Swiss vote to end fractional reserve banking

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trfie
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Re: Swiss vote to end fractional reserve banking

Post by trfie »

Riggerjack wrote:
Thu Aug 30, 2018 11:45 pm
Wait, did you just assert that block chain tech would in some way cause a stable currency? Have you heard of this thing the kids these days are calling Bitcoin?
Wait, are you saying that bitcoin is the optimal form of currency and that all the countries should use it instead of fiat currency?

trfie
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Re: Swiss vote to end fractional reserve banking

Post by trfie »

Hobbes wrote:
Fri Aug 31, 2018 6:26 pm

@trfie
Would your gold-backed 'goldcoin' be redeemable for gold (like a real gold deposit slip)?
I am not proposing it, but pointed it out as a solution to counterfeiting. Yes, it would be redeemable for gold.

BRUTE
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Re: Swiss vote to end fractional reserve banking

Post by BRUTE »

Riggerjack wrote:
Thu Aug 30, 2018 11:45 pm
Wait, did you just assert that block chain tech would in some way cause a stable currency? Have you heard of this thing the kids these days are calling Bitcoin?
completely missing the point. the post references a blockchain currency backed by gold - not bitcoin.

Riggerjack
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Re: Swiss vote to end fractional reserve banking

Post by Riggerjack »

Ok, guys. I seem to find myself in the awkward position of defending the Fed. When I am no fan of them, myself. All I am saying is that if one is proposing a change of system (gold standard, Bitcoin, whatever), to only compare the strengths of your proposed change to the weaknesses of the existing system is not very persuasive.

So, here's the advantages I see the Fed providing, for their cut:

The dollar is stable, with inflation priced in. This is the miracle. Every long term contact factors for inflation. Every retirement plan. We all expect inflation. We all expect the dollar to drop slightly, each year, in a growing economy, or shrinking.

So when we are planning for the future, we only need to worry about volitility in one direction. If you bought at the top of the X market, time will ease the pain. But you only have the one variable in your calculation. This efficiency of thought, is what we are paying for.

But what is the right price for capital in gold? For this, one needs to know the relative size of the economy relative to the supply of gold. Most folks would just know when gold was more dear. Harder to get, easier to spread. So one needs to know which direction the future value of gold is likely to go, to properly value the future outputs of that capital.

And as the economy grows at a pace greater than the gold supply, the value of your currency grows. But therein lies the rub: the holders of said currency then make a return on just holding the currency. Back to the bankers have all the money, again, aren't we?

Any commodity is variable. Tying the economy to a commodity, just increases the factors of that volitility.

That your currency wouldn't decrease in value against itself hardly seems to be a justification for the change.

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Jean
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Re: Swiss vote to end fractional reserve banking

Post by Jean »

Frb allows bank to keep most of the growth to themself. Dollar is stable as long as the economy keeps growing. If growth stop, your saving completly lose value with frb. Frb is the core of our growth addiction.

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Mister Imperceptible
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Re: Swiss vote to end fractional reserve banking

Post by Mister Imperceptible »

“The dollar is stable by pricing in inflation.”

?

With the constant erosion of the dollar and negative real interest rates long-term, the US sells away it’s credibility bit by bit, because it defrauds its creditors in real terms. Creditors being: people who hold the dollar in anyway- whether a physical $100 bill or a 30-year-bond.

How did that work out for the Romans?

http://armchairprehistory.com/wp-conten ... silver.gif

Societal wealth cannot be manipulated to increase by pricing in monetary inflation. There is no growth from total insolvency and bankruptcy. In fact, it leads to unproductive malinvestment.

But widespread confiscation can be brought about. Savers in the dollar are deprived of their net worth, and people often go into ruinous debt by misjudging the rates of inflation. The question becomes, do you consider that to be a desirable thing?

“Ease the pain” is a seductive Karvorkian enticement for the suicide of the West.

Gold must eventually be distributed in a way to facilitate business. All people need to do is accumulate it on a widespread basis.

But if the masses are convinced that it is a barbarous relic, they are more susceptible to financially engineered tail risks, because they are discouraged from saving itself. “The less I save, the more debt I can take on to invest, the wealthier I can become.”

That so few save what in what is a reliable money supply, is why we have financially-driven black swan events.

trfie
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Re: Swiss vote to end fractional reserve banking

Post by trfie »

Riggerjack wrote:
Sat Sep 01, 2018 12:32 pm
Ok, guys. I seem to find myself in the awkward position of defending the Fed. When I am no fan of them, myself. All I am saying is that if one is proposing a change of system (gold standard, Bitcoin, whatever), to only compare the strengths of your proposed change to the weaknesses of the existing system is not very persuasive.

So, here's the advantages I see the Fed providing, for their cut:

The dollar is stable, with inflation priced in. This is the miracle. Every long term contact factors for inflation. Every retirement plan. We all expect inflation. We all expect the dollar to drop slightly, each year, in a growing economy, or shrinking.

So when we are planning for the future, we only need to worry about volitility in one direction. If you bought at the top of the X market, time will ease the pain. But you only have the one variable in your calculation. This efficiency of thought, is what we are paying for.

But what is the right price for capital in gold? For this, one needs to know the relative size of the economy relative to the supply of gold. Most folks would just know when gold was more dear. Harder to get, easier to spread. So one needs to know which direction the future value of gold is likely to go, to properly value the future outputs of that capital.

And as the economy grows at a pace greater than the gold supply, the value of your currency grows. But therein lies the rub: the holders of said currency then make a return on just holding the currency. Back to the bankers have all the money, again, aren't we?

Any commodity is variable. Tying the economy to a commodity, just increases the factors of that volitility.

That your currency wouldn't decrease in value against itself hardly seems to be a justification for the change.
None of these points make sense. If these are the arguments for a Fed system versus a gold-backed currency, then we had better go to gold.

Riggerjack
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Re: Swiss vote to end fractional reserve banking

Post by Riggerjack »

That so few save
And here is where we diverge, I believe every trade has two sides. We can't have borrowers without lenders. And vice versa.

And I don't ascribe morality to either position. So I don't favor one over the other.

So while you seem concerned about the dollar's ability to hold value, I am more concerned with it's ability to facilitate trade.

I would suggest that you buy gold, if you have that much interest in it. It seems to do what you want it to do.

But there's no reason to hobble everyone else, so you can feel better about hoarding cash.

I like the cryptogold idea. I think there's enough interest overlap that the cryto geeks and the goldbugs could make it work.

But until there is a currency crisis in this country, the dollar will still win out against your cryptogold. And on the day one is hoarding cryptogold, and there is a currency crisis in America, one is going to need far more than cryptogold to make it through that mess.

TL,DR: there's no harm in goldbugs holding gold, nor any of the rest of the cash as store of value schemes, so long as your utopian currency isn't forced on the rest of us, who want to use capital, rather than hoard it.

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Jean
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Re: Swiss vote to end fractional reserve banking

Post by Jean »

Definitly, the point of frb is to have borrower without Real lenders.

BRUTE
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Re: Swiss vote to end fractional reserve banking

Post by BRUTE »

Jean wrote:
Sun Sep 02, 2018 2:10 pm
Definitly, the point of frb is to have borrower without Real lenders realizing they are lenders.
fixed

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Mister Imperceptible
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Re: Swiss vote to end fractional reserve banking

Post by Mister Imperceptible »

http://edelweissjournal.com/pdfs/Edelwe ... al-002.pdf

“Entrepreneurship with fiat money and fiat property” starting on page 9.

Unproductive debt consumes capital, it does not create it. Bailing out the financial institutions in 2008 created no real wealth, and doing so again in the upcoming crash will not either. It just pumps up the paper value of your broad based stock market “investments.”

Obama was the first president without a single year of GDP increase over 3%. The stock market run up is a mirage. Consumption is not creation.

http://www.multpl.com/us-real-gdp-growt ... le/by-year

Riggerjack
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Re: Swiss vote to end fractional reserve banking

Post by Riggerjack »

None of these points make sense.
OK. Let me try a different tack. I wish I could just post a link, but this is my own understanding from many sources and observation.

If we used gold for a currency, when the economy expanded at a faster rate than the gold supply, that would be deflationary. Each gold coin would buy more. But when the economy slows down, gold is still being produced, so your currency inflates. Now, over time, this tends to correct, but that doesn't make it any less volatile in the short term.

This uncertainty of the direction and amplitude of the inflation/deflation signal meant a larger predictable profit needs to be made, to get any capital raised. Because if I think I can make 3% return on cash by sitting on it, your venture needs to look at least 3% better than what my expected premium would be without the deflation risk. So when I am talking about the benefits of the Fed system, it is this that I am talking about. Deflation risk means sitting on more cash. By making inflation permanent, capital NEEDS to be invested. This has reduced returns for the bondholders, and reduced the cost of financing businesses and everything else.. This has had a long term boost to the economy, both by boosting demand, and production. More capital is invested, because sitting on it becomes risky, long term.


We traded that short term uncertainty, for a managed system of inflation. We did this in a depression, and we all just got used to it. Somehow, we just ran with it. We did it so well, I have to explain the difficulty deflation risk brings.

Will it last? Will it have been worth it if it doesn't? I don't know. Will it all come crashing down? I expect so, everything does, eventually. And I am no defender of QE.

This is literally robbing from the rich, to give to the rich. If one has capital, returns are slightly lower. If one is borrowing, the cost is slightly lower. I don't see the moral high ground belonging to either group. If you don't like inflation, take the other side of the trade.

But let's compare with gold. Gold was available as a store of wealth, and inflation hedge, THE WHOLE TIME. If you are uncomfortable with the moral implications of the Fed system, the push to invest your capital, gold was available the whole time. it did pretty much what you claimed it would do. But as money, it would suck. That's why, even though it does everything you claim, nobody uses it.

Let me use your suit of fine clothes example.

If you bought the suit a hundred years ago for an ounce of gold, and you could buy a suit today for an ounce of gold, that seems very stable. But that ounce of gold bought less cloth and more labor a hundred years ago than today. Yes, combined, they total nearly the same, but labor is far more expensive in gold than it used to be, and fine cloth is far cheaper than it used to be. And it gets worse if you wanted your new suit hand sewn, as it would have been in your example.

So which was the problem, and which the solution? The appreciation of labor compared to gold, or depreciation of cloth? Note that neither has anything to do with gold, other than in our thought experiment.

Nothing is stable. Stability itself is usually not a good thing, though we do crave it. The Fed system expands and contracts the money supply to kinda match the size of the economy. Inflation is the slop, or overhead. Bailouts lead to moral hazards, and undermine the system. But that's political, not economics.

I don't think it's the best we can do. I do think it's the best we have done. I really don't like QE, and can't see a way to put that genie back, and I expect bailouts to lead to horrible results. So if someone could please come up with a better system, I'm all ears. But gold isn't it.

Trying to force cash to be a store of wealth, isn't it.

A cryptocurrency that somehow expanded and contracted with the economy, to provide a short term stable currency without as much slop would be a very interesting idea. But tying that currency to gold isn't it.

I hope that makes sense.

BRUTE
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Re: Swiss vote to end fractional reserve banking

Post by BRUTE »

Riggerjack wrote:
Wed Sep 05, 2018 6:34 pm
By making inflation permanent, capital NEEDS to be invested.
the confusion here comes from most of economics' reducing of the entire economy into simple numbers, because they have penis envy when they look at physics and math.

if capital is being invested that would not otherwise have been invested, this means the capital is MISinvested. i.e. it is invested badly. just like building ghost cities in China and bridges to nowhere and train lines between Sacramento and L.A. is a terrible "investment".

therefore this creates an economy in which humans are constantly tricked/incentivized to invest in the wrong things, just so they won't lose their money. this might seem like a positive development if "investment %" is the goal, but the structure of capital allocated actually matters. it's not helpful to have 2 left shoes. misallocation of resources is the entire reason the soviet economy didn't work out.

now 3% per year or so is not nearly as bad as soviet-style central planning. but it's worse than not misallocating those resources.

Austrian economics seems (as far as brute has seen) to be one of the few schools of economics that looks at the economy in more detail than aggregate numbers, and they really care about the structure specificity of capital and capital investment. Riggerjack should know this if he has read any of the big Austrian works, like Human Action or Man, Economy, and State. even Economics in One Lesson should mention this.

BRUTE
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Re: Swiss vote to end fractional reserve banking

Post by BRUTE »

BRUTE wrote:
Wed Sep 05, 2018 10:55 pm
the confusion here comes from most of economics' reducing of the entire economy into simple numbers, because they have penis envy when they look at physics and math.

if capital is being invested that would not otherwise have been invested, this means the capital is MISinvested. i.e. it is invested badly. just like building ghost cities in China and bridges to nowhere and train lines between Sacramento and L.A. is a terrible "investment".

therefore this creates an economy in which humans are constantly tricked/incentivized to invest in the wrong things, just so they won't lose their money. this might seem like a positive development if "investment %" is the goal, but the structure of capital allocated actually matters. it's not helpful to have 2 left shoes. misallocation of resources is the entire reason the soviet economy didn't work out.

now 3% per year or so is not nearly as bad as soviet-style central planning. but it's worse than not misallocating those resources.

Austrian economics seems (as far as brute has seen) to be one of the few schools of economics that looks at the economy in more detail than aggregate numbers, and they really care about the structure specificity of capital and capital investment. Riggerjack should know this if he has read any of the big Austrian works, like Human Action or Man, Economy, and State. even Economics in One Lesson should mention this.
edit:
Riggerjack wrote: Gold was available as a store of wealth, and inflation hedge, THE WHOLE TIME. If you are uncomfortable with the moral implications of the Fed system, the push to invest your capital, gold was available the whole time. it did pretty much what you claimed it would do. But as money, it would suck. That's why, even though it does everything you claim, nobody uses it.
maybe it was because private ownership of gold was conveniently outlawed from 1934 to 1975.
https://en.wikipedia.org/wiki/Gold_Reserve_Act

the president who banned gold for over a generation later went on to ship off Japanese Americans to interment camps. swell fellow this Roosevelt guy. if only there were Democrats like him today!

Riggerjack
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Re: Swiss vote to end fractional reserve banking

Post by Riggerjack »

if capital is being invested that would not otherwise have been invested, this means the capital is MISinvested. i.e. it is invested badly. just like building ghost cities in China and bridges to nowhere and train lines between Sacramento and L.A. is a terrible "investment".
We are so close to agreement.

If capital is being invested that wouldn't be under a gold standard, this only leads to MISinvestment, if one believes that the gold standard is the RIGHT standard.

I think there is lots of room to talk about proper investment, and MISinvestment, if we can get past this gold problem.

Gold holds value over the long term. Lovely. Buy some, if that's what you want. But as a currency, it sucks.

It sucks, because in the short term, gold is volatile.

At the time someone is making a decision to buy or sell something, using fed dollars, they can just decide, based on price. We all know what a dollar is worth, that it is worth less this year than last, and it will be worth still less tomorrow.

But making that same buy sell decision using gold, one must factor in the relative price of gold. Is gold currently high? How's the economy doing overall? Will it be worth more tomorrow? Should I delay this purchase/sale until the value of gold changes?

Using gold is like using a foreign currency. Just an added level of uncertainty to each decision.

Central banking removes that uncertainty. Partially by making the future value of money most certainly less. Partially by making the money supply match the size of the economy.

Both of these are features of the system, not detractors.

Any time we can remove uncertainty, this leads to better decisions and more efficiency. (Or less MISinvestment, if you will.)

That this leads to a higher percentage of capital invested has a multiplier effect.

Now I think there's lots of room to talk about how capital has moved and changed, and the effects of central banking. But first, I think we need to get beyond this moralizing of gold. If one is thinking of this in moral terms, one will never wrap one's head around the next level of complexity.

If gold were a sledgehammer, and central banking a jackhammer, telling me that swinging a jackhammer is all wrong, and it makes a terrible sledgehammer, tells me you are looking at it wrong.

There are times to use a jack hammer. And times to use a sledgehammer. Each can do the job of the other, in different ways. But they are different, and need to be used in different ways. I'm just trying to get you to stop swinging a jack hammer over your head and into rocks to demonstrate what a lousy sledgehammer it is.

Riggerjack
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Re: Swiss vote to end fractional reserve banking

Post by Riggerjack »

@ brute

If it helps, I don't think anything I am describing is in any way incompatible with Austrian economics. That's the model I started with, and it's my primary model, today.

But we've had many decades since, trying other systems. I am not sure those were wise decisions, but trying to talk about them using the heuristics of the base system just doesn't work.

We frame houses out of prefab 2x4's. This is a modification of an older timber frame technique. The principals are the same, but the differences are big enough that trying to discuss truss design can't happen if one person is describing a king truss and another is picturing an attic truss. Gravity, live and dead loads, lumber choices are the same for both. With both models in mind, an intelligent discussion can be had in choosing one or the other. But if one is "right", and the other isn't, we can't really compare the two, and pick the best one for our purposes. The choice is made before considering both. Now I prefer the king truss. Esthetically it is far nicer. But it also costs more, is far more labor and materials expensive, doesn't support an attic, and makes hard to clean areas that attract spider webs. But we can't get to those points, if we are stuck at a king truss or attic truss is "right".

Starting from the economic model that Von Mises used, and applying it to what I am describing, works. Starting from Von Mises' conclusions, and applying them to my descriptions, doesn't. I am asking you to use what you know, not to skip to the conclusion reached before the experiment began.

BRUTE
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Re: Swiss vote to end fractional reserve banking

Post by BRUTE »

Riggerjack wrote:
Thu Sep 06, 2018 9:44 am
If capital is being invested that wouldn't be under a gold standard, this only leads to MISinvestment, if one believes that the gold standard is the RIGHT standard.
brute is not for a government-mandated gold standard. brute is for a completely free market in currencies. that might lead to a gold standard, or it might not.

the market-derived standard is the "right" standard in the sense that humans know best what they want, and Riggerjack or brute or the government imposing any standard on them will necessarily be a worse representation of their preferences.
Riggerjack wrote: [Gold] sucks, because in the short term, gold is volatile.

At the time someone is making a decision to buy or sell something, using fed dollars, they can just decide, based on price. We all know what a dollar is worth, that it is worth less this year than last, and it will be worth still less tomorrow.

But making that same buy sell decision using gold, one must factor in the relative price of gold. Is gold currently high? How's the economy doing overall? Will it be worth more tomorrow? Should I delay this purchase/sale until the value of gold changes?

Using gold is like using a foreign currency. Just an added level of uncertainty to each decision.
that is not inherent in gold though, but inherent in anything that isn't currently the default currency. it was the opposite when gold was the de-facto standard - using anything else was a hassle, and volatile, whereas using gold was easy and non-volatile.

the uncertainty is not at all removed by central banking, but by something being the dominant medium of exchange.

BRUTE
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Re: Swiss vote to end fractional reserve banking

Post by BRUTE »

Riggerjack wrote:
Thu Sep 06, 2018 1:38 pm
I am asking you to use what you know, not to skip to the conclusion reached before the experiment began.
that sounds nice and stuff, but Riggerjack is just wrong on so many points on this. brute reaches the conclusion because Riggerjack is saying many wrong things. sometimes, Von Mises is just correct, and insisting on that isn't misguided idealism, but attachment to logic and reason.

Riggerjack
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Re: Swiss vote to end fractional reserve banking

Post by Riggerjack »

that sounds nice and stuff, but Riggerjack is just wrong on so many points on this. brute reaches the conclusion because Riggerjack is saying many wrong things. sometimes, Von Mises is just correct, and insisting on that isn't misguided idealism, but attachment to logic and reason.
Could be. I am kinda hoping so. Maybe once I can agree with you on gold, we can work out where I am wrong. But first, please back this up:
it was the opposite when gold was the de-facto standard - using anything else was a hassle, and volatile, whereas using gold was easy and non-volatile.
In light of what I have said about short term volatility. If I am missing something, this seems to be where it would be.

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Mister Imperceptible
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Re: Swiss vote to end fractional reserve banking

Post by Mister Imperceptible »

Looks like gold was remarkably stable from 1792 to 1932:

http://onlygold.com/m/Prices/Prices200Years.asp

I am not religious about gold, but the price of gold seemed pretty stable before the Age of Fiat. It is only now that it is an alternative to the dollar that it is so volatile in the short-term. Indeed, I believe the US government manipulates the gold market to sour people on gold, to help maintain the (illusion of the) sovereignty of the dollar. Every time the price gets too high, I think they dump gold on the market.

How can anyone who studies the Austrians look at the debt bomb we are currently sitting on and not attribute that to central banking? There is no way we could get to this absurd extreme without the Fed. The central bankers are in bed with Wall Street. It’s a giant pyramid scheme and burns up our resources.

Someone mentioned FDR....I could probably get the Fed to loan me money to start a digging operation to the center of the Earth. When we are finished, we can just fill the hole back up, but hey, it will create jobs!

http://www.davidmcelroy.org/?p=2793

Bernanke’s eyes at 32seconds:

https://m.youtube.com/watch?v=iKYKLgzyF9o

:lol:

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