Fractional Reserve Lending IS NOT bad - its unavoidable

[solarion]

^Miz4r suggested that exponential growth is unsustainable.  I replied that human population growth is exponential.
Not everything in this thread is about you.

Consider taking part in the gubmint brainwashing program -- huffing gas may have seemed like a great alternative to education, but look how shit worked out...

<ignorant troll ignored>

This is a discussion forum. If you're unprepared, unable, or unwilling to defend your posts, then don't post them. You're contributing precisely nothing to this conversation.

[twiifm]

I'm also critic of the FR, but from a formal point of view it doesn't destroy the link between credit and debit. One man debit is another man/entity credit.

So at which point is the "money" to repay the interest on a debt created?

Since all fiat money is created out of debt (the central bank creates money by lending to banks or, in certain countries, directly to the State), interest creates new debt that can only be paid by borrowing more, supposedly supported in future income grow (think about corporations).

It's because of this that no modern economy is prepared for a long economic stagnation. Interest debt can only be paid by someone getting more loans and that can only be supported by economic grow or inflation (nominal grow). Any long stagnation creates a financial crisis, solved by inflation or defaults.

I agree but if you want free markets its gotta be this way.  How are you gonna stop people from wanting to enrich themselves through profit?  Communism didn't work.  

[NotLambchop]

^Miz4r suggested that exponential growth is unsustainable.  I replied that human population growth is exponential.
Not everything in this thread is about you.

Consider taking part in the gubmint brainwashing program -- huffing gas may have seemed like a great alternative to education, but look how shit worked out...

<ignorant troll ignored>

Re. your edit:
Your posts could be accurately described as "not even wrong."
While mostly grammatically well-formed, your posts fail to meet the same criteria at a logical level, thus responding with anything other than "lol" is a fool's errand.

[RoadTrain]

FR isn't only the right to lend out money someone lent to us, in the end it's the right to create money by lending the same amount of money several times.
Technically, isn't fraud, but it's risky and concedes a public function (a sovereign one) to a corporation, the right to create money, crowding out as unnecessary the same amount of public money. If the bank can lend the same money, it doesn't have to ask for credit from the central bank. We all lose.

The risk is credit worthiness of the borrower.

In England there is no cap so banks can create unlimited credit as long as there are credit worthy borrowers.  The make the loans THEN they look for the reserves not the other way around. The problem occurs when deregulation allows things like subprime lending

The issue isn't whether we should have FRB or not.  It's absolutely necessary for modern economies.  The issue is how to regulate it in order to avoid systemic risk

I'll tell you more, that's not only in England. It's virtually everywhere. Bank makes a loan and then corrects its reserve account (usually closer to the end of the day).
This makes reserve requirements obsolete because there will always be enough reserves to expand credit (unless central bank stops maintaining interest rate target).

[Ozziecoin]

@ozziecoin

LOL not even close.  Just because I like to learn doesn't mean I'm in school.  Try it sometimes

If you understood options trading you would not make a dumb statement like that about Taleb betting against me. It doesn't even make sense.  You don't even know how I trade or what my positions are.  Furthermore traders sont bet against each other as individuals just the options have 2 sides.  Its not a chess game its a market.  Besides, Taleb retired from trading its impossible for us to ever cross paths

Wait so you respect Soros for gaming the system, but not every other banker for gaming the system?  All Wall Street guys game the system.  Thats how they make money since they don't produce anything

You trying to impress me by name dropping Minsky?  You know he's considered a Post Keynsian right?  

None of these names you dropped says anything about FRB being responsible for economic crashes.  

So you're just another gamer in the system?  Don't keep tripping over yourself, will ya?

Except Minsky does.  So does Soros.  Seriously, for fucks sake - do some effing homework.

[Ozziecoin]

I'm also critic of the FR, but from a formal point of view it doesn't destroy the link between credit and debit. One man debit is another man/entity credit.

So at which point is the "money" to repay the interest on a debt created?

Since all fiat money is created out of debt (the central bank creates money by lending to banks or, in certain countries, directly to the State), interest creates new debt that can only be paid by borrowing more, supposedly supported in future income grow (think about corporations).

It's because of this that no modern economy is prepared for a long economic stagnation. Interest debt can only be paid by someone getting more loans and that can only be supported by economic grow or inflation (nominal grow). Any long stagnation creates a financial crisis, solved by inflation or defaults.

I agree but if you want free markets its gotta be this way.  How are you gonna stop people from wanting to enrich themselves through profit?  Communism didn't work.  

Between FRB and communism is this thing called the Blockchain and one on one lending.  Gee, do I have to spell everything out for you?

[Ozziecoin]

Human population growth is exponential.  Economic growth needs to be exponential just to keep up

I rebut you with David Suzuki

http://mmoffatt1.typepad.com/blog/2012/10/david-suzuki-how-economics-became-a-science-of-destruction.html

In economics, the bottom line is profit.

Judith Maxwell, president of the Economic Council of Canada, admitted in an interview that economists simply haven't paid attention to ecological factors. Economists consider the environment to be essentially limitless, endless, self-renewing and free.

As the eminent Stanford ecologist, Paul Ehrlich remarked: "Economists are one of the last groups of professionals on earth who still believe in perpetual motion machines."

But the fact is, we live in a finite world, human beings are now the most numerous large mammal and our numbers are increasing explosively. Our technological inventions permit extraction of resources at a horrifying rate. To economists, this simply offers greater opportunity to expand markets and increase profit.

In economics, the role performed by components of natural communities is of no importance. So, for example, a standing forest provides numerous ecological "services" such as inhibition of erosion, landslides, fires and floods while cleansing the air, modulating climate and weather, supporting wildlife and maintaining genetic diversity. And I haven't even considered the spiritual value of forests for human beings.

Yet to economists, these are "externalities" to their calculations. As the head of a multinational forest company remarked, "a tree has value once it's cut down." That's a classic economic perspective.

Economists live in a land of make-believe. They aim at steady growth in consumption, material goods, wealth and profit as if it can be sustained indefinitely. And they have faith that human ingenuity will open up new frontiers for steady expansion while providing endless solutions to problems we create.

[RoadTrain]

I'm also critic of the FR, but from a formal point of view it doesn't destroy the link between credit and debit. One man debit is another man/entity credit.

So at which point is the "money" to repay the interest on a debt created?

Since all fiat money is created out of debt (the central bank creates money by lending to banks or, in certain countries, directly to the State), interest creates new debt that can only be paid by borrowing more, supposedly supported in future income grow (think about corporations).

It's because of this that no modern economy is prepared for a long economic stagnation. Interest debt can only be paid by someone getting more loans and that can only be supported by economic grow or inflation (nominal grow). Any long stagnation creates a financial crisis, solved by inflation or defaults.

There's a nuance. You treat government as if it was another average Joe borrowing from banks. That's not quite true. In fact, the government is who sets rules here. It's the government that creates money.
For this very reason, MMT breaks down monetary transactions to two different types: horizontal and vertical. Horizontal transactions are those which happen between banks and average Joe. And it's true that interest repayment here can only happen through borrowing more. But it becomes more complicated when you add government to the system.

Vertical transactions involve central bank, banking system and the government. And the government is able to add money (monetary assets) to the economy. It does it every time it runs a budget deficit.
So, basically there are two ways new money is created: through bank lending and through deficit spending.

So the answer to this question:

So at which point is the "money" to repay the interest on a debt created?

is "when government runs fiscal deficit".

[NotLambchop]

...
I rebut you with David Suzuki

http://mmoffatt1.typepad.com/blog/2012/10/david-suzuki-how-economics-became-a-science-of-destruction.html
...

WTF am I reading?

Weirdass extrapolation from statements made by the guy who wrote The Population Bomb in the '60s (mostly shown wrong since), and an ex-chairwoman of some Canadian agency disbanded in the early '90s (had to look both of them up).

What are you trying to say?  Say it in your own words.

[solarion]

So the answer to this question:

So at which point is the "money" to repay the interest on a debt created?

is "when government runs fiscal deficit".

When you say "government" you're referring specifically and exclusively to federal government are you not?

Is this real in your opinion?



http://www.usdebtclock.org/

[twiifm]

I'm also critic of the FR, but from a formal point of view it doesn't destroy the link between credit and debit. One man debit is another man/entity credit.

Between FRB and communism is this thing called the Blockchain and one on one lending.  Gee, do I have to spell everything out for you?

One on One lending is not possible to meet the capital demands of the market.  You can still have FRB under BTC.  A bank makes loans and then finds the BTC reserves.  But the big difference is when they can't find reserves there is no Central Bank to act as lender of last resort and the system would collapse pretty fast.

[twiifm]

...
I rebut you with David Suzuki

http://mmoffatt1.typepad.com/blog/2012/10/david-suzuki-how-economics-became-a-science-of-destruction.html
...

WTF am I reading?

Weirdass extrapolation from statements made by the guy who wrote The Population Bomb in the '60s (mostly shown wrong since), and an ex-chairwoman of some Canadian agency disbanded in the early '90s (had to look both of them up).

What are you trying to say?  Say it in your own words.

LOL this ozziecoin guy has been constantly dropping names of economists and famous traders who don't support his position about FRB.  I don't know WTF he is saying either.  I think he's just trolling but I have some sick compulsion to keep replying him

[Miz4r]

I'm also critic of the FR, but from a formal point of view it doesn't destroy the link between credit and debit. One man debit is another man/entity credit.

So at which point is the "money" to repay the interest on a debt created?

Since all fiat money is created out of debt (the central bank creates money by lending to banks or, in certain countries, directly to the State), interest creates new debt that can only be paid by borrowing more, supposedly supported in future income grow (think about corporations).

And where does that 'growth' come from? And doesn't the compounding interest on ever growing debt require exponential growth, instead of just linear growth? Is that even sustainable in a finite world with finite resources? Could it be that all our financial and even climate change problems are related to this? I think the answer is yes, but I'm sure someone here will argue it's not and everything is fine...

Human population growth is exponential.  Economic growth needs to be exponential just to keep up

Human population growth is no longer growing exponentially, in some countries like Japan they're actively trying to stimulate the population to make more babies because they know otherwise it will be much harder to keep growing the earth's cancer economy to keep up with their debt burdens and accompanied interest. Do you believe this is actually a healthy and natural thing? Honest question.

[solarion]

One on One lending is not possible to meet the capital demands of the market.  You can still have FRB under BTC.  A bank makes loans and then finds the BTC reserves.  But the big difference is when they can't find reserves there is no Central Bank to act as lender of last resort and the system would collapse pretty fast.

That's just nonsense. One on one lending may be unable to meet the needs of warped and distorted capital markets. In a free market system, the cost of money(interest rates), would be set by the market...not a bunch of un-elected banksters in a privately owned cartel pretending to be government officials. It'd take capital formation to start and sustain business expansion. The masses would be appropriately compensated for producing more than they consume and the costs associated with poor investment decisions would be borne by the investor, not an ignorant public. IOW capitalism, which we most certainly do not have currently.

"lender of last resort" ROFL

Don't forget the rest of the fed's charter. Full employment of the sheep is necessary if you intend to continue sheering them indefinitely.

[twiifm]

One on One lending is not possible to meet the capital demands of the market.  You can still have FRB under BTC.  A bank makes loans and then finds the BTC reserves.  But the big difference is when they can't find reserves there is no Central Bank to act as lender of last resort and the system would collapse pretty fast.

That's just nonsense. One on one lending may be unable to meet the needs of warped and distorted capital markets. In a free market system, the cost of money(interest rates), would be set by the market...not a bunch of un-elected banksters in a privately owned cartel pretending to be government officials. It'd take capital formation to start and sustain business expansion. The masses would be appropriately compensated for producing more than they consume and the costs associated with poor investment decisions would be borne by the investor, not an ignorant public. IOW capitalism, which we most certainly do not have currently.

"lender of last resort" ROFL

Don't forget the rest of the fed's charter. Full employment of the sheep is necessary if you intend to continue sheering them indefinitely.

Just think logically about what you are saying.  If a bank has $1B in reserves and they can only lend out one to one.  What happens when that $1B runs out and there are about $10B of demand still unmet.  The only thing they could do is wait for some repayment.  If they knew the repayment is gonna take a while then the interest is gonna shoot thru the roof.  If interest shoots through the roof then who can buy a house or go to college or start a business?  You gotta stop only thinking about the supply side gotta consider the demand side as well

[NotLambchop]

...
Human population growth is no longer growing exponentially, in some countries like Japan they're actively trying to stimulate the population to make more babies because they know otherwise it will be much harder to keep growing the earth's cancer economy to keep up with their debt burdens and accompanied interest. Do you believe this is actually a healthy and natural thing? Honest question.

Not sure what you are asking.  What is "healthy and natural"?  Healthy and natural for whom or what?  It's perfectly healthy and natural for yeast to snack on sugar and shit out alcohol, multiplying exponentially until alcohol kills off the entire yeast culture.  We thank the critters for delicious booze.

Examples of this in nature are common as dirt.  The human population could follow an s-curve (reaching an equilibrium), be limited by some catastrophic event and resume exponential growth (major war, natural disaster -- stay in dynamic equilibrium), or be extinguished by a catastrophic event (okthxbi).  Examples of similar scenarios abound in nature and thus are (by definition) perfectly natural.

Economy is also not static, it's not even an entity.  It exists in constant flux, changing everything about itself.  Like a living culture, it can follow any one of the scenarios described, and then some.   Bitcoin is one of the things affecting economy.  

[RoadTrain]

So the answer to this question:

So at which point is the "money" to repay the interest on a debt created?

is "when government runs fiscal deficit".

When you say "government" you're referring specifically and exclusively to federal government are you not?

Is this real in your opinion?

https://i.imgur.com/WJNzV69.png

http://www.usdebtclock.org/

Federal government of course.

And what's your point? Be more concrete please.

[NotLambchop]

...In a free market system, the cost of money(interest rates), would be set by the market...not a bunch of un-elected banksters in a privately owned cartel pretending to be government officials. ...

These bankers are a part of, and a creation of, the free market.  Financial institutions and regulations were all created by the free market adapting to changing environment.
...unless you think that aliens brought us bankers and regulations.

[solarion]

One on One lending is not possible to meet the capital demands of the market.  You can still have FRB under BTC.  A bank makes loans and then finds the BTC reserves.  But the big difference is when they can't find reserves there is no Central Bank to act as lender of last resort and the system would collapse pretty fast.

That's just nonsense. One on one lending may be unable to meet the needs of warped and distorted capital markets. In a free market system, the cost of money(interest rates), would be set by the market...not a bunch of un-elected banksters in a privately owned cartel pretending to be government officials. It'd take capital formation to start and sustain business expansion. The masses would be appropriately compensated for producing more than they consume and the costs associated with poor investment decisions would be borne by the investor, not an ignorant public. IOW capitalism, which we most certainly do not have currently.

"lender of last resort" ROFL

Don't forget the rest of the fed's charter. Full employment of the sheep is necessary if you intend to continue sheering them indefinitely.

Just think logically about what you are saying.  If a bank has $1B in reserves and they can only lend out one to one.  What happens when that $1B runs out and there are about $10B of demand still unmet.  The only thing they could do is wait for some repayment.  If they knew the repayment is gonna take a while then the interest is gonna shoot thru the roof.  If interest shoots through the roof then who can buy a house or go to college or start a business?  You gotta stop only thinking about the supply side gotta consider the demand side as well

I have thought about it logically. Have you?

What you're suggesting is a system in which people only take on debt they can repay. People that choose to not take on debt and save are compensated as interest rates rise appropriately. As a result lenders are compensated appropriately for lending. How much of that theoretical $10b in loan demand disappears instantly when interest rates rise to appropriate levels? Buying a home is SUPPOSED to be difficult, not a simple matter of filling out a few HUD forms to pop "money" into existence so anyone with a minimum wage job can experience the satisfaction of home ownership...and later the crushing disappointment of home foreclosure because they lacked the means to buy the home in the first place. Naturally in between the signing for the home they could not afford and the day the bank takes the home back they're encouraged to borrow against their equity with a HELOC. This is "good" debt after all right? How much lower do you suppose home prices would be if not for government meddling in the housing and interest rate markets? Secondary education? Health care?

The moral hazard of endless mountains of debt and a government hell bent on sustaining an unsustainable system of debt greater than previous debt, simply does not have a positive end game scenario. You look at one tiny aspect of a thoroughly rigged system and say "look this needs to be thus", but ignore the broader implications.

[solarion]

So the answer to this question:

So at which point is the "money" to repay the interest on a debt created?

is "when government runs fiscal deficit".

When you say "government" you're referring specifically and exclusively to federal government are you not?

Is this real in your opinion?

https://i.imgur.com/WJNzV69.png

http://www.usdebtclock.org/

Federal government of course.

I feel it's an important distinction as only federal government can conjure currency from thin air.