Bitcoin Forum

Very interesting documentary here. Its basically about how our monetary system is corrupt and needs to be reformed.

Pretty interesting documentary to watch and thinking of bitcoin as an alternative to this corrupt system. Its a long documentary (2hours) but well worth the watch if you haven't seen it.

Here is the trailer:

http://www.youtube.com/watch?v=6cq9yEVcGIU

and the full movie (free):

http://www.youtube.com/watch?v=swkq2E8mswI

The central theme is to move the power to print the money from the private fed and return it to the US treasury. This would create debt free money.

Now here is the kicker: Now that we have bitcoin. Do we even need the government or fed to control the issuing of the money? Absolutely not. We have bitcoin, where the algorithm has already been created and controls the printing of the money. By using your bitcoin client you are agreeing to the accept the code/rules of the system. We have all agreed that 21 million bitcions being generated over a geometric series is the most effective way to generate new money. Now the people (users of bitcoin) control the printing of the money. The power to print money has been moved from the feds and government and into the hands of the people. This idea is huge and could change the world.

I will watch that, but that our current monetary system will fail was already predicted 100 years ago by Silvio Gesell.

The movie is very misleading, has big errors, just like the previous one from the same guy.

Yes its not perfect but I use that documentary because its pretty much the only one which says that the power to print money should be returned to the us treasury. Most of the other documentaries basically say we should use gold and silver which for our modern digital/global economy is not suitable.

The Fed already returns its benefits to the Treasury. So when the Fed monetizes government debt is roughtly equivalent to the government printing money. We are already more or less in the system the movie demands.

Would be true if the fed issued money at 0%. Thats not the case.

No. The interest payed for the bonds are benefits of the Fed. Those benefits are returned weekly to the government. Its like they are not payed.

Look this has been discussed in this forum, and I really dont want to go through the same again. The videos are very well done, but what they explain is false. The guy is a nutjob that does a disservice to the people, like me, who want to end the Fed.

I really liked Bill Still's original documentary, The Money Masters, and Secret of Oz is pretty similar to it if a bit more condensed. I really enjoyed the history lesson on money and banking and the rise of central banking.  After I really started learning about economics though, looking back on his solutions to the problem, I don't agree with what he proposes.  I guess he takes sort of a constitutionalist approach that all money should be issued by the government, not a pseudo private central bank. He is definitely against the "free market" competing for the best currency, and he believes that our current system is a product of the free market.

Wait, so the interest the fed gets from bonds is returned to the government????????

Wow, kid, you don't know what you are talking about. Read here:

http://en.wikipedia.org/wiki/Federal_Reserve_System#Structure

Yup, I agree. Its the best documentary I could find.

Don't know any documentaries that say, "the fed is corrupt, use bitcoins."

If I were to plot the evolution of money it would be this:

1. Commodity money: gold, bitcoins; massively deflationary, prevent the economy from growing and reaching it's full potential, by artificially clamping the aggregate demand. Everybody is worse off and poorer, huge resources are wasted for acquiring an otherwise much less useful commodity. Decentralized, cannot be manipulated, but creates a self-enforcing plutocracy - the holders of the commodity.

2. Government-issued fiat. Solves the primary flaw of scarce commodity money and allows for real economic growth and improved welfare. Entirely dependent on the moods of the rulers. History has shown that both tyrants and democratically elected rules will abuse the money creation privilege, either for building palaces or for getting themselves reelected, and print much more than the economy needs, therefore stealing wealth from everybody. This is what various non-functional states like Zimbabwe have.

3. Independent central bank that loans money into existence. The prevalent system nowadays, far better than the preceding ones, but with it's unique flaws. The government can't print it's own money and is just another borrower competing along side private productive entities. In theory this should reduce it's appetite for money - it has to give it back. If too much money is loaned into existence and creates inflation, the central bank should, again, in theory, hike the interest rates and diminish everyone's appetite for money thus controlling inflation, wile allowing the money supply to grow as the economy grows.
In practice this system creates multiple instances of moral hazard:
  a. the central bank will always print more money to help private banks who are overexposed - for fear it might bring about meltdown
  b. the parliament, as the central bank's overseer, will always pressure it to go for low interest, low unemployment policies at the expense of inflation
  c. the government's appetite for money is not curbed; banks would much rather borrow the government that take risks with productive business
Overall, the system allows private banks to profit at the expense of the society because they have a key position where they can blackmail both the public and the politicians with systemic collapse. Massive misappropriation of resources ensues, skewing the price signals of the free market, various bubbles occur etc.

The Bitcoin crowd is still at point 1. entangled in a matrix scheme disguised with elementary economic fallacies.
The Oz guy wants us to go back to point 2., and watch our leaders print all our wealth away.
The current model 3. is clearly wrong.

I think it's time to start working on number 4:

4. Decentralized democratic fiat currency. Printed to the benefit on democratically elected charities, so as to target zero long term deflation/inflation, and circulated through a Bitcoin-like open network. Banks are not involved in creating the base money supply - they and their depositors are entirely responsible for the risk the take on when expanding M2. Governments have no say either, and are responsible to the voters when the debt spirals out of control.

I apologize to the TL;DR low attention span crowd.

Its sad the effect the nujob movies has on the people. Look, you are probably not a bad guy, but you should not talk like this to people you dont know, who know a lot more tahn you in monetary policy and that are taking time to explain to you how a nutjob has fooled you with a very well produced movie.

Yes, the Fed returns its benefits to the Treasury weekly (and btw that link is irrelevant to this issue).

BubbleBoy, you are the troll with more knowledge in this forum, but you have serveral mistakes in this post. Your monetary policy part is lacking.

That is an interesting point about the Fed. However, we are not “more or less in the system the movie demands” because there are a few major differences. Currently our government has to spend money to pay interest on our debt because we don't just owe the Fed. Also, the Fed currently controls the money supply and the movie advocates that the government should be in control of a nations money supply. Also, we currently have a fractional reserve banking system and the movie wants to do away with fractional reserve banking.

Yes, the only difference is that the movie demands no fractional reserve while now its allowed. For the rest, we are in the system they demand. He makes it like he wants a different monetary system, but its not like that.


I dont understand what you mean.


The part of the Fed that controls the money supply is the Board of Governors of the Federal Reserve System (Bernanke and the rest of the gang) and it is a federal government agency. So the government is already controlling the money supply.

As I say the guy shows half truths and lies to give the impression that we are in a system that is very different from what he wants, but appart from not allowing the banks to perform fractional reserve, the monetary part is right now how he wants it.

I just finished to watch this long movie. I will repeat what the movie explains, lets debate if that is actually true.

The movie not only wants to end fractional reserve banking as hugolp explains, but also end the creation of money out of debt. The movie explains that governments can't create dollars directly. Instead,  due to a convoluted process involving several institutions, money is created when banks lend money to the public, and at the same time goverments have to pay interests to the bankers on all money created, except the small fraction of physical money (coins).

The movie explains that the money being created out of debt means bankers receive the interest fees on all money in circulation, and that is in effect a constant transfer of wealth from the general population to the bankers. Also, banks can control the amount of money in circulation (expanding or shrinking the supply) by giving more loans or restraining from giving loans. This makes the bankers incredibly powerfull to the point of being able to control governments, and societies. Governments are servant to bankers, instead of being servants to the public.

So the movie's solution has 3 escencial parts: (1) end fracional reserve banking, (2) let governments issue money (dollars) directly without debt, and (3) not let the money supply be backed by gold.

This last point the movie makes is in opposition to all the gold and silver fans (which I condidered myself part of). The reason he gives makes sense, to be honest, although I am not totally convinved for several reasons. The movie says that if money is restrained to be backed by gold, those persons / countries that own the gold, own the money, which is quite true frankly. The movie argues that for a government, giving away the power to create its own money is giving away its sovereinty.

Discuss.

This is also the impression i got out of the movie. I gained huge respect for him (before i discovered bitcoin) due to the fact: he was anti-fed and he was anti-goldbug at same time (which is a RARE combination these days). The only part i don't like about it he seems to be a pre-bitcoiner, he still thinks that the issue of currency should be in the hands of the government. Has anyone tried to contact this guy and ask him about bitcoin ?

Yes it does. What I said is 100% accurate.

It is because when the central bank monetizes government debt its roughtly equivalent to the government printing money. So a big part of QE1 and all of QE2 is basically financing the government with newly printed money. Its exactly what he wants to do and it is exactly what already happens. The problem is that there are several stages in the middle making the process complicated.

And again the government debt that the Federal Reserve holds does not reperesent an expense for the government because the Fed returns its benefits to the same government (weekly). The government does not pay interest to the bank.

These kind of manipulations is why I say that the guy is a nutjob and dishonest. And he will hate Bitcoin because he wants the government to force a monopolly on money onto the people, because its the only way to have a inflationary currency.

Anyway, I am done for today with my humanitarian task of trying to warn people of the charlatans that are trying to fool them. Do your research and decide.

PS: You might want to think about why it is better that the government finances with inflation, that is not controllable by the people because it has long term effects and people dont see them, than with direct taxation, that is more controllable by the people because people see right away how much money they have to give away. Financing through inflation is much more undemocractic than financing through direct taxation.

PS2: And while you are doing your research check the examples of nations that applied his theories. They all hyperinflated.

Yes, this is the part I dont like also, because I dont trust the wisdom of power-hungry polititians. But lets be honest, his solution would be much better than what we have today.

And regarding bitcoin, and this is the elephant in the room in this forum, it is obvious that bitcoin cannot survive against government will. As has been prooved, rendering bitcoin useless costs a couple of tens of millions of dollars at most, and any government could afford that. So, yes, bitcoin is a free market currency, but it can only survive with the cooperation of governments. In other words, we cannot, and will not be able to take governments out of the equation (to my deepest dissatisfaccion), but that is the way things are.

Hey Hugolp, we understand you are the hardest working moderator on this forum, keeping trolls in control and also educating people, but dont throw the towel with your humanitarian task!!  ;D Seriously I am learning a lot in this thread.

Hey, you say that the whole process of money creation does not mean government pay debt on created money. Thanks for clarifying this, I had that exact doubt. Now consider this, as banks create the money, does this mean that PEOPLE, not governments have to pay interest for "the privilege" of having money in the economy? In other words, the whole society has to pay banks just to have money circulating, because we have to borrow money for it to exist? Is as we had to pay banks to have blood circulating through our bodies, instead of creating our own blood? Maybe that was the meaning of the movie.

Your thoughs?

Before clicking... is this another inflation.us infomercial?

Tomorrow more. I have to write an article about the end of QE2 and the posibility of QE3 due today.

In that sentence was just pointing out that our government currently has debt/interest burdens (i.e. we have non-Fed debts) which is different from the movie because the movie advocated the government create money to eliminate debt/interest burdens.

Anyway, I think I see where you are coming from with the Fed already having the ability to create money to pay off all our government debts except for the debt to the Fed, but the debt to the Fed wouldn't really matter because the Fed could refund the government any interest payments the government had to pay the Fed. This isn't the exact "no debt and no interest" solution advocated by the movie, but I now see how the net result could effectively be the same.

Esperando tu opinion!  ;)

Yes, there is something like that to the system, but there are important things to take into consideration.

First, debt is not inherenlty bad. If you work and get money it is completely legitimate that you lend that money to someone because you believe in his project. And the same way you get some money when you rent your house or your car  or whatever, you get some moeney whe you rent your money. You are refusing to use your money for a while in exchange to getting some more in the future. This way people that have a good idea but not the resources can still devlop their project and become more productive. The problem is when you are not lending your savings (that you worked to get), but when you are charging interest for something you created out of thin air. And apart from charging interest from nothing you are competing unfairly with the people that is working and saving. Also they create all types of distortions on the economy because now everybody thinks there are a lot more resources because they see more money (bubbles).

Answering to your questions, yes. Basically the present system is designed to benefit banks and politicians at our expense. Banks can lend out much more money thatn they could without a central bank, because they know that if they go too far with the reserve ratio there can not be a bank run because the central bank will cover them. So they loan out all they can and earn interest on that. And the politicians get a lot more money than they would with direct taxes only. The central bank monetizes the government debt, lowering the interest rates, and basically giving fre emoney to the politicians. Because people has a hard time asociating the rising prices with this actions because they take even years to develop politicians get awya with it, when they would not get away with rising taxes.

And obviously, we are the suckers here because we pay all this with higher prices. And specially the poor and middle clases. Because the people who is closer to the money source (bankers, politicians and their corporate budies) get to spend the money when it has not yet circulated and the prices have not yet rised. The ones at the end of the chain (basically wage earners) get screwed because prices rise when their wages have not yet actuallized. Basically the further away from the money source (the central bank) you are, the more screwed you are.


Exactly.

The government still demands credit from other sources than the central bank because the limitation of printing money is rising prices. If you print too much it will get to a point when even the dumbest person will realize what is up and will revolt. In fact, there are numerous revolutions and government collapses that are preceded by rising prices due to the government trying to print its way out of whatever mess they created. In a sense, its kind of what every government is trying to do right now.

I believe the reason inflationary monetary policy hurts the poor and middle class is that the newly created money is controlled by government, and access to political power is inherently concentrated. If you have power, it's easier to manipulate 500 members of Congress to give your company a government contract than to convince 300 million consumers to buy your company's products.

The Fed also has control over newly created money, in its decisions on who to bail out, what assets to accept as collateral, how much to pay for said assets, etc, so inflationary monetary policy also favors powerful interests close to the Fed.

Inflationary policy would be more bearable to the poor if they had inflationary wages. The rub is that people in positions of power are able to ensure their incomes are indexed to inflation when people much lower on the ladder cannot. This ever widens the gap.

Hugolp,
When you say that the government doesn't pay interest on debt I don't follow you. I was under the impression that the government continually issued debt to many holders including foreign institutions. I don't think they get away with not paying the interest on those bonds. I understood that to be the largest portion of government debt and transactions between the fed and government not as significant.

Indeed. The people with better job position get higher wage increases every year, probably equivalent to the real rate of price inflation, while the rest get their wages actualized by the offical government price inflation rate.


I never said that they dont pay interest in the bonds that they sell to the general population. The government does not pay interest (or more accurately gets the interest payment back) from the debt monetized by the central bank.

Hugolp, thanks for clear answer. It was very well written.

I still have two unresolved issues in my mind though. Would appreciate if you could comment on them.

1) Fractional reserve banking
 
You have said before that fractional reserve banking is not the problem, the problem are central banks. I understand your point, because escencially central banks are designed to give banks a free pass to abuse the issuing of currency, because then banks dont have to fear bank runs. So I agree with you that we would be better without central banks for this reason.

But fracional reserve banking is still bugging me, and I will tell you why. The following example has fictional numbers to make math simple. Suppose all banks own 1 million dollar in reserves total, in other words their own hard earned money. With fractional reserve banking (10%), they could create and loan up to 10 million dollars (my math is wrong but it is just an example). If they loan at an interest rate of 4% montly (credit card), they are essentially making 40% monthly interest on their reserves. This looks like usury to me.  In other words, it seems like an abuse coming from organizations that monopolize the money creation.

Whats your point of view on this issue?

2) Money out of debt

As money is created via loans (via the multiplication effect of fractional reserve banking), the whole system seems unstable to me. What I mean by that, society as a whole needs debt to have most part of the monetary supply in the system. As long as society pays debt at large, money supply shrinks. The point is, as society we have no choice to live debt free. We are forced to borrow to the banks, or our economy would collapse. Seems like a perverse system to me, and not very "free".

Do you agree on this? Are we forced to live on debt to the banks as a society because of the fractional reserve banking? Would a massive payment of debt mean a collapse of most of the money supply?

Those are my unresolved issues so far.

The 1 million $ goes straight into the central bank's account as minimal reserve. The private bank has no money to lend out. In order to reach it's 9 mil $ allowance, the private bank must attract 9 million $ of deposits. For these money they must pay interest to the depositors. Only then can they start borrowing out money. Their actual profit is the spread between the deposit and credit interests, probably 10-15% with your figures. They need to pay staff, cover the risk of non-payment, cover the costs of the deposit insurance scheme (FDIC) etc.

A private bank cannot create more money directly, they are bound by accounting laws just like a regular business. The banking system as a whole creates deposit money, but banks still have to compete among each other to attract depositors.

That's just plain wrong. Banks issue debt which is itself an act of creating money. I thik maybe you should research this more - start with Wikipedia.

You might find the Steve Keen interview in the second half of this interesting:
http://rt.com/programs/keiser-report/episode-158-imf-downgrades-keen/

He's right, banks can issue debt in accordance with reserve requirements.

Thanks for the link, but the guy is a Keynesian, which I strongly disagree with.

The whole point of this is for the viewer to start thinking for yourself and actually follow the yellow brick road of history. You will then see the real truth. This is the moral of both the documentary and the story of Oz. The problem today is that people are being ignorant to the past and the history is repeating itself on a continuous loop at this point.

Monetary system such as fed and our current central banking has existed for over two centuries eating away at our livelihood. The history of banking extends much further than this and is a fantastic way to see world history in a new light based on true incentives. Do your own research into history and realize the truth first. Then understand that our current system is nothing more than a replacement of feudalism masked to appear to give choice to the people. When, in fact, only a very few control the economic well being of almost the entire world now.

BubbleBoy, in my example I was talking about the banking system as a whole, not a single bank. Thats why I wrote "all banks own ... in total". Maybe my writing was not clear enough, thats why I clarify that here.

What I care about is not the inner workings of a single bank, but the net result of the whole financial system for society. From my understanding (I am not an expert), each time people get loans, the financial system as a whole creates that money via the fractional reserve banking system, which does not seem right to me. Worst, the system can only create money into existence through debt.

I ask people in this thread to adopt a whole financial system point of view, because that is what we are discussing here. And that is the focus of the documentary (no matter if it is flawed or not). Focus on the macroeconomic perspective (whole society, all banks and central bank), instead of the microeconomic perspective (single user, single bank).

And how would you answer me if I said that gold can be divided up just like BTC can? If you had a GoldMoney account I could right now pay you $3.50. Digitally, instantly. There may well be a future like that awaiting us.

The next great currency event (upon us) will have people flocking to gold and silver moreso than to BTC. Doesn't mean BTC will go away and it may thrive as digital money will become familiar....  But people will want what they know and understand.

This will all happen in stages.

A lot to consider in this documentary, even if some of it is debatable. It's unfortunate that most people don't even know that much about money.
It's no more misleading than a lot of us here are about Bitcoin, when they call it "fully-decentralized", "instantaneous payment", "virtually free payment", "not fiat-based", "anonymous", "impossible to stop or regulate", and so on.

I think saying that the system Bill Still advocates is "roughly", "more or less" what exists today, "except for the fractional reserve" is like saying that a submarine is roughly more or less an airplane, except that it doesn't have wings.  :D
No other entity is allowed to crank out  a monopolized commodity, such as money, out of nothing the way that the commercial banks can.

Similar documentary WITH facts and references for every claim made. This changed my point of view of the world when I watched it a couple of years ago. Probably piqued my interest in bit coins somewhat. Guess many of you will find this interesting.

http://www.thrivemovement.com/the_movie