Quote: Original post by trzy

Quote: Original post by LessBread
Speaking of the Federal Reserve, here's look at an alternative approach: David Korten: “Agenda for a New Economy: From Phantom Wealth to Real Wealth”

Quote:
...
Now, the other piece that we need to deal with is the whole question of how we create money, which is not very much publicly discussed. But moving from the current system, where we essentially rely on banks to create money by lending it into existence, which creates all kinds of financial instability, and it also means that, in a sense, every economic transaction, we’re paying rent to the bank for the money, when it’s quite possible for government to spend the money into existence, as it is needed, to build a much more stable money supply. And that means that—you know, that lowers taxes.
...

Korten talks a lot about the importance of community but I'm not sure how he defines it. Communities are typically very localized. A community-oriented approach is great in that case, but if he's trying to define community as being something larger -- something on the national or international level -- then this is a recipe for disaster. If it's beyond the scope of what I can readily experience and empathize with, it's not part of my community, and that's the whole problem: society is a supra-communal entity, and community-oriented approaches are inadequate for managing anything but, well, actual communities.

I would hope that he defines community in his most recent book which I presume is where most of the ideas he discusses in the interview come from. I read his book "When Corporations Rule the World" back in the 1990's but I haven't read his other books. It seems to me he conceives of community as local. During the interview he covers a lot of interesting ground, but I found that paragraph particularly relevant to the topic at hand.

Quote: Original post by trzy
Near this quote about money, Korten talks about turning the banks into community-oriented organizations. Banks already exist in communities. Is he suggesting stripping banks of their national and international presence?

Earlier in the interview he speaks of nationalizing the depository banks, "spinning those banks off into community banks, in a sense restoring the unitary banking system that we had some decades ago, where the banks were organized and functioned as local financial institutions..." It seems to me that he's talking about decentralization in general and in particular rolling back the dismantling of Glass-Steagall. Consolidation in the banking industry has significantly reduced the number of available banks. It could be argued that this has led to the negative phenomenon tagged as "too big to fail".

Quote: Original post by trzy
A robust financial infrastructure is necessary to facilitate international business. Private organizations are now becoming truly multinational.

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But Lenovo went further than hiring international managers. “We are proud of our Chinese roots,” says Mr Yang, but “we no longer want to be positioned as a Chinese company. We want to be a truly global company.” So the firm has no headquarters; the meetings of its senior managers rotate among its bases around the world. Its development teams are made up of people in several centres around the world, often working together virtually. The firm’s global marketing department is in Bangalore.

Interesting article. Looking at the date of publication, I wonder how it would have been written a month later.

Quote: Original post by trzy
His remark about the government "spending money into existence" needs further elaboration. Printing money "as needed" doesn't strike me as a sound basis for a monetary system.

I agree that the idea needs more elaboration. I would hope he does that in his latest book. Bear in mind that he's talking about a radical reworking of the economic system. "And it requires a fundamentally different approach to the economy: evaluating economic performance by the things that we really want, in terms of human and natural well-being, rather than a system that is purely designed to increase financial returns to the already very wealthy." From the answer he gives to the question "What is phantom wealth?", it appears that he doesn't think our current monetary system has a sound basis either.

Quote: Original post by LessBread
It looks like Keynes hurts your rational choice conception of economics.

It looks like you have no clue about the subject matter other than what you google, and it shows. You'd likely never heard about Keynes animal spirits until i brought it up. There's a bit more to it than what your google-fu has revealed, keep trying.

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Yes, you're deluded. You said they had not yet started losing their savings, when in fact they have, courtesy of Capitalism's finest gambling establishments.

You state their savings was "destroyed", in the scheme of things they've only begun to diminish, the worst is yet to come. But congrats on miscontextuallizing yourself in order to try and be an internet tough guy.

Quote:
You missed the point entirely. Perhaps because I didn't highlight the relevant portions. the underlying problem began much earlier -- in the late 1970s, when median U.S. incomes began to stall. Because wages got hit then by the double-whammy of global competition and new technologies, the typical American family was able to maintain its living standard only if women went into the workforce in larger numbers, and later, only if everyone worked longer hours.

When even these coping mechanisms were exhausted, families went into debt -- a strategy that was viable as long as home values continued to rise. But when the housing bubble burst, families were no longer able to easily refinance and take out home-equity loans. The result: Americans no longer have the money to keep consuming. So much for weak dollar policy etc.

Of course you're still not getting it. I blame the fact that you have no meaningful ideas of your own on the subject and only parrot what you read when it lines up with your hazy view of "how it is."

I am fully conversant in english ad read your article. They miss the point, as do you.

Quote: Original post by Dreddnafious Maelstrom
Once again you missed the point. A dollar saved does not circulate through the economy and higher savings rates translate into fewer sales and lower revenue for struggling businesses. Meanwhile, your "do nothing" solutions are going to leave a lot of people homeless, in bread lines and in the morgue. Heckuva job!

A dollar saved is loaned out by the same bank that would be loaning it out anyway. The Keynesian fear of savings is moronic.

Quote:
If I wasn't dishing it out to you, then why were you crying about it? Meanwhile, it's glaringly obvious that only unthinking fanatics continue to chant the decades old tax cuts mantra long after tax cuts have failed to provide their promised results.

Who's crying? I pointed that out so the next time you cry foul on me for pointing out that you're an unrepentant cheerleader of a specific political party and tend only to parrot the dross you find that supports said parties agenda without adding any original thought to the matter you might think about the veracity of my claim, and your own little cyber-bully tactics.

Quote:
It's not that you disagree with me, it's that you're not well informed (you got that timing of the loss in savings completely wrong in order to assert an ideological prediction)

The fact is that you're completely lost on the subject and swallow wholesale anything you google that supports your predetermined prejudices. I didn't get the timing wrong, you got the scope wrong. You're relying on crap information peddled out by court jesters that turn out work that is equivalent to a political speech.

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and you're relying on the same old prescriptions that got us into this mess in the first place.

Pointing out your fallacies isn't the same as prescribing anything. Your attempting to label my viewpoint in some predetermined box so you can look up the talking points to refute it. I could write a BOT to generate the same content given enough time.

Quote:
Would you like me to concoct bullshit stories about cavemen instead?

No, I'd rather defer my personal reason and logically fellate anyone that's ever written on the subject so long as it challenges none of my preconceived prejudices. Because that's what passes for an informed and reasoned approach apparently.

Quote: Original post by Dreddnafious Maelstrom

Quote: Original post by Zahlman
Only if you had taxable income to begin with. If you don't have a job, you don't have income besides what the government gives you, which is presumably not itself taxed (since there would be no point to giving out extra and then taking some away, except to create more bureaucracy), which means you weren't paying taxes, which means your previous taxation of zero is reduced by X% to still zero, while you still don't have enough income to support yourself, because what the government is giving you isn't enough (unless this is the point you want to argue, in which case why didn't you just say so) to sustain food and shelter as a single parent.

What is so hard about this?

I am following what logically happens. I don't see you trying to do the same. I only see you repeating your economic policy talking points.

That's because you're either economically or ideologically ignorant of the topic. A person without a job doesn't need a check from the government, they need a job. Further, for that job to be sustainable they need to be producing wealth for their employer.

Ok, so show me how tax cuts lead to people becoming employed.

Quote: Original post by Dreddnafious Maelstrom

Quote: Original post by LessBread
It looks like Keynes hurts your rational choice conception of economics.

It looks like you have no clue about the subject matter other than what you google, and it shows. You'd likely never heard about Keynes animal spirits until i brought it up. There's a bit more to it than what your google-fu has revealed, keep trying.

In that case it would seem that I should ask you to clarify what Keynes was talking about, but you're not an impartial source of information about Keynesian economics, so there's no point in that.

Quote: Original post by Dreddnafious Maelstrom

Quote:
Yes, you're deluded. You said they had not yet started losing their savings, when in fact they have, courtesy of Capitalism's finest gambling establishments.

You state their savings was "destroyed", in the scheme of things they've only begun to diminish, the worst is yet to come. But congrats on miscontextuallizing yourself in order to try and be an internet tough guy.

$2 trillion is a lot of destruction.

Quote: Original post by Dreddnafious Maelstrom

Quote:
You missed the point entirely. Perhaps because I didn't highlight the relevant portions. the underlying problem began much earlier -- in the late 1970s, when median U.S. incomes began to stall. Because wages got hit then by the double-whammy of global competition and new technologies, the typical American family was able to maintain its living standard only if women went into the workforce in larger numbers, and later, only if everyone worked longer hours.

When even these coping mechanisms were exhausted, families went into debt -- a strategy that was viable as long as home values continued to rise. But when the housing bubble burst, families were no longer able to easily refinance and take out home-equity loans. The result: Americans no longer have the money to keep consuming. So much for weak dollar policy etc.

Of course you're still not getting it. I blame the fact that you have no meaningful ideas of your own on the subject and only parrot what you read when it lines up with your hazy view of "how it is."

I am fully conversant in english ad read your article. They miss the point, as do you.

I cited Reich's description of the trend of the last 35 years. The rest of the article wasn't relevant to my argument about wages. That you think it was is where you miss the point. If you think his description is inaccurate, fine, provide one that you think is accurate, otherwise, you've gotten lost shadow boxing a tangent.

Quote: Original post by Dreddnafious Maelstrom

Quote: Original post by LessBread
Once again you missed the point. A dollar saved does not circulate through the economy and higher savings rates translate into fewer sales and lower revenue for struggling businesses. Meanwhile, your "do nothing" solutions are going to leave a lot of people homeless, in bread lines and in the morgue. Heckuva job!

A dollar saved is loaned out by the same bank that would be loaning it out anyway. The Keynesian fear of savings is moronic.

The banks aren't lending right now. To pretend that they are is moronic.

Quote: Original post by Dreddnafious Maelstrom

Quote:
If I wasn't dishing it out to you, then why were you crying about it? Meanwhile, it's glaringly obvious that only unthinking fanatics continue to chant the decades old tax cuts mantra long after tax cuts have failed to provide their promised results.

Who's crying? I pointed that out so the next time you cry foul on me for pointing out that you're an unrepentant cheerleader of a specific political party and tend only to parrot the dross you find that supports said parties agenda without adding any original thought to the matter you might think about the veracity of my claim, and your own little cyber-bully tactics.

Who's crying? You were crying. And you trotted out the cheerleader attack (prematurely for that matter), long before I began ridicule the call for more tax cuts. Looking over my comments in this thread from the beginning, it's obvious your cheerleader attack has been flat out wrong. I've been harshing on Republicans and Conservatives, but I haven't been cheering Obama and the Democrats. They haven't done enough to cheer about yet. And now you're pretending to offer original thinking on the matter - even as you trot out the same old same old. It's hilarious actually.

Quote: Original post by Dreddnafious Maelstrom

Quote:
It's not that you disagree with me, it's that you're not well informed (you got that timing of the loss in savings completely wrong in order to assert an ideological prediction)

The fact is that you're completely lost on the subject and swallow wholesale anything you google that supports your predetermined prejudices. I didn't get the timing wrong, you got the scope wrong. You're relying on crap information peddled out by court jesters that turn out work that is equivalent to a political speech.

Actually, I leave most of the dreck that google turns up behind.

Quote: Original post by Dreddnafious Maelstrom

Quote:
and you're relying on the same old prescriptions that got us into this mess in the first place.

Pointing out your fallacies isn't the same as prescribing anything. Your attempting to label my viewpoint in some predetermined box so you can look up the talking points to refute it. I could write a BOT to generate the same content given enough time.

You haven't pointed out any fallacies, but you have made some ideologically based predictions and repeated the same old same old prescriptions for the economy.

Quote: Original post by Dreddnafious Maelstrom

Quote:
Would you like me to concoct bullshit stories about cavemen instead?

No, I'd rather defer my personal reason and logically fellate anyone that's ever written on the subject so long as it challenges none of my preconceived prejudices. Because that's what passes for an informed and reasoned approach apparently.

Suck away then, suck away fondly on your prejudices.

Quote: Original post by Zahlman
Ok, so show me how tax cuts lead to people becoming employed.

Tax cuts, actual tax cuts, and by this I mean a tax cut in coordination with a commensurate spending cut, increases disposable income. Disposable income enters the market in 2 ways, as spending, which creates demand for goods and services, and as savings, which business use as capital to satisfy demand.

Spending drives demand, increased demand requires increased production, increased production creates jobs, and not busy work jobs(digging a hole one day and filling it the next), but sustainable jobs that result in a product that the market has demanded.

That's the simple version.

The longer version:

Take your existing income,(assuming you weren't using your personal circumstances as an example), and add 20% to it. Assume for a moment that you're breaking dead even after all things considered. Not a dollar to spend after bills, food, etc. After your 20% "raise", you now have 20% of your prior income as disposable income. You can either bank it, in which case the bank will employ that money as capital to a productive enterprise, or spend the money, in which case the money enters the market as demand for goods and services.

In a market with a price based interest rate,(which we don't have, the Fed sets the rate artificially), the pay-off for savings fluctuates according to need. So when businesses are growing to satisfy demand, the bank needs lots of capital and interest rates rise. The response is that people tend to save more money because it's a decent use of their disposable income.

Once demand for capital is satisfied and the bank has the money it needs to loan for productive enterprise the rates go down. Production eclipses demand, prices fall, and a previous good you deferred purchasing seems very reasonably priced. The $100 you would have saved in the past because you got 10% interest on it, now you spend for some product because the money would only earn 1%, and the product is cheaper.

So the relationship is symbiotic. Anytime you make a purchase or put money in savings, think about what you would do with that money otherwise. This "otherwise" is called the "opportunity cost", and refers to the second most desirable use of your money.

When the opportunity cost of saving money gets low enough, people start spending. When the opportunity cost of spending gets high enough, people start saving.

To bring this back to the Federal Reserve, rather than allow the interest rate to be priced by the market the Fed loans money to banks at a set rate, and by controlling this rate they control the opportunity cost of spending and saving.

The actual mechanism as an example is say your personal bank borrows money from the Fed today(different country I realize). Inflation adjusted interest rate is around .5%(.005) in the amount of $10,000.

In a non commercial setting without exploiting any loopholes the bank can then turn around and loan $100,000 using the loan from the Fed as an asset to be leveraged. Exploiting loopholes this money could become $300,000 dollars just as easily.

So what is the cost of the money? In the $100,000 dollar scenario it is 1 tenth of 1 half of 1 percent. In the $300,000 dollar scenario it is 1 thirty third of 1 half of 1 percent.

With money this cheap, approaching free, you only have to be right on a very small portion of the loans you write to be profitable. Cheap money floods the market, supply of products skyrocket.

The opportunity cost of saving goes way up, because you get next to nothing for your savings. How can you compete with .5% interest versus the Fed? Further, money is cheap even for you, you can borrow money at an artificially low price and many do.

This has a multiplicative effect. Savings costs money, spending costs next to nothing. Human nature would rather have goods and services now than later(this is known as the time preference dynamic) So it results in demand rising. Why save when you can have now instead?

The entire mechanic creates an artificial price bubble. Prices are high because people are living beyond their means through cheap credit. The demand is artificial, and not sustainable. Cheap credit means that dollars are created at will, which devalues each previously existing dollar.

The ratio of money employed in productive ventures to money employed in non-productive ventures skews. Consumers responding to artificial market signals borrow money they can not pay back, and banks have an endless pot of gold from which to loan.

Wealth is a sum of productive venture, and wealth can be capitalized or consumed. Wealth generation requires the organization of capital in to a productive venture. So for every dollar printed a smaller portion of it is capitalized in a productive means. This makes every dollar holder poorer.

Bringing this back to your question, when you give someone money from the government, it comes from one of two places. They either print the money(which devalues each existing dollar in circulation by a proportional amount), or they tax the money, which is in effect removing money from a productive enterprise(you or me or the compnay down the street), and putting it in to a non-productive enterprise.(the person that needs a job)

Netting a wholesale loss for the population.

The challenge is to employ that person in a productive venture, accomplish that and his well being is sustainable, accomplish that and not only is he better off but everyone is richer for it.

Original post by Dreddnafious Maelstrom

Quote: Original post by Zahlman
The actual mechanism as an example is say your personal bank borrows money from the Fed today(different country I realize). Inflation adjusted interest rate is around .5%(.005) in the amount of $10,000.

In a non commercial setting without exploiting any loopholes the bank can then turn around and loan $100,000 using the loan from the Fed as an asset to be leveraged. Exploiting loopholes this money could become $300,000 dollars just as easily.

A single bank can only turn that $10,000 into $100,000 if the money loaned out is continuously redeposited with them, which is unlikely to happen. The banking system as a whole can, if the money is continously redeposited with other banks.

Quote: Original post by LessBread
In that case it would seem that I should ask you to clarify what Keynes was talking about, but you're not an impartial source of information about Keynesian economics, so there's no point in that.

I agree, I have no credibility with you as it regards Keynes. To attempt to bring it home, think about Smith's "Invisible Hand", which actually regards the concept of spontaneous order, which is now well understood in game theory.

"Animal Spirits" is Keynes' "Invisible Hand", except instead of referring to spontaneous order, he refers to the concept that at some point people will only swallow X amount of BS before they wise up to the scam.

Quote:
$2 trillion is a lot of destruction.

I agree, but it's just the precursor. If you consider me delusion then you must assume that the recent past is the worst of it?

Quote:
I cited Reich's description of the trend of the last 35 years. The rest of the article wasn't relevant to my argument about wages. That you think it was is where you miss the point. If you think his description is inaccurate, fine, provide one that you think is accurate, otherwise, you've gotten lost shadow boxing a tangent.

My point was that I'd much rather discuss the issue with you rather than a politicized editorial you drug up on the internet. What the author gets right is that real discretionary income has gone down. What he gets wrong is:

a) The cause-

I) Technological innovation creates productivity which increases wealth, not decreases it.

II) Global competition- Less productive ventures that are allowed to fail are replaced by more competitive ventures that results in more wealth productivity, which results in more wealth creation for everyone involved. Specialization and division of labor isn't debated even by the Keynes crowd. It just isn't intelligently applied because the philosophy lacks coherence. He's looking at a very very simplified version of supply and demand, and claiming that because the labor pool supply increased, the demand for labor decreased, which puts negative pressure on wages. I'll grant him the basic premise but only with the qualifier that government cartelization of industries reduces the flexibility of the labor market.



b) The symptoms-

I) Money accumulation at the top of the food chain is a result of pursuing the bubble policy. As money enters the market, those that receive the money spend it at the before market adjusted value, while those that receive it spend it at the post market adjusted value. This concentrates the money at the top of the inverted funnel.

II)"Rich people don't spend as much because they don't need as much" This is a logical fallacy as well. The people being made rich aren't producing anything to become so. The ratio of productively employed money to non-productively employed money is skewed. Again he misses the point. Dollars are setting around, I'll grant him that, but it is because of the bubble policy not in spite of it.

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The banks aren't lending right now. To pretend that they are is moronic.

The banks ARE lending to credit worthy companies and consumers, it's just that the pool of those people are much smaller, and they are handcuffed to price money at market rate because that would be "predatory" lending.

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Who's crying? You were crying. And you trotted out the cheerleader attack (prematurely for that matter), long before I began ridicule the call for more tax cuts. Looking over my comments in this thread from the beginning, it's obvious your cheerleader attack has been flat out wrong. I've been harshing on Republicans and Conservatives, but I haven't been cheering Obama and the Democrats. They haven't done enough to cheer about yet. And now you're pretending to offer original thinking on the matter - even as you trot out the same old same old. It's hilarious actually.

Quote: Congress passed Prohibition over Wilson's veto. Who's policy was it?

Why Lessbread, it was the "ebil" Republicans whom overturned the saintly Democrat Wilson's veto; how pertinent to the topic and thank you for bringing that up.

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Actually, I leave most of the dreck that google turns up behind.

I believe that. I'm not accusing you of being indiscriminate or ill-studied. I'm accusing you of substituting editorial for fact, and for appealing to authority where i do not sanction one.

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Suck away then, suck away fondly on your prejudices.

Obviously I was referring to you, but I'll leave it at that. The overall tone of my previous post was less civil than it perhaps should have been. I recall a time when you had a respectable amount of independence in your philosophy and I keep forgetting you've conceded reason for certainty.

Quote: Original post by Dreddnafious Maelstrom

Quote: Original post by Zahlman
The actual mechanism as an example is say your personal bank borrows money from the Fed today(different country I realize). Inflation adjusted interest rate is around .5%(.005) in the amount of $10,000.

In a non commercial setting without exploiting any loopholes the bank can then turn around and loan $100,000 using the loan from the Fed as an asset to be leveraged. Exploiting loopholes this money could become $300,000 dollars just as easily.

A single bank can only turn that $10,000 into $100,000 if the money loaned out is continuously redeposited with them, which is unlikely to happen. The banking system as a whole can, if the money is continously redeposited with other banks.

Link to Federal Reserve liability requirements

Quote:

Type of liability: More than $44.4 million
Percentage of liability: 10
Effective Date: 1-01-09

Quote: Original post by Dreddnafious Maelstrom

Quote: Original post by Dreddnafious Maelstrom

Quote: Original post by Zahlman
The actual mechanism as an example is say your personal bank borrows money from the Fed today(different country I realize). Inflation adjusted interest rate is around .5%(.005) in the amount of $10,000.

In a non commercial setting without exploiting any loopholes the bank can then turn around and loan $100,000 using the loan from the Fed as an asset to be leveraged. Exploiting loopholes this money could become $300,000 dollars just as easily.

A single bank can only turn that $10,000 into $100,000 if the money loaned out is continuously redeposited with them, which is unlikely to happen. The banking system as a whole can, if the money is continously redeposited with other banks.

Link to Federal Reserve liability requirements

Quote:

Type of liability: More than $44.4 million
Percentage of liability: 10
Effective Date: 1-01-09

Yes, banks are not required to hold full reserves for thier liabilities. This does not mean (regular) banks are allowed to just loan money they do not possess(you cant loan one person $100,000 if all you have is $10,000). You can loan someone $9000, and then if the person they give the money to redeposits it in your bank, you can loan out 90% of that, and so on, thus increasing the money supply. Consult the wikipedia article on fractional reserve banking, any book on banking or an acctual banker ;-).

Quote: Original post by laeuchli

Quote: Original post by Dreddnafious Maelstrom

Quote: Original post by Dreddnafious Maelstrom

Quote: Original post by Zahlman
The actual mechanism as an example is say your personal bank borrows money from the Fed today(different country I realize). Inflation adjusted interest rate is around .5%(.005) in the amount of $10,000.

In a non commercial setting without exploiting any loopholes the bank can then turn around and loan $100,000 using the loan from the Fed as an asset to be leveraged. Exploiting loopholes this money could become $300,000 dollars just as easily.

A single bank can only turn that $10,000 into $100,000 if the money loaned out is continuously redeposited with them, which is unlikely to happen. The banking system as a whole can, if the money is continously redeposited with other banks.

Link to Federal Reserve liability requirements

Quote:

Type of liability: More than $44.4 million
Percentage of liability: 10
Effective Date: 1-01-09

Yes, banks are not required to hold full reserves for thier liabilities. This does not mean (regular) banks are allowed to just loan money they do not possess(you cant loan one person $100,000 if all you have is $10,000). You can loan someone $9000, and then if the person they give the money to redeposits it in your bank, you can loan out 90% of that, and so on, thus increasing the money supply. Consult the wikipedia article on fractional reserve banking, any book on banking or an acctual banker ;-).

You're correct of course, but you're making a mechanical argument?

You're either debating that $10,000 isn't 10% of $100,000; or that we have no central bank? All banks clear at Fed rates, all banks inflate simultaneously

Unless I miss your point entirely, you're claiming that a bank with $100,000 in liabilities and $10,000 in assets is out of compliance?


edit** ahh, i see, you're quibbling with my verbage, "a single bank". I concede your point. I should have stated "banks" turn, instead of a single banks, and "can" is also pointless as almost all banks are leveraged to the max.

I didn't get in to the money multiplier forumla or any of that, but I don't believe your arguing the outcome just the verbage correct?