Financial crisis ! whats your opinion and why :)

I don't care about growth. I care about human happiness. Capitalism is not great because it creates growth. It is great because it allows men to achieve their values freely and in doing so benefiting others.

The only reason growth matters is because we have debt financed money system. And we need to keep growing to keep up with the interest. It is like a treadmill that keeps getting faster and faster and faster.

This is sadly a very common misconception. There is nothing intrinsic to a fractional reserve banking system that makes growth essential to a sustainable economy. That wouldn't make sense. Its a closed system ffs. We're not paying interest to Mars. The world money supply is a relative constant.

The only reason the UK "needs" growth at the moment is because the past government naively built an assumption of uninterupted growth into their borrowing plans, in the theory that they could borrow more each year but provided it was at a rate lower than national growth, then in percentage terms that would be a reduction. Clearly, this was a stupid and reckless thing to do and now we're all paying the price.

This is the basic fallacy underpinning most modern macro economics, as well as the fallacy of strong reduction.

It is the idea that the debt of one man is the assets of another man. Thus any debt one person has is an asset somebody else has. Therefore roughly in the words of Krugman "Private debt does not matter".

This of course completely negates that banks do not lend existing money. The banks lend what is essentially money into existence. We do not pay interest to savers. We pay interest to banks.

http://www.positivemoney.org.uk/how-banks-create-money/balance-sheets/

My proposal is that we create a system whereby private debt equals private assets. Which is what has to happen with a full reserve system. The system you seem to think exists, would actually exist.



The problem is not government debt. It is all debt. Private debt. Corporate debt.

Our problems today were not caused by government spending (did I just say that?), it was caused by people going into debt (creating money) to buy assets such as homes (which caused the price to rise), which caused people to go further into debt (create more money) to buy those assets (which caused them to rise more in price) and so on and so forth. But like all bubbles they eventually have to burst. The house price bubble has been inflation, pure and simple.

Also please stop putting in links to right wing conspiracy theory cult websites. You're nowhere near stupid enough to believe in that flimsy bull****.

Positive money is actually rather left wing.

Why do you keep repeating the same retarded arguments only a couple of days after they have been completely blown out of the water?

In monetary terms, one mans assets are another mans debts. Money is just formalised credit. Credit implies debit. Hence the reason Loans = Deposits - Reserves.

You really haven't got a clue what caused the financial crisis either, but keep repeating the same old discredited Austrian theories.

Because they have not been refuted.



But the point is that savers assets do not equal debtors debts. Banks do not operate like that, it is fairly tale. Debtors debts equals the banks assets, not savers assets.

Now as money is created when banks lend money. And when they lend money, the receiver goes into debt, money is debt. And therefore if private debt rises. The money supply rises. And as private debt has risen massively for decades so has the money supply, making your conjecture that the world money supply is relatively constant absolute nonsense.

Now basic economics tells us that if the money supply increases then you get inflation. However if you use indicators like the CPI everything seems fine. Well that is because money gets spent into a certain part of the economy first and inflates that thing the most. And as most people go into debt for mortgages, most money is created to buy houses. Which causes house prices to rise. Something which indicators like the CPI completely ignore.

We have just been enjoying inflation for the last decade and now we are suffering the hang over.



Seriously? You do not even know what Austrian theories are. I know you don't because I have not been using Austrian theories (actually I have once, when I referred to coordinating peoples times preferences, which is an Austrian theory that in some places is taken up by the mainstream, which you flippantly dismissed).

If I was using Austrian theories I would be talking about central banks and the risks of inflation.

May I humbly suggest, that if you're googling credit and the money multiplier to try and find a hole in my argument, you stick to websites with at least some degree of rigour.

The money multiplier is irrelevant really, it does exist though.

The central banks today target funds rates, if a bank does not meet a reserve requirement that bank will be issued with high powered central bank money immediately to meet the requirement (at a cost). Or the commercial bank will get money off the market from other banks with excess reserves, at something like the LIBOR rate.

The central bank will issue enough base money to meet the demands of debtors. There is no market for loanable funds. There is just demand for debt. Which is demand for money.

please, just stop now. stop repeating what you have read from conspiracy cult websites.

Your arguments (stretching the term) have been refuted time and time again. Anyone who knows even the first thing about economics would be able to refute them.

The idea that "banks create money" is equally rediculous. Of course they do, we all do, because money is simply credit - and we are all free to extend credit. If I promise my girlfriend that if she buys a pair of shoes I will pay for them, then I am extending her credit. Im effect, I am "creating money". Everytime I put a drink on a tab, the bar is extending me credit and hence "creating money". Is this what you're so terrified of? This easy and simple smoothing of financial processes? Would you rather go back to bartering?

The only logical conclusion then, is you do not know the first thing about economics.

Repeat after me. Money is simply credit. Credit is the oil that allows the economy to function. Credit and debit are simply our method of giving values to the goods and services we produce and consume and a method of keeping track of who owes what to whom. To argue that "money is debt" is to earn a degree in stating the obvious. debt is debit and debit implies credit and credit is money.



This is the ideal system. Privately issued credit. Take away the monopoly of money from the the government. You create your own currency by your own credit.

The problem arises when we use government money, as it is good for the payment of taxes and will be enforced as debt in courts (the government is what gives fiat money value) but then private banks create this money. Would it really be all that different to what we had today if two guys cooperated together and made lots of counterfeit notes (the guys being a bank and a debtor)?

It is the governments money, they give it value, and they should create it. Is that really so crazy?

If you want to create your own credit and issue it as a circulating medium of exchange, brilliant. But do not create somebodies else money.

The government does not have a monopoly on creating money. You have already argued that banks create money and you think the government should have a monopoly. You're contradicting yourself. We already are all able to "create our own credit", by which I presume you mean "extend credit".

It is logical and practical to use the same units as the government credit to describe out own credit. I could extend you 100 "pys" in credit, but that's pretty meaningless unless I specify the exchange rate between a "py" and a pound or a dollar. Your argument appears to be that you think something exciting and revolutionary would happen if people started using a more awkward exchange rate like 145345:1. In reality it would swiftly get forgotten.

You could print your own money if you like. Its perfectly legal. Its value would be affected by people's faith in your willingness and ability to provide goods and services equal to the stated value on demand though.

I think you're very confused about this. The system we have has evolved because it is the system that best facilitates the smooth functioning of the economy. All the suggestions you have made would do the exact opposite, as I have explained.

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.

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.

Yes, in the UK children do not need to work, so rather than doing "very little harm " these laws help protect children, which is good.

-Children in the UK don't need to work. Introducing legislation would "do very little harm".

-If children in the UK worked they would be taking time away from their education etc (as you said in an earlier post, its stupid to make a child work instead of go to education - no "good parent" would do it) hence children working would "do harm"

-Some people are mean and don't care about childrens future and would make them work. hence some people would "do harm" to children.

Say you own a shop that employs 10 people, thats all you need. There are 400 applicants every month. If you half your wage, you increase your profits. If you half your wage and hire annother 10 people you won't increase your profits, and having 20 people is pointless.

Now, you could look at that as the shop then has leeway to lower prices - but that most likley doesn't happen (take a look at gas prices, they rise when oil price rises, but stay level when oil price drops. Generally, companies raise the prices to keep profits level, but if costs drop they can get away with increasing profits by not dropping price).

There are arguments against having a high minimum wage sure, but having none at all simply because you don't like the word "legislation"?

I know, dude, I study monetary economics. The three main tools of monetary policy: central bank interest rates, reserve requirements and open market operations. Which one they choose to use depends on the circumstances.

But for the most part the system controls the central bank. The money supply is determined by the demand of people to go into debt and the willingness of banks to issue bank credit.

When the bank trys to expand the money supply, when there is no demand for debt, it is like pushing on a string.

The loanable funds model of banking is simply not real today.

No thats the liquidity demand function. The money supply is different. Banks can't control the money supply, only the central bank or government can do that.

Here's a revision question for ya: What happens if the money supply (M1/P) is increased but liquidity demand remains constant?