of damage-control here, but they're more about book-keeping than anything tangible, just some more hidden tax on imaginary concepts to keep the books clean.<!--QuoteEnd--></div><!--QuoteEEnd-->

The bank can take back money, but they prefer to keep the loan out as long as possible to get more interest on it, much moreso now under the Federal Reserve System. Bank runs used to cause these banks to close their doors due to these deceptive practices, but under the current system money is printed by the Fed and rushed to their location to cover the withdrawls. This is not unlike the practice used by the old wildcat banks of the west. They used to keep a barrel full of nuts and bolts in public view with a layer of gold coins on top to quiet the worries of the depositors that they didn't have their money. They usually were able to get another bank to rush them some fresh money (literally) moments before the government inspector came to check their reserves. If not, they were forced to close their doors or fined (which pretty much is a loss of confidence which causes them to close anyways). Essentially the Fed has 3 options now when a bank is unable to pay back its depositors due to being loaned up.

1) Let them fail, the depositors lose everything. More common with smaller banks.

2) Fold the bank and merge it into a larger, less loaned up bank that is able to handle the withdrawl demand.

3) Get Congress to use tax dollars to bailout the bank. I also believe they use inflation to do this as well, but prefer tax dollars since they're already in circulation and won't have to debase the currency more often then they need to.

<!--quoteo--><div class='quotetop'>QUOTE </div><div class='quotemain'><!--quotec-->Quite right. I'm fairly sure the situation would exist even without the fed: even assuming the government can just freely create money, it would still have to battle banks creating money on their own through fractional reserve or similar in effect book-keeping, and in that produce even more inflation. The thing to keep in mind is that it doesn't matter what you use as money, as long as loan statements, checks, notes and so on are also used to pay for things, the money creation will be a possibility. Indeed that's where the system originates, among gold-backed paper money.
As I pointed out earlier, it might be mind-bending at first, but ultimately convenient to think of money as form of debt: if there's no debt, there's no money, if there's no money, there's no debt, because money is created out of an *as* a debt, ultimately a debt to the bank that produced it.<!--QuoteEnd--></div><!--QuoteEEnd-->

The government is constitutionally restricted from printing their own fiat money. This was mainly due to the havoc fractional reserve caused in the colonies, and the fiat notes created to finance the revolutionary war. Unfortunately, the founders didn't think to add a restriction on the usage of a private "bank" to augment funding of the government. You would think this would have been a given, seeing as how the Bank of England pretty much funded the development of the massive royal navy used against them in the revolution.

If our dollars were fully backed by gold, then bankers would merely be collecting a reasonable fee to store and provide security for our gold stockpiles, which represent the real money behind the paper dollars we carry around. It's a bit more honest living, but much less profitable. Our dollar has been using fractional reserve on the state and federal level for the majority of our history, and other instances like greenbacks (fully fiat) used by Lincoln during the civil war. I am fairly sure we have never had 100% gold back dollars in this country, but if so, someone please correct me.

You are spot on about our debt based dollars, and how it is impossible for us to get fully out of debt as long as we can only use Fed notes to pay it back. Now if we were to allow competition between currencies again, then you would likely see gold backed dollars (or whatever they would be called) quickly becoming the preferred monetary unit over fiat Fed notes and a favorable conversion ratio for the currencies backed by real assets like gold. That is a solution to pay back our $12+ trillion national debt.

<!--quoteo--><div class='quotetop'>QUOTE </div><div class='quotemain'><!--quotec-->PS: I'm getting the impression that the next wave of current financial crisis might hit in a month or so, housing bubble as the origin point yet again.<!--QuoteEnd--></div><!--QuoteEEnd-->

All of this below is my own understanding on the subject, feel free to correct me or add anything:

The Fed merely inflated the currency to buy up all those "toxic assets" from the banks that were unable to pay their depositors
back when their crazy sub-prime mortgage loans failed and they had to write them off. All the investment companies and other financial instruments gorged on the wave of cheap credit provided by the Fed and other central banks during the early part of the decade, and invested in the housing market which artificially drove up prices in certain areas of the country (and the world) until the bubble popped in late '08, and the true values of the homes were trying to resurface after the market started cleansing itself of the inflated prices given to them. This was not allowed to happen, and Fannie May and Freddie Mac became subsidized by taxpayer dollars and currency inflation. A number of other banks, insurance companies, and corporations that were hurt by this speculative bubble were also bailed out, although many have since paid back their bailout debt.

I'm not sure if they've gotten right back into reinvesting into the housing market, or have moved on to another market such as green energy. The problem with having businesses going to the banks to get loans because of cheap credit, is that it encourages them to invest in things that aren't always in sync with the laws of supply and demand that a normal free market regulates automatically. The artificial investment caused by low interest credit and bank loans causes people to go crazy buying things they realize they don't need/want/afford and they eventually go broke or realize its folly and stop buying those things. This can cause these artifical markets to collapse very quickly if they're not built on a solid understanding of what people historically want and need from the market. This is the nature of the boom and bust cycle we've been living with, at least nationally, for almost a century.

I think what has hurt us economically the most (beyond fiat dollars) is the loss of confidence in our monetary unit from foreign nations. We currently have the privledge of having the world's reserve currency, which means there is always demand for nations to buy up U.S. debt (dollars) in times of uncertainty with their own currency. China has certainly been buying up most of it as of late, and is financing our current wars and expanding welfare state. Although it is benefiting them currently to be getting so much investment from U.S. corporations due to their massive holdings of government debt, they're at the same time pegging their value of the currency to bleed our manufacturing base dry to build up their own country. This in conjunction with NAFTA and other forthcoming agreements, will severely hurt our chances of quick recovery once the world dumps the dollar as the reserve currency. Petrodollars also play another role in the demand for dollars, but our intervention in the Mideast will likely stall this for a little while longer.

<!--quoteo--><div class='quotetop'>QUOTE </div><div class='quotemain'><!--quotec-->This afternoon a local radio talk show host reported that he had been in contact with a member of the military. This military source stated that the armed forces have been alerted to the strong possibility that civil unrest may occur in the United States this summer, prior to the midterm elections of 2010.<!--QuoteEnd--></div><!--QuoteEEnd-->

It might be just anecdotal evidence, or maybe he's just fibbing a bit to get a bigger radio audience, but if it is true wouldn't be surprised by this at all. I'm sure they have all kinds of contingencies for all different kinds of scenarios. There is much more I could say on the issue, but this post is already long enough lol.

What's disappointing to me is that I see the same old Republicans vs. Democrats theater being played out in the media. A minority (but growing?) segment of the Republican party sees Obama as a "socialist" or an "Obamanation" that is facilitating the destruction of the country. Beyond the empty slogans, what they fail to understand is that our country has already had elements of socialism for some time, and that our monetary system itself encourages its gradual enroachment over our society. Whatever political model you wish to attach it to (facism, socialism, communism, democracy, republic), fiat money encourages the growth of government in any of these systems at the expense of individual freedom.

Chris0132

America really has a weird aversion to socialism.

I really don't get why, it works very nicely over here. It's one of the nicest things about living in the UK to be honest.

Draco_2k

<!--quoteo(post=1768078:date=Apr 21 2010, 05:30 AM:name=aeroripper)--><div class='quotetop'>QUOTE (aeroripper @ Apr 21 2010, 05:30 AM) <a href="index.php?act=findpost&pid=1768078"><{POST_SNAPBACK}></a></div><div class='quotemain'><!--quotec-->John deposits $100.00. Larry wants a loan, the bank approves him for $900. I'm not sure why its 9x the amount of the deposit beyond the limitation of the 10% reserve. It seems a bit arbitrary. Just doing the basic math itself, the bank would only be able to loan Larry $90, since then they would still have their 10%, $10.00 reserve left in the bank to handle a small withdrawl from John. I do remember my head exploding reading that portion in the book, but I don't recall the exact details of how that feat is accomplished mathmatically. I'm assuming it doesn't work out at all if the depositor actually withdrew more than his $10.00 reserve the bank actually has, and the whole practice is an accounting fraud, and similar to gambling with money you don't have. The whole thing collapses if the depositor gets wise and demands more than $10.00 back from the bank, assuming there is no intervention by the state or national central bank.<!--QuoteEnd--></div><!--QuoteEEnd-->
It's somewhat hard to wrap your head around, and there's a lot of bureaucracy involved.

The general gist is that the bank does not at all give out 9 times the amount they have, possibly so it doesn't look like a fraud outright. They give out 90% of what they have. The crunch of the matter, and the legal loophole, is that they don't have to support that 90% give-away with any form of money at all, but only their book-keeping record, and so do not actually part with that money. And then this newly-created money is also available for loaning in a similar fashion, which creates new money, which creates new money, and so on...

The outcome of which is, the banks can loan out 9 times the amount they have given enough transactions. All of which is created out of nothing, including the starting sum. That's the important part.

The way this particular distinction is important is because it illustrates how important the interest rate is in this scheme: it controls how likely people are to borrow, and thus how fast the inflation accelerates. And I think you know who controls the interest rates.

<!--quoteo(post=1768078:date=Apr 21 2010, 05:30 AM:name=aeroripper)--><div class='quotetop'>QUOTE (aeroripper @ Apr 21 2010, 05:30 AM) <a href="index.php?act=findpost&pid=1768078"><{POST_SNAPBACK}></a></div><div class='quotemain'><!--quotec-->The bank can take back money, but they prefer to keep the loan out as long as possible to get more interest on it, much moreso now under the Federal Reserve System. Bank runs used to cause these banks to close their doors due to these deceptive practices, but under the current system money is printed by the Fed and rushed to their location to cover the withdrawls.<!--QuoteEnd--></div><!--QuoteEEnd-->
That is exactly right. This is also open fraud neighbouring on conspiracy, frankly.

<!--quoteo(post=1768078:date=Apr 21 2010, 05:30 AM:name=aeroripper)--><div class='quotetop'>QUOTE (aeroripper @ Apr 21 2010, 05:30 AM) <a href="index.php?act=findpost&pid=1768078"><{POST_SNAPBACK}></a></div><div class='quotemain'><!--quotec-->The government is constitutionally restricted from printing their own fiat money. This was mainly due to the havoc fractional reserve caused in the colonies, and the fiat notes created to finance the revolutionary war. Unfortunately, the founders didn't think to add a restriction on the usage of a private "bank" to augment funding of the government. You would think this would have been a given, seeing as how the Bank of England pretty much funded the development of the massive royal navy used against them in the revolution.

If our dollars were fully backed by gold, then bankers would merely be collecting a reasonable fee to store and provide security for our gold stockpiles, which represent the real money behind the paper dollars we carry around. It's a bit more honest living, but much less profitable. Our dollar has been using fractional reserve on the state and federal level for the majority of our history, and other instances like greenbacks (fully fiat) used by Lincoln during the civil war. I am fairly sure we have never had 100% gold back dollars in this country, but if so, someone please correct me.

You are spot on about our debt based dollars, and how it is impossible for us to get fully out of debt as long as we can only use Fed notes to pay it back. Now if we were to allow competition between currencies again, then you would likely see gold backed dollars (or whatever they would be called) quickly becoming the preferred monetary unit over fiat Fed notes and a favorable conversion ratio for the currencies backed by real assets like gold. That is a solution to pay back our $12+ trillion national debt.<!--QuoteEnd--></div><!--QuoteEEnd-->
That's all quite right too.

The issue I was trying to get at, besides the perpetual debt and all its implications, is that such a system is relatively currency-agnostic: as long as you have exchange of notes in place of actual goods anywhere in the system at all - this includes loans, IOUs, metal-backed currency, and so on - the system can be perpetuated and, indeed, that's where it originates. Fiat is more convenient for the purpose, but it's not the start. What's worse, going back to hauling around lumps of metal in the modern world is just not a possibility.

Yet again worse, the issue - if you look at the big picture for a moment, not just banking and such - is the concept of producing money by producing... Nothing. This act itself can result in nothing but inflation and devaluation, because the amount of tangible goods does not increase with increase in money supply. It doesn't matter if money from money comes from the bank, or wall-street, or gambling, or producing and buying useless things, the implications of this are much more grievous and much more encompassing than banking fraud alone, simply because it concerns reality: real finite supply of resources and labour here, on Earth.

This is a problem with concept of money in general, with chasing non-existent value of papers or coins. We have long lived at a point when producing useless toys, junk food, false hope and monetary fraud is a hundredfold more profitable than investigating new technology, feeding the world, or helping the environment. And if there's no profit to be made, it won't be done.

<!--quoteo(post=1768078:date=Apr 21 2010, 05:30 AM:name=aeroripper)--><div class='quotetop'>QUOTE (aeroripper @ Apr 21 2010, 05:30 AM) <a href="index.php?act=findpost&pid=1768078"><{POST_SNAPBACK}></a></div><div class='quotemain'><!--quotec-->All of this below is my own understanding on the subject, feel free to correct me or add anything:

The Fed merely inflated the currency to buy up all those "toxic assets" from the banks that were unable to pay their depositors
back when their crazy sub-prime mortgage loans failed and they had to write them off. All the investment companies and other financial instruments gorged on the wave of cheap credit provided by the Fed and other central banks during the early part of the decade, and invested in the housing market which artificially drove up prices in certain areas of the country (and the world) until the bubble popped in late '08, and the true values of the homes were trying to resurface after the market started cleansing itself of the inflated prices given to them. This was not allowed to happen, and Fannie May and Freddie Mac became subsidized by taxpayer dollars and currency inflation. A number of other banks, insurance companies, and corporations that were hurt by this speculative bubble were also bailed out, although many have since paid back their bailout debt.

I'm not sure if they've gotten right back into reinvesting into the housing market, or have moved on to another market such as green energy. The problem with having businesses going to the banks to get loans because of cheap credit, is that it encourages them to invest in things that aren't always in sync with the laws of supply and demand that a normal free market regulates automatically. The artificial investment caused by low interest credit and bank loans causes people to go crazy buying things they realize they don't need/want/afford and they eventually go broke or realize its folly and stop buying those things. This can cause these artifical markets to collapse very quickly if they're not built on a solid understanding of what people historically want and need from the market. This is the nature of the boom and bust cycle we've been living with, at least nationally, for almost a century.

I think what has hurt us economically the most (beyond fiat dollars) is the loss of confidence in our monetary unit from foreign nations. We currently have the privledge of having the world's reserve currency, which means there is always demand for nations to buy up U.S. debt (dollars) in times of uncertainty with their own currency. China has certainly been buying up most of it as of late, and is financing our current wars and expanding welfare state. Although it is benefiting them currently to be getting so much investment from U.S. corporations due to their massive holdings of government debt, they're at the same time pegging their value of the currency to bleed our manufacturing base dry to build up their own country. This in conjunction with NAFTA and other forthcoming agreements, will severely hurt our chances of quick recovery once the world dumps the dollar as the reserve currency. Petrodollars also play another role in the demand for dollars, but our intervention in the Mideast will likely stall this for a little while longer.<!--QuoteEnd--></div><!--QuoteEEnd-->
I would concur with that. Or at least most of it.

In my mind, such booms and busts are inevitable simply because these loans produce, eventually, more money than there is in the system to be paid or earned back. The booms and busts of the business cycle to this extent, are in full control of the Fed and how much exactly do they want to give out or hold back. It's not a natural occurrence, it's impossible to predict before it started... And my prediction rests on the first few signs of collapse in the housing bubble, based mainly on testimony of few involved people.

Whether this has any impact on the public at all depends solely on whether its informed about it: the fiat money has indeed no more value than there is faith in it. It may just be a quiet re-distribution of wealth as usual. There is, however, a more unfortunate possibility for both the banks and the people, in that the cyclical pyramid created by the scheme of perpetual loan can and will collapse when it hits its limits, and those are, as they have always been: how much resources do we have left? How much metal, wood, oil or gas do we have? Once the mines start running dry, it doesn't matter how much money you print in addition.

What happens to US specifically, I don't know. On one hand, it's in deep ###### and has been for a while, on the other, it can freely threaten, persuade, buy out or invade anyone who somehow doesn't want to help it because their financial stability is tied together anyway due to the free market and IMF injections. US itself isn't the player here, it doesn't own any money, or debt. The banks do.

<!--quoteo(post=1768078:date=Apr 21 2010, 05:30 AM:name=aeroripper)--><div class='quotetop'>QUOTE (aeroripper @ Apr 21 2010, 05:30 AM) <a href="index.php?act=findpost&pid=1768078"><{POST_SNAPBACK}></a></div><div class='quotemain'><!--quotec-->It might be just anecdotal evidence, or maybe he's just fibbing a bit to get a bigger radio audience, but if it is true wouldn't be surprised by this at all. I'm sure they have all kinds of contingencies for all different kinds of scenarios. There is much more I could say on the issue, but this post is already long enough lol.<!--QuoteEnd--></div><!--QuoteEEnd-->
It's pretty much worthless, but first signs rarely come in any other format. I'll post if I come across anything reliable on the matter.

<!--quoteo(post=1768078:date=Apr 21 2010, 05:30 AM:name=aeroripper)--><div class='quotetop'>QUOTE (aeroripper @ Apr 21 2010, 05:30 AM) <a href="index.php?act=findpost&pid=1768078"><{POST_SNAPBACK}></a></div><div class='quotemain'><!--quotec-->What's disappointing to me is that I see the same old Republicans vs. Democrats theater being played out in the media. A minority (but growing?) segment of the Republican party sees Obama as a "socialist" or an "Obamanation" that is facilitating the destruction of the country. Beyond the empty slogans, what they fail to understand is that our country has already had elements of socialism for some time, and that our monetary system itself encourages its gradual enroachment over our society. Whatever political model you wish to attach it to (facism, socialism, communism, democracy, republic), fiat money encourages the growth of government in any of these systems at the expense of individual freedom.<!--QuoteEnd--></div><!--QuoteEEnd-->
I'd wager the most reliable source of information on these matters would be Fox news.

We all know they peddle government's (not just elected one) agenda, so whatever they report - or don't report - is what the government wants people to think, and from there it's only step to what they want to do.

Politics in general, at least as they exist now... I personally view as a convenient mask over the face of true rulers to make the public believe they have any say in anything.

<!--quoteo(post=1768092:date=Apr 21 2010, 09:12 AM:name=Chris0132)--><div class='quotetop'>QUOTE (Chris0132 @ Apr 21 2010, 09:12 AM) <a href="index.php?act=findpost&pid=1768092"><{POST_SNAPBACK}></a></div><div class='quotemain'><!--quotec-->America really has a weird aversion to socialism.

I really don't get why, it works very nicely over here. It's one of the nicest things about living in the UK to be honest.<!--QuoteEnd--></div><!--QuoteEEnd-->
It's probably the red scare still making its way through memetic wavelengths.

Damn all those communists at fire department...

Chris0132

I don't get the 'red scare' either. Pure communism kind of doesn't work too well but that's hardly a reason to be afraid of it, and certainly not a reason to oppose everything that it does or that is/was a part of it.

Draco_2k

It has nothing to do with logic, and all to do with emotion. For all our prized brains that are supposed to make us bigger and better than other animals, we're still just a bunch of monkeys.

More importantly, opposition to communism is extremely important for a nation resting on corporate profit. Not the real communism as it exists or ever existed - it too lives off money, profit, political power, the usual - but the notion of just having people work together, without reliance on making money. It's a very direct opposition that way.

snooggums

<!--quoteo(post=1768092:date=Apr 21 2010, 01:12 AM:name=Chris0132)--><div class='quotetop'>QUOTE (Chris0132 @ Apr 21 2010, 01:12 AM) <a href="index.php?act=findpost&pid=1768092"><{POST_SNAPBACK}></a></div><div class='quotemain'><!--quotec-->America really has a weird aversion to socialism.

I really don't get why, it works very nicely over here. It's one of the nicest things about living in the UK to be honest.<!--QuoteEnd--></div><!--QuoteEEnd-->

We have a lot of socialist programs in the US, people just don't understand that they are socialist, or if they do, they have no problem with <i>that</i> socialist program but don't want <i>this</i> socialist program because they benefit from <i>that</i> program and don't think or understand they benefit from <i>this</i> one. Basically, they don't mind pooling resources as long as they get more out of it than they put in individually in a way that they can see, like fire departments, roads and police departments.

juice

<!--quoteo(post=1768144:date=Apr 21 2010, 09:11 AM:name=snooggums)--><div class='quotetop'>QUOTE (snooggums @ Apr 21 2010, 09:11 AM) <a href="index.php?act=findpost&pid=1768144"><{POST_SNAPBACK}></a></div><div class='quotemain'><!--quotec-->We have a lot of socialist programs in the US, people just don't understand that they are socialist, or if they do, they have no problem with <i>that</i> socialist program but don't want <i>this</i> socialist program because they benefit from <i>that</i> program and don't think or understand they benefit from <i>this</i> one. Basically, they don't mind pooling resources as long as they get more out of it than they put in individually in a way that they can see, like fire departments, roads and police departments.<!--QuoteEnd--></div><!--QuoteEEnd-->

I would agree, but pooling resources and getting more out if it than they put in individually is something that private institutions can do as well. Credit unions are one example. The difference is that government programs are MANDATORY, and that is an important distinction to make.

Corporatism/socialism/whatever is contentious because it is coercive. You can't "opt out" and get your money back. In medicine in the U.S., for example, you can't, as a doctor, decide not to accept Medicare.

Chris0132

The point of socialism isn't to put some in and get more out, if you did that then you'd essentially be making money out of thin air, which is rather hard.

The idea is everyone puts in so that everyone can be in a position to be productive. Most people would probably break even or work at a loss, exceptionally rich people would work at a major loss, and exceptionally poor people gain more than they put in, but the reason they do is so that they can get educations and live in decent houses and not end up with no prospects and turning to crime and all the other probems normally associated with living in poverty.

In a sense you get more out than you put in because it helps the country as a whole to be more productive and thus helps the economy to grow and whatnot, but it isn't a magic money machine that if you put money in at the top you get more out of at the bottom.

Obviously pure socialism doesn't work any more than pure capitalism, but elements of it work very well, socialised healthcare is one of them, nobody seriously suggests getting rid of the NHS because everybody likes 'free' healthcare, well, except for maybe people who are really rich and pay for private, but the overwhelming majority of people like it. The only thing that ever gets proposed is ways to improve it, although to be honest it works pretty well most of the time anyway.

snooggums

<!--quoteo(post=1768207:date=Apr 21 2010, 06:11 PM:name=juice)--><div class='quotetop'>QUOTE (juice @ Apr 21 2010, 06:11 PM) <a href="index.php?act=findpost&pid=1768207"><{POST_SNAPBACK}></a></div><div class='quotemain'><!--quotec-->I would agree, but pooling resources and getting more out if it than they put in individually is something that private institutions can do as well. Credit unions are one example. The difference is that government programs are MANDATORY, and that is an important distinction to make.

Corporatism/socialism/whatever is contentious because it is coercive. You can't "opt out" and get your money back. In medicine in the U.S., for example, you can't, as a doctor, decide not to accept Medicare.<!--QuoteEnd--></div><!--QuoteEEnd-->

<a href="http://www.aapsonline.org/medicare/medrep.htm" target="_blank">http://www.aapsonline.org/medicare/medrep.htm</a>
<!--quoteo--><div class='quotetop'>QUOTE </div><div class='quotemain'><!--quotec--># Almost 25% of doctors refuse to treat new Medicare patients;
# 20% of those who refuse to accept new Medicare patients, do so because of hassles and/or threats from Medicare carriers;
# More than one-third of doctors have trouble finding referral doctors for Medicare patients;
# More than one-third of doctors surveyed are restricting services to Medicare patients;<!--QuoteEnd--></div><!--QuoteEEnd-->

Looks like doctors can refuse to accept medicare by never taking on a medicare patient.

What people fail to realize is that they are paying for the uninsured's medical care already, they are just paying for it indirectly and in a more expensive way by forcing them to use emergency rooms and free clinics that are paid for through private insurance or tax dollars. Making it mandatory simply makes it clear that we are already paying for it and making sure that people have the opportunity to get preventative care instead of emergency room stuff.

juice

<!--quoteo(post=1768289:date=Apr 22 2010, 09:03 AM:name=snooggums)--><div class='quotetop'>QUOTE (snooggums @ Apr 22 2010, 09:03 AM) <a href="index.php?act=findpost&pid=1768289"><{POST_SNAPBACK}></a></div><div class='quotemain'><!--quotec--># Almost 25% of doctors refuse to treat new Medicare patients;
# 20% of those who refuse to accept new Medicare patients, do so because of hassles and/or threats from Medicare carriers;
# More than one-third of doctors have trouble finding referral doctors for Medicare patients;
# More than one-third of doctors surveyed are restricting services to Medicare patients;<!--QuoteEnd--></div><!--QuoteEEnd-->

Yep, looks like government-run health care is the way to go.

Draco_2k

Fellas, you can make a new topic if you want to discuss something else.

Draco_2k

I guess I'll note something else here.

---

<u><b>Inflation</b></u> refers to increase in the total amount of money in circulation, and resulting increase in prices of goods.

An inflation rate of 2% implies that someone created 2% more money to go around, and it - after some time - will result in rise of prices of all things 2%, in a process of natural adjustment of the free market: because the amount of goods does not increase with creation of new money, the market will simply adjust to new size of money supply. Newly created money - inflation - will, so to speak, draw a share of value from other money that already exists. One important thing to note here is that this usually describes a <i>trend</i>, not a single-use static number, and not a total.

<u>For example:</u> assuming yearly inflation rate of 2% and tax rate of 50%, it would take inflation 50 years to overcome taxation in terms of loss of purchasing power for the taxpayer: 50 years of 2% inflation a year is 100% inflation total, now there's twice the money to go around, and so each coin is worth twice less.

---

In actuality, inflation would usually be calculated against previous year, so with constant year-on-year inflation of 2% it would actually be 2% on year one, 4,02% on year two, 6,1% on year three (against the original year) and so on.

There is only one thing in economy that can result in inflation, and that is the creation of new money (or, to be more precise, introduction new money into circulation). Nothing else can produce inflation. Nothing other than increase in availability - not number or quality - of goods and services, uniformly, can avert it.

tjosan

<a href="http://www.monthlyreview.org/100401palley.php" target="_blank">http://www.monthlyreview.org/100401palley.php</a> <- an interesting article on how and why the current recession happened in the context of existing models. It also explains some of the intricacies of the economy - real and financial - though mostly as an afterthought I'd guess.

I'd argue that while this issue of debt and inflation that you've been discussing certainly has it's place, an equally or more important problem is the abandonment of a full employment policy. To quote the article

<!--quoteo--><div class='quotetop'>QUOTE </div><div class='quotemain'><!--quotec-->"The results of the neoliberal model, now well documented, were widening income inequality and detachment of worker wages from productivity growth.13 The severing of the wage-productivity link was brought about by substituting concern with inflation in place of full employment; attacking unions, labor market protections, and the minimum wage; and placing U.S. workers in international competition via globalization.

Economic policy played a critical role in generating these outcomes, with policy weakening the position of workers and strengthening the position of corporations. These new policies can be described in terms of a pen that fenced workers in. The four sides of the pen are globalization, labor market flexibility, small government, and abandoning full employment.

Globalization promotes the internationalization of production that puts workers in international competition. Attacks on the legitimacy of government push privatization, deregulation, and a tax cut agenda that worsens income inequality and squeezes government spending and public investment. The labor market flexibility agenda attacks unions and labor market supports such as the minimum wage, unemployment benefits, employment protections, and employee rights. The adoption of inflation targeting places concern with inflation ahead of full employment, and it also turns over to financial interests the management of central banks and monetary policy.14 "<!--QuoteEnd--></div><!--QuoteEEnd-->

Basically, as wages are pressed and debt increases the link between wages and demand on products (-> productivity and economical growth is severed, hinging the (in)stability of the economy entirely to the financial sector. "Financial innovation, financial deregulation, regulatory capture, and changed investor attitudes to risk" then comes naturally as described by Minsky.