Total Posts:8|Showing Posts:1-8
Jump to topic:

Paul Krugman Explains the Financial Crisis

sadolite
Posts: 8,842
Add as Friend
Challenge to a Debate
Send a Message
10/26/2011 6:24:05 PM
Posted: 5 years ago
At 10/26/2011 6:42:36 AM, Kinesis wrote:
http://www.theonion.com...

I looked at his biography. Lots of academic opinion about economics. But has never owned or run a business or had to make a pay roll. What would he know about business and economics other than to give lip service. He only knows what some other acidemic economic professor that never owned a business or had to make a payroll regurgitated to him.
It's not your views that divide us, it's what you think my views should be that divides us.

If you think I will give up my rights and forsake social etiquette to make you "FEEL" better you are sadly mistaken

If liberal democrats would just stop shooting people gun violence would drop by 90%
RoyLatham
Posts: 4,488
Add as Friend
Challenge to a Debate
Send a Message
10/26/2011 6:46:32 PM
Posted: 5 years ago
The Onion is a joke site, which makes it ideal for Krugman. There is a reason why the government "investing in the economy" doesn't work: it takes money that could be used more productively and guarantees it is spent less productively. Japan spent a fortune on infrastructure after their real estate collapse in the early 90s. They bailed out all their banks. Their national debt is 140% of GDP, showing they provided much more stimulus than we have, with our debt being about 100% of GDP. It didn't work there and won't work here.
MyVoiceInYourHead
Posts: 260
Add as Friend
Challenge to a Debate
Send a Message
10/30/2011 11:23:29 AM
Posted: 5 years ago
The crisis IMO has been caused by the debt-based money system we currently have which has rammed up against the buffers. For decades the bulk of the money supply has been created as an interest-bearing debt to a bank or financial institution. In the UK 97% of our money supply has been created as debt (digital money on computers). Only 3% of our money is debt-free (i.e. cash). It's worse still in America.

Austerity will not work because it will kill growth.
Spending will not work because the government has to borrow money into existence to do this.

Monetary Reform is the only long-term solution.

Money reform actually means that 3 things need to happen:

1. Governments have to stop borrowing money into existence from private banks (e.g. the Fed). They can create their own money at 0% interest.
2. Private banks need to stop lending money they don't have - called fractional reserve lending / capital adequacy ratios.
3. There needs to be significantly more debt-free money in the system (i.e. cash or its electronic equivalent) and less debt-based money.
Most of the money in the US and Europe is tied up as an interest-bearing debt to a bank.

For the US see www.moneymasters.com

For the UK see www.positivemoney.org.uk
darkkermit
Posts: 11,204
Add as Friend
Challenge to a Debate
Send a Message
10/30/2011 3:11:01 PM
Posted: 5 years ago
At 10/30/2011 11:23:29 AM, MyVoiceInYourHead wrote:

1. Governments have to stop borrowing money into existence from private banks (e.g. the Fed). They can create their own money at 0% interest.

If you have 0% interest all the time, that would lead to an explosion of credit.

2. Private banks need to stop lending money they don't have - called fractional reserve lending / capital adequacy ratios.

It's more that they're increasing the money supply rather than lending money they don't have. Money isn't something there can be a "shortage" of since one can always print money.

3. There needs to be significantly more debt-free money in the system (i.e. cash or its electronic equivalent) and less debt-based money.

How do you plan to interject money into the system then? Debt isn't necessarily bad.
Open borders debate:
http://www.debate.org...
MyVoiceInYourHead
Posts: 260
Add as Friend
Challenge to a Debate
Send a Message
10/30/2011 3:36:12 PM
Posted: 5 years ago
At 10/30/2011 3:11:01 PM, darkkermit wrote:
At 10/30/2011 11:23:29 AM, MyVoiceInYourHead wrote:

1. Governments have to stop borrowing money into existence from private banks (e.g. the Fed). They can create their own money at 0% interest.

If you have 0% interest all the time, that would lead to an explosion of credit.

Not necessarily. Read my main post below. Banks would be genuinely competitive under the post-reform system. And there would be proper moral hazard.

2. Private banks need to stop lending money they don't have - called fractional reserve lending / capital adequacy ratios.

It's more that they're increasing the money supply rather than lending money they don't have. Money isn't something there can be a "shortage" of since one can always print money.

It's money created as debt. 97% of the UK money supply is as an interest-bearing debt to a financial institution (electronic money on computers).

3. There needs to be significantly more debt-free money in the system (i.e. cash or its electronic equivalent) and less debt-based money.

How do you plan to interject money into the system then? Debt isn't necessarily bad.

Newly created money would be used by the government according to it's democratically elected mandate They could either lower taxes, increase public pending or, best of all, make direct payments into citizens bank accounts and encourage them to pay off credit card debts and mortgages.

Some debt in an economy is fine, especially if its geared towards self-liquidating debt instead of consumptive debt. Unfortunately what we have in the western world at the moment is debt saturation.

My main post
The UK government would need to repeal legislation which gave private banks the ability to create new money out of thin air. Private banks would still remain private. The money supply would be nationalised and banks would effectively be account holders in the Bank of England and there would be massive penalties if they went into the red - which would be effectively counterfeiting and devaluing UK currency. An at arms length agency such as the Monetary Policy Committee would have control over the total money supply (to minimise political tinkering) which they could increase or decrease accordingly to set inflation or to take into account a rising population or even boost it during a national emergency to stimulate the economy.
The UK would probably need to renegociate the Maastricht Treaty (Article 101) & sever all ties with the Central World Banks, the Basel Accords and the credit ratings agencies who are behaving more and more like loan sharks. All they do is hold entire countries to ransom with economic WMDs. Look at the developing world - they are producing but not for themselves. They are producing just in order to service an unpayable debt whilst their children starve. Nice.

I believe the above would free up the nation's money supply which was previously hanging around not doing very much other than servicing a debt.
Banks keep saying they can make money (not surprising seeing as how they have a monopoly on our one and only means of exchange). So I say let them try to make it - on a level playing field, competing properly with other banks for good quality customers.

Customers would have 2 types of account.
(a) Transaction (current) account - guaranteed by the government, no risk.
(b) Investment (savings) account - not guaranteed, therefore slight risk.
Customers do not have to put all their eggs in one basket. They can spread their savings around.

Some have suggested a State Bank such as The Bank of North Dakota. The reason I would not want to go for a State run bank initially is that it would be politically better if someone got refused a loan on commercial grounds by a commercial bank rather than a government bureaucrat. There would be cries of "Totalitarianism" or "the Commies are here."

This money reform model should free up so much money that the demand for loans would fall because people would no longer be experiencing "poverty amidst plenty."
If there are temporarily insufficient funds for lending to viable businesses then interest rates would need to be raised to encourage savers to put more money in the banks coffers for lending. This could even be market controlled.
Banks could still be profitable if run responsibly but they would cease to be the multibillion dollar gambling casinos they are at present. They will also have to stop paying CEOs silly seven figure bonuses which have not been earned in the true sense of the word.

Other things to consider:
The banking system is a complicated, interconnected web of various financial packages - some low risk, some toxic. The way this is directed is by market forces and herd mentality. The whole thing is a bit like a nasty game of pass the parcel with a bomb inside and when the music stops, the person left holding the parcel is up a certain creek without a particular implement.
The system of full reserve acts to calm the system down (not stagnate it) and simplify it, which should smooth out some of the inefficiencies (how efficient is it to allow electronic money be passed around from computer to computer the way it was leading up to the credit crunch?) Full reserve also is a means by which the money supply can be stabilised during a transition period to debt-free money, so inflation can be controlled and set to 0%. Contrary to popular belief a 0% inflation rate wouldn't cause people to stop spending (people will always want to spend, some would say, too much!) - but it would benefit savers and debtors equally.
The UK has a money supply of 2 trillion pounds. Plenty of money for anyone to gain acces to - to earn it and spend it.

Lots of ideas in this post. I hope you can decipher them and get something useful from my ramblings. I hope I'm wrong. I hope the world economy magically heals itself in the next year or two but I think it's caught in a debt trap.
I think the current financial system is dead and if the government hadn't nailed it to the perch, it would be pushing up the daisies.
darkkermit
Posts: 11,204
Add as Friend
Challenge to a Debate
Send a Message
10/30/2011 4:16:40 PM
Posted: 5 years ago
So If you have interest free money, how do you plan on rationing it? If you have interest-free rate money, then the demand for it would likely cause massive inflation. After all, why wouldn't one take interest free money. So basically you only allow 'certain' people to have interest free money. A form of rationing.

Isn't that just major misallocation of resources? How is the national system to determine where the money should go to?
Open borders debate:
http://www.debate.org...
MyVoiceInYourHead
Posts: 260
Add as Friend
Challenge to a Debate
Send a Message
10/30/2011 5:00:33 PM
Posted: 5 years ago
At 10/30/2011 4:16:40 PM, darkkermit wrote:
So If you have interest free money, how do you plan on rationing it? If you have interest-free rate money, then the demand for it would likely cause massive inflation. After all, why wouldn't one take interest free money. So basically you only allow 'certain' people to have interest free money. A form of rationing.

Isn't that just major misallocation of resources? How is the national system to determine where the money should go to?

Debt-free money would be issued only during a transition period (estimated to be about 15 years for the UK because the national debt needs to be paid off slowly otherwise it would affect the value of pensions). It has been estimated that about 3000 pounds per citizen per year could be issued during this period whilst maintaining the quantity of total money in the system (so controlling inflation directly instead of indirectly through interest rates). Much of the debt-based money would be replaced by debt-free money over time - a bit like pressing the reset button on the economy! Personal debt could be paid off quicker (and it's at a higher interest rate too - 8% instead of 4% for the national debt).

Private banks would continue to recirculate existing money. They can make money from the markets but they can't create new money out of nothing by tapping numbers on a computer to make a loan. They can only loan money that is actually theirs. Check out the New Economics Foundation website or www.positivemoney.org.uk for their joint submission to the IBC.

It's time to put an end to our rent-a-currency!