Dont be too quick to judge the 1%

[blueblood]

Ya, you are right.

It isn't the richest one percent that the Occupy movement is against, it is the one percent that have come to own and controls everything around us by influencing government policies.

I don't think people understand that we live in a fascist world, the banks control everything. Just recently the world kicked out two Prime Ministers in Greece and Italy and replaced them with bankers. The banks have taken over, central banking needs to end.

No central banking doesn't need to end. There needs to be central bankers who can accept that they can't change reality, the central banks have a purpose, arbitrarily setting interest rates isn't one of them.

[maple_leafs182]

No central banking doesn't need to end. There needs to be central bankers who can accept that they can't change reality, the central banks have a purpose, arbitrarily setting interest rates isn't one of them.

A central banker that will accept that they can't change reality...that won't happen anytime soon. Central banking does need to end, they provide no useful service. Central banks are here for the benefit of the big banks and the corporations those banks support. There will never be any kind of free economy as long as we have bankers manipulating the monetary supply for their own gain.

[Michael Hardner]

This is an informative discussion - thank you Dre and TimG...

TimG - the graph you linked to earlier in the thread (GDP per capita ?) doesn't seem to work.

[dre]

No central banking doesn't need to end. There needs to be central bankers who can accept that they can't change reality, the central banks have a purpose, arbitrarily setting interest rates isn't one of them.

I think that at the end of the day money is just a TECHNOLOGY that helps facilitate trade. As complexed as they have tried to make the system the problem that it needs to solve is actually a very simple one, and it could be solved with MUCH less overhead than we have now.

Technological progress will render the system obsolete just like claim checks (the first kind of paper money) made gold obsolete as the physical medium of exchange.

This system has almost run its course.

[Michael Hardner]

You're starting to get close to my idea:

a new kind of money - electronic with all transactions publicly trackable

no more hiding money, or lobbying government to say you're poor when you're not...

Better yet, this system could be implemented alongside the current system so it would be tested against non traceable trade. There would be no need to destroy the system and launch a grand new experiment. People could voluntarily use the system as a measure of good faith...

It's just an idea but I like the idea of competing systems of exchange...

[blueblood]

You're starting to get close to my idea:

a new kind of money - electronic with all transactions publicly trackable

no more hiding money, or lobbying government to say you're poor when you're not...

Better yet, this system could be implemented alongside the current system so it would be tested against non traceable trade. There would be no need to destroy the system and launch a grand new experiment. People could voluntarily use the system as a measure of good faith...

It's just an idea but I like the idea of competing systems of exchange...

I think it's pretty much electronic now anyway, and any transaction I make is more easily trackable than ever which makes accounting far easier. I find it's getting more and more so anyway.

If you watch the Peter schiff goes to OWS videos, he makes an interesting point. It's not the lobbying that's the problem, as lobbying is a logical activity. The problem is gov't having created so much power to have for sale in the first place. Look at it this way, if gov't wasn't so large and powerful as it created for itself; what would the lobbyists be getting?

[Michael Hardner]

The problem is gov't having created so much power to have for sale in the first place. Look at it this way, if gov't wasn't so large and powerful as it created for itself; what would the lobbyists be getting?

Maybe the problem is also that the complexity of their activities negates the possibility for western democracy to function as it was designed.

Maybe we need a new level of public stakeholder to deal with these problems. Civic volunteers who vote consistently, who are charged with informing themselves in detail about the activities of government - and by extension of business.

[dre]

You're starting to get close to my idea:

a new kind of money - electronic with all transactions publicly trackable

no more hiding money, or lobbying government to say you're poor when you're not...

Better yet, this system could be implemented alongside the current system so it would be tested against non traceable trade. There would be no need to destroy the system and launch a grand new experiment. People could voluntarily use the system as a measure of good faith...

It's just an idea but I like the idea of competing systems of exchange...

Give this video a look Mike its pretty short. Its fairly close to what you suggested. This is a system a friend of mine designed. Hes starting to get a lot of interest from economists around the world.

http://www.digitalcoin.info/Digital_Coin_Introduction.html

This is a modern electronic version of the usury-free self issued credit that was very successfull in the early market place.

Its a completely private market based system, and the governments only real role is to maintain the IT infrastructure thats required.

Edited November 19, 2011 by dre

[TimG]

This is a modern electronic version of the usury-free self issued credit that was very successful in the early market place.

A not even remotely workable system that ignores the fact that modern businesses need a lot of capital before they can produce and goods and that in the marketplace people will have no reliable information about the value of a 'credit coin' from some company and will inevitably demand that transactions be settled in a national currency of one form or another. Edited November 19, 2011 by TimG

[dre]

I think it's pretty much electronic now anyway, and any transaction I make is more easily trackable than ever which makes accounting far easier. I find it's getting more and more so anyway.

If you watch the Peter schiff goes to OWS videos, he makes an interesting point. It's not the lobbying that's the problem, as lobbying is a logical activity. The problem is gov't having created so much power to have for sale in the first place. Look at it this way, if gov't wasn't so large and powerful as it created for itself; what would the lobbyists be getting?

But if currency is not anchored to the economy the government will ALWAYS keep growing, because monetary expansion is how they fund that growth, and the banking industry heavily promotes the growth of government because government borrows so much money and pays so much interest.

Todays era of big government is a direct result of our monetary system.

[dre]

A not even remotely workable system that ignores the fact that modern businesses need a lot of capital before they can produce and goods and that in the marketplace people will have no reliable information about the value of a 'credit coin' from some company and will inevitably demand that transactions be settled in a national currency of one form or another.

The system has already been used and produced robust economic growth.

And you obviously didnt pay attention because the whole point of the system is that everyone always knows how much credit coin is worth, because the system tracks the the issuers balance of trade, and the value is based on the real demand for them in the marketplace. Very similar to how a stock exchange works.

[TimG]

The system has already been used and produced robust economic growth.

On a small scale in medieval times. Hardly a recommendation for today.

And you obviously didnt pay attention because the whole point of the system is that everyone always knows how much credit coin is worth, because the system tracks the the issuers balance of trade, and the value is based on the real demand for them in the marketplace. Very similar to how a stock exchange works.

Are you so naive that you actually believe the scammers and fraud artists involved in the system today would quietly go find gainful employment elsewhere? They would target this system exploiting loop holes and, in the process, completely undermine the credibility of the database. People will learn that they can only trust certain "brands". New companies will be shut out of the system because they will have no "rep". This will give immense power to the established players. Then you have the problem with corrupt government officials in places like China.

I think naive and unworkable is the most polite way to describe it.

Edited November 19, 2011 by TimG

[dre]

On a small scale in medieval times. Hardly a recommendation for today.

Are you so naive that you actually believe the scammers and fraud artists involved in the system today would quietly go find gainful employment elsewhere? They would target this system exploiting loop holes and, in the process, completely undermine the credibility of the database. People will learn that they can only trust certain "brands". New companies will be shut out of the system because they will have no "rep". This will give immense power to the established players. Then you have the problem with corrupt government officials in places like China.

I think naive and unworkable is the most polite way to describe it.

Are you so naive that you actually believe the scammers and fraud artists involved in the system today would quietly go find gainful employment elsewhere?

No but any system where credit is actually tied to goods and services is going to be inherently much harder to game. Your credit is based on your real ability to create products and services, and the demand for those products and services in the marketplace.

They would target this system exploiting loop holes and, in the process, completely undermine the credibility of the database.

We'll see. A system with rigid rules and less human decisions is going to be harder to scam. And macro economists around the world are looking a pauls system and many others, trying to figure out ways to crash them and distabilize them.

I think naive and unworkable is the most polite way to describe it.

You cant think that all you want, but youve seen a ten minute video that just explains the underpinnings of the system. You dont even know how its supposed to work, or what the rules are.

New companies will be shut out of the system because they will have no "rep".

This is no different than how the system works now. You have to realize that credit EVEN TODAY is by its very nature "self issued". The commercial banking system will allocate capital to you if you have a good reputation, and favorable balance of trade... Investment banks will allocate capital based on a good idea.

Investment banking would still be a logical function of this system, and there would still be a private tertiary banking system.

From a logical standpoint this system and other systems of self issued credit are really just a light weight way to express the functions that todays system already has, and create a stronger bond between credit and the economy.

Edited November 19, 2011 by dre

[TimG]

No but any system where credit is actually tied to goods and services is going to be inherently much harder to game.

Actually it would be really easy to game because there is no contract stipulating exactly what quality of goods and/or services are included with these credits. If these credits are passed on to other people they really have no idea what they are getting and there is no way a database could provide such information. That is why I say it would quickly revert to what we have now where only a few credit issuers are 'trusted'

Your credit is based on your real ability to create products and services, and the demand for those products and services in the marketplace.

And someone could set up a system of closely linked companies that circulate credits between them. This would create the illusion of a large volume of goods/services trading hands when it is nothing more than check kiting. How would your 'simple' database handle this kind of fraud?

We'll see. A system with rigid rules and less human decisions is going to be harder to scam.

You would think but that is never the case in practice. If fact, the reason we end up with these insanely complex systems is because authorities are constantly finding cases the simple rules are not 'just' so they create exceptions and then they create more rules to stop people from abusing those loop holes. On top of that we have a culture of 'rent seekers' who will lobby politicians to change the system for personal gain (all those companies pedding sham *green* technologies are good examples). Why do you think those forces would disappear?

You cant think that all you want, but youve seen a ten minute video that just explains the underpinnings of the system. You dont even know how its supposed to work, or what the rules are.

It is enough to know it has ZERO chance of working. It is like a hippy commune - looks great on paper with 'honest' people. In practice when real, dishonest people are added to the mix it falls apart quickly.

This is no different than how the system works now. You have to realize that credit EVEN TODAY is by its very nature "self issued".

It is issued by banks which are subject to fairly strict regulations. There is no way that regulatory system could be applied to ever person and enterprise in the world. Edited November 20, 2011 by TimG

[dre]

Actually it would be really easy to game because there is no contract stipulating exactly what quality of goods and/or services are included with these credits. If these credits are passed on to other people they really have no idea what they are getting and there is no way a database could provide such information. That is why I say it would quickly revert to what we have now where only a few credit issuers are 'trusted'

And someone could set up a system of closely linked companies that circulate credits between them. This would create the illusion of a large volume of goods/services trading hands when it is nothing more than check kiting. How would your 'simple' database handle this kind of fraud?

You would think but that is never the case in practice. If fact, the reason we end up with these insanely complex systems is because authorities are constantly finding cases the simple rules are not 'just' so they create exceptions and then they create more rules to stop people from abusing those loop holes. On top of that we have a culture of 'rent seekers' who will lobby politicians to change the system for personal gain (all those companies pedding sham *green* technologies are good examples). Why do you think those forces would disappear?

It is enough to know it has ZERO chance of working. It is like a hippy commune - looks great on paper with 'honest' people. In practice when real, dishonest people are added to the mix it falls apart quickly.

It is issued by banks which are subject to fairly strict regulations. There is no way that regulatory system could be applied to ever person and enterprise in the world.

Actually it would be really easy to game because there is no contract stipulating exactly what quality of goods and/or services are included with these credits.

Again, this is no different than the system we have now. Producers that make low quality goods get a bad reputation and do less business. The market would decide who the good producers are and who the bad ones are. Good ones would do more business, and by natural extension have more credit.

And someone could set up a system of closely linked companies that circulate credits between them. This would create the illusion of a large volume of goods/services trading hands when it is nothing more than check kiting. How would your 'simple' database handle this kind of fraud?

Simply swapping credits back and forth would not change your balance of trade. And no monetary system will completely prevent fraud, and its completely rampant in this system as well.

If fact, the reason we end up with these insanely complex systems is because authorities are constantly finding cases the simple rules are not 'just' so they create exceptions and then they create more rules to stop people from abusing those loop holes.

Thats true but its not a salient point regarding this or any other monetary system or monetary theory. No matter what system you were discussing OF COURSE you could say "Well what if people change the rules and break it".

Thats a political problem, not a monetary problem.

On top of that we have a culture of 'rent seekers' who will lobby politicians to change the system for personal gain (all those companies pedding sham *green* technologies are good examples). Why do you think those forces would disappear?

Where did I say I thought they would? Youre looking way beyond what a monetary system is supposed to do. The only purpose of money is to provide a trasactional medium thats stable over time so that you have wage and price stability.

This again is a political problem that no monetary system is going to fix.

It is enough to know it has ZERO chance of working. It is like a hippy commune - looks great on paper with 'honest' people. In practice when real, dishonest people are added to the mix it falls apart quickly.

This again is not a problem a monetary system is meant to solve. You would still need to have the same types of laws around fraud and theft.

It is issued by banks which are subject to fairly strict regulations.

No it isnt. Credit is issued by 100's of different kinds of businesses today from corporations, to department stores, to thrifts, and trusts, and private individuals.

The main reason why commercial banks are regulated is simply because the FDIC is expected to back deposits and like any insurer they force rules on you if they are expected to cover losses. But if a bank today doesnt want to accept insured deposits they can do pretty much whatever they like. Companies like Country Wide and New Century Financial can even lend an unemployed guy 400K at 10% interest if they want!

[Jack Weber]

I wasn't referring to you specifically in my last sentence, you = anyone, not "dre". I did read your post, twice.

And yes I agree the system needs reform. And it proves that capitalism needs some regulations (maybe not fed mucking with money/supply & interest rates, this needs reform also), but it needs regs because some people are greedy, immoral a-holes, and those people will do just about anything to increase profit & get ahead. And this forces others in business to do immoral things in order to compete in the game, because if they don't they go belly-up. One of the moral hazards of free-market competition. If there were no regulation of business many of us may still be working for 3 dollars an hour in garbage work conditions, consuming products laced with poisons, much more of the animals in our major lakes dead from pollution, and maybe the ozone would be completely destroyed by now.

I blame the 99% just as much as the 1% for putting up with this crap. We've all been fooled.

Nothing like the biting lyrics of one,Peter Townshend, to get the point across...

[Guest Manny]

Nothing like the biting lyrics of one,Peter Townshend, to get the point across...

Yeah I really like that tune!

[TimG]

Again, this is no different than the system we have now. Producers that make low quality goods get a bad reputation and do less business.

Actually there is a huge difference. Right now the issue of quality is only a matter between the buyer and seller. In your system a seller would get 'credits' for goods/services of unknown quality and seek to use these credits to buy goods/services from a third party. In the real world those third parties will want nothing to do with credits issued by sources they don't have personal experience with. That means the rube goldberg machine that you wish to create will inevitably revert back to what we have now with a few trusted currencies that can be used as means of exchange.

The market would decide who the good producers are and who the bad ones are. Good ones would do more business, and by natural extension have more credit.

There is a huge problem today preventing fraud in the stock market because companies can engage in any number of accounting tricks to disguise problems until they are too late (think Nortel, Enron). Yet in the current system the only people who get burned are people who made the deliberate decision to buy the dodgy stock. In your system, the harm from these frauds would ripple through the system as people find they are holding now worthless 'credits' from a producer they never dealt with.

Simply swapping credits back and forth would not change your balance of trade. And no monetary system will completely prevent fraud, and its completely rampant in this system as well.

Yet the current one is elegently simple compared what you want to create.

Where did I say I thought they would? Youre looking way beyond what a monetary system is supposed to do. The only purpose of money is to provide a trasactional medium thats stable over time so that you have wage and price stability.

Your system won't do that because you are assuming products/service credits can't be inflated though accounting tricks. They can. The only difference is keeping track of which credits are "good" and which ones are "bad" will be an accounting nightmare that will make people long for the days of central banks and the CPI.

No it isnt. Credit is issued by 100's of different kinds of businesses today from corporations, to department stores, to thrifts, and trusts, and private individuals.

The shadow banking system cannot engage in fractional reserve banking. They play games with derivatives and insurance policies in order to exist. As I said before, the regulators failed to understand how derivatives can destabilize the system and regulators need to move back to a system where only tightly regulated banks are able to expand the money supply. Edited November 20, 2011 by TimG

[Michael Hardner]

Give this video a look Mike its pretty short. Its fairly close to what you suggested. This is a system a friend of mine designed. Hes starting to get a lot of interest from economists around the world.

http://www.digitalcoin.info/Digital_Coin_Introduction.html

This is a modern electronic version of the usury-free self issued credit that was very successfull in the early market place.

Its a completely private market based system, and the governments only real role is to maintain the IT infrastructure thats required.

Ok. A "short" video of 8 minutes probably represents 20 threads I could have read, which is one reason I prefer text to video but this was interesting.

I don't see this system as having appeal to people... the digital coins basically have an expiration date and can't be converted to government backed currency. How would somebody finance anything with digital coins ? How would they buy property ? What's to stop people from issuing more digital coins than they can produce for in the short term, effectively increasing the money supply by creating a "loan" ? The advantage would be that banks wouldn't take their cut, but banks also perform a service for the money they make.

I'm still learning, though...

[Michael Hardner]

The more I read about this, the more I come to believe that the biggest problems with the financial crisis were sloppy work by financial institutions, and too much deregulation which necessitated bailouts when 'too big to fail' institutions almost failed.

Canada was slow to adapt to the changing marketplace, which helped us in this instance.

Surprise, surprise... I'm once again in the middle-of-the-road with my opinion, conventional wisdom and yadda yadda...

Keep this one going, though. I really do appreciate it, and I feel like I'm learning something. Not sure if I am ACTUALLY learning something but it feels like I am.

[TimG]

I don't see this system as having appeal to people... the digital coins basically have an expiration date and can't be converted to government backed currency.

That is my argument: there is no appeal. It would turn every transaction into a stock market trade where the onus would be on the seller to research the 'quality' of the credits being offered to determine if they want to take the risk accepting them. It would be pain that people would seek to rid themselves of by demanding that all payments be in some medium that is not tied to the welfare of a single company. Edited November 20, 2011 by TimG

[dre]

Ok. A "short" video of 8 minutes probably represents 20 threads I could have read, which is one reason I prefer text to video but this was interesting.

I don't see this system as having appeal to people... the digital coins basically have an expiration date and can't be converted to government backed currency. How would somebody finance anything with digital coins ? How would they buy property ? What's to stop people from issuing more digital coins than they can produce for in the short term, effectively increasing the money supply by creating a "loan" ? The advantage would be that banks wouldn't take their cut, but banks also perform a service for the money they make.

I'm still learning, though...

I don't see this system as having appeal to people.

I can see usury free credit having HUGE appeal. By the time I pay off my 300 thousand dollars mortgage I will have had to pay about 600 thousand dollars.

How would somebody finance anything with digital coins ?

The exact same way they finance stuff with todays dollars.

How would they buy property ?

You would trade your money for it.

What's to stop people from issuing more digital coins than they can produce for in the short term, effectively increasing the money supply by creating a "loan" ?

The same thing that stops somebody who makes 10 bux an hour from borrowing 500K. The system is aware of your balance of trade, just like banks are today.

The advantage would be that banks wouldn't take their cut, but banks also perform a service for the money they make.

Yes banks perform a valuable service. They monitor credit worthiness and they administer the electronic collection of your mortgage payments. Basic services for which a small fee should be charged.

Edited November 20, 2011 by dre

[TimG]

I can see usury free credit having HUGE appeal. By the time I pay off my 300 thousand dollars mortgage I will have had to pay about 600 thousand dollars.

And paying that $600,000 over 25 years is HUGE benefit to you because you can live the house before you can afford pay for it. How much would you have pay in rent if you were forced to save $300K before you could buy the house?

There is no way to have a system where people can borrow against their future earning potential unless the lenders have a way to make a profit on the transaction.

Edited November 20, 2011 by TimG

[dre]

And paying that $600,000 over 25 years is HUGE benefit to you because you can live the house before you can afford pay for it. How much would you have pay in rent if you were forced to save $300K before you could buy the house?

There is no way to have a system where people can borrow against their future earning potential unless the lenders have a way to make a profit on the transaction.

Sure there is. Theres a whole bunch of different ways actually. When you qualify for a loan the credit authority could simply add the money you need to the monetary base, assign it to you, and charge you a small fee based on the real cost to administer your loan and evaluate your credit.

Usury free money has existed in various different forms and various different times throughout history. Theres absolutely nothing impossible about it at all.

In fact... we came very very close to this being what our economic system was based on. Abraham lincoln implemented usury free money in order to win the civil war because internataional bankers tried to charge him 23% interest on the money required to win. He told them to go ____ themselves and Colonel Dick Taylor was put in charge of solving the problem.

The solution was to create the green back.

"The government should create, issue and circulate all the currency and credit needed to satisfy the spending power of the government and the buying power of consumers..... The privilege of creating and issuing money is not only the supreme prerogative of Government, but it is the Government's greatest creative opportunity. By the adoption of these principles, the long-felt want for a uniform medium will be satisfied. The taxpayers will be saved immense sums of interest, discounts and exchanges. The financing of all public enterprises, the maintenance of stable government and ordered progress, and the conduct of the Treasury will become matters of practical administration. The people can and will be furnished with a currency as safe as their own government. Money will cease to be the master and become the servant of humanity. Democracy will rise superior to the money power."

So they printed out 450 million dollars worth of usury free money, using green ink on the back to make sure they looked different than bank notes.

The system worked so well, that Lincoln wanted to adopt this as permanent national policy but he caved to pressure from internation bankers.

Edited November 20, 2011 by dre

[TimG]

Here is a primer in how Muslims get around the prohibition on interest payments.

http://nyuiba.com/ibj/2011/11/the-magical-world-of-islamic-finance/

These principles apply to a wide range of financial services and products, including leasing, bank loans, joint ventures, insurance, equity funds, microfinance, fixed income and much more. So how does an Islamic bond or sukuk work without interest? In basic terms, an issuer will sell a bond to an investor, who then rents it back to the issuer. The issuer will later buy back the bond for at par value. The key principle here is that the Islamic bond will be supported by an underlying asset. Therefore, the bondholder will have ownership over real assets rather than debt. This makes it less risky to invest in sukuk than conventional bonds.

In other words, it is a word game. Interest is still charged but it is called 'rent'. Edited November 20, 2011 by TimG