Martin Armstrong Discussion

[minor-transgression]

@ Lateralus - Fractional reserve banking. Your earlier post covered quite a bit of ground,
and I won't claim to have the answer to everything economic, but just for the laughs, lets
suppose we are fractional reserve bankers. I'm the Bank of England and I have £1 in gold,
and that means I can lend you £10. You are the Federal Reserve Bank, so if we have £:$
parity, you can lend me $100. With that as a reserve .... you can see where this is going.
:-)

To have fractional reserve banking, you need to be working on a Gold Standard, or a near
equivalent. That's not how todays banks work. So what constrains bank lending?
Risk. More precisely, Perceived Risk. Which is why I wrote up the thread
"Unlimited Banking and Problem Banking" which got too long, but you may want to skim
through it.

I'm trying to put together something on Banning Usury, but for the moment that solution
looks worse than the problem that needs fixed, so no rush to finish there.

[1715078933]

1715078933

[1715078933]

1715078933

[CoinCube]

@ Lateralus - Fractional reserve banking. Your earlier post covered quite a bit of ground,
and I won't claim to have the answer to everything economic, but just for the laughs, lets
suppose we are fractional reserve bankers. I'm the Bank of England and I have £1 in gold,
and that means I can lend you £10. You are the Federal Reserve Bank, so if we have £:$
parity, you can lend me $100. With that as a reserve .... you can see where this is going.
:-)

To have fractional reserve banking, you need to be working on a Gold Standard, or a near
equivalent. That's not how todays banks work. So what constrains bank lending?
Risk. More precisely, Perceived Risk. Which is why I wrote up the thread
"Unlimited Banking and Problem Banking" which got too long, but you may want to skim
through it.

I'm trying to put together something on Banning Usury, but for the moment that solution
looks worse than the problem that needs fixed, so no rush to finish there.

You cannot successfully top-down ban usury. The only was to eliminate it is to get people to voluntarily refuse to participate both as borrower or lender despite the fact that doing so is potentially profitable.

That's probably not going to happen in our lifetimes and it is not even possible without an alternative currency that can be used for day to day transactions one that does not have usury at its core.

This is where BTC comes in and is one of the reasons I am interested in it.

[sidhujag]

@ Lateralus - Fractional reserve banking. Your earlier post covered quite a bit of ground,
and I won't claim to have the answer to everything economic, but just for the laughs, lets
suppose we are fractional reserve bankers. I'm the Bank of England and I have £1 in gold,
and that means I can lend you £10. You are the Federal Reserve Bank, so if we have £:$
parity, you can lend me $100. With that as a reserve .... you can see where this is going.
:-)

To have fractional reserve banking, you need to be working on a Gold Standard, or a near
equivalent. That's not how todays banks work. So what constrains bank lending?
Risk. More precisely, Perceived Risk. Which is why I wrote up the thread
"Unlimited Banking and Problem Banking" which got too long, but you may want to skim
through it.

I'm trying to put together something on Banning Usury, but for the moment that solution
looks worse than the problem that needs fixed, so no rush to finish there.

If you didn't have the ability to turn $1 into $100 there would be a huge credit crunch. So we need to unravel the mess by slowly shifting away from the leverage and allowing banks easy profits off of the free spread between central and commercial banks off of the interest rates. I'm not sure but in a cryptocurrency world would there still be a need for a pyramid of interest rates to create insensitives for banks to lend, or are we are own banks and we can lend with some type of escrow or insurance to others earning interest in a decentralized scheme?

[CoinCube]

If you didn't have the ability to turn $1 into $100 there would be a huge credit crunch. So we need to unravel the mess by slowly shifting away from the leverage and allowing banks easy profits off of the free spread between central and commercial banks off of the interest rates. I'm not sure but in a cryptocurrency world would there still be a need for a pyramid of interest rates to create insensitives for banks to lend, or are we are own banks and we can lend with some type of escrow or insurance to others earning interest in a decentralized scheme?

I 100% agree about the need to unravel the mess slowly. Here is an interesting parallel that I present for consideration.

Rabbi's Comments on Slavery in the Old Testament
http://www.chabad.org/library/article_cdo/aid/305549/jewish/Torah-Slavery-and-the-Jews.htm

Let's start simple:

Take an agrarian society surrounded by hostile nations. Go in there and forcefully abolish slavery. The result? War, bloodshed, hatred, prejudice, poverty and eventually, a return to slavery until the underlying conditions change. Which is pretty much what happened in the American South when the semi-industrialized North imposed their laws upon the agrarian South. And in Texas when Mexico attempted to abolish slavery among the Anglophones there.

Not a good idea. Better idea: Place humane restrictions upon the institution of indentured servitude. Yes, it's still ugly, but in the meantime, you'll teach people compassion and kindness. Educate. Make workshops... Eventually, things change and slavery becomes an anachronism for such a society.

Which is pretty much what happened to Jewish society. Note this: At a time when Romans had literally thousands of slaves per citizen, even the wealthiest Jews held very modest numbers of servants. And those servants, the Talmud tells us, were treated better by their masters than foreign kings would treat their own subjects.

Torah teaches us how to run a libertarian society--through education and participation. Elsewhere in the world, emperors and aristocracy knew only how to govern a mass of people through oppression. Look what happened to Rome.

Getting Real Change

...If G d would simply and explicitly declare all the rules, precisely as He wants His world to look and what we need to do about it, the Torah would never become real to us. No matter how much we would do and how good we would be, we would remain aliens to the process.

So, too, with slavery (and there are many other examples): In the beginning, the world starts off as a place where oppressing others is a no-qualms, perfectly acceptable practice. It's not just the practice Torah needs to deal with, it's the attitude. So Torah involves us in arriving at that attitude. To the point that we will say, "Even though the Torah lets us, we don't do things that way."

Which means that we've really learnt something. And now, we can teach it to others. Because those things you're just told, those you cannot teach. You can only teach that which you have discovered on your own.
History bears this out... As much as Rome ruled over Judea, Jewish values deeply transformed Rome. One of the results was the legal privileges eventually granted to slaves and the gradual recognition of the value of human life.

[iamnotback]

The institution where physical ownership of another human being was acknowledged as acceptable by society and ones "property rights" were enforced by the state is gone.

For example, debt slavery will never be eliminated, because it is a natural aspect of a limited lifespan, and else where I had explained to you (and others in some public posts) that without a limited lifespan entropy could not increase and the universe would be static with no future (past and future collapsed as in Godel's universe).

You cannot successfully top-down ban usury. The only was to eliminate it is to get people to voluntarily refuse to participate both as borrower or lender despite the fact that doing so is potentially profitable.

It will never happen, unless you want a static universe. They tried banning usury in the Middle (Dark) Ages, and economic growth became static or declined.

I do not feel like explaining (Edit: I ended up explaining more). Assemble the puzzle based on my past writings (but I've seen that you haven't quite assimilated all my writings).

It depends on your definition of slavery. My definition is broad and that is humans will never be equal, so some will always be subservient to others. Society can mask this as social obligations, slave level wages, or whatever, that is still slavery in my definition. I am a tax slave to Uncle Sam. People who think they are free even when they are not, are a form of satiated slave (Stockholm Syndrome being another example of that phenomenon).

[CoinCube]

You cannot successfully top-down ban usury. The only was to eliminate it is to get people to voluntarily refuse to participate both as borrower or lender despite the fact that doing so is potentially profitable.

It will never happen, unless you want a static universe. They tried banning usury in the Middle (Dark) Ages, and economic growth became static or declined.

I do not feel like explaining. Assemble the puzzle based on my past writings (but I've seen that you haven't quite assimilated all my writings).

It depends on your definition of slavery. My definition is broad and that is humans will never be equal, so some will always be subservient to others. Society can mask this as social obligations, slave level wages, or whatever, that is still slavery in my definition. I am a tax slave to Uncle Sam. People who think they are free even when they are not, are a form of satiated slave (Stockholm Syndrome being another example of that phenomenon).

Your definition of slavery is simply another way of saying that we will never be entirely free. This is true. However, it ignores the fact that there are degrees of slavery. We can approach freedom gradually over time. Freedom can progress.

Usury descends inevitably into fractional reserve. For the most part there was never a time without money lending. In the middle ages it was simply Christians who could not lend money. Jews were allowed by law to do so. Over time this was viewed to be oppressive and was widely resented it was a major factor in the rise of European anti-antisemitism. Views of the time can be seen in Shakespeare's play The Merchant of Venice. Shylock is a Jewish moneylender who lends money to his Christian rival, Antonio, setting the security at a pound of Antonio's flesh from next to his heart. His defeat and conversion to Christianity forms the climax of the story.

I understand your arguments that large concentrations of capital were required to facilitate the industrial revolution and that usury and fractional reserve were a necessary part of this process. I agree with it. However, this is just another example of the need for some level of top-down control when knowledge is lacking. At the time and even today there are a lack of options outside of usury when it comes to concentrating funds for large scale projects. The current lack of options does not mean usury is desirable or forever necessary. It simply means we lack the knowledge to move on to a superior system. We are not yet ready to eliminate usury.

However, I believe the knowledge is coming. We will eventually be able to create a society with lower levels of top-down oppression. It is not a process of absolute but rather incremental change.

[STT]

I find it funny the people who think FRB is a scam also think inflation shouldn't exist.

Money is nothing other than the lifeblood of society, and just as a human body grows in size and requires a larger volume of blood, the economy requires an increase in money supply in order to operate effeciently (hence the term "liquidity").

100% reserve banking is socialism because it leaves no legitimate way to expand the money supply, and a fixed money supply rewards people who sit on their ass, it treats money like it was a corporate share in the economy that should increase in value as time goes on. This is also why cryptocurrencies which are modeled on fixed money supplies are doomed to fail over the long term (or at least fail in the sense that they will always be relegated to niche uses, rather than becoming primary or world-leading currencies)

Roach you're just another luddite running your mouth about a world you haven't even begun to understand.

If by sit on ass you mean invest wages and withheld value instead of spending and requiring goods immediately for their labour.    The modern alternative is to reward and to gift money to politics which spends it as it wishes without restraint or in proportion to the benefit it brings.   The inflation of the monetary base to subsidise a government is far closer to a taxing situation then just allowing those who have earnt value at a market agreed price to invest and gain interest for delaying importing goods or using up domestic supply, its proportional not unfair ?
  Not spending when technology allows such a big advantage in utility does not seem too easy or iliquid a situation, it might be less rewarding

[iamnotback]

That was a very insightful post from CoinCube!

Cryptocurrency is not a real store of value, though.  It is basically at the same level as fiat on Exter's pyramid.  Wealth is derived from resources and labor.  Cryptocurrency will always be the bad money driving out good money compared to an actual resource/commodity based currency whether it's gold, silver, oil, or some other substance.  The problem that it's very difficult to remove counterparty risk on things like uranium and oil always switch roles back to metals such as gold and silver instead.
...

The difference is that crypto currency has the potential to someday climb beyond fiat beyond gold even on Exter's pyramid.

Gold can essentially be thought of as an eternal partially anonymous POW blockchain. It is mined and mining requires work limiting its supply and allowing it to be used as a store of value. Gold does have counterparty risk. The counterparty is society. The purchaser of gold takes the risk that the gold network (the network of individuals in society willing to buy and own gold) will continue to exist. Governments play a role here in that they have the power through their actions to strengthen or weaken this network but they lack the ability to destroy it entirely.

Governments can devalue gold by making it very expensive to transact with it:

Since ancient times, many times those in power have cancelled their money supply to make a profit or collect taxes by force. It is rather absurd to think gold or silver coins could somehow exempt one from these types of actions by tyrants for they pulled off such maneuvers even in ancient times. Governments have recalled all coinage and demonetized silver and gold coins, declaring them not acceptable in payment for anything. Despite their metal content, the coins were still declared worthless. This is one of the simple truths that demonstrate not even a gold standard will save the day.

...[examples from history are cited]...

This is why, as we move forward, it will be best to hold assets out of banks and out of currency. They can even declare gold a criminal act to possess, which is why I suggest genuine old coins rather than bullion. Just another layer of protection. Whether that would be the case, as it was under Dionysios I of Syracuse, is not unthinkable. The safest asset may simply be blue chip stocks for they would never make it illegal to own corporations unless you had a full-fledged leftist revolution that seized all private assets as in a communist revolution. That risk would naturally alter everything once again.

The gold network has existed for thousands of years it has also survived multiple government attempts to eliminate it so the counterparty risk is lower than with anything else that exists.

To displace gold cryptocurrency would need to have a counterparty risk that was lower than gold.
This would require
A) Demonstration of enternal nature currency would need to hold its value over several generations
B) Demonstration of resilience cryptocurrency network it would need to show its ability to survive outlast and not be broken or destroyed by hostile government action.

The jury is still out on whether bitcoin can meet these very high hurdles. However, even if bitcoin fails it seems almost inevitable that something will come along someday that can meet them.

Back when governments needed gold backing for their currency to retain public CONFIDENCE, then gold had some inherent blackmarket exchange value, because it was known there was a legitimate demand for gold. Because money was physical. The public doesn't give a shit about gold backing any more. I wrote an entire thread about this.

Edit: Selling a 10 oz Silver Bar for $10 (When It's Worth $160) - EXPERIMENT -

Selling 1 Oz Gold Coin for $25 (when it's worth over $1,500)

Buying a 99¢ Taco with 1 Ounce Gold Coin (worth over $1000) - from Taco Bell's Drive-Through

Free $5 Bill or Free Silver Dollar? It's Up To You  <--- make sure you listen at 1:30 to the guy who knows the spot price but still won't take the silver dollar!

But now there is even no legitimate need to physically carry money, thus governments all over the world have restricted the transport of gold. Thus a blackmarket can't even function. It is physically too expensive and impractical to circumvent the barriers now (interdiction and control technology has improved, e.g. the spying device known as the Internet)

Gold is entirely loosing its legitimate demand as we move to electronic currency backed by the power of control the government has and the inherent backing of the productive capacity of the slaves which the government controls (all of us).

Crypto-currency is not going to defeat society as a counter party risk just as gold never did. Gold used to require the entire world to go bezerk for it to loose its value as an escape value, but now it is losing that attribute. Whereas, crypto-currency is rising to provide that function that gold used to offer in that it can't beholden to any one government only all of them must gang up to regulate globally. So the counter party risk is only if all the world goes bezerk.

And this is why Bitcoin can't be the winner, because it is beholden to China.

Don't worry, because I have the technological solution of where we are headed to. Stay tuned...


EDIT: The world doesn't need gold any more for public CONFIDENCE and thus governments are free to cooperate to declare it terrorist money laundering and to ban it. They have the power to do so, which they didn't in the past. The Internet has forced us to a new monetary paradigm. Gold has died and no longer sits at the bottom of Exter's Pyramid (as the Bible predicted). Gold won't be coming back, because the Internet won't be going away. The Internet has changed everything.

https://bitcointalk.org/index.php?topic=1082909.msg17390261#msg17390261
https://www.armstrongeconomics.com/world-news/taxes/the-new-2017-banking-system-coming/
https://www.armstrongeconomics.com/markets-by-sector/precious-metals/gold/confiscating-gold-3/

[iamnotback]

You cannot successfully top-down ban usury. The only was to eliminate it is to get people to voluntarily refuse to participate both as borrower or lender despite the fact that doing so is potentially profitable.

It will never happen, unless you want a static universe. They tried banning usury in the Middle (Dark) Ages, and economic growth became static or declined.

I do not feel like explaining. Assemble the puzzle based on my past writings (but I've seen that you haven't quite assimilated all my writings).

It depends on your definition of slavery. My definition is broad and that is humans will never be equal, so some will always be subservient to others. Society can mask this as social obligations, slave level wages, or whatever, that is still slavery in my definition. I am a tax slave to Uncle Sam. People who think they are free even when they are not, are a form of satiated slave (Stockholm Syndrome being another example of that phenomenon).

Your definition of slavery is simply another way of saying that we will never be entirely free. This is true. However, it ignores the fact that there are degrees of slavery. We can approach freedom gradually over time. Freedom can progress.

I didn't ignore that. I wrote it depends on your definition of slavery.

Technology (you call this knowledge) is what drives the level of freedom we have, and I have said that for years. I am surprised you would forget.

Physical slavery was required when most labor was fungible, menial labor. That is what my entire thesis that you quoted in the OP of Economic Devastation. How could you forget?

I understand your arguments that large concentrations of capital were required to facilitate the industrial revolution and that usury and fractional reserve were a necessary part of this process. I agree with it. However, this is just another example of the need for some level of top-down control when knowledge is lacking. At the time and even today there are a lack of options outside of usury when it comes to concentrating funds for large scale projects. The current lack of options does not mean usury is desirable or forever necessary. It simply means we lack the knowledge to move on to a superior system. We are not yet ready to eliminate usury.

However, I believe the knowledge is coming. We will eventually be able to create a society with lower levels of top-down oppression. It is not a process of absolute but rather incremental change.

And the transformation can be as I have described many times that we won't need to aggregate capital, because technology will enable maximum division of labor to coordinate without Theory of the Firm Coasian costs, because of decentralization technology of which the Inverse Commons of open source is a main component. Refer to my prior writings for the cited references.

[Lateralus]

I find it funny the people who think FRB is a scam also think inflation shouldn't exist.

Money is nothing other than the lifeblood of society, and just as a human body grows in size and requires a larger volume of blood, the economy requires an increase in money supply in order to operate effeciently (hence the term "liquidity").

100% reserve banking is socialism because it leaves no legitimate way to expand the money supply, and a fixed money supply rewards people who sit on their ass, it treats money like it was a corporate share in the economy that should increase in value as time goes on. This is also why cryptocurrencies which are modeled on fixed money supplies are doomed to fail over the long term (or at least fail in the sense that they will always be relegated to niche uses, rather than becoming primary or world-leading currencies)

Roach you're just another luddite running your mouth about a world you haven't even begun to understand.

If by sit on ass you mean invest wages and withheld value instead of spending and requiring goods immediately for their labour.    The modern alternative is to reward and to gift money to politics which spends it as it wishes without restraint or in proportion to the benefit it brings.   The inflation of the monetary base to subsidise a government is far closer to a taxing situation then just allowing those who have earnt value at a market agreed price to invest and gain interest for delaying importing goods or using up domestic supply, its proportional not unfair ?
  Not spending when technology allows such a big advantage in utility does not seem too easy or iliquid a situation, it might be less rewarding

What do you think fractional reserve banking is? It's the process of investing depositors funds and putting them work rather than just having it sit there in a "vault". 100% reserve banking = dead money/dead capital doing nothing.

Fractional reserve banking is just LEVERAGE.

[sidhujag]

I find it funny the people who think FRB is a scam also think inflation shouldn't exist.

Money is nothing other than the lifeblood of society, and just as a human body grows in size and requires a larger volume of blood, the economy requires an increase in money supply in order to operate effeciently (hence the term "liquidity").

100% reserve banking is socialism because it leaves no legitimate way to expand the money supply, and a fixed money supply rewards people who sit on their ass, it treats money like it was a corporate share in the economy that should increase in value as time goes on. This is also why cryptocurrencies which are modeled on fixed money supplies are doomed to fail over the long term (or at least fail in the sense that they will always be relegated to niche uses, rather than becoming primary or world-leading currencies)

Roach you're just another luddite running your mouth about a world you haven't even begun to understand.

If by sit on ass you mean invest wages and withheld value instead of spending and requiring goods immediately for their labour.    The modern alternative is to reward and to gift money to politics which spends it as it wishes without restraint or in proportion to the benefit it brings.   The inflation of the monetary base to subsidise a government is far closer to a taxing situation then just allowing those who have earnt value at a market agreed price to invest and gain interest for delaying importing goods or using up domestic supply, its proportional not unfair ?
  Not spending when technology allows such a big advantage in utility does not seem too easy or iliquid a situation, it might be less rewarding

What do you think fractional reserve banking is? It's the process of investing depositors funds and putting them work rather than just having it sit there in a "vault". 100% reserve banking = dead money/dead capital doing nothing.

Fractional reserve banking is just LEVERAGE.

and leverage is what got us in this mess, claims may not respected (bank runs) they can go out of business and your shit out of luck since their reserves are depleted and insurance wont cover you over say $100k.. oh well should have known better than to trust a bank right?

If anything it taught us that yes we can live like kings until we realize one day that no we can't have our cake and eat it too... everything has a price sooner or later and generating wealth off of someone elses "future" work will hit hard until you realize it (as the person involved in the ponzi scheme). Yes it may not seem efficient currently, but once you have something closer to ideal money being the backbone of the economy you can then start to lay a solid foundation in place for tomorrows growth and prosperity

[Lateralus]

I find it funny the people who think FRB is a scam also think inflation shouldn't exist.

Money is nothing other than the lifeblood of society, and just as a human body grows in size and requires a larger volume of blood, the economy requires an increase in money supply in order to operate effeciently (hence the term "liquidity").

100% reserve banking is socialism because it leaves no legitimate way to expand the money supply, and a fixed money supply rewards people who sit on their ass, it treats money like it was a corporate share in the economy that should increase in value as time goes on. This is also why cryptocurrencies which are modeled on fixed money supplies are doomed to fail over the long term (or at least fail in the sense that they will always be relegated to niche uses, rather than becoming primary or world-leading currencies)

Roach you're just another luddite running your mouth about a world you haven't even begun to understand.

If by sit on ass you mean invest wages and withheld value instead of spending and requiring goods immediately for their labour.    The modern alternative is to reward and to gift money to politics which spends it as it wishes without restraint or in proportion to the benefit it brings.   The inflation of the monetary base to subsidise a government is far closer to a taxing situation then just allowing those who have earnt value at a market agreed price to invest and gain interest for delaying importing goods or using up domestic supply, its proportional not unfair ?
  Not spending when technology allows such a big advantage in utility does not seem too easy or iliquid a situation, it might be less rewarding

What do you think fractional reserve banking is? It's the process of investing depositors funds and putting them work rather than just having it sit there in a "vault". 100% reserve banking = dead money/dead capital doing nothing.

Fractional reserve banking is just LEVERAGE.

and leverage is what got us in this mess, claims may not respected (bank runs) they can go out of business and your shit out of luck since their reserves are depleted and insurance wont cover you over say $100k.. oh well should have known better than to trust a bank right?

If anything it taught us that yes we can live like kings until we realize one day that no we can't have our cake and eat it too... everything has a price sooner or later and generating wealth off of someone elses "future" work will hit hard until you realize it (as the person involved in the ponzi scheme). Yes it may not seem efficient currently, but once you have something closer to ideal money being the backbone of the economy you can then start to lay a solid foundation in place for tomorrows growth and prosperity

" leverage is what got us in this mess, claims may not respected (bank runs)".

There's no more reason to ban the practice of fractional reserve banking because it can go wrong any more than there is reason to ban ownership of guns because they can be used to murder innocent people. The problem is, like always, a LACK OF COMPETITION. So no, SOCIALISM with it's never ending amount of state borrowing is what got us into this mess. Government intervention in the housing market is what got us into this mess. Government monopolization of the banking industry is what got us into this mess.

In the U.S., J.P. Morgan and his colleagues tried to set up a private reserve system in 1913, unfortunately that got hijacked in 1914 by the progressives in Washington who turned their ingenious system into the grotesque monster known as the Federal Reserve today. It was Morgan who single handedly managed to contain the crisis of 1907, and that was the event that inspired bankers to create a reserve system in order to deal with bank runs should they happen. It was the FREE MARKET at work, and once again the fucking marxists got in the way in 1914, which is why we are where we are today.

Rather than questioning it, you're just trying to twist history and reality to fit your presupposed idea that there's something inherently wrong with fractional reserve banking, which is why, as iamnotback said, you are simply "conflating orthogonal issues".

[sidhujag]

I find it funny the people who think FRB is a scam also think inflation shouldn't exist.

Money is nothing other than the lifeblood of society, and just as a human body grows in size and requires a larger volume of blood, the economy requires an increase in money supply in order to operate effeciently (hence the term "liquidity").

100% reserve banking is socialism because it leaves no legitimate way to expand the money supply, and a fixed money supply rewards people who sit on their ass, it treats money like it was a corporate share in the economy that should increase in value as time goes on. This is also why cryptocurrencies which are modeled on fixed money supplies are doomed to fail over the long term (or at least fail in the sense that they will always be relegated to niche uses, rather than becoming primary or world-leading currencies)

Roach you're just another luddite running your mouth about a world you haven't even begun to understand.

If by sit on ass you mean invest wages and withheld value instead of spending and requiring goods immediately for their labour.    The modern alternative is to reward and to gift money to politics which spends it as it wishes without restraint or in proportion to the benefit it brings.   The inflation of the monetary base to subsidise a government is far closer to a taxing situation then just allowing those who have earnt value at a market agreed price to invest and gain interest for delaying importing goods or using up domestic supply, its proportional not unfair ?
  Not spending when technology allows such a big advantage in utility does not seem too easy or iliquid a situation, it might be less rewarding

What do you think fractional reserve banking is? It's the process of investing depositors funds and putting them work rather than just having it sit there in a "vault". 100% reserve banking = dead money/dead capital doing nothing.

Fractional reserve banking is just LEVERAGE.

and leverage is what got us in this mess, claims may not respected (bank runs) they can go out of business and your shit out of luck since their reserves are depleted and insurance wont cover you over say $100k.. oh well should have known better than to trust a bank right?

If anything it taught us that yes we can live like kings until we realize one day that no we can't have our cake and eat it too... everything has a price sooner or later and generating wealth off of someone elses "future" work will hit hard until you realize it (as the person involved in the ponzi scheme). Yes it may not seem efficient currently, but once you have something closer to ideal money being the backbone of the economy you can then start to lay a solid foundation in place for tomorrows growth and prosperity

" leverage is what got us in this mess, claims may not respected (bank runs)".

There's no more reason to ban the practice of fractional reserve banking because it can go wrong any more than there is reason to ban ownership of guns because they can be used to murder innocent people. The problem is, like always, a LACK OF COMPETITION. So no, SOCIALISM with it's never ending amount of state borrowing is what got us into this mess. Government intervention in the housing market is what got us into this mess. Government monopolization of the banking industry is what got us into this mess.

In the U.S., J.P. Morgan and his colleagues tried to set up a private reserve system in 1913, unfortunately that got hijacked in 1914 by the progressives in Washington who turned their ingenious system into the grotesque monster known as the Federal Reserve today. It was Morgan who single handedly managed to contain the crisis of 1907, and that was the event that inspired bankers to create a reserve system in order to deal with bank runs should they happen. It was the FREE MARKET at work, and once again the fucking marxists got in the way in 1914, which is why we are where we are today.

Rather than questioning it, you're just trying to twist history and reality to fit your presupposed idea that there's something inherently wrong with fractional reserve banking, which is why, as iamnotback said, you are simply "conflating orthogonal issues".

Government intervention in interest rate manipulation is much bigger than manipulation of housing through allowance of mbs's and artificially low borrowing rates. The root of the problem lies in frb and the way it is structured. In either case manipulation doesnt bode well for any market and frb is just one of the bigger examples of manipulation. We thought that the government was needed to control our economy by being a driver and detecting what the right rates are because rhey have a high level view of our economy and every tax payers stats... that let us prosper a bit esp since we were stuck with only so much finite amounts of gold and hit a wall in terms of running deficet which would have been problem if a world war broke out at the time..

Like i said before i understand your stance.. and it does not play well with an asymptotically ideal form of money in which transfer utility is maximized in a game.. it was good enough to get us here today in this state but not good enough to continue to prosper at expense of future work. If someone doesnt know who the pig in the room is, its probably you.

[CoinCube]

There's no more reason to ban the practice of fractional reserve banking because it can go wrong any more than there is reason to ban ownership of guns because they can be used to murder innocent people. The problem is, like always, a LACK OF COMPETITION. So no, SOCIALISM with it's never ending amount of state borrowing is what got us into this mess. Government intervention in the housing market is what got us into this mess. Government monopolization of the banking industry is what got us into this mess.
...
Rather than questioning it, you're just trying to twist history and reality to fit your presupposed idea that there's something inherently wrong with fractional reserve banking, which is why, as iamnotback said, you are simply "conflating orthogonal issues".

Just because a theft is a minuscule spread across millions of victims does not make it any less of a theft. Fractional reserve steals purchasing power aka value.

The banks are allowed to create multiple simultaneous claims which cannot be simultaneously honored to the benefit of themselves and favored insiders. The value of all of the other money in the economy drops when ever this is done. The prime beneficiaries are both the bank who collect interest and the borrower who is the first to access this created money and can spend it before the effects of its creation can percolate through the economy. The ultimate consequences of this is an increasing distortion of the underlying signaling mechanisms in the economy.

Credit creation makes it appear as if the supply of "saved funds" ready for investment has increased, for the effect is the same: the supply of funds for investment purposes increases, and the interest rate is lowered. Borrowers, in short, are misled by the bank inflation into believing that the supply of saved funds (the pool of "deferred" funds ready to be invested) is greater than it really is.

In an environment where the money supply is continually expanding via debt, entrepreneurs mistakenly conclude that investments are really available for long term projects when in fact the pool of available funds has come solely from artificial credit creation consumer demand is artificially and unsustainably elevated.

In a fractional reserve system based on a tangible asset like gold. The banks will quickly cease lending in a downturn fearing that the reality of their multiple simultaneous claims will be exposed in a "run on the bank". This leads to a critical economy wide liquidity shortage. In a system built on fiat we instead get super bubbles and collectivism.

Fractional reserve increases the supply of money to the benefit of the early receivers, that is, the government, the banks, and their favored debtors or contractors. Monetary inflation is thus a method by which the banking system, and favored political groups, are able to partially expropriate the wealth of other groups in society. Those empowered to control money issue new money to their own economic advantage and at the expense of the remainder of the population.

In The Foundations of Contentionism the argument is made that top-down oppression and control plays a necessary role in the process of knowledge creation. New knowledge facilitates the gradual relaxation of top-down control in a virtuous cycle. It is not feasible to ban usury as it is critically intertwined throughout all aspects of the modern economy. Instead of outlawed it must be outgrown.

[deisik]

I find it funny the people who think FRB is a scam also think inflation shouldn't exist.

Money is nothing other than the lifeblood of society, and just as a human body grows in size and requires a larger volume of blood, the economy requires an increase in money supply in order to operate effeciently (hence the term "liquidity").

100% reserve banking is socialism because it leaves no legitimate way to expand the money supply, and a fixed money supply rewards people who sit on their ass, it treats money like it was a corporate share in the economy that should increase in value as time goes on. This is also why cryptocurrencies which are modeled on fixed money supplies are doomed to fail over the long term (or at least fail in the sense that they will always be relegated to niche uses, rather than becoming primary or world-leading currencies)

Roach you're just another luddite running your mouth about a world you haven't even begun to understand.

If by sit on ass you mean invest wages and withheld value instead of spending and requiring goods immediately for their labour.    The modern alternative is to reward and to gift money to politics which spends it as it wishes without restraint or in proportion to the benefit it brings.   The inflation of the monetary base to subsidise a government is far closer to a taxing situation then just allowing those who have earnt value at a market agreed price to invest and gain interest for delaying importing goods or using up domestic supply, its proportional not unfair ?
  Not spending when technology allows such a big advantage in utility does not seem too easy or iliquid a situation, it might be less rewarding

What do you think fractional reserve banking is? It's the process of investing depositors funds and putting them work rather than just having it sit there in a "vault". 100% reserve banking = dead money/dead capital doing nothing.

Fractional reserve banking is just LEVERAGE.

In the modern fiat system fractional reserve banking is a useless and misleading concept

Reserves referred to in FRB are only needed when there is cash in the system. Namely, when a client comes to a bank office and asks to get his money as cash. When banks loan money, they should not necessarily have these loans backed up by either the money of depositors or their own capital. That would nominally and numerically amount to negative FRB requirements, but essentially it just shows that this concept is out of place

[Lateralus]

There's no more reason to ban the practice of fractional reserve banking because it can go wrong any more than there is reason to ban ownership of guns because they can be used to murder innocent people. The problem is, like always, a LACK OF COMPETITION. So no, SOCIALISM with it's never ending amount of state borrowing is what got us into this mess. Government intervention in the housing market is what got us into this mess. Government monopolization of the banking industry is what got us into this mess.
...
Rather than questioning it, you're just trying to twist history and reality to fit your presupposed idea that there's something inherently wrong with fractional reserve banking, which is why, as iamnotback said, you are simply "conflating orthogonal issues".

The banks are allowed to create multiple simultaneous claims which cannot be simultaneously honored to the benefit of themselves and favored insiders. The value of all of the other money in the economy drops when ever this is done.

Literally babbies first argument against fractional reserve banking. The money-multiplier theory has been debunked time and time again. AGAIN, it's simply called LEVERAGE. You're trapped in circular logic.

The prime beneficiaries are both the bank who collect interest...

Conveniently you leave out the part where the bank splits the earned interest with depositors.

Also FRB != central banking & interest rate manipulation. You guys keep trying to tie those two things together when they are completely separate ideas.

This is a thread on Armstrong's work isn't it? One of the most critical aspects of his entire thesis is that you people who rip on FRB and can't see the inherent flaws of commodity-backed currencies (and how unnecessary they are in the first place), are just as lost as anyone.

Austrian theory is NOT INFALLIBLE, and that's saying a lot because I have immense respect for their school of thought. There are PLENTY of others who share that same respect and yet agree when these critical flaws are pointed out in classical Austrian theory.

[tabnloz]

Armstrong on bitcoin again

https://www.armstrongeconomics.com/markets-by-sector/precious-metals/gold/bitcoin-is-it-sustainable/

Doesn't really get into it in any depth. Seems convinced govt will ban it if it grows.

[CoinCube]

The banks are allowed to create multiple simultaneous claims which cannot be simultaneously honored to the benefit of themselves and favored insiders. The value of all of the other money in the economy drops when ever this is done.

Literally babbies first argument against fractional reserve banking. The money-multiplier theory has been debunked time and time again. AGAIN, it's simply called LEVERAGE. You're trapped in circular logic.

The prime beneficiaries are both the bank who collect interest...

Conveniently you leave out the part where the bank splits the earned interest with depositors.

Also FRB != central banking & interest rate manipulation. You guys keep trying to tie those two things together when they are completely separate ideas.

This is a thread on Armstrong's work isn't it? One of the most critical aspects of his entire thesis is that you people who rip on FRB and can't see the inherent flaws of commodity-backed currencies (and how unnecessary they are in the first place), are just as lost as anyone.

Austrian theory is NOT INFALLIBLE, and that's saying a lot because I have immense respect for their school of thought. There are PLENTY of others who share that same respect and yet agree when these critical flaws are pointed out in classical Austrian theory.

Money in whatever form it takes gold, dollars, or bitcoin is ultimately a signaling system a channel for information to travel through.

Knowledge and Power by George Gilder
https://www.amazon.com/Knowledge-Power-Information-Capitalism-Revolutionizing/dp/1621570274

Capitalism is not chiefly an incentive system but an information system. We continue with the recognition, explained by the most powerful science of the epoch, that information itself is best defined as surprise: by what we cannot predict rather than by what we can. The key to economic growth is not acquisition of things by the pursuit of monetary rewards but the expansion of wealth through learning and discovery. The economy grows not by manipulating greed and fear through bribes and punishments but by accumulating surprising knowledge through the conduct of the falsifiable experiments of free enterprises. Crucial to this learning process is the possibility of failure and bankruptcy. In this model, wealth is defined as knowledge, and growth is defined as learning.

That new economics—the information theory of capitalism—is already at work in disguise. Concealed behind an elaborate mathematical apparatus, sequestered by its creators in what is called information technology, the new theory drives the most powerful machines and networks of the era. Information theory treats human creations or communications as transmissions through a channel, whether a wire or the world, in the face of the power of noise, and gauges the outcomes by their news or surprise, defined as “entropy” and consummated as knowledge. Now it is ready to come out into the open and to transform economics as it has already transformed the world economy itself.

Let us imagine the lineaments of an economics of disorder, disequilibrium, and surprise that could explain and measure the contributions of entrepreneurs. Such an economics would begin with the Smithian mold of order and equilibrium. Smith himself spoke of property rights, free trade, sound currency, and modest taxation as crucial elements of an environment for prosperity. Smith was right: An arena of disorder, disequilibrium, chaos, and noise would drown the feats of creation that engender growth. The ultimate physical entropy envisaged as the heat death of the universe, in its total disorder, affords no room for invention or surprise. But entrepreneurial disorder is not chaos or mere noise. Entrepreneurial disorder is some combination of order and upheaval that might be termed “informative disorder.”

Shannon defined information in terms of digital bits and measured it by the concept of information entropy: unexpected or surprising bits...The accomplishment of Information Theory was to create a rigorous mathematical discipline for the definition and measurement of the information in the message sent down the channel. Shannon entropy or surprisal defines and quantifies the information in a message
...

In the Shannon scheme, a source selects a message from a portfolio of possible messages, encodes it through resort to a dictionary or lookup table using a specified alphabet, then transcribes the encoded message into a form that can be transmitted down a channel. Afflicting that channel is always some level of noise or interference. At the destination, the receiver decodes the message, translating it back into its original form. This is what is happening when a radio station modulates electromagnetic waves, and your car radio demodulates those waves, translating them back into the original sounds or voices at the radio station.

Part of the genius of information theory is its understanding that this ordinary concept of communication through space extends also through time. A compact disk, iPod memory, or Tivo personal video recorder also conducts a transmission from a source (the original song or other content) through a channel (the CD, DVD, microchip memory, or “hard drive”) to a receiver chiefly separated by time. In all these cases, the success of the transmission depends on the existence of a channel that does not change significantly during the course of the communication, either in space or in time.
...

The problem with fractional reserve is that it allows multiple simultaneous claims that are expected to be honored but in reality cannot be. Thus it allows fraudulent claims or noise into the channel. The ultimate consequence of this is an increasing distortion of the underlying signaling mechanisms in the economy.

Yes of course depositors also benefit some to from the scheme. It is everyone else in the economy who suffers. Fractional reserve banking is different than central banking. However, fractional reserve is ultimately a process that increases economic distortion or noise. This is why it was recurrently associated with economic crises and bank runs. Historically this distortion directly paved the way to our current central banking (an even greater distortion) and there is no reason to think the same processes would not immediately recur if we could somehow reset the system back to a gold or silver standard.

I am less familiar with Armstrong's discussion on gold but my understanding is that he feels that over the very long term it will gradually lose its liquidity which will erode its value.

Armstrong Economics Will Gold and Silver Become the Underground Currencies of the Future?
https://www.armstrongeconomics.com/markets-by-sector/precious-metals/gold/will-gold-and-silver-become-the-underground-currencies-of-the-future/

ANSWER:They probably will to some extent, but it will be very limited. Gold and silver have lost their mobility. You can no longer hop on a plane with a briefcase full of metal. The more likely outcome is that gold and silver will simply be a hedge against government. It is unlikely that everyone will simply be using them at the local Starbucks.
Government will make transactions in gold or silver illegal and equivalent to money laundering.

I agree with his analysis above. Ultimately, fractional reserve represents a very challenging obstacle that distorts and thus reduces growth over the long run. A gold standard is not a solution but technology (coupled with a greater awareness of the problem) may someday provide one. Decentralized blockchain technologies are very interesting as they appear to be the first steps in that direction.
  

[sidhujag]

The banks are allowed to create multiple simultaneous claims which cannot be simultaneously honored to the benefit of themselves and favored insiders. The value of all of the other money in the economy drops when ever this is done.

Literally babbies first argument against fractional reserve banking. The money-multiplier theory has been debunked time and time again. AGAIN, it's simply called LEVERAGE. You're trapped in circular logic.

The prime beneficiaries are both the bank who collect interest...

Conveniently you leave out the part where the bank splits the earned interest with depositors.

Also FRB != central banking & interest rate manipulation. You guys keep trying to tie those two things together when they are completely separate ideas.

This is a thread on Armstrong's work isn't it? One of the most critical aspects of his entire thesis is that you people who rip on FRB and can't see the inherent flaws of commodity-backed currencies (and how unnecessary they are in the first place), are just as lost as anyone.

Austrian theory is NOT INFALLIBLE, and that's saying a lot because I have immense respect for their school of thought. There are PLENTY of others who share that same respect and yet agree when these critical flaws are pointed out in classical Austrian theory.

Money in whatever form it takes gold, dollars, or bitcoin is ultimately a signaling system a channel for information to travel through.

Knowledge and Power by George Gilder
https://www.amazon.com/Knowledge-Power-Information-Capitalism-Revolutionizing/dp/1621570274

Capitalism is not chiefly an incentive system but an information system. We continue with the recognition, explained by the most powerful science of the epoch, that information itself is best defined as surprise: by what we cannot predict rather than by what we can. The key to economic growth is not acquisition of things by the pursuit of monetary rewards but the expansion of wealth through learning and discovery. The economy grows not by manipulating greed and fear through bribes and punishments but by accumulating surprising knowledge through the conduct of the falsifiable experiments of free enterprises. Crucial to this learning process is the possibility of failure and bankruptcy. In this model, wealth is defined as knowledge, and growth is defined as learning.

That new economics—the information theory of capitalism—is already at work in disguise. Concealed behind an elaborate mathematical apparatus, sequestered by its creators in what is called information technology, the new theory drives the most powerful machines and networks of the era. Information theory treats human creations or communications as transmissions through a channel, whether a wire or the world, in the face of the power of noise, and gauges the outcomes by their news or surprise, defined as “entropy” and consummated as knowledge. Now it is ready to come out into the open and to transform economics as it has already transformed the world economy itself.

Let us imagine the lineaments of an economics of disorder, disequilibrium, and surprise that could explain and measure the contributions of entrepreneurs. Such an economics would begin with the Smithian mold of order and equilibrium. Smith himself spoke of property rights, free trade, sound currency, and modest taxation as crucial elements of an environment for prosperity. Smith was right: An arena of disorder, disequilibrium, chaos, and noise would drown the feats of creation that engender growth. The ultimate physical entropy envisaged as the heat death of the universe, in its total disorder, affords no room for invention or surprise. But entrepreneurial disorder is not chaos or mere noise. Entrepreneurial disorder is some combination of order and upheaval that might be termed “informative disorder.”

Shannon defined information in terms of digital bits and measured it by the concept of information entropy: unexpected or surprising bits...The accomplishment of Information Theory was to create a rigorous mathematical discipline for the definition and measurement of the information in the message sent down the channel. Shannon entropy or surprisal defines and quantifies the information in a message
...

In the Shannon scheme, a source selects a message from a portfolio of possible messages, encodes it through resort to a dictionary or lookup table using a specified alphabet, then transcribes the encoded message into a form that can be transmitted down a channel. Afflicting that channel is always some level of noise or interference. At the destination, the receiver decodes the message, translating it back into its original form. This is what is happening when a radio station modulates electromagnetic waves, and your car radio demodulates those waves, translating them back into the original sounds or voices at the radio station.

Part of the genius of information theory is its understanding that this ordinary concept of communication through space extends also through time. A compact disk, iPod memory, or Tivo personal video recorder also conducts a transmission from a source (the original song or other content) through a channel (the CD, DVD, microchip memory, or “hard drive”) to a receiver chiefly separated by time. In all these cases, the success of the transmission depends on the existence of a channel that does not change significantly during the course of the communication, either in space or in time.
...

The problem with fractional reserve is that it allows multiple simultaneous claims that are expected to be honored but in reality cannot be. Thus it allows fraudulent claims or noise into the channel. The ultimate consequence of this is an increasing distortion of the underlying signaling mechanisms in the economy.

Yes of course depositors also benefit some to from the scheme. It is everyone else in the economy who suffers. Fractional reserve banking is different than central banking. However, fractional reserve is ultimately a process that increases economic distortion or noise. This is why it was recurrently associated with economic crises and bank runs. Historically this distortion directly paved the way to our current central banking (an even greater distortion) and there is no reason to think the same processes would not immediately recur if we could somehow reset the system back to a gold or silver standard.

I am less familiar with Armstrong's discussion on gold but my understanding is that he feels that over the very long term it will gradually lose its liquidity which will erode its value.

Armstrong Economics Will Gold and Silver Become the Underground Currencies of the Future?
https://www.armstrongeconomics.com/markets-by-sector/precious-metals/gold/will-gold-and-silver-become-the-underground-currencies-of-the-future/

ANSWER:They probably will to some extent, but it will be very limited. Gold and silver have lost their mobility. You can no longer hop on a plane with a briefcase full of metal. The more likely outcome is that gold and silver will simply be a hedge against government. It is unlikely that everyone will simply be using them at the local Starbucks.
Government will make transactions in gold or silver illegal and equivalent to money laundering.

I agree with his analysis above. Ultimately, fractional reserve represents a very challenging obstacle that distorts and thus reduces growth over the long run. A gold standard is not a solution but technology (coupled with a greater awareness of the problem) may someday provide one. Decentralized blockchain technologies are very interesting as they appear to be the first steps in that direction.
  

The velocity of money slows down if you deleverage so its a hard problem that will only be  solved with asymptotically ideal money which offers more efficient transfer utility... then slowly technology and process breakthroughs will allow us to get back and over the hump.

[OROBTC]

Armstrong on bitcoin again

https://www.armstrongeconomics.com/markets-by-sector/precious-metals/gold/bitcoin-is-it-sustainable/

Doesn't really get into it in any depth. Seems convinced govt will ban it if it grows.

Armstrong writes in the piece you cite:

"As far as gold is concerned, I have recommended old common date coins rather than bars and bullion."

A good fraction of my gold stash is in common date US gold coins.  Collectible historical coins..., most of mine are dated before 1900.

Looks like neither Armstrong nor even iamnotback advised us of BTC's 15% drop last night...

*  *  *

CoinCube quoted from George Gilder's book Knowledge and Power.  I read that about a year ago.

Highly recommended!