Post: #351

(07-11-2015 04:01 AM)michelin Wrote:  Funny no one mentioned that the eurocrats have raised their own skyhigh salaries over the past few years while cutting down Greece pensions.

I read somewhere Yanis Varoufakis, now ex-Minister of Finance of Greece, is holding speeches and lectures as a part time job.

Before he became a celebrity, he demanded around 1000 Euro for a speech. After the last crisis he will be able to ask for up to 25000 Euro for every "performance" due to his increased publicity.

Although he played a substantial part in digging the hole for greece even further, the whole process played out very well for him in the end. And that's the story of almost all modern politicians in the west. Although wreaking havoc on the nations they're responsible for, they'll almost always make their cut, living happily until the end of their lives at the expense of everyone else.

Post: #352

(07-06-2015 02:23 AM)KorbenDallas Wrote:  What did greek people aged 18-25 ever agree to that they're not honoring? Also, 92% of the bailout went to banks. Banks that knew the loans were unpayable and that would only saddle children to financial slavery they never consented to.

Correct. How can you act with honour to a usurer? It is like saying a man should be a gentleman to a feminist. Both the debtor and the gentleman will end up in poverty and in jail.




Doesn't the notion of people who are yet to be born being destined to expend all their working lives to pay off the usury from capital that was created out of nothing sound suspiciously like the human batteries in the Matrix?

Power = Work/ Time

Therefore

Work = Power x Time

A productive man needs intellectual, managerial or physical power over a unit of time to produce work.

Since bartering ended, we know that money facilitated the free exchange between the producer of work and the consumer of work. The free market of course would impose different values on different work inputs.

Now take the usurer. His most important advantage that he has over the producer in the above formula is time (he boasts time = money). The worker cannot work 24 hours a day and within his 8-hour working day, fatigue decreases his productivity. Moreover, the worker cannot work for all of his life. All things considered, a worker's productivity across his entire life is less than 50%.

The usurer in contrast not only receives an unearned (read, unworked) income, governments' rentier laws ensure that he can receive wealth 24/7, 365 days per year and for all of his life and his descendants' lives after him. Worse, when the worker tires over time and age, compound usury increases the usurer's wealth and his ability to lend even more at compound rates. Here is the secret of why the rich get richer and the poor get poorer but few SJWs would ever target the usurer - instead favouring the higher-level producers and providers which in the West is traditionally (mostly), the white, middle-class, heterosexual man/ father.

Assuming that in a natural, productive free market that a unit of money is exchanged (read deemed equal) to a unit of work, what does the equation look like for the usurer?

Work = Money = Time = Power. We can see that this is mathematically, scientifically and naturally perverse.

We can see that the usurer receives money/ work by receiving power with unlimited time.

Where does he get this power? The worker of course by capturing the governments that democracy elects so that tax and interest can be legally (as opposed to ethically) extracted from a mortgaged population!

Remember that the SI unit of Work is the Joule. Joule is the unit of energy too. Therefore when you pay indebted (read bonded) governments income tax, hidden sales taxes, VAT on every productive process from raw material extraction to value-adding engineering, you are paying someone your energy in Joules. When you pay usury on capital to the unproductive, you are paying a parasite your energy in Joules.

Back to my point. People yet unborn have had their Joules already mortgaged to the money power of usury who like the robots in the Matrix use mathematical power (exponential function), coercion and human energy to prosper and to govern as parasite-kings. With every generational cycle, the power over mankind gets stronger. This is why the Old Testament had jubilee years that cancelled debt and freed slaves and allowed the productive fields to be unworked for a period.

This is why usury was deemed SATANIC by most of Christendom.

Post: #353

In Greece.

I'm no economics junkie, but I'll post anything observations that seem interesting.

Post: #354

No.6, I know based on your previous rebuttal ( /thread-48479-...pid1054465 ) that you just want to have a monologue on this, but you're still wrong.

What you are arguing for is communism. Your claim that it is immoral that some people receive incomes from the ownership of assets (which can be interest, dividends, rents) while the worker has to slave away is exactly the same stuff as Karl Marx was saying. You are using "usurer" in place of "capitalist".

As much as you think I'm 'too foolish' to debate with because I don't agree with your point of view, my point remains: there is no moral difference between income received from renting plant / machinery / vehicles / land / real estate, and renting money. There is nothing morally wrong with loans.

Post: #355

Delete.

Post: #356

(07-12-2015 03:15 AM)Phoenix Wrote:  No.6, I know based on your previous rebuttal ( /thread-48479-...pid1054465 ) that you just want to have a monologue on this, but you're still wrong.

What you are arguing for is communism. Your claim that it is immoral that some people receive incomes from the ownership of assets (which can be interest, dividends, rents) while the worker has to slave away is exactly the same stuff as Karl Marx was saying. You are using "usurer" in place of "capitalist".

As much as you think I'm 'too foolish' to debate with because I don't agree with your point of view, my point remains: there is no moral difference between income received from renting plant / machinery / vehicles / land / real estate, and renting money. There is nothing morally wrong with loans.

I don't really see the point in debating with you given that you confuse usury not only with rents but with capitalism too. The capitalist creates wealth from poverty while the usurer poverty from abundance.

So it is little wonder that you come to the wrong conclusion that I am echoing Karl Marx and arguing for Communism. Marx only taught the organisation of labour as the opposition dialectic for organised capital. He never touched the money question.

If Aristotle saw Greece today, he would repeat:

Quote:“The most hated sort, and with the greatest reason, is usury, which makes a gain out of money itself, and not from the natural object of it. For money was intended to be used in exchange, but not to increase at interest. And this term interest, which means the birth of money from money, is applied to the breeding of money because the offspring resembles the parent. Wherefore of an modes of getting wealth this is the most unnatural.”

Post: #357

(07-12-2015 06:36 AM)N°6 Wrote:  I don't really see the point in debating with you given that you confuse usury not only with rents but with capitalism too.

I have $10,000. I buy a tractor for that $10,000. I rent it out to a farmer for $1000 a year. I am now merely a businessman, and by your moral code, good.

I have $10,000. I lend it to a farmer for $1000 a year. He buys a tractor with it. I am now a 'usurer' (lender), and by your moral code, evil.

Please address this arbitrary inconsistency.

Post: #358

(07-12-2015 06:36 AM)N°6 Wrote:  I don't really see the point in debating with you given that you confuse usury not only with rents but with capitalism too. The capitalist creates wealth from poverty while the usurer poverty from abundance.

So it is little wonder that you come to the wrong conclusion that I am echoing Karl Marx and arguing for Communism. Marx only taught the organisation of labour as the opposition dialectic for organised capital. He never touched the money question.

If Aristotle saw Greece today, he would repeat:

Quote:“The most hated sort, and with the greatest reason, is usury, which makes a gain out of money itself, and not from the natural object of it. For money was intended to be used in exchange, but not to increase at interest. And this term interest, which means the birth of money from money, is applied to the breeding of money because the offspring resembles the parent. Wherefore of an modes of getting wealth this is the most unnatural.”

Let it go guys. Actually in a usury-free interest-free money-society small and medium businesses thrive even better as was shown in Woergl/Austria in the 1930s. It's also seen in Switzerland with the WIR, which explains partly why Switzerland continues to have more manufacturing plants than the US/per capita. The reason is because small and mid-size companies had access to cheap capital (almost interest free) which only the big corporations do in the rest of the world (as they are often owned by the big banks and global usurers anyway).

But this discussion leads nowhere, since we might as well desire change in fairy land here.

Greece is just a stepping stone of powers that play their own game.

Quote:European Economics Commissioner Pierre Moscovici, who along with the French government has pressed for a deal to keep Greece in the zone, stressed that the three institutions representing the creditors - the Commission, the IMF and the ECB - agreed there was a basis for loan talks.

http://uk.reuters.com/article/2015/07/12...FR20150712

It looks as if they are set to stay in the Euro zone.

There are talks of temporarily leaving the Euro for 5 years, but I can guarantee you that the Greek people will get clobbered during that period. Yes - tourism may boom, but anything imported will cost a fortune. This simply won't happen or it will be stopped by the Greek people through riots. Usury wins once again and the international banks get their blood - 50-80 billion for the next 3 years. In addition they will have to privatize anything from water to energy with disastrous consequences (as has been proven in many privatized utility companies around the world - lower quality, higher costs - you cannot give a private company power over a monopoly market).

I am just waiting for the big shoe to drop - when the EU commission announces that it is better if Greek finances are administrated by the EU directly. They will sweeten the deal with low-interest loans and an intermittent end of austerity measures. We will see.

Post: #359

(07-12-2015 06:51 AM)Phoenix Wrote:  

(07-12-2015 06:36 AM)N°6 Wrote:  I don't really see the point in debating with you given that you confuse usury not only with rents but with capitalism too.

I have $10,000. I buy a tractor for that $10,000. I rent it out to a farmer for $1000 a year. I am now merely a businessman, and by your moral code, good.

I have $10,000. I lend it to a farmer for $1000 a year. He buys a tractor with it. I am now a 'usurer' (lender), and by your moral code, evil.

Please address this arbitrary inconsistency.

The former example results in merely the transfer of money, while the latter example results in the creation of new money.

Post: #360

No it doesn't, any more than the former results in the creation of a new tractor. If that farmer then lends the tractor to his neighbour, we don't say there are now 3 tractors in existence just because there are 3 parties to loan contracts.

All that 'money as debt', 'fractional reserve banking is the devil' stuff is false and will eventually fade out of the Austrian economics circles too.

Post: #361

Business as usual here. If it weren't for a thing called internet, I'd have no idea what was going on.

Most places accept CC. I offered to pay the hotel in cash, to which the owner said it's not necessary.

Post: #362

(07-12-2015 06:51 AM)Phoenix Wrote:  

(07-12-2015 06:36 AM)N°6 Wrote:  I don't really see the point in debating with you given that you confuse usury not only with rents but with capitalism too.

I have $10,000. I buy a tractor for that $10,000. I rent it out to a farmer for $1000 a year. I am now merely a businessman, and by your moral code, good.

I have $10,000. I lend it to a farmer for $1000 a year. He buys a tractor with it. I am now a 'usurer' (lender), and by your moral code, evil.

Please address this arbitrary inconsistency.

With all due respect. The real life example is rather this:

You have a tractor, you have plenty of money.
You then print now 10.000$ in your private printing press and lend it at interest. Actually you print 1.000.000$ of it and put down your 10.000$ as tractor as collateral (and even that is not adhered to right now).

Also - even if a family that has accumulated massive wealth through centuries and now owns pretty much everything - even if they use actually sound non-fractional-reserve banking, then they have already stolen most of the resources to do it. No one could ever attain even 10% of their level in the future, if 99,99999999% of the world would acknowledge their status.

What you describe in your example is rather more how the Swiss WIR system works. Some mid- to small level entrepreneur made 10.000$ and a tractor with the aid of other investors in the WIR and now is giving it back almost interest free for other people to use. That is more comparable to sound banking - and as I said it's several centuries too late even for that since the big guys already managed to own or control pretty much anything of value.

Post: #363

There are no private printing presses. Banks are debt intermediaries, and in a free market anyone can be a bank:

Their deposit accounts (or historically, banknotes) are liabilities. Compare this to an actual government printing press - every bill printed carries no liability, same as a gold coin.

With regards to the 'rich will accumulate all the capital' question, life doesn't work like that. Children born into money have a bad habit of spending it away. I suppose there are a few cases where families maintain successful dynasties (the Rothschilds would be a good example), but its a drop in the ocean. The world has more than enough self-made billionaires to know that men can succeed regardless of birth:
http://www.forbes.com/sites/afontevecchi...er-before/

The main reason the top 1% have most of the wealth I think comes down to a biological reason. Payoff is not at all linear. It's closer to 'winner takes all' rather than 'everyone gets a share based on their effort'. The leader gets most of the money and the runners-up share the remainder. I think this is just a fact of life generally, and not something that can be avoided by changing people's morals.

Edit: also on the interest-free theories, what is to stop me just buying apartments with the interest free money and renting them out for a free 5% yield?

Post: #364

(07-12-2015 07:23 AM)Phoenix Wrote:  No it doesn't, any more than the former results in the creation of a new tractor. If that farmer then lends the tractor to his neighbour, we don't say there are now 3 tractors in existence just because there are 3 parties to loan contracts.

All that 'money as debt', 'fractional reserve banking is the devil' stuff is false and will eventually fade out of the Austrian economics circles too.

You are shifting goalposts. Initially, you described the situation with yearly payments, but now you have suddenly started comparing the initial situations, before any yearly payments have occurred. Also, I have zero connection to Austrian economics and have never read Mises & C.O. in my life, so take your strawmen elsewhere.

Let's say that there are two people, the lender (capital owner) and the borrower (farmer). Their starting situations look like this:

LENDER: 10 000
BORROWER: 0

Example A: Lender buys a tractor and lends it to the borrower for 1000 a year over a period of 10 years. The situation becomes:

LENDER: 0, 1000 yearly claim
BORROWER: 0, tractor, 1000 yearly debt

After 10 years of payments, the situation is like this:

LENDER: 10 000, (used) tractor
BORROWER: 0

Example B: Lender lends the borrower 10 000 for 1000 a year over a period of 10 years. The borrower uses the 10 000 to buy a tractor. The situation becomes:

LENDER: 0, 1000 yearly claim
BORROWER: 0, 10 000 debt, 1000 yearly debt, tractor

After 10 years of payments, the situation is like this:

LENDER: 10 000, 10 000 claim
BORROWER: 0, (used) tractor, 10 000 debt

Where in Example A both the lender and the borrower haven't moved from their starting positions (except for the used tractor), in the Example B the lender has his 10 000 back, PLUS a claim of additional 10 000 (the original money lent - principal).

Are you claiming that the Example B doesn't leave the lender in a position far superior to that of example A?

Post: #365

Responses and corrections as below, I've also removed 'used' since depreciation only complicates the example unnecessarily:

(07-12-2015 08:09 AM)Handsome Creepy Eel Wrote:  You are shifting goalposts. Initially, you described the situation with yearly payments, but now you have suddenly started comparing the initial situations, before any yearly payments have occurred.
- Not all all
Also, I have zero connection to Austrian economics and have never read Mises & C.O. in my life, so take your strawmen elsewhere.
- That statement was more of an aside than targetted at you, no strawmanning intended.

Let's say that there are two people, the lender (capital owner) and the borrower (farmer). Their starting situations look like this:

LENDER: 10 000
BORROWER: 0

Example A: Lender buys a tractor and lends it to the borrower for 1000 a year over a period of 10 years. The situation becomes:

LENDER: 0, 1000 yearly claim
BORROWER: 0, tractor, 1000 yearly debt

After 10 years of payments, the situation is like this:

LENDER: 10 000, tractor (Total assets: 20,000)
BORROWER: -10,000 (Total assets: -10,000)

Example B: Lender lends the borrower 10 000 for 1000 a year over a period of 10 years. The borrower uses the 10 000 to buy a tractor. The situation becomes:

LENDER: 0 , 1000 yearly claim
BORROWER: 0, 10 000 debt, 1000 yearly debt, tractor

After 10 years of payments, the situation is like this:

LENDER: 10 000, 10 000 claim (Total assets: 20,000)
BORROWER: 0, tractor, 10 000 debt, -10,000 payments (Total assets: -10,000)

Both situations are fundamentally the same.

Post: #366

(07-12-2015 08:36 AM)Phoenix Wrote:  Responses and corrections as below, I've also removed 'used' since depreciation only complicates the example unnecessarily:

[quote='Handsome Creepy Eel' pid='1063545' dateline='1436706541']
You are shifting goalposts. Initially, you described the situation with yearly payments, but now you have suddenly started comparing the initial situations, before any yearly payments have occurred.
- Not all all

"Not at all" is not an argument. You were comparing apples and oranges and are refusing to admit it.

Regarding the example, your calculation for example B is not correct. You included the annual repayments in the balance sheet, but forgot the principal along the way. Unless the interest rate is zero and these repayments are actually chipping away at it, the principal is not going to simply vanish.

Examine the changes in the balance sheet again:

BORROWER'S BALANCE SHEET, PER STAGE:

1. Beginning: 0 tractors, 0 $
2. After taking out the loan: 0 tractors, 10 000 $, - 10 000 $ principal debt
3. After buying the tractor with the money from the loan: 1 tractor, 0 $, - 10 000 $ principal debt
4. After 10 years of payments: 1 tractor, -10 000 $ (annual interest paid so far), - 10 000 $ principal debt

TOTAL COMPARED TO BEGINNING: +1 tractor, -20 000$

Compared to the Example A's -10 000 $, the borrower is clearly worse off. In Example A, after ten years he's done with everything. In Example B, he's still on the hook for the entire principal.

Post: #367

(07-12-2015 06:51 AM)Phoenix Wrote:  I have $10,000. I buy a tractor for that $10,000. I rent it out to a farmer for $1000 a year. I am now merely a businessman, and by your moral code, good.

I have $10,000. I lend it to a farmer for $1000 a year. He buys a tractor with it. I am now a 'usurer' (lender), and by your moral code, evil.

Please address this arbitrary inconsistency.

The distinction is that the $10,000 being given as a loan did not previously exist prior to the loan being made. It was called into being by the magic of the balance sheet and fractional reserve banking. There was not $10,000 of previously earned wealth sitting in a vault that was given to the farmer, with $1000 being the corresponding risk and time-value premium. The $10,000 came into being the moment the farmer signed his name to the paperwork and the bank made a $10,000 entry in his name.

This is how banks expand and contract the money supply. Money is created through the issuing of loans, but since the money needed to pay back the interest is not created at the same time (ex: If I give you a loan for $10k requiring $1k in interest repayments, only $10k total has entered the monetary system. This means that eventually, from the sum total perspective of the entire monetary system, a new loan of at least $1k must be taken out somewhere by someone in order for that interest to be repaid). The result is that debt must be endlessly piled atop existing debt, otherwise nothing can be repaid. This is mathematically inevitable due to the way that compound interest works combined with fractional reserve banking. The result is that over time borrowers become more and more indebted, until at some point the bankers own everything and the economy grinds to a halt because no one else has any money.

This is why the ancients were so harsh against usury. They understood that money "reproducing" from itself was unnatural and unhealthy for society. Money is supposed to serve three purposes: 1) A means of exchange, 2) A store of wealth, 3) A unit of account. Allowing money to reproduce itself undermines its ability to perform its three core function, distorts the economy and eventually results in severe economic hardship when the math behind the interest becomes unsustainable.

Post: #368

(07-12-2015 09:04 AM)Handsome Creepy Eel Wrote:  

(07-12-2015 08:36 AM)Phoenix Wrote:  Responses and corrections as below, I've also removed 'used' since depreciation only complicates the example unnecessarily:

[quote='Handsome Creepy Eel' pid='1063545' dateline='1436706541']
You are shifting goalposts. Initially, you described the situation with yearly payments, but now you have suddenly started comparing the initial situations, before any yearly payments have occurred.
- Not all all

"Not at all" is not an argument. You were comparing apples and oranges and are refusing to admit it.

Regarding the example, your calculation for example B is not correct. You included the annual repayments in the balance sheet, but forgot the principal along the way. Unless the interest rate is zero and these repayments are actually chipping away at it, the principal is not going to simply vanish.

Examine the changes in the balance sheet again:

BORROWER'S BALANCE SHEET, PER STAGE:

1. Beginning: 0 tractors, 0 $
2. After taking out the loan: 0 tractors, 10 000 $, - 10 000 $ principal debt
3. After buying the tractor with the money from the loan: 1 tractor, 0 $, - 10 000 $ principal debt
4. After 10 years of payments: 1 tractor, -10 000 $ (annual interest paid so far), - 10 000 $ principal debt

TOTAL COMPARED TO BEGINNING: +1 tractor, -20 000$

Compared to the Example A's -10 000 $, the borrower is clearly worse off. In Example A, after ten years he's done with everything. In Example B, he's still on the hook for the entire principal.

But he owns the tractor, which he can sell to recoup funds to pay the principal, or perhaps whatever he was using the tractor for generated enough income to pay the principal off as well. If he had to sell, due to wear and tear he won't be able to get the full $10,000 principal back, but in the first example the same is true when the lender gets his tractor back with some wear and tear on it.

Post: #369

Few people really get money, but Phoenix, your post is right on.

(07-12-2015 07:57 AM)Phoenix Wrote:  There are no private printing presses. Banks are debt intermediaries, and in a free market anyone can be a bank:

Their deposit accounts (or historically, banknotes) are liabilities. Compare this to an actual government printing press - every bill printed carries no liability, same as a gold coin.

The only slight disagreement I have with you is that we do (can) have private monetary systems, though they're not printing presses. Technically, crypto-currencies and precious metals are decentralized monetary systems that a private institution could use. Bitcoin is an example of one. These could all cease to exist, though I think the likelihood of fiat going away (or being reset) is more probable.

Quote:With regards to the 'rich will accumulate all the capital' question, life doesn't work like that. Children born into money have a bad habit of spending it away. I suppose there are a few cases where families maintain successful dynasties (the Rothschilds would be a good example), but its a drop in the ocean. The world has more than enough self-made billionaires to know that men can succeed regardless of birth:
http://www.forbes.com/sites/afontevecchi...er-before/

You won't get a lot of allies at this forum and other places for this point, but you are right on the money (no pun intended). For all the whining of wealth inequality, now more than ever, it is easier to become a billionaire, and billionaires are constantly shuffled around decade after decade. The 1% isn't some stagnant group of people - it's constantly changing and anyone here could be in the 1%, but it's unlikely they'll be in the 1% for more than a year.

No matter what data I look at, the kids from poorer families usually do better than kids from middle class to richer families and all you have to do is take one look at the Lifestyle forum and you'll see why that is. For instance, a kid from a poor family is less likely to ask this question:

Should I Pursue Money, or Pursue An Interesting Life? [and it becomes obvious when you read threads like these that this rich kids are really looking for that rationalization to not focus as much on money].

That person is more than likely from a middle-class to rich family. Poor kids know: poverty sucks. Being poor sucks. Every day you're rich is 1000x better than being poor.

Fundamentally, though, the reason you'll get resistance for your point is that it refutes the rationalization from lazy people that the system is unfair. That's what they need to justify their 10-hour marathon of GoT, or the latest TV show, while people, who know the system isn't unfair and want to be wealthy, are hustling.

Post: #370

(07-12-2015 09:04 AM)Handsome Creepy Eel Wrote:  Compared to the Example A's -10 000 $, the borrower is clearly worse off. In Example A, after ten years he's done with everything. In Example B, he's still on the hook for the entire principal.

He's not worse off, if he wants to clear his balance sheet he just sells the tractor. Full circle.

(07-12-2015 09:14 AM)scorpion Wrote:  The distinction is that the $10,000 being given as a loan did not previously exist prior to the loan being made. It was called into being by the magic of the balance sheet and fractional reserve banking.

No, the businessman took his $10,000 in cash, signed the debt contract, then put the cash in the hand of the farmer.

I've probably spent way too much time explaining the 'adverse clearing mechanism' on the internet to those who claim fractional reserve banking is a free ride and is evil, but it's an important myth to dispel - everytime it gets the blame, the powers-that-be grin.

So suppose the farmer got the loan from Alex Bank instead, who simply adds that loan and deposit to its balance sheet. Oh lucky Alex Bank! It can just do the same thing a million times and then run off to the Bahamas! Pretty good gig aye...

However, it just so happens that this town has another bank - Bob Bank. The farmer buys his tractor from Big Baller Tractor Co by handing them a cheque from his Alex Bank bank account. However it turns out that Big Baller Tractor Co has their account at Bob Bank, and deposits it there.

Bob Bank has accumulated a pile of these Alex Bank cheques. Alex Bank is a competitor. If Alex Bank goes out of business, Bob Bank will stand to receive all their business.

So one day, Bob from Bob Bank shows up at Alex Bank with a pile of outstanding Alex Bank cheques and demands settlement. Alex Bank has $100,000 cash against its $2,000,000 outstanding liabilities, and Bob Bank has $200,000 worth in Alex Bank cheques.

"Pay up bitch!". "Oh fuck...". "That's right bitch, bankrupt!".

This is no different to an 'on-demand tractor hire service' whereby farmers leave their tractors at a 'tractor bank', and receive a yearly payment for their 'tractor deposit'. Other non-tractor-owning farmers then hire from the tractor bank when they need one. Obviously, the number of outstanding tractors on the balance sheet will exceed the number in the yard, and not every farmer who is "owed a tractor" will be able to receive one immediately if they all come to collect them at once. The only reason this service isn't common is the same reason barter isn't common - money is just easier.

Fractional reserve banking is just run-of-the-mill business, and there is nothing remotely immoral about it.

Post: #371

Banks are *not* intermediaries of loanable funds. This is simply a factual inaccuracy.
http://www.voxeu.org/article/banks-are-n...plications

Banks create new money whey they lend. They are entirely propped up by the central bank system. Now I don't think this is a bad thing, it's a stable system that I think works much better than a loanable funds model. But I do think it means that people should realize that bankers aren't providing some extraordinary service (they are arms in the government system that provides the service via money creation) and that it does mean banker pay is totally unreasonable, because it is entirely rent-seeking.

As to "self-made" billionaires, the majority of them came from rather wealthy but not super-rich families. The kind of people you would have already considered "rich" if you knew them. Just because a lot of people go from having 800 million to a billion and back again doesn't mean the billionaire's list is some kind of open, meritocratic club. How much money your parents have is still *by far* the most important factor is how economically successful you will be. Any relevant data will scream this at you loud and clear.

That doesn't mean people *can't* become rich from any circumstance, it is possible and a small number of people do. But a couple anecdotes shouldn't fool you about the larger reality.

Post: #372

(07-12-2015 10:10 AM)Phoenix Wrote:  No, the businessman took his $10,000 in cash, signed the debt contract, then put the cash in the hand of the farmer.

This is simply incorrect. Banks are not lending existing money, the money is created at the time the loan is made via balance sheet entry. The farmer walks away with a check, not a bag of cash. He then deposits that check into his bank, where it remains a balance sheet entry. The vast majority of money that exists in the world at this moment was created from debt out of thin air in this manner, and exists only on balance sheets (think about how much money you have right now in your bank accounts and investments versus how much physical cash you actually possess). Again, the money did not previously exist at all. It was not earned and saved, stashed in a vault and then lent out at interest. It never existed at all until the farmer came and asked for the loan.

(07-12-2015 10:10 AM)Phoenix Wrote:  I've probably spent way too much time explaining the 'adverse clearing mechanism' on the internet to those who claim fractional reserve banking is a free ride and is evil, but it's an important myth to dispel - everytime it gets the blame, the powers-that-be grin.

So suppose the farmer got the loan from Alex Bank instead, who simply adds that loan and deposit to its balance sheet. Oh lucky Alex Bank! It can just do the same thing a million times and then run off to the Bahamas! Pretty good gig aye...

However, it just so happens that this town has another bank - Bob Bank. The farmer buys his tractor from Big Baller Tractor Co by handing them a cheque from his Alex Bank bank account. However it turns out that Big Baller Tractor Co has their account at Bob Bank, and deposits it there.

Bob Bank has accumulated a pile of these Alex Bank cheques. Alex Bank is a competitor. If Alex Bank goes out of business, Bob Bank will stand to receive all their business.

So one day, Bob from Bob Bank shows up at Alex Bank with a pile of outstanding Alex Bank cheques and demands settlement. Alex Bank has $100,000 cash against its $2,000,000 outstanding liabilities, and Bob Bank has $200,000 worth in Alex Bank cheques.

"Pay up bitch!". "Oh fuck...". "That's right bitch, bankrupt!".

This is no different to an 'on-demand tractor hire service' whereby farmers leave their tractors at a 'tractor bank', and receive a yearly payment for their 'tractor deposit'. Other non-tractor-owning farmers then hire from the tractor bank when they need one. Obviously, the number of outstanding tractors on the balance sheet will exceed the number in the yard, and not every farmer who is "owed a tractor" will be able to receive one immediately if they all come to collect them at once. The only reason this service isn't common is the same reason barter isn't common - money is just easier.

Fractional reserve banking is just run-of-the-mill business, and there is nothing remotely immoral about it.

Again, you simply don't understand how banking works, especially in the modern era. The sort of inter-bank competition you're referring to was much more common in the days when banks actually issued their own private notes, and bank failures due to overlending were common. The modern banking system is much more insulated from these type of shocks due to central banking, legal tender laws and government protections. The modern banking system is more accurately understood as a giant wealth extraction system working perfectly in concert rather than as many banks competing against each other.

The tractor analogy also completely fails to capture the reality of the situation, as tractors are physical goods. A better analogy is software - banks are essentially just "copying and pasting" money into bank accounts when they make loans. They are not actually sacrificing the use or possession of the money they are "lending" as they would be if they lent out a physical good. They can lend out as many copies as they want. To continue the software analogy, imagine I "lend" you a copy of Microsoft Word by simply making a copy of the one I have and giving it to you. In return, I expect you to repay me with two copies of Microsoft Word at some point down the line. The only problem is that you are unable to make copies like I can (because I am a bank and have that special privilege, a privilege which is criminal to non-banks - counterfeiting). You must therefore somehow secure an additional copy of Microsoft Word somewhere in the economy in order to pay me. And from a macro perspective, that additional copy of Microsoft Word only comes into existence because someone else received it from another lender, which ensures that the cycle of debt must continue indefinitely until the banks end up owning all the productive assets in the economy.

This is the situation that banks create by "lending" out money that does not actually exist until the time the loan is made. It's a difficult concept to really wrap your head around, and most people simply can't do it. If there was ever any widespread understanding of how money actually works, bankers would be swinging from lampposts the world over within 24 hours.

Post: #373

(07-12-2015 10:10 AM)Phoenix Wrote:  

(07-12-2015 09:04 AM)Handsome Creepy Eel Wrote:  Compared to the Example A's -10 000 $, the borrower is clearly worse off. In Example A, after ten years he's done with everything. In Example B, he's still on the hook for the entire principal.

He's not worse off, if he wants to clear his balance sheet he just sells the tractor. Full circle.

Since you've taken the liberty of making the tractor invulnerable to depreciation to help balance your claim, let's also enhance the claim on money a bit:

- Unlike tractor rent prices, interest rates are not constrained by physical factors and the debt they create can balloon infinitely (compound interest)
- Not being able to pay the tractor rent results in just you not having access to the tractor anymore, whereas not being able to service debt results in you losing other assets too, often far more valuable than debt itself (collateral)

This is just on a personal level between one lender and one borrower. On a communal level, as Scorpion said, it gets a lot worse.

Speaking of which...

As for your response to Scorpion, it has nothing to do with the creation of money or with its regulation. A bank going bankrupt and taken over by its competitor doesn't in any way reduce the amount of extra money already created and owed to it. It simply transfers it to another bank. He is talking about the creation of money itself, and you are talking about market competition. These two topics don't have much in common, more so in an oligopoly environment like the one that exists today (see LIBOR fixing scandal & C.O.).

Quote:Debt is a major source of money creation in modern economies.
- https://en.wikipedia.org/wiki/Criticism_of_debt

Quote:Lord Adair Turner, formally the UK's chief financial regulator, said "Banks do not, as too many textbooks still suggest, take deposits of existing money from savers and lend it out to borrowers: they create credit and money ex nihilo – extending a loan to the borrower and simultaneously crediting the borrower’s money account".
- https://en.wikipedia.org/wiki/Fractional...ary_system

Quote:This description of how money is created differs from the story found in some economics textbooks. For instance, in normal times, the central bank does not in practice choose the amount of money in circulation. Nor is central bank money ‘multiplied up’ into more loans and deposits.
- http://www.bankofengland.co.uk/publicati...4/051.aspx

Quote:Jaromir Benes and Michael Kumhof of the IMF Research Department, argue that: the “deposit multiplier“ of the undergraduate economics textbook, where monetary aggregates are created at the initiative of the central bank, through an initial injection of high-powered money into the banking system that gets multiplied through bank lending, turns the actual operation of the monetary transmission mechanism on its head. At all times, when banks ask for reserves, the central bank obliges.
According to this model, reserves therefore impose no constraint and the deposit multiplier is therefore a myth. The authors therefore argue that private banks are almost fully in control of the money creation process.
- https://en.wikipedia.org/wiki/Money_mult...irst_model

Quote:This form of money is called "debt-based" because as a condition of its creation someone must go into debt in order for the money to be created and it must be paid back plus interest at some time in the future.
- http://wiki.mises.org/wiki/Criticism_of_...ve_banking

You could sure argue for fractional reserve banking as a major source of money creation by listing its many benefits, but denying that it exists completely?

Post: #374

Scorpion, in Phoenix's example he specifically stated that the lender had $10,000, so that money wasn't created out of thin air. However, what you've written about the modern banking system and how it functions is spot on. Phoenix is also correct in his description of the actual clearing mechanisms that take place. If you're still in doubt about it, go find a pdf from the Federal Reserve Bank of Chicago called 'Modern Money Mechanics.'

The missing link between both of your points is the central bank. In Phoenix's example of the two banks, the actual process of clearing means Alex Bank doesn't have the cash to clear the checks it has written when Bob Bank comes calling. This basic process is unchanged, only optimized by technology. In today's world, Alex Bank can just ring up the Charlie Central Bank Discount Window, who will print up the money out of thin air so that Alex Bank can pay Bob Bank. That is the real sin here, and this is what makes the endless debt and reproduction of money that you accurately described in your posts possible. The faults of Alex Bank in the example stem from human exuberance, greed, lack of judgement, etc. These are factors that will never be eliminated, regardless of the type of system you operate under. Phoenix is describing an idealized world in which these factors are checked by the forces of failure and bankruptcy. You're describing the current world which has had these checks removed from them.

Finally, people have thrown the world 'usury' around pretty freely in this thread, without offering an objective meaning for it and how it applies to the Greece situation. I'd like to see that clarified.

Post: #375

(07-12-2015 11:46 AM)Handsome Creepy Eel Wrote:  Since you've taken the liberty of making the tractor invulnerable to depreciation to help balance your claim

Why would you say that? I've left out depreciation to focus the debate on the point we disagree with. Otherwise I could just say in the example: "money depreciation (inflation) of 5%, tractor depreciation of 5%".

(07-12-2015 11:46 AM)Handsome Creepy Eel Wrote:  - Unlike tractor rent prices, interest rates are not constrained by physical factors and the debt they create can balloon infinitely (compound interest)

If he doesn't pay his tractor bill, he'll get charged a late fee for every month he doesn't pay. This is standard everywhere, or people would hold out paying until the bailiff knocked on the door.

(07-12-2015 11:46 AM)Handsome Creepy Eel Wrote:  As for your response to Scorpion, it has nothing to do with the creation of money or with its regulation. A bank going bankrupt and taken over by its competitor doesn't in any way reduce the amount of extra money already created and owed to it. It simply transfers it to another bank. He is talking about the creation of money itself, and you are talking about market competition.

Sure, until Charlie Bank shows up to Bob Bank and does the same thing. Bank balance sheets are constrained by having to settle with other banks, as I've described. Banks stop lending if interbank clearing is going against them, and increase lending if interbank clearing is in their favour. There is an equilibrium.

Debt is not money. People use debt claims on the bank as a substitute for money because it's credit worthiness is so high that repayment is almost guaranteed, and its more efficient and safer than carrying bags of cash to pay each other.

The moral error is as follows: people rightly think it is unfair to "be able to print money". They do so because this means "free stuff without working". People decide to call both cash and bank deposits "money". Cash carries no debt to anyone, but a bank deposit is a debt. Only if you can print cash, can you "live for free". If you have a bank, you still have to work like everyone else.

If the hangup is the definition of the word "money", we should just use the words "cash" and "debt".

(07-12-2015 11:28 AM)scorpion Wrote:  

(07-12-2015 10:10 AM)Phoenix Wrote:  No, the businessman took his $10,000 in cash, signed the debt contract, then put the cash in the hand of the farmer.

This is simply incorrect.

LOL, it's my example, I'm saying what I said, and what I said was "I have $10,000" and "I have a tractor". Unless I said "in this example I'm a bank", no one is going to assume I wrote down "IOU $10,000" on a piece of paper and the farmer bought a tractor with that.

(07-12-2015 11:28 AM)scorpion Wrote:  Again, you simply don't understand how banking works, especially in the modern era. ...
This is the situation that banks create by "lending" out money that does not actually exist until the time the loan is made. It's a difficult concept to really wrap your head around, and most people simply can't do it. If there was ever any widespread understanding of how money actually works, bankers would be swinging from lampposts the world over within 24 hours.

Aside from the fact that you side-stepped into central-banking when we were having a debate on fractional reserve banking, I don't consider this content of the response pursuant to me continuing to debate with you.