Swiss vote to end fractional reserve banking

[Mister Imperceptible]

If the Fed can’t stop the people from peopling, why bother having the Fed, if they only make things worse?

If the Fed is forcing me to buy overvalued securites and toxic mortgages, yeah, I don’t want a part of that, I would rather sit in gold and wait for something to be reasonably priced. There’s nothing wrong whatsoever with hoarding, I shouldn’t be obligated to buy the overvalued and repackaged toxic zombie securities. I’d hold gold until the Baby Boomers starve to death when they all try to sell at once. But forcing people into the market is like wanting to ban cash- it’s fascistic.

So am I an aristocrat for saving, for wanting to build savings that are a store of value of surplus earnings for future consumption? If that is my time preference, what is wrong with that?

One minute you aristocratically say that the herds blunder into disaster, the next you say that saving itself is aristocratic. So does being an aristocrat mean you save? Any peasant can save. Is being an aristocrat right or wrong? The sentiments you express seem contradictory. Does this- https://www.bloomberg.com/view/articles ... ream-isn-t
-seem right to you?

Here’s another contradictory fellow, whose established a school of interventionism and statism, yet had this to say:

“Lenin is said to have declared that the best way to destroy the Capitalist System was to debauch the currency. By a continuing process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens. There is no subtler, no surer means of overturning the existing basis of society than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which not one man in a million is able to diagnose.”
-John Maynard Keynes

It’s too bad everything he wrote encouraged the said debauching of currency and the perfidious wealth confiscation executed by the government.

Anyone is certainly entitled to their opinion, and not remain beholden to a foolish consistency, but rather than Ludwig Von Mises, I might suggest you change your avatar to this:

[Mister Imperceptible]

I don’t think debt is inherently bad. It’s neutral. It’s really whether the creditor is lending responsibly and the debtor is using the debt productively.

The problem is when debt becomes viewed as “money itself.” And if the primary means of paying back the loan becomes debauching the currency, that’s when you have a dishonest society.

Bad debts incurred because *wink wink*, “the Fed is prepared to take any action necessary to support the market,” that is the major problem. Trees must be allowed to die, lest the forest become overgrown and succumb to a fire.

The fact that those closest to the central bankers are siphoning away wealth from the middle and lower classes as a result of the Cantillon effect, is the problem. Unless, of course, the objective is to crush and demoralize people as part of population control. If that’s the argument, state that clearly, without obfuscating the issue by calling people who save Scrooge McDucks. But the central bankers don’t look very much like Nietzschean supermen to me. Looks more like they want borrow from the future and spend everything now, like a good group of Baby Boomers ought to.

[Mister Imperceptible]

https://edelweissjournal.com/pdfs/Edelw ... al-017.pdf

“Under today’s system of fractional reserve banking, all commercial banks are technically insolvent, since they would go bankrupt if everyone with the right to withdraw their money decided to do so at the same time. Fractional reserve banking is the reason why commercial banks are so vulnerable to bad news and economic downturns and so rely on central banks to be saved.”

[Mister Imperceptible]

More Tony Deden, this time from 2012, “Reflections on Doing the Right Thing.”

https://edelweissjournal.com/pdfs/Edelw ... al-004.pdf

[Mister Imperceptible]

You know what? How about all of them:

http://edelweissjournal.com/

[Riggerjack]

Anyone is certainly entitled to their opinion, and not remain beholden to a foolish consistency, but rather than Ludwig Von Mises, I might suggest you change your avatar to this:

I'm not as smart as he was, and certainly not as great a writer. Read his books, he's brilliant! His followers, not so much. But isn't that always the way?

I have no preference for savers or debtors. One can't have one without the other. My point is that it is very common for the rich to claim that their interests should be protected. I don't see any way that could be morally or economically true.

If you want something not influenced by Fed policy, simply invest outside the states, like everyone else.

You seem caught up in a worldview where stability is good, volatility and inflation, bad. Maybe you are right, but that application of morality to your view of economics is going to skew what you see, and limit the complexity you can perceive.

And that could be more dangerous to your savings than any Fed policy.

[7Wannabe5]

I just started reading "The Hour Between the Dog and Wolf: Risk Taking, Gut Feelings, and the Biology of Boom and Bust" by John Coates, which tells the story of a day on the trading floor when the Fed is rumored to take an action, from the perspective of what is going on at the level of biochemistry and physiology within the bodies of the traders. Very interesting to me, because it reminds me of how I used to feel at a big book sale or auction.

[Mister Imperceptible]

Well, I’m not rich. I come from a lower middle class family, and was the first from said family to attend college. I graduated with six figures of student debt, which I paid off last year after 8 years of very simple and humble living.

I suppose you disregarded the Bloomberg article I linked, which describes how a disproportionate amount of the “wealth” that has been created since 2008 has gone to the previously wealthy. Of course, not much real wealth has been generated at all, the Fed just played a financial engineering game to transfer wealth from the poor to the rich.

You are right, the rich are looking after their own interests, which I am going to hypothesize is not in any way good for the country. It’s just rent-seeking behavior, as “aspirational” types like myself with ability have been forced to play a cynical money-centric game, rather than do that which could be most beneficial to society. The malinvestment inherent in this distorted environment has convinced me that the market cannot tell me what job I can do that benefits society most, merely because it pays the most money, because as a result of centralized banking, the market makes no sense.

Of course, most are not as good at me at the cynical money-making game, so they are crushed by the Fed’s policies.

Regarding your suggestion to invest outside the US, that must be blatant trolling. Given the policies of the BOE and the BOJ are even more extreme.

Again, I’m not arguing against volatility in general, I’m arguing against centralized banking and fractional reserve banking, which as a result of the Cantillon effect (I will say it again and again) disproportionately benefits the parasitic vampire squid financial industry.

So again, unless the goal is to intentionally squeeze downward most everyone, and create and new aristocracy and a new peasantry, and discourage family formation itself, I say again that centralized banking is in no way intrinsically fair or beneficial to society.

I stated all of that fairly clearly so at this point I feel you are intentionally speaking past me.

[Riggerjack]

@ MI, I used to believe nearly all of what you are saying. I am pretty sure that the first political thread I was involved in here was "we're all Keynsians now", in which I was vociferously NOT Keynesian. And I am still not. I am sure it's still back there, if you would like to verify.

But I have stopped focusing on only the negative that the Fed supplies, and tried to come up with a preferable alternative. Taking into account both the benefits and detractors if each system.

I couldn't find one.

You seem to think we are in some kind of Battle for Truth, and that I am not playing fair. That isn't my intent. I am saying you have half of the information you seem to want, and rather than using it to light your way to the rest, you seem to be blinding yourself with it. I know I did.

Or I could be wrong. I have been wrong before.

[Mister Imperceptible]

I read Marx, to check my biases, and still disagree. I haven’t read Keynes, so I’ll get around to it.

I should say also that I do not absolve everyone who overindebts themselves. Often times they do so because of greed. Some people would not have been wiped out in the last recession if they gave themselves some margin of safety. Others were probably just trying to keep from being priced out of the market.

I cannot say whether or not it is a fair expectation that everyone should be well read in macroeconomics. Should the average Joe be obligated to understand a contrarian investment strategy when he sees house prices and stock prices running away from him in a bubble?

[BRUTE]

good point. brute hereby recommends Riggerjack change his avatar, so that poor old Ludwig can stop revolving in his grave.

Or I could be wrong. I have been wrong before.

yes. Riggerjack is wrong on this.

[Riggerjack]

Marx was brilliant at cataloging the failures of capitalism, but he had nothing better. His Solution was to free the World Spirit, by tearing it all down. He fails the first test of any economist. Never trust a guy who says he knows how the economy works, but can't pay his rent, and has to flee his creditors. Just saying.

As to Ludwig, he was famously critical. He once called Milton Friedman a communist to his face, for even discussing monetary policy. So when I found a picture of him smiling, with a thumbs up, I laughed out loud. I still find humor in it. Probably just my twisted funny bone, but there's something about the juxtaposition of the pic and the reputation that is still funny and endearing to me.

[BRUTE]

Marx ascribed the depravity of human existence to capitalism. his critique was as misguided as any other, and like all true socialists, he was never blue collar. the workers always need to be directed, comfortably, from above.

[suomalainen]

https://edelweissjournal.com/pdfs/Edelw ... al-017.pdf

“Under today’s system of fractional reserve banking, all commercial banks are technically insolvent, since they would go bankrupt if everyone with the right to withdraw their money decided to do so at the same time.”

I didn’t read the pdf so maybe the context would clarify, but I just wanted to point out that a liquidity insolvency is not the same thing as a balance sheet insolvency. Without the context that may (or may not) be provided in the pdf, this quote comes across as misleading at best.

[Riggerjack]

Well, my point was that the link went to someone who was doing what Marx did. Sum up all the Evil's of the world, and associate them with a despised system.

I don't disagree with any of the criticism of the Fed, advanced here. But I do believe many of the sins pointed out as failures of the Fed, are more accurately attributed to human nature or capitalism. But if one needs a bogey man, the Fed can be that for you.

That doesn't seem like a very good model to work with, financially, but identifying and calling out a malevolent force can be very emotionally satisfying.

[Mister Imperceptible]

If Marx is wrong and Mises is right, I think that’s a false equivalency.

If the problem is over-indebtedness and GDP growth assumption, I think it’s a little too tidy to just say “human nature inevitably leads to problems, and if it weren’t that, it would be something else.”

You could use that argument to nullify anything. Excessive debt is unqualifiedly bad, and cannot be dismissed. But we do.

That excessive over-indebtedness does not stop with economic policy. It’s also a cultural problem. Hence my insistence we are culturally and spiritually declining, even tho that sounds like religio-babble to some. It’s clear what must be done. We just do not have the will to do it.

[BRUTE]

Well, my point was that the link went to someone who was doing what Marx did. Sum up all the Evil's of the world, and associate them with a despised system.

I don't disagree with any of the criticism of the Fed, advanced here. But I do believe many of the sins pointed out as failures of the Fed, are more accurately attributed to human nature or capitalism. But if one needs a bogey man, the Fed can be that for you.

That doesn't seem like a very good model to work with, financially, but identifying and calling out a malevolent force can be very emotionally satisfying.

500 server error - ad hominem

[trfie]

I never argued for a gold standard, and do not believe that it should be implemented (that is, I do not believe it is the optimal solution, but I believe in anyone's ability to try it - the best currency will survive by self-selection in a free market), but it is far superior to the current system. I am not even sure how it can be conflated with the fiat money/Fed system.

In BRUTE'S home builder model, the mispricing of currency results in misallocations. But on a gold standard, a new gold find is inflationary, and a mine drying up, is deflationary. How is that not subject to the same mispricing of currency?

It is well documented that gold has maintained stable purchasing power for a couple thousand years. Just in the past, what 60 years, the USD has lost at least 95% of its value. Look at the German hyperinflation, when the currency lost 98% of its value in a few years. That is the government stealing from the populace [holding the currency]; the effect is no different than literal stealing. Where is the history of inflation/deflation with gold to which you refer? The price remains relatively constant (in real purchasing power) because as the demand for gold increases, more money is invested into mining, which is at a higher cost the more gold that has historically been mined, and when the price declines, fewer resources are invested there. So the increase in the supply is very constant due to market factors.

You mention the Fed system stimulating the economy through inflation. There is no stimulation of the economy. Whatever the currency is, even if there is 0% inflation, it still gets lent out to entrepreneurs, with interest. By artificially increasing the money supply, it encourages speculation. Look at the large government-caused increase in the money supply before the speculative mania of the 1920s and subsequent great depression. A growing economy is the result of productivity, not increasing the money supply. The industrial revolution took place without paper money.

To get an idea of what this can look like, look at a historical graph of the S&P500, denominated in gold. Or any fund, by any commodity. How would that lead to better investment?

This does not make sense. The S&P500 is volatile, so it will be volatile in no matter what it is denominated. But if you mean that gold has been volatile recently, it is because volatility is a function of liquidity. If gold were used as currency, the volatility would plummet.

And I am assuming you aren't thinking of gold ingots, but maybe gold coins? So now you have seniorage to pay for. And each coin will vary in value against other nation's currency just as the dollar does.

Currently, we have some serious tech going into counterfeit prevention of the dollar bills. How are you going to prevent tungsten filled coins, or ingots? Not a huge problem at present, because gold transactions are rare and thus careful. You would like to change that. How much overhead would go into counterfeit prevention?

This is a very easy problem to solve nowadays with blockchain, ie digital currency that represents gold, just as deposit slips historically began functioning as money instead of the gold that it represented, when it became common to store gold in warehouses.

You mention that all other systems seem to have similar drawbacks to the current fiat money +central bank system, but I do not see what any of your arguments against gold are?

[Riggerjack]

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?

[Hobbes]

I think the massive volatility in the value of bitcoin has more to do with people betting it'll be the future, rather than volatility being an inherent property of bitcoin. Bitcoin is, at its core, just a distributed time-stamping service (the block-chain) with a difficulty function controlling the rate of growth of new coins coming into being.
Moving onto trifie's 'goldcoin' (for lack of a better term): I'd suspect it wouldn't require the aforementioned difficulty system, as the rate of new coins would be determined by the amount of new gold, so his 'goldcoin' would be pretty close to a straight block-chain currency. So, in theory, it should be as volatile in value as the value of the gold underlying it, as it would serve the role of a ledger, recording which transactions occurred and when.

@trfie
Would your gold-backed 'goldcoin' be redeemable for gold (like a real gold deposit slip)?

As for what would, or would not, make a better currency, that's well into TL;DR (but knows it, and withholds opinion) territory for me