Credit Unions recruiting small businesses

[Bonam]

Ok then... run that 3% for a couple of thousand years and tell me what the world looks like. At that point we would consume as much as the entire human race does today in a year... in just a few minutes. Even if the earth was the size of the sun this would not be sustainable on a permanent basis.

Why would I run it for a few thousand years? Like I said, it's useless much past ~2050. Anyway, any attempt on my part about predicting things in the far future would be about how the galaxy looks like, not just planet Earth.

Look at the world 1000 years ago and ask how unthinkable, unimaginable, today's world would have been. And yet here we are. We sit where we are today after hundreds of years of exponential growth. Growth that could not have happened if we used only the resources and resource extraction methods that existed at the start of the growth.

Growth is most definately finite. The worlds population will peak about 10 billion then recede and growth in the developed world is going to slow way down... It already is.

Like I said, economic growth and population growth is not the same thing. You can have a steady population but a growing economy.

[Michael Hardner]

Youre comparing it to post world war 2, but thats irrelevant. There was a completely different monetary system then. And I already DID explain to you why it cant last. Its very simple mathematics Mike, and I really dont think anyone needs to explain to you why no exponential curve can go on forever, and I explained to you why we have that exponential curve. If the economy/debt/money doesnt grow by about 3% per year there will be massive defaults because no money exists to pay off all those loans.

Economic growth can't go on forever because ? It's lasted thousands of years of human history already.

Risk cannot be properly assessed in the current system, because of the absolutely requirement for growth in debt/money over time. Credit is relaxed because the government/banks are so desperate to put enough money into the system to prevent a crash. Thats why youre getting a dozen pre-approved credit cards in the mail, and unsolicited calls from bankers begging you to take advantage or rock bottom rates.

I'm not convinced that the 2008 crashes were indicative of anything beyond greed and lapsed regulatory requirements. I doubt that those institutions were trying for 3% growth to be competitive, it was likely much higher. 3% doesn't sound unreasonable, but greed can cause mistakes to happen.

Same thing. The government has given them the right to create money.

Then please be clear in your arguments. I'm trying to learn here, so as I said you will put me off as i detect more propaganda in your arguments. Government isn't giving this money away, that's just misleading.

I'm glad, though, that I've reached a level of understanding where I can question some of your ideas.

Thats exactly what they are. They invest their money through banks in order to recieve a return on that investment.

A savings account isn't an investment. Regular working people need these vehicles to live their lives, so there's nothing wrong with government regulating and insuring them to a degree so as to make them work.

Lending is not the problem and its important function in the economy as is investment banking. The problem is that the current system puts so much money into the economy so fast, that it creates massive bubbles in various different asset classes that destroy the economy, costing millions of people their livelyhood, homes, and jobs. The financial crisis happened because rates were pegged at rock bottom as the central banks tried prevent a collapse after the .com bubble burst. We are going to have the exact same problem in the future as a result of the overly easy credit conditions we have today. That overly easy credit drains people of their savings, which guarantees a future recession.

Ok, I do see what you're saying here in light of easy credit being a lever that government uses to get money into the system. Borrowing today to pay off in the future is necessary sometimes, however. The big question is how we're going to pay off in the future.

[dre]

Economic growth can't go on forever because ? It's lasted thousands of years of human history already.

I'm not convinced that the 2008 crashes were indicative of anything beyond greed and lapsed regulatory requirements. I doubt that those institutions were trying for 3% growth to be competitive, it was likely much higher. 3% doesn't sound unreasonable, but greed can cause mistakes to happen.

Then please be clear in your arguments. I'm trying to learn here, so as I said you will put me off as i detect more propaganda in your arguments. Government isn't giving this money away, that's just misleading.

I'm glad, though, that I've reached a level of understanding where I can question some of your ideas.

A savings account isn't an investment. Regular working people need these vehicles to live their lives, so there's nothing wrong with government regulating and insuring them to a degree so as to make them work.

Ok, I do see what you're saying here in light of easy credit being a lever that government uses to get money into the system. Borrowing today to pay off in the future is necessary sometimes, however. The big question is how we're going to pay off in the future.

I'm not convinced that the 2008 crashes were indicative of anything beyond greed and lapsed regulatory requirements. I doubt that those institutions were trying for 3% growth to be competitive, it was likely much higher. 3% doesn't sound unreasonable, but greed can cause mistakes to happen.

The crisis was a predictable outcome of overly easy credit conditions. The result of a garden variety asset bubble.

3% doesn't sound unreasonable

It does to someone that knows what an exponential curve is. Run it for long enough and the worlds economy will need to grow by more than its total size each year.

Then please be clear in your arguments. I'm trying to learn here, so as I said you will put me off as i detect more propaganda in your arguments. Government isn't giving this money away, that's just misleading.

Thats not propoganda and theres no substantive difference. By allowing banks to multiply base money they absolutely ARE giving them money.

I'm glad, though, that I've reached a level of understanding where I can question some of your ideas.

You havent questioned any of my ideas, and I havent really expressed any. I explained a few basic principles of the current monetary system, why the business cycle happens, and why low interest rates and too much borrowing causes asset bubbles and recessions, but none of these are my ideas. They are uncontraversial and you could learn about them anywhere.

A savings account isn't an investment.

Argue with the dictionary...

the investing of money or capital in order to gain profitable returns, as interest, income, or appreciation in value.

Regular working people need these vehicles to live their lives, so there's nothing wrong with government regulating and insuring them to a degree so as to make them work.

Yeah there is definately something wrong with that. When you assume someone elses risk for them they will behave badly.

Ok, I do see what you're saying here in light of easy credit being a lever that government uses to get money into the system. Borrowing today to pay off in the future is necessary sometimes, however. The big question is how we're going to pay off in the future.

We arent going to pay off that debt. It will continue to grow because every dollar in our national economy represents debt. If you stop growing the debt youll have a shortage of money and a recession. If all the debt was repaid there would be no money at all.

[Michael Hardner]

The crisis was a predictable outcome of overly easy credit conditions. The result of a garden variety asset bubble.

Both the 1929 crash and this crash happened as a result of unregulated industries, where certain players were exploiting a lack of information. Your solution, then, is to DEregulate... I don't buy it.

It does to someone that knows what an exponential curve is. Run it for long enough and the worlds economy will need to grow by more than its total size each year.

This is wrong. The rate of growth itself doesn't need to increase. You yourself put forward a number of 3%. It 200 years, it could well be 3%.

Thats not propoganda and theres no substantive difference. By allowing banks to multiply base money they absolutely ARE giving them money.

The government "giving" them money is a disbursement, such as with the bailout. Allowing them to use fractional reserve banking is not "giving" them money. Can't you see the difference there ?

You havent questioned any of my ideas, and I havent really expressed any. I explained a few basic principles of the current monetary system, why the business cycle happens, and why low interest rates and too much borrowing causes asset bubbles and recessions, but none of these are my ideas. They are uncontraversial and you could learn about them anywhere.

Ok. The ideas you're conveying here, then. They're not uncontraversial. You're starting to come across to me as an idealogue. Isn't it contraversial to say the system will crash soon/eventually ?

Argue with the dictionary...

Can't you see the importance of having stable banking to our economy ? I don't think most people see bank deposits as investments, but rather as financial services.

Yeah there is definately something wrong with that. When you assume someone elses risk for them they will behave badly.

This is a libertarian view, pure and simple. There is no reason why the commons can't regulate and monitor risk. Researching your ideas, they seem to be common to right wing economists.

We arent going to pay off that debt. It will continue to grow because every dollar in our national economy represents debt. If you stop growing the debt youll have a shortage of money and a recession. If all the debt was repaid there would be no money at all.

That's a categorization of our economy - that it's all based on debt.

You have some valid things to say about our system, but the medicine seems worse than the disease from what I'm reading.

[cybercoma]

I don't. I keep enough money in my account that I pay no fees (my business account is another story). I have no problem.

Royal Bank doesn't do this and banks that require a balance don't help people living paycheque to paycheque.

People don't shop around for their banks though, which is why I think a lot of them get frustrated.

PC Financial, for example, offers no fee chequing accounts without having to hold any kind of balance; however, they only offer that on chequing. The only problem, sometimes, is finding an ATM to use. However, they now allow you to use CIBC machines absolutely free. You pay nothing for withdraws, deposits (cash & cheques), bill payments, transfers, and other things. Since most people don't go into a physical bank any longer, they have fully functional online and telephone banking services so it doesn't matter. Really, I can't see any reason why anyone would bank anywhere else for their chequing accounts.

Edited April 25, 2012 by cybercoma

[dre]

Both the 1929 crash and this crash happened as a result of unregulated industries, where certain players were exploiting a lack of information. Your solution, then, is to DEregulate... I don't buy it.

You just arent reading what I have to say... youre speeding over it and looking for what you feel are easy points to dispute, and you have taken my position on that out of context. When I mentioned deregulation it was in the context of banks haveing been stripped of their money creation activities. This is a huge act of regulation in itself, that would make traditional bank regulation much less important. At this point banks would simply collect deposits from people, and lend them out, at whatever rate they choose.

Regulation is government control and Im actually proposing a lot more of that than you. The government would nationalize money creation, and take back this constitutional responsibility.

So to be totally clear Im not proposing we deregulate the fiat fractional reserve system. That would be a disaster.

Both the 1929 crash and this crash happened as a result of unregulated industries, where certain players were exploiting a lack of information.

No this is wrong. I assume when it comes to the recent crash you are talking about all the sketchy activity, corrupt ratings agencies, complexed derivatives, etc. These were all symptoms of the problem, and they were the first things exposed once the housing bubble burst, but the root cause was the housing bubble itself, and that bubble formed because there was too much easy credit in the system, and interest rates were set too low for too long. This is whats known as the "business cycle" and its very much a monetary phenomenon. If interest rates had been at 4% or 5% the house bubble never would have formed, and lenders and investors would have been more conservative.

This is wrong. The rate of growth itself doesn't need to increase. You yourself put forward a number of 3%. It 200 years, it could well be 3%.

Not the rate of growth, the ammount of growth. Something that increases at 3% per year has a doubling time of just over 20 years. So in 20 years it will be twice as large, in 40 years it will be 4 times as large, in 60 years it will be 8 times as large, and in 80 years it will be 16 times as large. My statement was exactly right... keep that up for too long, and the ammount of GDP growth happening in a single year will be more than the entire GDP today.

Heres what an exponential curve looks like http://www.kk.org/thetechnium/photos_taken.jpg

Ok. The ideas you're conveying here, then. They're not uncontraversial. You're starting to come across to me as an idealogue. Isn't it contraversial to say the system will crash soon/eventually ?

Not really. The system just DID crash. If money has not been taken from taxpayers and given to private banking corporations thousands of banks would have failed. And it still IS crashing... thats why interest rates are so low. They are desperately trying to keep the house of cards from collapsing. Couple this with the fact that every other fiat paper money system in the history of the world DID collapse.

Can't you see the importance of having stable banking to our economy ? I don't think most people see bank deposits as investments, but rather as financial services.

Absolutely I see the importance of that. Its become a bit of an obsession of mine as you can, and thats why Iv spend the last 18 months reading dozens of books and papers about monetary history, monetary theory, and banking. Our current system is NOT stable... its less than 40 years old, and its falling apart, and the only reason it hasnt completely failed is because money is taken away from tax payers and wage earners to keep it afloat.

That's a categorization of our economy - that it's all based on debt.

No thats the fundamental underlying principle of our monetary system. Almost all money is created as bank credit. Every dollar added to the system represents debt, which is why M3 (the total monetary base) correlates almost perfectly to debt as shown in the following graph.

http://www.eidolonspeak.com/wordpress/wp-content/uploads/2011/05/fig-3-us-national-debt-money-supply-vs-cpi.jpg

In this system you cannot have economic growth without debt growth. Monetary expansion is required to have economic expansion, and the mechanism to expand the money supply is to make more loans to people and/or government. This isnt a logical requirement per say, but simply the way the current system is designed. We could have a system that doesnt have this "rule" if we wanted to.

You have some valid things to say about our system, but the medicine seems worse than the disease from what I'm reading.

Again youre taking what Im saying out of context. Im not proposing "medicine", in fact Iv taken the position that its really not possible to reform the current system. It will collapse under its own weight, and my area of interest is what will emerge after that. You dont need medicine when the patient is dead.

And Iv done a poor job explaining what that might be, because I just dont know. But Ill follow this post up with my best attempt at explaining my best guess as to what might happen.

EDIT: Oops... Missed one of your comments.

This is a libertarian view, pure and simple. There is no reason why the commons can't regulate and monitor risk. Researching your ideas, they seem to be common to right wing economists.

No its not a libertarian view. The psycologic effect of insurance on how people manage risk is pretty well documented, and that view point is not limited to libertarians.

How many times have you heard liberals talk about "socializing the risk, and privatizing the profit". Thats exactly what we do in our banking system. Concerns about the stability and sustainability of this system, its impact on the both humans and the environment, and the extremely REGRESSIVE nature of it, and the fact it has created such a huge gap between the rich and the poor, are definately non partisan.

Edited April 25, 2012 by dre

[Michael Hardner]

You just arent reading what I have to say... youre speeding over it and looking for what you feel are easy points to dispute, and you have taken my position on that out of context. When I mentioned deregulation it was in the context of banks haveing been stripped of their money creation activities. This is a huge act of regulation in itself, that would make traditional bank regulation much less important. At this point banks would simply collect deposits from people, and lend them out, at whatever rate they choose.

Regulation is government control and Im actually proposing a lot more of that than you. The government would nationalize money creation, and take back this constitutional responsibility.

So to be totally clear Im not proposing we deregulate the fiat fractional reserve system. That would be a disaster.

I am listening. You were talking about 1929. The stock market crashed, and there were bank failures.

I get what you're saying here about banks not creating money, but that's not deregulation - it's regulation. I've got it now.

Banks would lend out as much fractional money as they had on hand if they weren't regulated to not do so. If you want to stop them, you'll be regulating them more, not less.

If interest rates had been at 4% or 5% the house bubble never would have formed, and lenders and investors would have been more conservative.

But interest rates did fall, and they will fall sometimes. There will be booms, or boomlets. I think easy credit is part of the problem but not what caused it to break.

Not the rate of growth, the ammount of growth. Something that increases at 3% per year has a doubling time of just over 20 years. So in 20 years it will be twice as large, in 40 years it will be 4 times as large, in 60 years it will be 8 times as large, and in 80 years it will be 16 times as large. My statement was exactly right... keep that up for too long, and the ammount of GDP growth happening in a single year will be more than the entire GDP today.

Heres what an exponential curve looks like http://www.kk.org/thetechnium/photos_taken.jpg

I see now. Yes, you're right and that's pretty much true.

What was the GDP a hundred, two hundred years ago ? That's what growth looks like, mathematically.

Not really. The system just DID crash. If money has not been taken from taxpayers and given to private banking corporations thousands of banks would have failed. And it still IS crashing... thats why interest rates are so low. They are desperately trying to keep the house of cards from collapsing. Couple this with the fact that every other fiat paper money system in the history of the world DID collapse.

Not in the way you're talking about. I have my own opinions on booms, deregulation and so on and I do think that easy credit, lax laws cause them but I don't think the system is doomed.

Maybe the language you're using makes it sound like you think the situation is worse than you really do.

Again youre taking what Im saying out of context. Im not proposing "medicine", in fact Iv taken the position that its really not possible to reform the current system. It will collapse under its own weight, and my area of interest is what will emerge after that. You dont need medicine when the patient is dead.

And Iv done a poor job explaining what that might be, because I just dont know. But Ill follow this post up with my best attempt at explaining my best guess as to what might happen.

So maybe I agree with you generally, and more than I may have thought I agreed with you. But I don't think the current system is obliged to collapse. The doomsayers are everywhere, but all doom is relative. We live in a world in a huge recession, where online gaming is still a multi-billion dollar industry, where starvation is less of a problem but relative poverty is more of a problem.

Do you see the contradiction here ?

Economic improvement works. It makes people able to feed themselves, and gets them to the next level on Maslow's hierarchy. But humans are bad at contextualizing their personal situations. I read an article that interviewed New Yorkers making 50K, 100K... and several other levels up to tens of millions per year.

Even those making a few million didn't feel that they were so well off. In fact, their stories sounded interchangeable with the $50K folks in many respects.

So, revolution isn't in the air ... even if people can't afford buy the latest Call of Duty as soon as it comes out. ( Please don't provide me statistics in response saying that people are starving in record proportions, or that a complete global collapse is just around the corner or happening now because this has been submitted before and I just don't buy it. )

[dre]

Banks would lend out as much fractional money as they had on hand if they weren't regulated to not do so. If you want to stop them, you'll be regulating them more, not less.

Yes thats right. What I meant is that the banking system that remained, would not need as much regulation. They perform a pretty simple function at that point : BANKING. They should be free to set their own rates, set their own lending standards, etc. If the government wanted to make sure that part of the financial system stayed stable, it could make sure that theres thousands of small banks, instead of a few super large ones. Such a system has more inherent fault tolerance, and should be more stable.

But interest rates did fall, and they will fall sometimes. There will be booms, or boomlets. I think easy credit is part of the problem but not what caused it to break.

Well easy credit created a huge realestate bubble, and all bubbles eventually burst. In my way of thinking this is the root cause, and if you read into it a little bit more, you will see that the federal reserve ignored their own established formulas and kept rates way too low for way to long. Interest rates should have started going up in about 2003... housing prices had more than doubled between 1997 and 2003, and it should have been obvious at that point we had a huge bubble forming.

But youre right... Once the the realestate bubble peaked and housing prices started to fall all of these dangerous and fraudulent credit and investment instruments were the first thing to come unravelled. Its hard to speculate how much worse these things made the the situation for everyone, but they played a huge part in my estimation.

This is a good time for us to introduce another inter related concept into our discussion and you actually touched on it in another thread. This is the short sighted nature of our political system, combined with the fiat money system. Its quite reasonable to ask: "Is it even POSSIBLE for the government to manage the economic and monetary system well?". No government wants to have a recession on their watch, but recessions are important and positive events in the long term. Governments will do everything in their power to prevent recessions, and the monetary system gives them an almost unlimited capacity to move future consumption to today, at the expense of the future. Is it simply a fantasy to think governments in our current political system can produce policies that are sound over the long term?

I dont know!

I see now. Yes, you're right and that's pretty much true.

Yeah... I was estimating btw... The doubling time at 3% is actually 23.45 years.

But just to expand on that line of conversation. That number is pretty much arbitrary. Based on this the world economy will double between now and 2035. We will be using twice as much resources, twice as much energy, burning twice as much oil, etc etc. Can you see my point now, about the pressure this exponential growth puts on our eco system and population? Energy prices will triple as a result... what impact will this have on our way of life? We are already seeing energy inflation at about 8%. 8% growth has a doubling time of only 9.01 years.

So maybe I agree with you generally, and more than I may have thought I agreed with you. But I don't think the current system is obliged to collapse. The doomsayers are everywhere, but all doom is relative. We live in a world in a huge recession, where online gaming is still a multi-billion dollar industry, where starvation is less of a problem but relative poverty is more of a problem.

First of all I dont consider myself a doomsayer. We have had unprecidented human growth and progress over the last 300 years, even though our montary system has collapsed about 4 times. The reason for this is simple... Growth and progress does NOT happen because of money. Economies exist become some people know how to produce goods and services that other people want. This wont change. There will certainly be a period of tough times (I think it will last about 10 years), but it will be nothing more than speed bump on the road of human advancement if you look at the bigger picture.

To expand on this point... heres a really great video that Iv posted before by a dude that is considered to be one of the worlds leading human development experts.

It shows human development (health and wealth) over the last 200 years. You can see that even the Great Depression was barely even a blip.

Even those making a few million didn't feel that they were so well off. In fact, their stories sounded interchangeable with the $50K folks in many respects.

I can really relate to that, and it makes a lot of sense. 100 K per year is the new 40k! All of those dollars are losing purchasing power at between 1-3 percent (think back to doubling times). As our dollars lose purchasing power the cost of food, energy, and homes are rapidly increasing. People feel squeezed.

So, revolution isn't in the air ... even if people can't afford buy the latest Call of Duty as soon as it comes out. ( Please don't provide me statistics in response saying that people are starving in record proportions, or that a complete global collapse is just around the corner or happening now because this has been submitted before and I just don't buy it. )

Yeah, thats not my position although the two are easily confused. The monetary system != The economy.

Edited April 25, 2012 by dre

[dre]

As promised heres an attempt at fleshing out a system that would separate lending and money creation, and replace the current system.

First a brief refresher on banking.

From our conversation thus far we have now established that for the most part banks to do not "loan" money. "Loaning" applies you are lending something in your posession to someone else. If I dont have a lawn mower, then I cant "lend" it to you.

So what really happens? You loan the money to YOURSELF. When you sit down with a bank and negotiate a mortgage, the money they really lend you is backed by your own personal reputation as a producer of goods and services. IT IS BACKED BY YOU. In essense the bank creates "Mike Hardner Dollars"... fresh new money.

So since the banks dont loan money, what DO they do? They do a couple of really usefull and important things.

1. They make sure that new money ends up being given to people that will do smart things with it, and pay it back. They track your balance of trade (income vs liability) and your reliability and honesty.

2. They administrate the collection of your loan payments.

The problem is, that modern technology has made these things easy and cheap. The bank totals up your assets, asks for your last few years tax returns, and contracts out to a private company like equifax to establish your reputation and credit history. The vast majority of the payment administration is computerized, and disputes are handled at the cost of the tax payer in our socialized court system.

But for providing these services they will take 300 thousand dollars in interest by the time you have paid off a 300 thousand dollar mortgage.

To summarize. EVERYTHING THAT BANKS DO COULD BE DONE TODAY WITH A PIECE OF COMPUTER SOFTWARE AND A BANK OF SERVERS.

Why not create a National Credit beareau to dispurse new interest free money? The government would look at economic growth from the previous year to see how much the money supply needs to grow in order to maintain price stability. The computers would then allocate that money to each person based on their balance of trade. If you wanted credit money to expand your business you would just log onto the NCB's website and see how much credit you qualify for, then click a button to download that money into your account. Maybe you would just pay a fee, or .5% interest or whatever to pay for its operation.

If you needed more money than had been created on your behalf that year, you would then go to the PRIVATE BANKING system, which would loan you other peoples money at interest.

You would have a much lighter weight system, that is less of a burden on the economy, and you will have price stability. There would be neither inflation or deflation.

PROS:

Light weight financial system that doesnt need be 15% of the entire economy.

Easy access to the right ammount of credit for each and every person.

Effeciency (entirely automated).

The government itself could borrow from this current system.

CONS:

Still open to government abuse. If the National Credit Beareau dispursed too much credit you would have inflation. If it doesnt dispurse enough you would have deflation. This could be addressed by making it a pretty rigid rule of the system that new credit is issued to citizens at a rate based on real market growth.

Im sure Im simplifying things a bit here, but its food for thought.

Ill finish with a quote that helps illustrate the gravity of the situation...

We are completely dependant on the commercial banks. Someone has to borrow every dollar we have in circulation, cash or credit. If the banks create ample synthetic money we are prosperous; if not, we starve. We are absolutely without a permanent money system.... It is the most important subject intelligent persons can investigate and reflect upon. It is so important that our present civilization may collapse unless it becomes widely understood and the defects remedied very soon.

Robert Hamphill is not some anarchist wackjob. He is the credit manager of the Atlanta Federal Reserve Bank, one of the biggest players in the global fiat empire.

[Michael Hardner]

Yes thats right. What I meant is that the banking system that remained, would not need as much regulation. They perform a pretty simple function at that point : BANKING. They should be free to set their own rates, set their own lending standards, etc. If the government wanted to make sure that part of the financial system stayed stable, it could make sure that theres thousands of small banks, instead of a few super large ones. Such a system has more inherent fault tolerance, and should be more stable.

There's a cost in that too. The US was more suspicious of big banks in the beginning, which is why big banking is newer to them than us as I understand.

But youre right... Once the the realestate bubble peaked and housing prices started to fall all of these dangerous and fraudulent credit and investment instruments were the first thing to come unravelled. Its hard to speculate how much worse these things made the the situation for everyone, but they played a huge part in my estimation.

There was a bubble burst in 1991 or so, with the S&L failures - smaller in comparison. They may be a good comparison.

Is it simply a fantasy to think governments in our current political system can produce policies that are sound over the long term?

Tough decisions are more easily made by adults, and the mass system of political involvement downplays personal responsibility and upplays disengagement.

But just to expand on that line of conversation. That number is pretty much arbitrary. Based on this the world economy will double between now and 2035. We will be using twice as much resources, twice as much energy, burning twice as much oil, etc etc. Can you see my point now, about the pressure this exponential growth puts on our eco system and population? Energy prices will triple as a result... what impact will this have on our way of life? We are already seeing energy inflation at about 8%. 8% growth has a doubling time of only 9.01 years.

Big improvements in GDP come from technology improvements, and there's no reason to think that they won't continue. Humans have taken the first step in fixing the eco system in that they're starting to understand the impact.

Just look at how things have improved today over a few generations ago. Why aren't people talking more about that ? It's negativism.

First of all I dont consider myself a doomsayer. We have had unprecidented human growth and progress over the last 300 years, even though our montary system has collapsed about 4 times. The reason for this is simple... Growth and progress does NOT happen because of money. Economies exist become some people know how to produce goods and services that other people want. This wont change. There will certainly be a period of tough times (I think it will last about 10 years), but it will be nothing more than speed bump on the road of human advancement if you look at the bigger picture.

I want to point out that the goods and services part WILL change. Not to sound too hippy here, but we have likely reached the limit of our material wants, and real human needs will now start to take precedence.

To expand on this point... heres a really great video that Iv posted before by a dude that is considered to be one of the worlds leading human development experts.

http://www.youtube.c...h?v=jbkSRLYSojo

It shows human development (health and wealth) over the last 200 years. You can see that even the Great Depression was barely even a blip. I can really relate to that, and it makes a lot of sense. 100 K per year is the new 40k! All of those dollars are losing purchasing power at between 1-3 percent (think back to doubling times). As our dollars lose purchasing power the cost of food, energy, and homes are rapidly increasing. People feel squeezed.

This is a very positive and upbeat video. That made my day, thanks.

[Michael Hardner]

Im sure Im simplifying things a bit here, but its food for thought.

Even the NDP isn't so keen on nationalizing banks anymore. I don't see any reason to not have a government owned/run bank except that it would be owned/run by the government. I get what you're saying, but as Gordon Gekko said in Wall Street: "Greed Works". The banks are still on the hook for the money if you don't pay them back, and they don't want to not make money right ?

[GostHacked]

The Credit Unions are Ok for borrowing too, in my 30 years' experience.

Any minor differences in interest rates are more than compensated in better service, fewer fees. They are not profit-obsessed. You're a customer, not a 'mark'.

And you are a member/shareholder with input to the business.

And I have been debating with myself to move a good deal of my savings into a credit union. What are the downfalls if there are any with a credit union?

[GostHacked]

Even the NDP isn't so keen on nationalizing banks anymore. I don't see any reason to not have a government owned/run bank except that it would be owned/run by the government. I get what you're saying, but as Gordon Gekko said in Wall Street: "Greed Works". The banks are still on the hook for the money if you don't pay them back, and they don't want to not make money right ?

Greed works for Greed and for no one else.

[dre]

This is a very positive and upbeat video. That made my day, thanks.

Isnt that kewl? I Love how he presented it.

You could find a lot of interest in what that guy is doing. His project is to compile hundreds of thousands of statistics from around the world, nad publish them, along with an open source toolset to help understand the data. This seems right up your ally, as you often lament a lack of both information and context.

Heres a link to the project. You can download the gapminder code, and the data there, and do all kinds of analysis and build all kinds of visualization.

http://www.gapminder.org/

[Bonam]

dre, you sound like you are coming from the point of view of a person that for the first time in their life beheld the revelation of what an exponential curve is. You say things like: after a few doubling times, we'll be adding the equivalent of the world's entire total GDP every year. Well of course we will. Just like today we're adding the equivalent of the world's GDP ~100 years ago annually too. So what? We're also adding ~100 million people per year, and that's more than the entire world's population was earlier in our history.

There are countless processes that follow exponential curves. The increasing complexity of lifeforms created through evolutionary processes is a good natural example. A more relevant example is technological progress.

If you're just wrapping your mind around the nature of exponentially growing processes and what they imply for the economy, you can't try to consider that in isolation without also considering the effect of exponentially advancing technology. The two go hand and hand, and enable one another.

Now, all this is not to say that your proposed system, fully fleshed out, could not work well. It perhaps very well could. But your arguments about why 3% growth can't continue well into the future are, frankly, not well enough thought out. Even looking only at the Earth, the reality is we use only 0.01% of the energy that is constantly available to us from the Sun on the Earth's surface. And with energy, you can make pretty much anything else. So the reality is we have room for a thousand-fold growth using only the energy hitting the Earth from the Sun. That's over 200 years of growth at 3%, and totally ignores that we have a vast variety of other resources also available to us.

[dre]

Even the NDP isn't so keen on nationalizing banks anymore. I don't see any reason to not have a government owned/run bank except that it would be owned/run by the government. I get what you're saying, but as Gordon Gekko said in Wall Street: "Greed Works". The banks are still on the hook for the money if you don't pay them back, and they don't want to not make money right ?

Not nationalizing banks! Nationalizing money creation. And the advantages are pretty simple... how much more would you be able to contribute to the economy if you got to keep that 300k in interest?

Theres also the inherent injustice in the current system, and the fact that its so regressive and concentrates wealth at the very top. Take a look at the gap between the rich and poor between WW2 and 1971. The gap between the rich and poor dramatically shrank. As soon as the global fiat empire was established it began to explode, for all the reason we have already talked about. Socialized risk... privatized profit. People with no money to put in a savings accounts, pay taxes to insure the deposits of the ones wealthy enough to have lots of cash put away.

Theres no real need to "nationalize" anyting because money creation and monetary policy are already constitutional duties of government.

And BTW... Canada nationalized its central bank in the 1930's. All of its shares are held by the minister of finance. And its one of the reasons our system is a little more stable.

[dre]

dre, you sound like you are coming from the point of view of a person that for the first time in their life beheld the revelation of what an exponential curve is. You say things like: after a few doubling times, we'll be adding the equivalent of the world's entire total GDP every year. Well of course we will. Just like today we're adding the equivalent of the world's GDP ~100 years ago annually too. So what? We're also adding ~100 million people per year, and that's more than the entire world's population was earlier in our history.

There are countless processes that follow exponential curves. The increasing complexity of lifeforms created through evolutionary processes is a good natural example. A more relevant example is technological progress.

If you're just wrapping your mind around the nature of exponentially growing processes and what they imply for the economy, you can't try to consider that in isolation without also considering the effect of exponentially advancing technology. The two go hand and hand, and enable one another.

Now, all this is not to say that your proposed system, fully fleshed out, could not work well. It perhaps very well could. But your arguments about why 3% growth can't continue well into the future are, frankly, not well enough thought out. Even looking only at the Earth, the reality is we use only 0.01% of the energy that is constantly available to us from the Sun on the Earth's surface. And with energy, you can make pretty much anything else. So the reality is we have room for a thousand-fold growth using only the energy hitting the Earth from the Sun. That's over 200 years of growth at 3%, and totally ignores that we have a vast variety of other resources also available to us.

Youre just missing the point of what Im saying, and ignoring whats already happening. We already have 8-9% energy inflation TODAY. Prices will double in the next 9 years. This isnt a potential problem we might have in the future, its a problem we already have now.

Both you and Mike are right that technology can make growth more sustainable, but if energy technology was keeping up with growth prices would be going down not up.

Fresh water and soil are an even bigger concern. Our entire system of agriculture is scaling out... Now youll just say "we already have the technology to grow food without soil", and we do. But having technology and actually implementing it to feed 7 billion people are too different things. Like I said most of the world uses basically the same technology to grow food as we did 100 years ago.

The point being that technology and supply and demand should drive growth. It should not be driven by an arbitrary number, and it should not be driven by monetary policy. Monetary policy should concern itself completely with price stability.

Energy use will double in 22 years and as it does costs will more than quadruple. Its a complete leap of faith to suggest that technology can completely mitigate that... modern energy plants that we have already designed wont even come online for another 20 years, and capital costs associated with these technologies are ballooning as well. Its getting more and more expensive, not cheaper.

And yes. We have had strong growth for a long time, but thats relatively easy when you are on the early flat part of the exponential curve. It gets harder and harder to maintain that the steeper it gets. And the monetary system is ALREADY under severe stress.

Edited April 25, 2012 by dre

[Bonam]

Youre just missing the point of what Im saying, and ignoring whats already happening. We already have 8-9% energy inflation TODAY. Prices will double in the next 9 years. This isnt a potential problem we might have in the future, its a problem we already have now.

Both you and Mike are right that technology can make growth more sustainable, but if energy technology was keeping up with growth prices would be going down not up.

While in the long time scale, progress is a smooth exponential curve, in the short time scale, it happens in leaps and bursts. And each of those steps has causes and incentives. Rising energy prices simply raise the incentives to develop new energy technologies.

Fresh water and soil are an even bigger concern. Our entire system of agriculture is scaling out... Now youll just say "we already have the technology to grow food without soil", and we do. But having technology and actually implementing it to feed 7 billion people are too different things. Like I said most of the world uses basically the same technology to grow food as we did 100 years ago.

Who says we have to feed 7 billion people? And, even if we do, who says they all have to be fed with this technology?

The point being that technology and supply and demand should drive growth. It should not be driven by an arbitrary number, and it should not be driven by monetary policy. Monetary policy should concern itself completely with price stability.

I'm not sure, I don't know if I see anything fundamentally wrong with an economic system that is inherently biased towards stimulating more rapid growth, at the cost of somewhat increased economic instability along the way.

Energy use will double in 22 years and as it does costs will more than quadruple. Its a complete leap of faith to suggest that technology can completely mitigate that... modern energy plants that we have already designed wont even come online for another 20 years, and capital costs associated with these technologies are ballooning as well. Its getting more and more expensive, not cheaper.

How quickly new plants come online is a matter of policy and political deadlock, not any fundamental difficulty. China, for example, seems to have no trouble building new power plants by the hundreds very rapidly, using a wide range of both old and new technologies.

And yes. We have had strong growth for a long time, but thats relatively easy when you are on the early flat part of the exponential curve. It gets harder and harder to maintain that the steeper it gets. And the monetary system is ALREADY under severe stress.

Actually, every part of an exponential curve looks the same to the person sitting on it. The part ahead of you is just as much steeper than the part behind you, whichever part of the curve you are on. In other words, there is no inherent asymmetry between growing an economy by $3 billion when its current size is $100 billion, and growing it by $3 trillion when its current size is $100 trillion.

Anyway, I have no doubt that over the coming decades, our monetary system will continue to change and evolve just as it has in the past. I have no particular stake in or love of the current system. I do agree that the financial sector seems to represent a far larger part of the economy than it should, given the useful services that it actually provides.

All that being said, whether we stick with the current system for some time, or soon transition to another, so long as some horrific worldwide apocalypse doesn't strike down human civilization, our growth and progress will keep following an exponential curve, and the resource limits people make so big a deal about today will be circumvented almost trivially. The stone age didn't end because we ran out of stone, the bronze age didn't end because we ran out of bronze, and the iron age didn't end because we ran out of iron. And neither will this age end because we run out of oil (or whatever other resource), but because we will find something better.

Edited April 26, 2012 by Bonam

[Michael Hardner]

Not nationalizing banks! Nationalizing money creation. And the advantages are pretty simple... how much more would you be able to contribute to the economy if you got to keep that 300k in interest?

Ok, but this would effectively nationalize most of what banks do, since they make money by creating it now.

Theres also the inherent injustice in the current system, and the fact that its so regressive and concentrates wealth at the very top.

"Injustice" as you put it occurs naturally, and to a certain degree concentration should happen and ability should be rewarded.

Take a look at the gap between the rich and poor between WW2 and 1971. The gap between the rich and poor dramatically shrank.

In North America, mostly.

As soon as the global fiat empire was established it began to explode, for all the reason we have already talked about.

Those events may have happened concurrently, but credit didn't cause inequality.

Socialized risk... privatized profit. People with no money to put in a savings accounts, pay taxes to insure the deposits of the ones wealthy enough to have lots of cash put away.

Socialized risk is kind of a slogan that's used to describe bail-outs but I don't see how this sentence makes sense.

[dre]

Those events may have happened concurrently, but credit didn't cause inequality.

Not credit the new monetary system. And it absolutely IS a major cause of inequality and the reason why that trend change immediately when we moved to the debt-money system.

Governments used all that debt to fund regressive tax cuts the corporations and the wealthy, shower businesses with money, bail out banks and corporations, etc. And all that easy cheap credit was used to inflate the realestate bubble between 1996 and 2006... Speculators, and lenders made literally staggering profits, at the cost of a while shitload of people losing their jobs.

Its not a coincidence at all, that the trend towards wealth consolidation began immediately after this system was implemented and hasnt stopped since. Its the root cause.

[bush_cheney2004]

... And all that easy cheap credit was used to inflate the realestate bubble between 1996 and 2006... Speculators, and lenders made literally staggering profits, at the cost of a while shitload of people losing their jobs.

Not in Canada, where we can see unemployment rates decreasing over that time period (1996 - 2006).

Its not a coincidence at all, that the trend towards wealth consolidation began immediately after this system was implemented and hasnt stopped since. Its the root cause.

Nope...data shows an average decline for income inequality for Canadians from 1970's through 1990.

http://www.conferenceboard.ca/hcp/hot-topics/caninequality.aspx

Edited April 27, 2012 by bush_cheney2004

[Michael Hardner]

Not credit the new monetary system. And it absolutely IS a major cause of inequality and the reason why that trend change immediately when we moved to the debt-money system.

Governments used all that debt to fund regressive tax cuts the corporations and the wealthy, shower businesses with money, bail out banks and corporations, etc. And all that easy cheap credit was used to inflate the realestate bubble between 1996 and 2006... Speculators, and lenders made literally staggering profits, at the cost of a while shitload of people losing their jobs.

Its not a coincidence at all, that the trend towards wealth consolidation began immediately after this system was implemented and hasnt stopped since. Its the root cause.

Root causes are notoriously hard to establish. In the case of a global economy, it would be almost impossible. If pressed, I would always submit our communication systems as root causes as those are the means by which we make all decisions.

[bush_cheney2004]

Root causes are notoriously hard to establish....

...and has not been demonstrated here based on real data for employment and income inequality, which improved overall through 1990, a good 20 years after the "debt society".

[dre]

Root causes are notoriously hard to establish. In the case of a global economy, it would be almost impossible. If pressed, I would always submit our communication systems as root causes as those are the means by which we make all decisions.

Right but its ver easy to see why the debt money system is regressive, and the regressive nature of inflation is very well documented as well. Inflation is a tax on consumption... so the larger percentage of your income that goes towards consumption the more it hurts you. People who spend almost their entire paycheck on consumption are hurt the most.

Just think about how our banking system works. How much credit you get depends on how much income and assets you already have. Lets say the bank wants to loan out a million dollars... three applicants walk through the front door... on has an annual income of 15K per year, the other 50k, the other 250k.

The 15k per year application will get nothing.

The 50k application will get a little bit.

The 25Ok applicant will get the vast majority of it.

Its regressive by its very definition because the whole mechanism of deciding who gets credit is based on income and assets.

Quick case in point. I make 6 figures, but one of my best friends makes only 20k. During the realestate boom, I qualified for credit, and I invested the money realestate. My net worth tripled.

The "gap" between him and I grew simply because I had access to that credit, and the only reason I did was because I already had income and assets. The net result for him? While me and other speculators were using that easy credit to bid up housing prices all he got was higher rents.

The final slap in the face to him, will come once the asset bubble created by myself and all the other investors speculators collapses, and theres a recession. Then he probably wont have a JOB either.

And thats not even getting into the regressive nature of inflation itself, which robs wage earners of purchasing power, or the fact all this credit has allowed western countries to run big trade deficits with other nations which have resulted in an exodus of productive jobs.

But theres more

Once governments in the west were able to fund themselves with credit, they immediately began implementing regressive tax cuts. It was a sea change not only in our economy but in the "social contract" itself.

http://www4.agr.gc.ca/resources/prod/img/pol/pub/itdat60-05/images/Tax_figure1.gif

Within a couple of years of the birth of the debt-money system, we saw absolute wages keep up with productivity, but real inflation adjusted wages because to diverge as shown in the following graph...

http://worthwhile.typepad.com/.a/6a00d83451688169e20134878dba59970c-800wi

Again, and entirely predictable result of the new systems design/rules/features. Inflation and easy credit are really good for investors, but really bad for wage earners.

Up until that point real wages and productivity had followed the same trend since ww2, during which time the middle class emerged.

Edited April 27, 2012 by dre