IMF's whacky far-out conspiraloon Government Issued Utility Money Plan

[camouflage]

http://www.telegraph.co.uk/finance/...-conjure-away-debt-and-dethrone-bankers.html#

The conjuring trick is to replace our system of private bank-created money -- roughly 97pc of the money supply -- with state-created money. We return to the historical norm, before Charles II placed control of the money supply in private hands with the English Free Coinage Act of 1666.
Specifically, it means an assault on "fractional reserve banking". If lenders are forced to put up 100pc reserve backing for deposits, they lose the exorbitant privilege of creating money out of thin air

I still reckon "thin-air" is underrated, some of humanities best ideas, notions and concepts have come out of or reside in "thin air"... but all that aside I've reckoned this the way forward for years! so what gives, why is the IMF suddenly into the idea *squints eyes with suspicion*

Got to be something about this idea that's wrong and bad that I hadn't previously noticed or considered...

 

[elbows]

Desperate means call for desperate measures.

But just because its an IMF research paper doesnt mean the IMF are behind the idea. We've reached a point where some people will think the unthinkable and want to have a long debate about it, but we are not at the point where such things stand a great chance of happening.

One of the terrible mistakes conspiraloons make is in assuming that certain sections of the elite will always be allowed to do absolutely anything they want, no matter the consequences for other sections of the elite. Whereas in fact certain interests will be ditched if they threaten a broader set of interests. We may see this play out in slow motion with the banking crisis, but its still a bit early to judge.

 

[elbows]

I havent read the research paper yet, but I will get round to it asap.

My initial reaction is that if w enter an era where growth is no longer our god, it is no longer unthinkable to ditch the present system for increasing money supply.

 

[gosub]

tbf Jazz has been going on about that white paper for months in other threads

 

[butchersapron]

tbf Jazz has been going on about that white paper for months in other threads

Has he?

 

[gosub]

Has he?

No it hasn't. There is only ever £1000 in circulation.

I don't really understand what you mean here. If you are saying that the banks can create new loans corresponding to the fraction of (demand) deposits that is not likely to be withdrawn, and get away with it then that is simply fractional-reserve banking.

If they are to treat the deposits as time-deposits, that means that they will not allow the original depositor to withdraw his money on demand. In which case, if the original depositor made a demand deposit, the bank is in dishonour; if he made a time-deposit, this is full-reserve banking.

It would certainly restrict high-street bank lending (money created as debt) and I say that would be a extremely good thing. There is no reason why we cannot create the money we need another and far better way.

IMF working paper supports full reserve banking

at least a month then

 

[butchersapron]

I believe that he said that someone else whose work he had tried to use had mentioned it - and he did this once. He didn't give any indication that he had read the thing never mind understood it.

 

[Hocus Eye.]

If this change was brought about, and it worked, it would only reduce future debts. Of itself were it possible, that would be a good thing. However it would not remove the existing debts. The change in banking laws could not be retrospective.

Also given that this is a proposal initially suggested for America, it would meet with massive opposition from American bankers and many others in the world of economics. It would be dismissed as 'Big Government' because of the new (or revived since 1666) role of only the State in creating money. Americans don't want their government involved in business.

 

[gosub]

Well I looked at coz of him, even pmd him not to bother pointing out there would be slack due to banks still being able to do some lending, and gave him the percentages.


Not pulling a pogo, more pointing out the telegraph is as up to date as its name implies

 

[Jazzz]

http://www.telegraph.co.uk/finance/...-conjure-away-debt-and-dethrone-bankers.html#

I still reckon "thin-air" is underrated, some of humanities best ideas, notions and concepts have come out of or reside in "thin air"... but all that aside I've reckoned this the way forward for years! so what gives, why is the IMF suddenly into the idea *squints eyes with suspicion*

Got to be something about this idea that's wrong and bad that I hadn't previously noticed or considered...

No, I think it's all good! Ending fractional reserve banking is most certainly the way forward. Possibly the only way forward.

Great to see it in the Telegraph.

 

[Jazzz]

Ben Dyson of Positive Money is on Radio 4 (that ultra-wacky radio station) coming up - 8.45pm

http://www.bbc.co.uk/programmes/b01ngmjr

 

[butchersapron]

No, I think it's all good! Ending fractional reserve banking is most certainly the way forward. Possibly the only way forward.

Great to see it in the Telegraph.

Have you read the report Jazzz?

 

[Jazzz]

Have you read the report Jazzz?

butchersapron, I have spent vast hours of time arguing the case for full-reserve banking, which is the plan promoted by the IMF paper which I had indeed linked to. You can have a look at the thread that my above post is taken from here. You made a few posts on that thread none of which seriously engaged the topic of fractional reserve banking, except one post to suggest that I was 'confused' when I had posted quite accurately.

If you have a genuine enquiry about full or fractional reserve banking, by all means ask away. I could not be happier than engaging. However, if the nature of your discourse is simply that of being awkward - which is what I suspect - then you can piss off.

 

[butchersapron]

An emphatic no you haven't read it then. Thanks.

 

[Blagsta]

Say bye bye to fee free bank accounts.

 

[Jazzz]

An emphatic no you haven't read it then. Thanks.

You may believe what you like. Now do piss off.

 

[butchersapron]

You may believe what you like. Now do piss off.

An even more empahtic no.

And we get a treatise and insight on your methodology as well

You may believe what you like.

 

[littlebabyjesus]

Half-way through the paper. This bit is questionable, I think, or at least needs further explanation:

Because additional bank deposits can only be created through additional
bank loans, sudden changes in the willingness of banks to extend credit must therefore not
only lead to credit booms or busts, but also to an instant excess or shortage of money, and
therefore of nominal aggregate demand.

The size of the money supply's relationship with aggregate demand is more complex than that, no?


Here, while I absolutely agree that banks have a vested interest in increasing debt - they're making more business for themselves - it still isn't the whole story. Demand for loans comes before the loan.

What would cease to exist however is the proliferation of credit created, at the almost exclusive initiative of private institutions, for the sole purpose of creating an adequate money supply that can easily be created debt-free.

This also appears to be a variant on equilibrium theory, stating with confidence that this new system will 'approach a new steady state'. I'm highly suspicious of any equilibrium theories, particularly ones that think governments can effectively control the money supply. That was monetarism's big failing. I have a strong suspicion that this system would lead to a horribly stagnating economy with no effective mechanisms for stimulating it. They say, rightly, that ' bank liabilities are money that can be created and destroyed at a moment’s notice', but there are strengths to such a situation as well as weaknesses.

I certainly agree with this, though, which is Steve Keen's position:

at all times, when banks ask for reserves, the central bank obliges. Reserves therefore impose no constraint. The deposit multiplier is simply, in the words of Kydland and Prescott (1990), a myth.

Chapter 2 is interesting. Their analysis of German hyperinflation and the role of private speculation is interesting - one of many examples of the way it is possible to make money by fucking up an economy. Short-selling is an inherently immoral practice, it seems to me. It's interesting analysis, but I am still unsure about their proposed solution, which appears to be based on some rather misplaced confidence. I'll read the rest later.

 

[Jazzz]

Say bye bye to fee free bank accounts.

And bye bye to bank bailouts, vast banking profits, vast house prices, and vast house rental prices.

 

[Blagsta]

And bye bye to bank bailouts, vast banking profits, vast house prices, and vast house rental prices.

Why was Northern Rock bailed out, Jazzz?

 

[littlebabyjesus]

Why was Northern Rock bailed out, Jazzz?

That has nothing to do with this proposal, tbf. 100% reserve banking means you can only lend someone £100 for 1 year if someone has deposited £100 for 1 year in your bank. The Northern Rock situation could never occur - there was a mismatch with Northern Rock between long-term loans and short-term borrowing from other banks. Tbh, that's what banks do - they lend long and borrow short. There's a chicken and egg problem here, though. I haven't finished the paper, though, and they might answer it.

 

[Blagsta]

That has nothing to do with this proposal, tbf. 100% reserve banking means you can only lend someone £100 for 1 year if someone has deposited £100 for 1 year in your bank. The Northern Rock situation could never occur - there was a mismatch with Northern Rock between long-term loans and short-term borrowing from other banks. Tbh, that's what banks do - they lend long and borrow short. There's a chicken and egg problem here, though. I haven't finished the paper, though, and they might answer it.

I was asking Jazzz, seeing as he claimed there would be no more bank bailouts under this scheme.

 

[littlebabyjesus]

I was asking Jazzz, seeing as he claimed there would be no more bank bailouts under this scheme.

Yes, and I was answering. The Northern Rock situation could not happen. Banks would no longer be able to lend long and borrow short, which is what Northern Rock did, and every bank does, and why they can potentially hit difficulties if the source of their borrowing short dries up, whether that source is individual depositors or other banks.

 

[camouflage]

Short-selling is an inherently immoral practice, it seems to me. It's interesting analysis, but I am still unsure about their proposed solution, which appears to be based on some rather misplaced confidence. I'll read the rest later.

You mention Steve Keane a lot, I don't think short-selling is inherently immoral though. You can put money on either side of a speculation, so in a way it's like saying the bottom half of an altimeter is inherently immoral, or even better it's like saying the 'tails' side of a coin is inherently immoral.

 

[Jazzz]

Radio 4 coming up http://www.bbc.co.uk/programmes/b01ngmjr

 

[Blagsta]

Yes, and I was answering. The Northern Rock situation could not happen. Banks would no longer be able to lend long and borrow short, which is what Northern Rock did, and every bank does, and why they can potentially hit difficulties if the source of their borrowing short dries up, whether that source is individual depositors or other banks.

In that case, say bye bye not only to fee free banking, but any kind of affordable loans at all. It'd be an utter disaster.

 

[littlebabyjesus]

You mention Steve Keane a lot, I don't think short-selling is inherently immoral though. You can put money on either side of a speculation, so in a way it's like saying the bottom half of an altimeter is inherently immoral, or even better it's like saying the 'tails' side of a coin is inherently immoral.

I think short-selling is immoral because it is backing failure, essentially.

I do mention Steve Keen a lot, I guess. I think he's very well worth reading.

 

[littlebabyjesus]

In that case, say bye bye not only to fee free banking, but any kind of affordable loans at all. It'd be an utter disaster.

I also suspect that it would be an utter disaster.

 

[littlebabyjesus]

He's totally ignoring the other side of money creation through debt - money destruction through the repayment of debt. There are far better analyses out there than this - surprised this chap has made it to the radio, tbh.

 

[Jazzz]

I was asking Jazzz, seeing as he claimed there would be no more bank bailouts under this scheme.

There would be no need to bailout a full-reserve bank that went bust, any more than there would be a need to bail out an ordinary business. Those who had demand deposits would have them back - as the bank would be obliged to have reserves to cover them. Those who had money invested in time deposits would lose out, retaining the fraction of the money left that was available.

As the bank was not creating any new money, there is no loss of money in the system if it did go bust. Also, note that a bank run cannot hurt a full-reserve bank.

Whereas if a fractional reserve bank goes bust it is catastrophic. As confidence in it vanishes, so does all the money it created vanish - which can lead to a chain reaction with the other banks, as massive amounts of money vanishes they can't get their loans repaid - hence further loss of confidence, which is all that is needed to start the next run.

The full-reserve situation is very ordinary and straightforward. The fractional-reserve is really utterly bonkers.