How the banks create money

[psionl0]

Evidently in antibank conspiracy fairy tale land, you're on the hook for your entire property when you pledge collateral for a loan.

A lot of third world nations are victims of this "antibank conspiracy fairy tale land".

Yes, third world countries like Narnia, Gondor, Rohan, and Sans Serif.

Don't forget some of the real countries like the Republic of Congo and Zambia (to name but two).

For a reality check, have a look at this IPS article:

"Vulture Funds" Prey on Poor Debtor Nations
By Eli Clifton

WASHINGTON, Aug 19, 2009 (IPS) - Fifty advocacy organisations are calling on the U.S. Congress to put a stop to investment funds which purchase heavily indebted countries' debt and jeopardise the impact of bilateral and multilateral debt cancellation to over 30 countries.

The groups - which include the NAACP, the Jubilee USA Network, TransAfrica Forum, the American Jewish World Service, the United Methodist Church and Africa Action –are seeking a stop to what they have dubbed "Very Unscrupulous Loan Transfers from Underprivileged countries to Rich, Exploitive Funds".

These so-called VULTURE funds purchase heavily indebted countries debt at pennies to the dollar and then "aggressively pursu(e) their claims through the seizure of assets, litigation and political pressure, seeking repayments that are far in excess of the amount that they paid for the debt," the groups say.

Further details at http://ipsnews.net/news.asp?idnews=48147

 

[webb5]

From your fictional story, I've learned that the chief banker was an idiot who ran off with a load of worthless shells.

In this story this chief banker took these shells that we call worthless to another island that thought it had value. Very much like our paper money.

I will repeat this for your ignorance. It must be stated here that money is only a tool; it is used as a means to exchange goods of value. Its value is only recognised by the accepted faith, the people have on money– without this, it is worthless. Money therefore has no real value.

 

[Mashuna]

Oh, I didn't realise the whole archipelago was on the shell standard. Weren't they the people that suffered from massive hyperinflation following the rain of clams in 1897? The subsequent conch wars just about finished them off.

 

[webb5]

I don't know. Do you think Frodo would have gone to Mordor if Gandalf had offered him a ride on an eagle?

Part of what makes this particular fairy tale so uncompelling as an argument is that it's so unrealistic. It sounds to me like the islanders got rooked by a slick-talking salesman from the other island who lied to them about what the effects of creating a modern banking system would be. There's no explanation of how a patently impossible consequence is supposed to fall out of this story -- we're just supposed to take his word for it that this is what happened on the other island.

As far as I can tell, this is just like "don't wear short skirts or God will send you to hell," only without the plausibility.

A bank lover like you will never understand.

You could relate this story to any country in the world. The slick talking salesmen here are the international bankers. They continue to sell modern banking to us as debt. Every country in the world is massively in debt. Some how economists around the world think that we can trade our selves out of debt. This is irrational thinking. Any way this story is not a fairy tale its a nightmare for many countries of the world. Be glad you are not living in a third world country wandering where your next meal will come from.

 

[Sceptic-PK]

Its value is only recognised by the accepted faith

Ie, just like everything else we put "value" on.

 

[marplots]

A bank lover like you will never understand.

You could relate this story to any country in the world. The slick talking salesmen here are the international bankers. They continue to sell modern banking to us as debt. Every country in the world is massively in debt. Some how economists around the world think that we can trade our selves out of debt. This is irrational thinking. Any way this story is not a fairy tale its a nightmare for many countries of the world. Be glad you are not living in a third world country wandering where your next meal will come from.

Here's a list of 'external debt' by country (although some of the figures are old) at CIA: https://www.cia.gov/library/publications/the-world-factbook/rankorder/2079rank.html

There are a few at the bottom at zero, but note the top on the list are not those nations you are worried about, but the U.S., U.K., Germany and France.

You should also note that the reasons countries take on foreign debt (when it isn't used for bribes) is to improve infrastructure to make money beyond the interest payments. This isn't always successful. And countries can and do default. I like the homespun flavor of the shells story, but it really is cartoonish. What, for instance, would happen if the banker who stole all the shells originally managed to sneak his hoard back into the island economy at the end of the story?

 

[webb5]

Here's a list of 'external debt' by country (although some of the figures are old) at CIA: https://www.cia.gov/library/publications/the-world-factbook/rankorder/2079rank.html

There are a few at the bottom at zero, but note the top on the list are not those nations you are worried about, but the U.S., U.K., Germany and France.

Yes the world is crippled with debt. The nations on the top of this list will go into third world status if uncontrollable debt created by the banks is not removed soon. I am concerned about world debt. Not sure why you think I do not care about nations on top of list.
You should also note that the reasons countries take on foreign debt (when it isn't used for bribes) is to improve infrastructure to make money beyond the interest payments. This isn't always successful. And countries can and do default.

This is what I am trying to get at. Why borrow money from international banks as foreign debt when you can create your own money to improve infrastructure.

Social Credit can release us from this bondage of everlasting debt. Using social credit, a country may create debt-free money on the basis of its real physical wealth such as oil, minerals and land, and on its ability to create new physical wealth in areas such as farming, building, and industry. Social credit then, when used wisely, can turn a debt-ridden nation into a vibrant wealthy nation free of debt. It is an essential tool of any nation.

I like the homespun flavor of the shells story, but it really is cartoonish. What, for instance, would happen if the banker who stole all the shells originally managed to sneak his hoard back into the island economy at the end of the story?

Inflation would proberly be the case. But I'm sure the natives here would
eat him alive when they find out.

 

[psionl0]

I like the homespun flavor of the shells story, but it really is cartoonish. What, for instance, would happen if the banker who stole all the shells originally managed to sneak his hoard back into the island economy at the end of the story?

The message here is that it is a mistake to view money as a "physical" substance.

I am reminded of a recent episode of The Waltons. One family was in a position to supply timber and another family had a car they wanted to get rid of. Because there was no "money" around, a trade was impossible. It's a classical example of what happens when we allow money rule over commerce.

And we want the banks to dictate who gets to trade?

 

[marplots]

This is what I am trying to get at. Why borrow money from international banks as foreign debt when you can create your own money to improve infrastructure.

Social Credit can release us from this bondage of everlasting debt. Using social credit, a country may create debt-free money on the basis of its real physical wealth such as oil, minerals and land, and on its ability to create new physical wealth in areas such as farming, building, and industry. Social credit then, when used wisely, can turn a debt-ridden nation into a vibrant wealthy nation free of debt. It is an essential tool of any nation.

This is true, except the countries we are worried about seem to want to interact with the larger world. Perhaps they yearn for those things that foreign currency can provide. You can model this yourself with the notion of "going off the grid" and living on a cash basis with money you generate from your own resources.

I may be wrong, but I think people tend to interact with a larger marketplace because they see opportunities to come out ahead. They take risks and make mistakes as well.

I am curious though. Do you see the current situation as unethical or perhaps criminal? I only ask because it seems to denigrate the smaller nations if we take the position that they were mere financial 'children' taken advantage of by unscrupulous international bankers. Aren't they a bit more intelligent and savvy than that?

If I had to lay blame, I think I would look hard at the governmental systems that allow bribery and fraud as a matter of course. It would help your island parable if there were a scheming, charismatic, popular leader who ended up with a fat bank account.

 

[The_Animus]

Yes. But since that's both the designed and the most likely end, this is hardly a problem.

Are you honestly telling me you believe uniform and unilateral buying occurs in the real world? That isn't even remotely the case on either a person to person level or on a national level. The sheer differences in wealth between individuals, the poverty that exists, and the amount of debt both individuals and nations have should disprove this notion utterly.

 

[drkitten]

Are you honestly telling me you believe uniform and unilateral buying occurs in the real world?

Well, uniform isn't necessary. If I buy twice as much fish as someone else, that doesn't hurt the economy.

And almost all buying is unilateral. I want fish, I buy fish. If someone else wants fish, they can buy it -- or not, if they don't like the price. It's very rare for me to buy fish only if someone else buys something else from me (the only time I really see this is with houses and contingent offers).

All that's really necessary for this to work is for people to buy what they need to create wealth. I need fish in order to make fish tacos. Other people need fish tacos because they need something to eat while weaving nets. The fisherman needs nets for his boat, so he can catch more fish and sell to me. We all get richer as we all add wealth to the process.

 

[webb5]

This is true, except the countries we are worried about seem to want to interact with the larger world. Perhaps they yearn for those things that foreign currency can provide. You can model this yourself with the notion of "going off the grid" and living on a cash basis with money you generate from your own resources.
I think these countries you are talking about are also stuck in the debt trap.
They are doing exactly what the larger richer nations are doing, trying o remove debt by trading with other nations. Of course this helps no one as everyone is deep in debt. The I.M.F and the world bank is not helping

I may be wrong, but I think people tend to interact with a larger marketplace because they see opportunities to come out ahead. They take risks and make mistakes as well.
These risks are forced on them. Debt tends to do this when you got no other options.

I am curious though. Do you see the current situation as unethical or perhaps criminal? I call it crimes against humanity. There are 24 thousand children dying every day globally from poverty. The world media is very silent on this.

I only ask because it seems to denigrate the smaller nations if we take the position that they were mere financial 'children' taken advantage of by unscrupulous international bankers. Aren't they a bit more intelligent and savvy than that?
The international bankers have just about got, every country in the world in unrepayable debt. They control the finance and thus control all the parliaments of the world. If we asked the avarage person on the street, if this was so they would give the negative. Aren't they a bit more intelligent and savy than that?

If I had to lay blame, I think I would look hard at the governmental systems that allow bribery and fraud as a matter of course.
Our democratic systems have continually been degraded for a long time. The media has not helped. People need to get involved again. Citizens Initiated Referendums is a process that would allow the voice of the people to be heard.

It would help your island parable if there were a scheming, charismatic, popular leader who ended up with a fat bank account.

possibly but I think the message is there

 

[Sceptic-PK]

You talk an overwhelming amount of nonsense. Pick up an economics textbook and stop wasting our time with your childish, poorly-written scribble.

 

[psionl0]

There are more economic theories than there are people. Any particular book you have in mind?

 

[Sceptic-PK]

 

[psionl0]

Looks too complicated for me

EDIT: found an online version of the book. It says nothing about the use of credit, fractional reserve banking or other ways that money can exist based on nothing but promises. Nor does it discuss the effect of charging interest on money.

 

[Sceptic-PK]

1. It was a joke.
2. That isn't an online version of the book.

 

[psionl0]

That tends to prove my point.
There are so many different books on economics that they have had to start recycling the titles.

 

[drkitten]

That tends to prove my point.
There are so many different books on economics that they have had to start recycling the titles.

There are also so many calculus books they have to recycle the titles. That doesn't give you license to make up equations at random and expect us to believe them.

 

[psionl0]

Calculus is something I happen to know something about. Anyhow, I think we agree on what fractional reserve banking is. The main difference is that I am not as in favour of it as you are.

EDIT: Look at that. I am now a "Thinker"! Now I can never be accused of BS anymore.