tag:blogger.com,1999:blog-1089082204850170942.post7141705040009705138..comments2024-03-21T12:52:08.166+11:00Comments on Freedom and Flourishing: Does fractional reserve banking have to be a scam?Winton Bateshttp://www.blogger.com/profile/07383561940886657594noreply@blogger.comBlogger6125tag:blogger.com,1999:blog-1089082204850170942.post-64688364400257234942012-04-18T11:50:27.969+10:002012-04-18T11:50:27.969+10:00Anon:
Excessive leverage can be a problem, but no...Anon: <br />Excessive leverage can be a problem, but not because debt is greater than equity. Banks get into trouble when debt outstanding is greater than asset values of borrowers and/or debt servicing obligations are greater than income available to service debt.<br /><br />It is confusing to view the banks as creating money from nowhere. The Reserve Bank has the capacity to do that, but the other banks are just financial intermediaries - providing a mechanism for funds to flow from savers to borrowers. <br /><br />The question of whether there has been excessive or insufficient money creation by central banks is quite distinct from the question of whether the legal framework in which financial intermediaries operate tends to encourage them to take excessive risks.Winton Bateshttps://www.blogger.com/profile/07383561940886657594noreply@blogger.comtag:blogger.com,1999:blog-1089082204850170942.post-83937129278994885772012-04-18T10:58:44.916+10:002012-04-18T10:58:44.916+10:00Looking at the debt based money system and fractio...Looking at the debt based money system and fractional reserves there is more debt than equity & it is in the hands of private banks that seem to have stretched the debt leverage too far to be ever paid back.<br />One solution for this is for government to nationalise private banks, so that securities used to provide deposits to private banks can be used directly for the taxpayer benifit without the over expansion, profit motive, & unsustainable leverage.<br />As the vast majority of deposits purchased by private banks are from government securities or directly from the depositing taxpayer,one must ask why should they pay a premium for thier wealth to be managed by private concerns who make profits from other people's money & assetts,that eventually end up in a profit frenzy ponzi scheme asking for bailouts from the victims of this scam. <br />If one reviews the reforms made by prime minister Ben Chiffley just after the last depression you will see he knew about this solution his comments in the Royal commision into banking state this plus his 1948 bank act set out how this can be done this act was passed by all sides of parliament here only to be knocked back by Englands Privy council on state issue grounds that could be rectified.<br />Avery good example of how fractional reserves work is given by the federal reserve bank of chicago explainging the source,& the expansion of deposits upon which interest is charged on all expansion of real deposit including money from nowhereAnonymousnoreply@blogger.comtag:blogger.com,1999:blog-1089082204850170942.post-52359675725260441842009-03-27T06:55:00.000+11:002009-03-27T06:55:00.000+11:00B&Q: I think the worm in the apple metaphor is...B&Q: I think the worm in the apple metaphor is appropriate. We need to think about how a natural evolutionary process would make the apple resistant to worms.Winton Bateshttps://www.blogger.com/profile/07383561940886657594noreply@blogger.comtag:blogger.com,1999:blog-1089082204850170942.post-46469399348240294832009-03-26T23:05:00.000+11:002009-03-26T23:05:00.000+11:00Quite an interestibng proposition Winton. Seems fe...Quite an interestibng proposition Winton. Seems feasible. Of course, the worm is in the debt based money system apple.Being and Quirkinesshttps://www.blogger.com/profile/07583685928768315045noreply@blogger.comtag:blogger.com,1999:blog-1089082204850170942.post-15685025480269382442009-03-22T17:32:00.000+11:002009-03-22T17:32:00.000+11:00JS: You might be right that conversion of deposits...JS: You might be right that conversion of deposits into equity would be a long process, but I don't see why it should be. As I see it the main issues that would need to be addressed are: clearly defining the event(s) that would trigger the conversion; and defining the equity entitlements of individual depositors. To do this all we would need to know would be the amount of an individual's deposit as a percentage of the total debts of the institution. Complications could arise with such things as hybrid securities, but it seems to me that it is just a matter of making a ruling at the outset as to whether this stuff is equity or debt.<BR/><BR/>I share some of your concerns about deposit insurance. I see this proposal as an alternative to such things as deposit insurance and guarantees to banks that they will not be allowed to fail.<BR/><BR/>As I see it what we need to avoid a financial shambles like we are experiencing at present is a process that will (1) require financial institutions to make up-front commitments to depositors as to what will happen if the institution is unable to meet its promise of repayment on demand, and (2)a way to enable the market to deal with the assets of troubled banks (that doesn't leave the banks in Zombie land or require taxpayers to pick up the tab for restructuring).Winton Bateshttps://www.blogger.com/profile/07383561940886657594noreply@blogger.comtag:blogger.com,1999:blog-1089082204850170942.post-16857942908012853522009-03-22T02:49:00.000+11:002009-03-22T02:49:00.000+11:00Converting deposits into equity would be, probably...Converting deposits into equity would be, probably, a long process where much money would be lost in the process (in expenses). another issue to look at would be the Federal backing of funds up to one hundred thousand. This allows banks to make careless decisions and the money, if needed from the Fed, would only cause higher inflation rather than protect a deposit.Sam Rothrockhttps://www.blogger.com/profile/10883995679322533007noreply@blogger.com