No proprietary trading for banks

[robster970]

Could you please elaborate the mechanism being used to transfer the wealth.

I couldn't tell if you were being sarcastic or not ODT. If you're not, the economic principal of money supply causing inflation does not mean that it is equally distributed. That's why the rich get richer and the poor get poorer over time. You're examples which are as pertinent to me as they are to you just highlight how the ruling classes bend it to their advantage and suck money from us via direct and indirect forms of taxation.

This gives a fairly 101 explanation.

http://www.vagabondinvestors.com/archives/481

Apologies if you already know this sh1t. It's not meant to be condescending. I just couldn't tell if you did but felt it's an important thing to understand in economics.

 

[oildaytrader]

I couldn't tell if you were being sarcastic or not ODT.

I now understand how it creates inflation.

Why is the fed the only entity allowed to print money?Getting 4% per annum on 10% deposit equates to 40% ,secured by the U S government.Why would they want to stop printing money?If there is inflation interest will rates rise ,somebody printing money gets bigger interest payments.

 

[robster970]

They're not - any central bank can print money for their own currency. Why they don't just print gazillions of USD is because it would completely devalue the currency and it would end up like Zimbabwe where $1m would buy you a bag of crisps and the exchange rate compared to other currencies would be prohibitive to import/export. Nobody would trade with the US.

 

[SSINGH]

These western financier are quickly becoming obsolete.

 

[Benton D Struckcheon]

I think where we differ is that I don't have faith in the current US administration, and in fact I have no faith in government in general. I actually happen to think that banks should essentially be no more than 'money warehouses' where the commodity of money is simply stored, and a fee charged for that storage. Then there is nothing stopping other separate institutions from being 'loan companies' or 'speculation companies'. This would only really be achieved by doing away with central banking and fractional reserve banking as a whole. Anything that stops short of the complete destruction of he fractional reserve concept and central banks is just papering over the cracks.

Forget I said anything.
There HAS NEVER been a commercial society without "fractional reserve" banking: that IS banking, and unless you want to go back to the Middle Ages, it's a required service.
I have nothing further to add to this subject, not if I'm going to be engaged by the usual radical lib internet ideology that seems to run rampant whenever these discussions take place.
Read it a million times. A million and one doesn't make it any less ahistorical or utopian.
Ideologues bore me.

 

[Benton D Struckcheon]

Yes, I've never really been able to get my head round the concept of effectively buying a company with its own money,

Take Manchester United as an example. How a couple of guys can breeze in, buy the club and lay the debt on the club is beyond me. If ManU sink under the weight of that debt (do I hear some cheers ) the Glazers will be unscathed and walk away with the millions they have taken out of the club - mmmm.

cheers

jon

Funny.
I'm not exactly up on your soccer stuff, but from here it's pretty clear Manchester is to British football what the Yankees are to American baseball, and there'd probably be mighty cheers - outside of Manchester - if that were to happen.

 

[robster970]

Most of the cheers will come from the Manchester City supporters in Manchester. Most Utd supporters are from outside the local vicinity.

 

[robster970]

Forget I said anything.
There HAS NEVER been a commercial society without "fractional reserve" banking: that IS banking, and unless you want to go back to the Middle Ages, it's a required service.
I have nothing further to add to this subject, not if I'm going to be engaged by the usual radical lib internet ideology that seems to run rampant whenever these discussions take place.
Read it a million times. A million and one doesn't make it any less ahistorical or utopian.
Ideologues bore me.

I don't think you'll find any ideologists here. In any event I'm not sure what a radical liberal is. Is that someone who wears flamboyant cardigans?

 

[Benton D Struckcheon]

I don't think you'll find any ideologists here. In any event I'm not sure what a radical liberal is. Is that someone who wears flamboyant cardigans?

Radical libertarian.
One question, for all of you, since you all seem to consider yourselves experts on currency questions: have any of you even heard of Paul Einzig?
Answer truthfully.

 

[robster970]

Radical libertarian.
One question, for all of you, since you all seem to consider yourselves experts on currency questions: have any of you even heard of Paul Einzig?
Answer truthfully.

That makes more sense.

No. I also fall into the minority on here because I don't do forex. I just think it's important to know some basic economics.

The name seems to ring some bells though.

 

[oildaytrader]

Radical libertarian.
One question, for all of you, since you all seem to consider yourselves experts on currency questions: have any of you even heard of Paul Einzig?
Answer truthfully.

NO , never heard of him.He passed away in 1973

 

[Benton D Struckcheon]

Just looked around, and there is, as is usual with that site, an excellent appreciation of him on eh.net:

The History of Foreign Exchange | Book Reviews

Besides the book explicitly reviewed here, you could do worse than spend a few afternoons plowing through "Theory of Forward Exchange", which was later also published as "A Dynamic Theory of Forward Exchange". It has a priceless historical review of past currency crises in the back part of the book. There's an interesting and not particularly flattering mention of Mises in there in re how the Austrian empire managed its currency.
As for our current situation, his book written right after the breakup of Bretton Woods, "The Destiny of the Dollar", is still perfectly relevant.
There's a lot more nutrition in this stuff than in the standard internet rad-lib stuff, in my ever-so-humble opinion.

 

[virtuos0]

Forget I said anything.
There HAS NEVER been a commercial society without "fractional reserve" banking: that IS banking, and unless you want to go back to the Middle Ages, it's a required service.
I have nothing further to add to this subject, not if I'm going to be engaged by the usual radical lib internet ideology that seems to run rampant whenever these discussions take place.
Read it a million times. A million and one doesn't make it any less ahistorical or utopian.
Ideologues bore me.

In Asia China in the 8th century, in Europe Venice in the 14-16th Century. Banking began exactly as I set out above, by people depositing money with Goldsmith's for safekeeping. Unfortunately at some point a Goldsmith/bank realised that he could commit fraud/counterfeiting and get away with it, as not everybody would demand their gold bank at the same time. So he would issue more receipts for Gold, than his physical storage of Gold. Fast forward to the modern day and that exact same fraud is being committed.

I would love to engage in a debate on this, so perhaps you could explain why fractional reserve banking is a required service?

 

[oildaytrader]

Forget I said anything.
There HAS NEVER been a commercial society without "fractional reserve" banking: that IS banking, and unless you want to go back to the Middle Ages, it's a required service.
I have nothing further to add to this subject, not if I'm going to be engaged by the usual radical lib internet ideology that seems to run rampant whenever these discussions take place.
Read it a million times. A million and one doesn't make it any less ahistorical or utopian.
Ideologues bore me.

There needs to be strict regulation of the financial industry to prevent another set of crisis .There can not be another LTCM,Bear stearns ,Lehman's,Merril,A I G etc

There will always be uncontrollable increases in money supply ,these increases may be due to external factors such as foreign investments etc.The investment banks have proved they are incompetent and incapable of self controls and prudence.

There needs to be regulation to prevent excessive money creation and leverage by banks .

 

[Benton D Struckcheon]

In Asia China in the 8th century, in Europe Venice in the 14-16th Century. Banking began exactly as I set out above, by people depositing money with Goldsmith's for safekeeping. Unfortunately at some point a Goldsmith/bank realised that he could commit fraud/counterfeiting and get away with it, as not everybody would demand their gold bank at the same time. So he would issue more receipts for Gold, than his physical storage of Gold. Fast forward to the modern day and that exact same fraud is being committed.

I would love to engage in a debate on this, so perhaps you could explain why fractional reserve banking is a required service?

That's a fiction.
Bank comes from the Italian banco, because bankers sat on benches and did their money-changing right there. (Niall Ferguson, The Ascent of Money)
Banking was a service needed by the export/import trade, and started (or better, was restarted) in medieval Europe in response to this. (Innumerable histories; pick one) According to Paul Einzig in The History of Foreign Exchange, the first bills of exchange were issued way way back, in Babylonian times. Even then, it had to do with exporting and importing. As of today, international commercial banking is still, by a far and very wide margin, the largest part of the banking business. Foreign exchange is intimately tied in with money market operations in these banks, and the two are interchangeable almost, which is why the operations described by Einzig in A Dynamic Theory of Forward Exchange exist. Without the ability to lend out against goods shipped but for which payment has not yet been received, and to convert those payments into an equivalent amount of currency A from currency B via forward exchange, the entire apparatus of world trade would come to a screeching halt. This almost happened in the fall of 2008, in the middle of the late unpleasantness, as a matter of fact.
This is how the actual world that we all live in works, and has worked in every commercial civilization that has ever existed. No one except the Austrian ideologues thinks otherwise, and the only reason I can think of is that they still have in front of them Charlemagne's monetary system from the Middle Ages.
Charlemagne, of course, used silver rather than gold, gold being too scarce to make practical use of at that time in Europe. I'll bet a silver dollar that little tidbit of info is something you never see out there on those rad-lib sites.

 

[virtuos0]

That's a fiction.
Bank comes from the Italian banco, because bankers sat on benches and did their money-changing right there. (Niall Ferguson, The Ascent of Money)
Banking was a service needed by the export/import trade, and started (or better, was restarted) in medieval Europe in response to this. (Innumerable histories; pick one) According to Paul Einzig in The History of Foreign Exchange, the first bills of exchange were issued way way back, in Babylonian times. Even then, it had to do with exporting and importing. As of today, international commercial banking is still, by a far and very wide margin, the largest part of the banking business. Foreign exchange is intimately tied in with money market operations in these banks, and the two are interchangeable almost, which is why the operations described by Einzig in A Dynamic Theory of Forward Exchange exist. Without the ability to lend out against goods shipped but for which payment has not yet been received, and to convert those payments into an equivalent amount of currency A from currency B via forward exchange, the entire apparatus of world trade would come to a screeching halt. This almost happened in the fall of 2008, in the middle of the late unpleasantness, as a matter of fact.
This is how the actual world that we all live in works, and has worked in every commercial civilization that has ever existed. No one except the Austrian ideologues thinks otherwise, and the only reason I can think of is that they still have in front of them Charlemagne's monetary system from the Middle Ages.
Charlemagne, of course, used silver rather than gold, gold being too scarce to make practical use of at that time in Europe. I'll bet a silver dollar that little tidbit of info is something you never see out there on those rad-lib sites.

I'll grant you that it was never only goldsmith's, after all anyone of means could lend money, but certainly there is little doubt that goldsmith's having the monetary means and the means of storage, were prominent in this field. They continued to be prominent upto around the 17th Century. To say it's a 'fiction' is absurd.

But all of that is besides the point. you completely failed, in fact did not even start to answer my question posed to you. I will repeat it for you:

You stated that Fractional Reserve lending is a REQUIRED SERVICE. Please justify why you hold this belief. What you have written above has absolutely nothing to do with fractional reserve, you just seem to be writing any old gibberish, I guess in the hope that you can fool me, well unfortunately it's not going to work. You say above that:

"Without the ability to lend out against goods shipped but for which payment has not yet been received, and to convert those payments into an equivalent amount of currency A from currency B via forward exchange, the entire apparatus of world trade would come to a screeching halt."

Well yeh, I agree, but that has nothing whatsoever to do with the discussion. What you describe above can take place just as easily under 100% reserve, in fact it did take place under 100% reseve lending up until around the 1650's when Stockholm's Banco began large scale fractional reserve lending.

Try again.

 

[Benton D Struckcheon]

You know, you almost caused me to fall out of my chair. Seriously. Do you actually believe what you write?
Anyway, a cite:

The Rise and Decline of the Medici Bank

Scroll to page 228, if that link doesn't put you there, where the reserves these banks held are discussed. Their common practice was to hold 5% in reserve.
It's actually tough to find this stuff, since fractional reserve banking is pretty much assumed. I can't figure out where you got your beliefs.
As for the necessity, I think I showed that. Not sure what else I can do in that vein, but if you insist, I'll dig stuff up. A little hard, but hardly impossible.

 

[Benton D Struckcheon]

I should point out that of course the Medicis ran the largest bank in Europe, so I think that qualifies as "large-scale fractional reserve banking".

 

[virtuos0]

You know, you almost caused me to fall out of my chair. Seriously. Do you actually believe what you write?
Anyway, a cite:

The Rise and Decline of the Medici Bank

Scroll to page 228, if that link doesn't put you there, where the reserves these banks held are discussed. Their common practice was to hold 5% in reserve.
It's actually tough to find this stuff, since fractional reserve banking is pretty much assumed. I can't figure out where you got your beliefs.
As for the necessity, I think I showed that. Not sure what else I can do in that vein, but if you insist, I'll dig stuff up. A little hard, but hardly impossible.

umm..read what I wrote again, you've misunderstood me. My point is that 100% reserve lending regularly took place up until the 1650's, at which point the advent of the Stockholm Banco effectively signalled the end of 100% reserve banking, and very shortly after it almost entirely ended with the advent of the era of central banking (Bank of England came about in the 1690's). Clearly this transition was a gradual process, there is no black and white, so please for the love of God don't unleash your crazy-ass Google skillz on me.

Not sure what else I can do in that vein, but if you insist, I'll dig stuff up

Don't bother digging stuff up, the fact that you need to dig stuff up at all shows that, as I suspected, you are full of sh*t. You tried to pick an argument with me on the basis of your assertion that fractional reserve banking is a required service, and yet it is now revealed that when you wrote that you didn't have a clue why you even hold that opinion. Before you come out with crap like "idealogues bore me" make sure you can back up what you say, or you end up looking like a fool.

 

[montmorencyt2w]

Could you please elaborate the mechanism being used to transfer the wealth.

How come house prices are 30 times hat they were 30 years ago, yet there is no inflation in the system?

We are getting f*tcked on state pensions.We were a promised a means tested pension , equivalent to £15,000 a year today(we get £5,000), my son is getting into debt at university (fees used to come out of my taxes),unemployment benefits are now means/savings tested (they were an entitlement as long as you paid N I),Dentists bills were paid from N I contributions and school dinners were free(the only things were going to school for).

Have to pick you up one one thing here: I was a "baby boomer"/"post-war-bulger", so was of the generation when taxation paid for most things, but school dinners were never free, except as a means-tested benefit (i.e. your parents were too poor to pay).
Also I don't think the NI contributions went towards health or dental care. They were mainly for unemployment and sick benefit. Health and dental care came out of general taxation. The line has been blurred a bit in recent years as NI increases have been made specifically to fund taxation shortfalls - interpretation - they are too cowardly to put up income tax, so they put up NIC instead.