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Financial crisis ! whats your opinion and why :)

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    (Original post by Classical Liberal)
    What the crazy policy of saying the banks should not be able to create money?

    If think if the people at large understood the system, they would think you were the insane one.
    The very fact that you use misleading terms like "create money" so beloved of the nutjob far right simply demonstrates that you don't even understand the very foundations of the subject you're discussing. I suggest you subscribe to a course in the foundations of the modern banking system.

    If you've already watched one (and I mean an economically rigorous one, not some crackpot video off youtube), I suggest you watch it again. And again and again until you realise why using phrases like "create money" makes you look stupid.
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    (Original post by py0alb)
    The very fact that you use misleading terms like "create money" so beloved of the nutjob far right simply demonstrates that you don't even understand the very foundations of the subject you're discussing. I suggest you subscribe to a course in the foundations of the modern banking system.
    The Programme for Monetary reform has been around for years and was written by people like Irving Fisher. And enjoyed a good deal of support.

    But in all seriousness, banks do create the circulating media of exchange. It is simply an undeniable fact.

    "When banks create loans, the create additional deposits for those that have borrowed the money" - Bank of England

    The Bank of England, those well know right wing nut jobs.

    This is starting to feel like Keen vs Krugman all over again.
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    (Original post by Hanvyj)
    We have a human system.


    Take a look at crime. Crime is not nice for most people. It exists, we combat it by making things laws that govern what people can and can't do.

    You say this is a bad system, we shoudln't relly on laws - removing laws would make everything o.k.

    Do you think the world runs on fluffy pink cotton candy?
    We should not rely on arbitrary government regulation. It will simply fail. Either through ineptitude, through corruption or by simply doing more harm than good.

    The point is that anybody who knows anything about monetary policy knows that the current financial system we have is very unstable. It is only kept up, just about, by government help. I think a system that needs government help simply to exist is a bad system, because sooner or later the government will screw it all up and the house of cards will collapse.

    A system that relies on the right person in government at the right time, is a bad system. Instead we should have an automatic system that is not prone to sudden collapse.

    Notice how I actually have some specific policy subscriptions, at least the desired end result, and compare this to the people who say new regulation of the banking system is what is needed. Notice how vague and unclear what specific regulations they would introduce. That is the very nature of arbitrary government regulation, vague and unclear.
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    (Original post by Classical Liberal)
    We should not rely on arbitrary government regulation. It will simply fail. Either through ineptitude, through corruption or by simply doing more harm than good.

    The point is that anybody who knows anything about monetary policy knows that the current financial system we have is very unstable. It is only kept up, just about, by government help. I think a system that needs government help simply to exist is a bad system, because sooner or later the government will screw it all up and the house of cards will collapse.

    A system that relies on the right person in government at the right time, is a bad system. Instead we should have an automatic system that is not prone to sudden collapse.

    Notice how I actually have some specific policy subscriptions, at least the desired end result, and compare this to the people who say new regulation of the banking system is what is needed. Notice how vague and unclear what specific regulations they would introduce. That is the very nature of arbitrary government regulation, vague and unclear.
    Yes you're very specific in exactly how you wish to destroy capitalism. I think you might secretly be a revolutionary Marxist, its the only possible explanation for you wishing to destroy one of the pillar stones of the western world.

    Full reserve banking is effectively nationalising the banks. Instead of the free market system being able to extend credit and create liquidity, the government is given a monopoly on that facility, and the banks are reduced to being merely a conduit. That's a seriously hardline left wing, anti-capitalist, statist policy. As a moderate liberal, it instinctively repulses me.

    You really should change your username to "Classic Statist".
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    (Original post by Hanvyj)
    wut?

    For a start, I assume you are giving up on abolishing child labor...
    You have to be very careful her. I do not want to see children working. But I think it is unwise for the most part to pass laws saying the children are not allowed to work.

    For example in Africa, if you passed such a law, you would condemn many children to starvation because those children would be able to earn money to get food.

    The child labour laws in the UK do very little harm for the main reason that children in the UK need not work. We have free education and parents can support their children, and if not we have benefits. The fact children need not work has nothing to do with laws. And everything to do with how productive the UK is today and some welfare provisions.

    Ok, Lets see if I can get this straigt - I say there is unemployment and if you abolish NMW employers will lower wages for those currently on NMW this because of the huge competition for jobs.

    You then reply with "see, you admit that NWM causes unempolyment".
    You are saying. Get rid of the NMW. That will cause a fall in wages due to competition. Now if something is cheaper people will buy more. Therefore if labour is cheaper then there will be more jobs.
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    (Original post by py0alb)
    Yes you're very specific in exactly how you wish to destroy capitalism. I think you might secretly be a revolutionary Marxist, its the only possible explanation for you wishing to destroy one of the pillar stones of the western world.

    Full reserve banking is effectively nationalising the banks. Instead of the free market system being able to extend credit and create liquidity, the government is given a monopoly on that facility, and the banks are reduced to being merely a conduit. That's a seriously hardline left wing, anti-capitalist, statist policy. As a moderate liberal, it instinctively repulses me.

    You really should change your username to "Classic Statist".
    Well I somewhat agree, much to my own disgust.

    What is quite funny (and shows how much **** you have been talking) is that you criticise me on the basis of saying, "ohhh you are driven by ideology" or "you do not care what the facts are". But in reality I am promoting a policy that does give all the power to create money to the government. Which proves that I am able to put ideology aside and think about economics divorced from philosophy, unlike you.

    If I was really driven entirely by ideology, don't ya think I would be promoting a gold standard?
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    (Original post by Classical Liberal)
    Well I somewhat agree, much to my own disgust.

    What is quite funny (and shows how much **** you have been talking) is that you criticise me on the basis of saying, "ohhh you are driven by ideology" or "you do not care what the facts are". But in reality I am promoting a policy that does give all the power to create money to the government. Which proves that I am able to put ideology aside and think about economics divorced from philosophy, unlike you.

    If I was really driven entirely by ideology, don't ya think I would be promoting a gold standard?
    If you weren't driven by ideology then you wouldn't be so damn intransient and unable to be reasoned with. I just think you believe whatever you're told by the lastest blog post from the deluded idiots on mises.org, which is a hotchpotch of conspiracy theories, misapprehensions and lies. Hence the reason your ideology is inconsistent and self-contradictory.

    We're talking about a holistic set of principles that is informed equally by sociology, philosophy and economics. None of the professionals in any of those disciplines would agree with you on the fundamental assumptions of your belief system. That should tell you something. Its getting pretty desperate when you have to convince yourself that every professional sociologist, economist and philosopher in the world disagrees with you because they are all part of some dastardly global left-wing conspiracy theory, rather than accepting the simple fact that maybe you're wrong and you need to reconsider things a little, maybe read some more unbiased sources.
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    Well...not sure I want to get involved in this 'discussion' given the amount of hyperbole and s***-flinging...but I'll just weigh-in quickly with my 2 cents:

    Isn't this crisis just an intrinsic feature of capitalism? A bust cycle in which the economy will restructure itself for the next boom? My understanding is that it is a bust cycle catalyzed by the debt crisis, which itself was a response to falling rates of profit due to increased competition from other countries.

    Capitalism is an organism of self-interest and perpetual growth. Each consumer and each producer act in their own self-interest with utter disregard for others, where profit is the one and only goal.

    Just an example from recent news, Coke is changing an ingredient so as to avoid having to put a notice on their cans that they contain carcinogens. Why didn't they do so long ago? - Because it would've cost them money, with no possibility of monetary return.
    Now there is the possibility of losing money, so it has finally become worthwhile to change this ingredient. That is just a single example of a single player, now multiply that by thousands upon thousands of companies and factories polluting the earth and hiding unhealthy ingredients in their products because it's cheaper for them to do so.

    Remember, nearly everything you buy comes from some sort of slave labour or child labour. From the cotton in your clothes, picked by kids in Africa and India, to your cell phones and gadgets, assembled in China and Vietnam. Your society functions with human rights like minimum wage, labour laws, child labour laws, and that makes you feel good. But everything you purchase, the entire rotten foundation of your society, is based on the continued exploitation of societies without those rights.

    Now, some people believe that you can make a "good capitalism" by regulating these things, forcing companies not to pollute, forcing companies not to exploit children and workers both at home and abroad, but my belief is that this is just putting lipstick on a pig. I agree with Classical Liberal to a certain extent here, but I also believe that regulation is necessary for capitalism.

    I remember reading recently that the Economist magazine was against the introduction of child labour laws 100 years ago, and against the lowering of the working day from 12 hours because these would hurt the economy and productivity. A few months ago I read an article in the Economist where they worried that the growing middle class in China would result in workers demanding more rights and higher pay - hurting the economy in the US. This article sadistically concluded that it's ok, we can still rely on the millions of Chinese peasants migrating to the cities for dirt-cheap labour, as well as other eminently exploitable countries like Vietnam and Cambodia, so all is not lost yet! We can still enjoy cheap ipads for decades to come! Phew!


    Just as an addendum, I'm not partisan about this topic, and don't pretend to hold The Answer for all economic problems. I'm more interested in reaching the truth through cooperation and discussion than perpetuating my answer vs. yours. If I've said something false, I don't mind being corrected, as long as you can cite a source/ provide a logical explanation.
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    (Original post by py0alb)
    If you weren't driven by ideology then you wouldn't be so damn intransient and unable to be reasoned with. I just think you believe whatever you're told by the lastest blog post from the deluded idiots on mises.org, which is a hotchpotch of conspiracy theories, misapprehensions and lies. Hence the reason your ideology is inconsistent and self-contradictory.
    Makes a lot of sense, except that I am probably a Post-Keynesian and almost never read Mises.org.

    And just because I have not changed my mind because you have called me an idiot, right wing crackpot, you have straw-manned full reserve, not actually explained what is actually wrong with full reserve, and hardly given a spirited defense of fractional reserve. Does not make me unable to be reasoned with. It is probably that you are either poorly informed, bad at explaining yourself, or just fundamentally wrong.

    None of the professionals in any of those disciplines would agree with you on the fundamental assumptions of your belief system.
    Well it is true that the vast majority of macro-economists today are New Keynesians, of which you are clearly a disciple. And it is true that I think for the most part they are wrong, mainly because they completely ignore the banking system and how money is created endogenously in their models.

    Unlike Austrians or Post Keynesians who put the credit system at the absolute heart of their analysis.

    Your assertion nobody in a position of authority agrees with me, is just a lie.

    Its getting pretty desperate when you have to convince yourself that every professional sociologist, economist and philosopher in the world disagrees with you because they are all part of some dastardly global left-wing conspiracy theory, rather than accepting the simple fact that maybe you're wrong and you need to reconsider things a little, maybe read some more unbiased sources.
    Depends on what you mean by that. If by that you mean "I think professional intellectuals usually have a left wing bias" then yes, I think that is true and I think the vast majority of people concur.

    If by conspiracy you mean, do gooder Fabians ****ing everything up, then yes I believe in that.
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    (Original post by spaceman spiff)
    Well...not sure I want to get involved in this 'discussion' given the amount of hyperbole and s***-flinging...but I'll just weigh-in quickly with my 2 cents:
    There's no **** flinging, its just me and CL repeating our usual friendly arguments.
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    (Original post by py0alb)
    There's no **** flinging, its just me and CL repeating our usual friendly arguments.
    You ever seen the episode of the ''The Thick of It'' when Malcolm Tucker takes the Minster outside of the goldfish bowl, during a meeting with a journalist, and Tucker gives the minister a massive *******ing

    The Minister comes back into the meeting with the journalist and says "we are really good friends really, we can be quite brutal with each other"

    ?
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    Thanks guys. Great exchange.
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    So am I wrong in saying that this crisis is simply a regular feature of capitalism?

    My understanding is that Keynesian economics took root after the Great Depression with Roosevelt's New Plan, and that the 70s saw a shift towards neoliberal economics. These resulted in the repeated bubbles in real estate, stock markets, and finance, and now generally neoliberals are on the retreat and a slew of Keynesians, New Keynesians, Neo-Keynesians, and Post-Keynesians are emerging from the woodwork demanding more regulation to sort of 'save capitalism from itself'. Both sides agree that free-market capitalism is the optimal solution for wealth creation, although they disagree on whether it is the optimal solution for social welfare.

    My understanding on the current debate is that it is between deregulation and new, but different regulation. Whereas what is actually happening is that the economy is shaking itself, optimizing and reducing the labour force, so as to create a larger reserve army of labour, thereby putting downward pressure on wages, making companies profitable oncemore. The post WW2 boom cycle began to slow during the 70s, which resulted in an unprecedented debt explosion, where households tried to sustain consumption through mortgages and easy loans, and the governments tried to sustain growth through borrowing to inject funds into the system. These actions sustained consumption in the US through debt, which then spurred on the debt bubble that could not sustain itself. From what I recall from some essays back in business school (did an undergrad in international business), other reactions to the slowdown was more aggressive globalization, as well as pressures from the IMF and World Bank for developing countries to open up their economies to western competition.

    Am I on the right track here? I know it's a brief rambling summary, but I'm trying to frame the debate and understand its context.
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    (Original post by Classical Liberal)
    The problem is the monetary framework. Full reserve banking is the solution for the time being.

    http://en.wikipedia.org/wiki/A_Progr...onetary_Reform
    Why not just go back to deposit boxes or hell just barter for stuff with cows and sheep.
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    (Original post by spaceman spiff)
    So am I wrong in saying that this crisis is simply a regular feature of capitalism?

    My understanding is that Keynesian economics took root after the Great Depression with Roosevelt's New Plan, and that the 70s saw a shift towards neoliberal economics. These resulted in the repeated bubbles in real estate, stock markets, and finance, and now generally neoliberals are on the retreat and a slew of Keynesians, New Keynesians, Neo-Keynesians, and Post-Keynesians are emerging from the woodwork demanding more regulation to sort of 'save capitalism from itself'. Both sides agree that free-market capitalism is the optimal solution for wealth creation, although they disagree on whether it is the optimal solution for social welfare.

    My understanding on the current debate is that it is between deregulation and new, but different regulation. Whereas what is actually happening is that the economy is shaking itself, optimizing and reducing the labour force, so as to create a larger reserve army of labour, thereby putting downward pressure on wages, making companies profitable oncemore. The post WW2 boom cycle began to slow during the 70s, which resulted in an unprecedented debt explosion, where households tried to sustain consumption through mortgages and easy loans, and the governments tried to sustain growth through borrowing to inject funds into the system. These actions sustained consumption in the US through debt, which then spurred on the debt bubble that could not sustain itself. From what I recall from some essays back in business school (did an undergrad in international business), other reactions to the slowdown was more aggressive globalization, as well as pressures from the IMF and World Bank for developing countries to open up their economies to western competition.

    Am I on the right track here? I know it's a brief rambling summary, but I'm trying to frame the debate and understand its context.

    The ideal solution is a vertically and horizontally integrated perfectly free market in all sectors, with technological progress driving a gradual increase in living standards, prices and wages reflecting both the marginal product of labour and the social cost of the good. The government has three responsiblities to the economy: enforcement of contract, laws and regulations to ensure that the market remains as free as possible (ie prevent collusion, monopolies, trade description violations etc). Fiscal policy should be used to maximise public utility via providing public goods at a fair price, incentivising socially beneficial behaviour and completing any incomplete markets in order to reduce negative externalities. Monetary policy should be used to prevent the system moving too far away from equilibrium by careful adjustments of the money supply and the interest rate to ensure a good business environment.

    This is not an easy thing to achieve, its like trying to juggle burning knives with one arm tied behind your back. However that's not to say its not worth trying, and over the long run we're not doing too badly.
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    (Original post by Classical Liberal)
    x
    This is totally irrelevant to your debate but I wonder, do you have pictures of John Locke in your bedroom?
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    (Original post by spaceman spiff)
    But everything you purchase, the entire rotten foundation of your society, is based on the continued exploitation of societies without those rights.
    The economy is the conduit by which human knowledge and endeavour (aka capital and labour) is combined and converted to human health and happiness. For centuries, the wealthy have "boosted" their own health and happiness by exploiting other people's endeavour. First it was through slavery, then it was through exploiting the working class of their own country, and now its by exploiting the poor of the developing world.

    Eventually (hopefully) technological progress will allow us to maintain and eventually improve our current living standards whilst finally stopping the necessity to exploit the vulnerable.
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    Considering that money=debt, there is no way out of it without a full scale world change.
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    (Original post by Classical Liberal)
    We should not rely on arbitrary government regulation. It will simply fail. Either through ineptitude, through corruption or by simply doing more harm than good.
    Really this argument again, the point of regulation is that once the correct regulation is put in the government does not need to constantly intervene the system simply runs itself under those laws and there is a regulating body which just keeps tabs on the system to make sure nothing goes horribly wrong.

    I have named several systems previously that rely on regulation to exist but you did not comment on getting rid of intellectual property rights did you?

    You talked about earlier people just give vague remarks I don't have a full program of reform but I guess this general idea will help.

    Banning/ Greatly limiting the sale of complex derivatives.

    Forcing clear breakdowns on what a financial derivative contains.

    Taking the power from rating agencies which everyone pretty much accept are useless and having breakdowns of which firms can buy exactly what financial products. Such as banks not being able to buy CDS's.

    Getting rid of the constant chain of reinsurance that occurs. (Lloyds made large losses just because of this ridiculous cycle.)
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    (Original post by spaceman spiff)
    Well...not sure I want to get involved in this 'discussion' given the amount of hyperbole and s***-flinging...but I'll just weigh-in quickly with my 2 cents:

    Isn't this crisis just an intrinsic feature of capitalism? A bust cycle in which the economy will restructure itself for the next boom? My understanding is that it is a bust cycle catalyzed by the debt crisis, which itself was a response to falling rates of profit due to increased competition from other countries.

    Capitalism is an organism of self-interest and perpetual growth. Each consumer and each producer act in their own self-interest with utter disregard for others, where profit is the one and only goal.

    Just an example from recent news, Coke is changing an ingredient so as to avoid having to put a notice on their cans that they contain carcinogens. Why didn't they do so long ago? - Because it would've cost them money, with no possibility of monetary return.
    Now there is the possibility of losing money, so it has finally become worthwhile to change this ingredient. That is just a single example of a single player, now multiply that by thousands upon thousands of companies and factories polluting the earth and hiding unhealthy ingredients in their products because it's cheaper for them to do so.

    Remember, nearly everything you buy comes from some sort of slave labour or child labour. From the cotton in your clothes, picked by kids in Africa and India, to your cell phones and gadgets, assembled in China and Vietnam. Your society functions with human rights like minimum wage, labour laws, child labour laws, and that makes you feel good. But everything you purchase, the entire rotten foundation of your society, is based on the continued exploitation of societies without those rights.

    Now, some people believe that you can make a "good capitalism" by regulating these things, forcing companies not to pollute, forcing companies not to exploit children and workers both at home and abroad, but my belief is that this is just putting lipstick on a pig. I agree with Classical Liberal to a certain extent here, but I also believe that regulation is necessary for capitalism.

    I remember reading recently that the Economist magazine was against the introduction of child labour laws 100 years ago, and against the lowering of the working day from 12 hours because these would hurt the economy and productivity. A few months ago I read an article in the Economist where they worried that the growing middle class in China would result in workers demanding more rights and higher pay - hurting the economy in the US. This article sadistically concluded that it's ok, we can still rely on the millions of Chinese peasants migrating to the cities for dirt-cheap labour, as well as other eminently exploitable countries like Vietnam and Cambodia, so all is not lost yet! We can still enjoy cheap ipads for decades to come! Phew!


    Just as an addendum, I'm not partisan about this topic, and don't pretend to hold The Answer for all economic problems. I'm more interested in reaching the truth through cooperation and discussion than perpetuating my answer vs. yours. If I've said something false, I don't mind being corrected, as long as you can cite a source/ provide a logical explanation.
    I agree with a lot of what you say. Capitalism is basically growth through exploitation however we have to admit that it has raised living standards through technological innovation over the many years. Many of us wish for a better system but can't really think of one perhaps someone will but until then we gotta deal with it.

    Also although capitalism works through exploitation that is the point of wealth distribution but that is left up to governments so unless you want to become a politician not much that can be done apart from charity.

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