Banking and Conspiracies

[phildwyer]

No, sorry ADB. I've spoken to another that was a financial trader for years that had never even heard of fractional reserve banking. Just because you know what a bond looks like doesn't mean that you understand how the money supply is actually affected when they change hands, which it appears you don't. wikipedia gets it right - hardly surprising really.

Those who are employed in the financial world are actually the *least* well equipped to understand its workings ime. That is, they obviously understand the practicalities, but this very fact seems to blind them to the philosophical implications.

This is not a criticism of A Dashing Blade, btw. In fact I have a question for him: do you know Doug Henwood's book "Wall St.," and if so what is your opinion of it?

 

[Backatcha Bandit]

I love the way Jazzz thinks he can argue with experts based upon the shit he reads on the internet.

It's so funny.

Interesting comment, PK. Not interesting in content - somewhat devoid of that - but interesting in that it betrays a certain prevalent attitude regarding such seemingly 'complex' issues as those surrounding the origin and nature of 'money' in the modern world.

What this post clearly suggests is that you, PK, are quite content to leave any understanding of this particular issue quite firmly in the hands of those you consider 'experts'.

But is it really such a complicated mechanism as to defy understanding by a 'non-expert'?

What is there in the mechanism of usury and fractional reserve banking - or even 'economics' as a whole - that is really so difficult to grasp?

Of course, pretty much every profession has it's own language and terminology that appears unfamiliar to the layman. Medicine is one example that immediately springs to mind, along with many other fields of a technical nature.

I wouldn't be surprised if you knew what I meant were I to ask if you had, for instance, a 'grelko' about your person. People who had never had anything to do with stage lighting would most likely respond with a blank stare were I to ask them the same question. That doesn't mean they wouldn't be able to understand me if I'd asked for 'one of those double adapter things for the lights with the round pin 15 amp plugs on'.

Terminology of that type serves the purpose of making communication between peers more efficient, yet it also serves to obfuscate the meaning for the uninitiated. This has it's uses - if wishing to discuss the finer technical points of a job I'm on, we sometimes deliberately use obscure language, the meaning of which is known only to those 'in the trade', as a way of maintaining the impression of our technical competence.

Openly discussing a potential problem in 'plain language' might reveal what could be perceived as 'incompetence' to a client - even if it's something as simple as 'having forgotten to load something into the van'.

With the use of obscure terminology, we can discuss how we're going to bodge around the problem while the client remains unworried. Similarly, mechanics, electricians, plumbers, software engineers etc. all have terms which are not understood by the layman - occasionally used because if a client were to know exactly what they were talking about, the client might realise that they could perfectly well do the job themselves.

How much of the language of 'economics' is designed simply to obfuscate the meaning of relatively simple concepts?

How much of ADB's posts are actually disagreeing with the basic mechanism of money creation as described by Jazzz, and how much of it is nit-picking over terminology, whilst conveying the impression that it's all 'far too complicated' for any 'non-expert' to understand?

Why do you dismiss the whole subject as being beyond your understanding and content yourself with the interpretation as offered by 'experts', when you're perfectly capable of comprehending the mechanism and making your own judgements as to it's validity and appropriateness yourself?



The obfuscating language of 'economics' is no more than the curtain behind which the weedy little bloke sits, pulling the levers.

Perhaps I'm reading too much into your comment, as your only desire was to prance about waving your cock in Jazzz's face. If that was purely your intention, I can only offer my apologies. And pity.

 

[Backatcha Bandit]

Those who are employed in the financial world are actually the *least* well equipped to understand its workings ime. That is, they obviously understand the practicalities, but this very fact seems to blind them to the philosophical implications.

I'd argue that you'd probably have to be in order to be able to perform your function without leaping out of the window (as the most sincere form of self-criticism).

do you know Doug Henwood's book "Wall St.," and if so what is your opinion of it?

Funny you should mention it...

Since it's gone out of print, Doug's made it available for download, free.

http://www.leftbusinessobserver.com/WSDownload.html

 

[A Dashing Blade]

Those who are employed in the financial world are actually the *least* well equipped to understand its workings ime. That is, they obviously understand the practicalities, but this very fact seems to blind them to the philosophical implications.

Nothing there I'd disagree with tbh.
Will look at the pdf tomorrow (off to LCD Soundsytem tonite)

 

[A Dashing Blade]

. . .
How much of ADB's posts are actually disagreeing with the basic mechanism of money creation as described by Jazzz, and how much of it is nit-picking over terminology, whilst conveying the impression that it's all 'far too complicated' for any 'non-expert' to understand?
. . .

I sincerely hope I wasn't giving that impression and, hand on heart, that was not my intention. I was attempting to put in into simple language, in doing so, neccessarily made things simpler than they actually are.

However, I hope I have illustrated that using Wiki is far from a guru in this subject (and indeed many others).

 

[Backatcha Bandit]

I sincerely hope I wasn't giving that impression and, hand on heart, that was not my intention. I was attempting to put in into simple language, in doing so, necessarily made things simpler than they actually are.

However, I hope I have illustrated that using Wiki is far from a guru in this subject (and indeed many others).

I don't mean to imply that you are being deliberately obscure - I do genuinely appreciate your informative posts... however, if this:

At the short end of the curve yes but, therefore, (kind of) at a (relatively) day-to-day level. Long end G7 bond issuance has dried to a trickle over the last 5 years tho' there was, last week, a French 2040 index-linked OAT issued.

..is your idea of 'simple language', God help us if you decide to get 'technical'.

Fair point re: Wiki, tho. Doug Henwood's book is a good read - well, as far as systemic analysis of financial systems can be.

 

[Jonti]

.

 

[phildwyer]

Funny you should mention it...

Since it's gone out of print, Doug's made it available for download, free.

http://www.leftbusinessobserver.com/WSDownload.html

You're not him are you? If so PM me, you know me!

 

[Pete the Greek]

You're not him are you? If so PM me, you know me!

lazy sod, why don't you PM him?

 

[Jazzz]

ADB - Is there any statement I have made in our recent exchanges that you still claim to be flawed?

 

[Jazzz]

Wrt the secondary market, I don't see how, even if a central bank was one of these counterparties, that the money supply changes.

Simply put; by conjuring up the money to buy things with, the central bank will increase the money supply. Whatever the market is of little concern. As far as I am aware, government securities are the main purchase by which this is done, but a purchase of gold will also increase the money supply, say. The former is of course essentially a loan at interest to the government.

 

[Pete the Greek]

ADB - Is there any statement I have made in our recent exchanges that you still claim to be flawed?

do you ever envisage the day where you'll way up and think, "holy shit. I am wrong."

???

 

[Yossarian]

The single most successful revolutionary movement in history is Christianity, which brought down the most powerful empire the world has ever seen by changing consciousness, not by seizing state power.

Christianity didn’t bring down the Roman Empire. There were plenty of factors behind the decline and fall of Rome and Christianity was a minor one at best.

 

[A Dashing Blade]

Fair point re: Wiki, tho. Doug Henwood's book is a good read - well, as far as systemic analysis of financial systems can be.

Went thru the first chapter, it's 10 years old (so no mention of credit derivatives) and very US-centric

There's a couple of things I'd pick up on (eg his explanation of currency swap and where he uses the Wheat Option to illustrate hoW options) work but these are more than compensated for by the parts that are very well explained (correctly pointing out that shareholdees are at the bottom of the food chain in the event of bankruptsy for example).

 

[A Dashing Blade]

ADB - Is there any statement I have made in our recent exchanges that you still claim to be flawed?

Nothing is flawed per se if one accepts certain definitions, use other (more widely accepted in professional circles) definitions and these statements can become ambiguous and/or appear far to simplistic

 

[A Dashing Blade]

..is your idea of 'simple language', God help us if you decide to get 'technical'.

Yeah, apols for that.

<snip : can't put it into laymans terms in less that half a page so f**k it>

As an aside, and setting myself up for some obvious come-backs, the three uses of professional jargon are. . .

1) Bullshit the client
2) Find out how much the other guy really knows
3) It is a convenient professional shorthand.

 

[A Dashing Blade]

As far as I am aware, government securities are the main purchase by which this is done

I'd caveat by quibbling (note : NOT disagreeing, just quibbling!) with your use of the word "main" simply bacause of the plethora of derivatives available these days and the inter-relationships between bond, interest and fx markets.

 

[boskysquelch]

"caveat" is a noun.

 

[slaar]

That's refreshing to hear from an economist.

Would you go so far as to suggest that your views are prevalent amongst others in your profession?

I doubt it! I'm a development economist with a strong bent towards political economy, so most economists would see me as quite heretical. Which only goes to display how out of touch a lot of economics is with deeper philosophical issues as opposed to the mechanics of individual, rational utility maximisation.

 

[Jazzz]

Banking Quotes #5

okay, well now ADB seems to be happyish, let's have another quote.

This is from the third President of the United States, and the lead draughtsman of the Declaration of Independence. His biographer said that he could "calculate an eclipse, survey an estate, tie an artery, plan an edifice, try a cause, break a horse, dance a minuet, and play the violin."

I sincerely believe that banking establishments are more dangerous than standing armies, and that the principle of spending money to be paid by posterity, under the name of funding, is but swindling futurity on a large scale.

Thomas Jefferson 1743-1826

 

[exosculate]

okay, well now ADB seems to be happyish, let's have another quote.

This is from the third President of the United States, and the lead draughtsman of the Declaration of Independence. His biographer said that he could "calculate an eclipse, survey an estate, tie an artery, plan an edifice, try a cause, break a horse, dance a minuet, and play the violin."

Jazz, any chance of a quick summary of the main argument?

 

[Backatcha Bandit]

I see no argument here - just a growing consensus.

 

[exosculate]

I see no argument here - just a growing consensus.

Any chance of a quick summary of the growing consensus then?

 

[A Dashing Blade]

Any chance of a quick summary of the growing consensus then?

It's all smoke & mirrors.

 

[ZWord]

I dunno, Jazzz... it's not that difficult. Especially when you've been here before.

Here you go, fela fan:

'Money' - as we know it - is borrowed into existence by 'Government' in the form of 'Bonds' - promissory notes - 'sold' to a central bank for their face value, secured against future tax revenues.

These 'bonds' carry a premium - or charge in addition to their face value - generally referred to as their 'yield' or 'interest'.

OK. Lets assume for the purpose of demonstration that we are on an island with a population of 10 individuals in the 'economy' and one Bank(er).

For these 10 individuals to trade goods and services they need a 'medium of exchange', which will be supplied by the Bank - 'lent' onto the 'economy' - at a premium of 10% (to keep the figures simple).

The Bank lends each of our islanders £100, expecting upon maturity of the loan a return of £110 - that's the initial sum plus the 10% interest. So the Bank stands to make £100 on top of the £1000. With me so far?

OK. So where is that £100 going to come from? The Bank only lent £1000 'into existence'. How is the 10th individual going to find the £110 to pay back to the Bank? Because only £1000 is in 'circulation' within our island 'economy', what we can see here is the mechanism by which our islanders are forced into unnatural 'competition' with each other in order to repay the loan.

By it's very nature, a 'competition' will have a 'loser'. In this case, the 'loser' will be the 10th individual who cannot repay the loan as ther is only £10 left in the 'economy' to do so. 9 X £110 paid back by the 'winners' is £990.

So what options are open to our 'loser'?

Their only option is to either borrow more from the Bank, forfeit property (real wealth) or perhaps engage in some 'overseas adventure' to bring 'wealth' in from some outside 'loser' on another island.

This is the fundamental mechanism that underpins the 'debt based monetary system'. The need for 'growth' is systemic.

A political tool that by it's very nature will concentrate real wealth in the hands of those with at the expense of those without.

...And you can't say that there is 'No Alternative'. If a 'Government' is able to issue a promissory note to a central bank (at interest), there is no reason that they cannot issue the equivalent in debt free currency themselves.

-

'Debt based' currency is an insidious evil that permeates every aspect of our lives.

The simplest solution is to kill the loser.

 

[ZWord]

Oh yeah, I don't deny that it's a con-trick, but it's also one that everyone participates in and agrees works, as things like the direct lending phenomena show. .

Everyone Except those who don't participate in it, who probably don't agree that it works, - which is pretty much everyone whose bank balance is effectively zero, and lives off their wages. - and of course those who don't have any wages and do whatever they can to get by or starve. How many people is that ?

 

[ZWord]

(1) Debt is not a negative amount of money, it's a positive amount of money.

(.

I wish you could persuade my bank.

 

[ZWord]

Post 235 said something along the lines of:

-why don't governments issue money for free?

And that really is the $$$$$$$ question.

I know what an economist would probably say. -- Well it would cause inflation-

But I don't really trust economists, - I think they're professional apologists for capitalism, whether they know it or not.- and most of them don't - they just believe what they were taught. -

I visited londn a few months ago and read a paper called city news, while I was on a bus. The headline article was something along the lines of personal debt and individual bankruptcies reach all-time highs. Then I read the rest of the articles, and every single one reported how this company and that bank had just reported record profits. I thought there was a beautiful symmetry to the publication.

Going back to economists, - and the question of why they don't governments just issue money for free, - - Well the simplest answer is- they're not allowed to. But who makes the rules.? That is the mystery. Should you trust an economist. ? I say not. But the government disagrees. They disagree so strongly that they have put economists in charge of the bank of England, and made it independent. Recently, you may have noticed that the bank of England increased interest rates a couple of times. The knock on effect of this is that people's mortgage repayments increase as well, as the lending banks follow suit .

It was reported that the bank of England had raised interest rates, in response to fears of rising inflation, - that is- they raised interest rates to combat inflation. The reasoning here is fairly obscure, but- as I understand it, it is considered to be a law of economics that interest rates and inflation have an inverse relationship, - putting interest rates up is said to bring inflation down, and vice versa. - This has been found to be true empirically?? and the reasoning behind it is that increasing interest rates will encourage people to save and discourage people from borrowing, and so will decrease the amount of cash floating round the economy reducing demand and inflation. This "law of economics" is so widely believed that it's in fact the first thing you'll be taught on any economics course. (Incidentally - a similar line of reasoning probably underlies the idea that you can't issue new money for free. Doing so would cause inflation, - putting a price tag on it, means that in theory you've put a disincentive on borrowing it, and more importantly, - over all, if the money + the interest is paid back to the central bank in the long term, at five percent over ten years, then the amuont of money outside the central bank should remain roughly constant.)

But going back to the law of economics, - leaving aside questions of to what extent economic laws are like laws of physics, and indeed whether physical laws are unbreakable necessities or generalisations about observed data- leaving such questions aside, - well there is another view that could be taken of the situation, - if it were possible that economists could be wrong .

If interests rates rise and mortgage rates increase, then the effect could be, that all those who've bought property with borrowed money, and who let their property to someone else to live or work in, - well they may think, Hmmm my outgoings have increased but my income hasn't, so either I'm going to have to face having less disposable income, or else I'm going to have to increase my income, - I know, I'll put the rent up on my properties. (You know, in 1998-1999 I saw rooms advertised in Easton, Bristol for 35 a week) So you get a lot of people putting up the price of the rent on their properties, - and suddenly a whole bunch of other people have a problem that their regular outgoings seem to be rising substantially, - so what are they going to do about it- ask for higher wages, put up the price of a packet of rizlas, or a pint of milk. - If they can- they're going to find some way to ensure that the amount of disposable income they've got doesn't decrease, cause it's tight enough as it is.

But strangely, the possibility that increasing interest rates will actually increase inflation rather than control it, doesn't even get considered by experts.. You see, being economists, they already know that increasing interest rates lowers inflation, - it was rule no-1 on their course. So the newspapers and the TV parrot out the line, -the bank of england has raised interest rates amid growing fears about rising inflation.- And no-one questions it except idiots like me on the internet, who know nothing, and who no-one listens to anyway.

It was so much simpler in the old days, when there were whole new continents to exploit. You borrowed some money, you outfitted your ship, and you went off and traded with some indians, or stole their land, brought back the gold + the profit, and everyone was happy, and richer, and the problem of where the money would come from to pay the interest didn't arise, - it always came from some other economy, so it didn't really cause any problems, except for the indians, and they were just unfortunate, and didn't really matter anyway Now with a global economy, and a lack of space, the problem seems more acute to me.

Nowadays we have record levels of personal bankruptcy, apparently, . Well the money's got to come from somewhre, and you can't have winners without losers. Luckily, the losers are usually pretty stupid, and will believe that it's their fault.

 

[A Dashing Blade]

. . .
It was reported that the bank of England had raised interest rates, in response to fears of rising inflation, - that is- they raised interest rates to combat inflation. The reasoning here is fairly obscure, but- as I understand it, it is considered to be a law of economics that interest rates and inflation have an inverse relationship . . .

1) Inflation essentially caused by too much money chasing too few goods.
2) Interest is what it costs you to borrow money.
3) Put the price of something up and demand for that something goes down.

Whats not to understand?

 

[Barking_Mad]

Interesting thread, well done folks

Just in relation to some of this I've seen and read a bit about how the US Federal Income Tax is by the US constitution, illegal and came about after the US government handed over all its power to a group of private bankers - Rockerfeller etc...

Would tie in nicely with some of what's been said. Anyone know more about it than me?!