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critique of loon theories around banking/money creation/the federal reserve

This is me then is it? It's not Sihhi, it's me. Is it?

Actually, forget it. I'm not getting sucked in to Sihhiland and nor should you.

Leave these unfortunates to their obsessions.

This is a very good book on usury today. Has anyone here read it, or perhaps any other such book?

http://www.amazon.com/Predator-Nation-Corporate-Criminals-Corruption/dp/030795255X/ref=pd_cp_b_3

If you want 'to forget it' (?) why bring my username in and mess around with a posting username?
I find the post absurd and demeaning to the given that you believe an archaic concept as banking.

I've seen the film of the author of that book, it's irrelevant to conspiracist claims that a blob of "banks" control money willy-nilly creating it out of thin air and society. That's what the OP was after - a refutation of these conspiracist claims - in fact the refutation is all there in the first 3 pages of this thread.

Someone brought in antisemitism into this thread by quoting vile anti-banking anti-international finance hero Henry Ford. Ford's role in aiding the National Union of Social Justice via the Dearborn Independent is clear. The magazine and the radio broadcasts refer to its articles and claims, such as this one, same issue as the earlier article November 1938:
dearborn.jpg


Ford himself was not going to fully display all his beliefs against Jews openly lest it provoke a boycott or counteraction, so instead he took the option of the Dearborn Independent with deniability of output ('I don't write the articles'). In many ways Ford's Dearborn Independent is the key link in turning Coughlin from being just another zealous Catholic Canadian priest into a figure to aid populism - at first via Roosevelt in 1932, but then onto Huey Long and then his associate G L K Smith. (Coughlin reads the Dearborn Independent from when he is in Detroit itself from 1923-1926 and then from 1926 onwards in its out of town suburb of Royal Oak at which point he begins his weekly radio show).
Ford wrote a book Today and Tomorrow in 1926 ghosted by acolyte journalist Sam Crowther outlining his philosophy to supplement his autobiography, it drives home 'good industrial capitalism' and 'bad finance capitalism', simply stating that "certain hereditary groups" (no mention of who in particular) have been manipulating the world's gold and money supply for centuries and that this could lead to disaster in the future, or the weakening of America. (Ford he claimed he was right when the Wall Street Crash happened in 1929, and again when the Detroit banking panic of 1933 happened). Like his autobiography My Life and Work - which was a huge bestseller too - it is translated and distributed across the Western world - wittingly or unwittingly aiding, in small part, the intellectual climate for militant anti-finance capital populism in Europe.
The poster who introduced Ford was the one you immediately began to defend on this thread for some reason, no one forced you to start defending that poster or indeed to enter a thread explicitly for debunking - not promoting - conspiracism.
 
It also isn't really 'created out of thin air' in the way Jazzz claims it is anyway. It's only created on paper - if the banks don't have it in current accounts etc they can't pay it out - otherwise the very idea of a financial crisis makes no sense whatsoever - if these loans actually 'created' money in the way Jazzz claims they did there wouldn't be a black hole that required bailouts to fill (and even then not successfully).
Well no, it's not true that it is only created on paper.

The loans that create the money are created on computers by keystrokes.

"if the banks don't have it in current accounts etc they can't pay it out". I'm struggling to see where you are coming from. Are you saying that the only way money is created is cash (paper) and that banks must have the cash to correspond with a new loan? If so, well it's correct that they must have a least as much cash as the new loan: but this isn't a correspondence. For every £1 in cash reserves, the bank can lend out £30 or so. This is fractional reserve banking.

It's precisely because banks are creating money which isn't backed up by 100% cash reserves that bailouts might be necessary as they will go down whenever confidence in their magic trick vanishes (and there is a 'run').

With full-reserve banking, there is the complete elimination of bank runs, and bailouts too - if a bank fails, it's just like any other business going bust. You just let the bank go down.

I know you don't yet understand any of this. That's really okay. It is better to admit that than pretend otherwise.
 
He also mentions, I think in The Limits to Capital, that he accepts the validity of the Okishio theorem, which is IMO heavily flawed. It basically says that since labour saving tech also brings down the cost of fixed capital the organic composition doesn't actually rise (along with a load of maths that I don't understand). But IMO (and this is Kliman's take too) the problem with this is that the fixed capital was bought at the price it was back when it was purchased, not at the price it would cost when the most recent commodities were produced - it requires crisis to bring it down to a lower price (I know I'm being a bit lazy here conflating price and value but I'm a bit knackered and don't have time to make sure I get my terms right - think the general gist ought to be clear enough though).

The 'T' in TSSI is simple but incredibly important!

Kliman's first book 'Reclaiming Marx's Capital' deals with the theoretical side of all this stuff (and much more) in a very comprehensive and structured way while at the same time being a very easy read
 
Well yes, we keep those promises that it suits us to keep and break those that it suits us to break. And sometimes, a system of promises has been made that cannot all be kept. Personally, I'd like to see promises made to pensioners, the unemployed, children, etc kept first. All that money does in the end is represent a promise. But as I said, without others willing to be party to that promise, banks can't just create money on their own.
Seeing as we are completely reliant on new bank-created money to come in to sustain our money supply, it's not going to be hard to find people wanting bank loans.

The absolutely truth of the matter is that it's actually the person taking out the loan that creates the money. The loan agreement is a promissory note
 
Well no, it's not true that it is only created on paper.

The loans that create the money are created on computers by keystrokes.

"if the banks don't have it in current accounts etc they can't pay it out". I'm struggling to see where you are coming from. Are you saying that the only way money is created is cash (paper) and that banks must have the cash to correspond with a new loan? If so, well it's correct that they must have a least as much cash as the new loan: but this isn't a correspondence. For every £1 in cash reserves, the bank can lend out £30 or so. This is fractional reserve banking.

It's precisely because banks are creating money which isn't backed up by 100% cash reserves that bailouts might be necessary as they will go down whenever confidence in their magic trick vanishes (and there is a 'run').

With full-reserve banking, there is the complete elimination of bank runs, and bailouts too - if a bank fails, it's just like any other business going bust. You just let the bank go down.

I know you don't yet understand any of this. That's really okay. It is better to admit that than pretend otherwise.

I see where you're going wrong. Banks don't lend based on reserves. They keep reserves based on what is deposited (usually 10%) and loan the rest. You've got it back to front.

This
http://www.economics.utoronto.ca/jfloyd/modules/monc.html
explains it, including the difference between base money and the money supply. We can see that loans based on FRB expand the money supply, but not base money. We can also see that banks loan on what is deposited, they cannot loan otherwise.

You also appear to think that only cash counts as money. Cash is just one form of money.
 
The C
I see where you're going wrong. Banks don't lend based on reserves. They keep reserves based on what is deposited (usually 10%) and loan the rest. You've got it back to front.

This
http://www.economics.utoronto.ca/jfloyd/modules/monc.html
explains it, including the difference between base money and the money supply. We can see that loans based on FRB expand the money supply, but not base money. We can also see that banks loan on what is deposited, they cannot loan otherwise.

You also appear to think that only cash counts as money. Cash is just one form of money.

Yes, key point - and this is simply the money-form of value.
 
Yes, this is called circulation. In the same way that one £10 note can transact more than £10 worth of goods.
NO IT IS PRECISELY NOT 'CIRCULATION'.

In a thread a long time ago, love-detective suggested that what happens in banks is this:

Person A has £10 and lends it to B
B lends the £10 to C
C lends the £10 to D

etc, thus creating a chain of deposits and 'expansion of the credit supply'.

Which is really a misundestanding, because in this chain, no new money has been created. Why not? Because it's naturally 'full-reserve'. There is only £10 in circulation. Crucially, A cannot demand his £10 cash back from B at any time, because while it is lent out to D, B doesn't have it.

But with fractional-reserve take this scenario:

A lends £10 to Bank B
Bank B lends £10 to C

The situation is that A still has £10 in his account and can withdraw it at any time. In fact, the Bank has simply created £10 with the new loan to C. The bank can do with because only a few percentage of people at any time withdraw the cash in their accounts (demand deposits).

In fact it's more like:

A lends £1000 to Bank B
B lends £1000 to C
B lends £1000 to D
B lends £1000 to E
B lends £1000 to F

with the interest, it's a 'nice little earner'
 
NO IT IS PRECISELY NOT 'CIRCULATION'.

In a thread a long time ago, love-detective suggested that what happens in banks is this:

Person A has £10 and lends it to B
B lends the £10 to C
C lends the £10 to D

etc, thus creating a chain of deposits and 'expansion of the credit supply'.

Which is really a misundestanding, because in this chain, no new money has been created. Why not? Because it's naturally 'full-reserve'. There is only £10 in circulation. Crucially, A cannot demand his £10 cash back from B at any time, because while it is lent out to D, B doesn't have it.

But with fractional-reserve take this scenario:

A lends £10 to Bank B
Bank B lends £10 to C

The situation is that A still has £10 in his account and can withdraw it at any time. In fact, the Bank has simply created £10 with the new loan to C. The bank can do with because only a few percentage of people at any time withdraw the cash in their accounts (demand deposits).

In fact it's more like:

A lends £1000 to Bank B
B lends £1000 to C
B lends £1000 to D
B lends £1000 to E
B lends £1000 to F

with the interest, it's a 'nice little earner'

You're getting confused because you think that money is the only thing that counts. As butchers said above, money is just a form of value. It is the value that circulates, but changing form in my circulation example.
 
The 'T' in TSSI is simple but incredibly important!

Kliman's first book 'Reclaiming Marx's Capital' deals with the theoretical side of all this stuff (and much more) in a very comprehensive and structured way while at the same time being a very easy read

I have this on pdf if anyone's interested I'll stick it on the net somewhere - been meaning to read it for a while but I've not got around to it yet.
 
I see where you're going wrong. Banks don't lend based on reserves. They keep reserves based on what is deposited (usually 10%) and loan the rest. You've got it back to front.

This
http://www.economics.utoronto.ca/jfloyd/modules/monc.html
explains it, including the difference between base money and the money supply. We can see that loans based on FRB expand the money supply, but not base money. We can also see that banks loan on what is deposited, they cannot loan otherwise.
This is precisely the poor explanation in an economics textbook which is causing the ignorance. The key point to recognise, if you wish to model banks as loaning out deposits they receive, is that with fractional-reserve banking, the (demand) deposits ARE STILL THERE when they are subsequently loaned out! They can be transferred, they can be withdrawnin cash, they are there as ledger-entry money. The explanation points out that only a fraction of the deposit needs to be held back to make this work (because we are happy with 97% of our money existing as numbers in a bank account and not cash in our pockets, and just as digital money goes out from one bank, so it can be expected to come in from others).

Thus, each new loan creates new digital money in circulation. This is where most of our money comes from.

If there was full-reserve banking, you wouldn't need to hold any portion of the deposit back. The deposit would be a time deposit: it could be withdrawn when the loan was scheduled to be repaid.

When did you last go to a bank to withdraw your money to be told, "oh sorry, we can't do it, we loaned your money out"? Of course that doesn't happen!

You also appear to think that only cash counts as money. Cash is just one form of money.
I'm trying to explain that banks create the stuff!
 
25 pages of circle jerking, name calling, and bullying.

On both sides.


Yay Urbanz!
Fuck you.

Calling out anti-semites as anti-semites isn't bullying, and if you think it is you can fuck right off you liberal/clueless mug.

These people are scum and are infecting a lot of the wider anti-cuts movement (see Occupy), they are a problem and need to exposed for what they are.
 
This is precisely the poor explanation in an economics textbook which is causing the ignorance. The key point to recognise, if you wish to model banks as loaning out deposits they receive, is that with fractional-reserve banking, the deposits ARE STILL THERE when they are subsequently loaned out! They can be transferred, they can be withdrawnin cash, they are there as ledger-entry money. The explanation points out that only a fraction of the deposit needs to be held back to make this work (because we are happy with 97% of our money existing as numbers in a bank account and not cash in our pockets, and just as digital money goes out from one bank, so it can be expected to come in from others).

Yes, because this is because banks count on people not withdrawing all their money at the same time.

Thus, each new loan creates new digital money in circulation. This is where most of our money comes from.


You're right that circulation is key. Without that circulation, no value is transacted. ( think this is what lbj was getting at). The whole thing is moving, this is key - if it stops moving it doesn't mean anything, its only in this motion that any of it makes sense. This is what is hard to get your head round, we're used to thinking about things as static not dynamic.

If there was full-reserve banking, you wouldn't need to hold any portion of the deposit back. The deposit would be a time deposit: it could be withdrawn when the loan was scheduled to be repaid.

I'm not sure how this would work with on demand accounts.

I'm trying to explain that banks create the stuff!

Yes, they facilitate circulation. M-C-M. The change of value from money form to commodity form to money form.
 
This is precisely the poor explanation in an economics textbook which is causing the ignorance. The key point to recognise, if you wish to model banks as loaning out deposits they receive, is that with fractional-reserve banking, the deposits ARE STILL THERE when they are subsequently loaned out! They can be transferred, they can be withdrawn, they are there as ledger-entry money. The explanation points out that a fraction of the deposit needs to be held back to make this work (because we are happy with 97% of our money existing as numbers in a bank account and not cash in our pockets, and just as digital money goes out from one bank, so it can be expected to come in from others).

Thus, each new loan creates new digital money in circulation. This is where most of our money comes from.

If there was full-reserve banking, you wouldn't need to hold any portion of the deposit back. The deposit would be a time deposit: it could be withdrawn when the loan was scheduled to be repaid.

I'm trying to explain that banks create the stuff!

Un-ignored to reply to this ignorant bollocks. The money is still technically in the account, yes. Otherwise banks wouldn't be able to lend out deposits current account holders placed in them - which is one of the key functions of a bank. But it places into circulation the money that is showing in the account - it's not new money in that sense.

For example, you deposit £10 in the bank of Spiney. It's a new bank so yours is the only deposit I have - I don't have any other money. Blagsta asks me for a loan. At the point when I agree the loan 'new money' is created - but only in a in a very specific sense - and it's the use to mean something very specific and your lack of understanding of what that specific something is that's causing loons like you to say what you do. Because it exists only on a ledger - it's not real. Blagsta then withdraws the £10 I lent him. Now according to the ledger I still hold the £10 you deposited. But you try taking it out - you can't because I haven't actually got it - it only exists on the ledger. So to give it to you I have to borrow it from someone else.

This is why there was a financial crisis - for various reasons that I'm not going to go into because it would take too long to check the specifics, banks were unable to borrow the money to cover their liabilities. If they'd really been 'creating money out of thin air' this wouldn't be a problem - they'd just pay you the money they 'created' and everyone would be happy.
 
Un-ignored to reply to this ignorant bollocks. The money is still technically in the account, yes. Otherwise banks wouldn't be able to lend out deposits current account holders placed in them - which is one of the key functions of a bank. But it places into circulation the money that is showing in the account - it's not new money in that sense.

For example, you deposit £10 in the bank of Spiney. It's a new bank so yours is the only deposit I have - I don't have any other money. Blagsta asks me for a loan. At the point when I agree the loan 'new money' is created - but only in a in a very specific sense - and it's the use to mean something very specific and your lack of understanding of what that specific something is that's causing loons like you to say what you do. Because it exists only on a ledger - it's not real. Blagsta then withdraws the £10 I lent him. Now according to the ledger I still hold the £10 you deposited. But you try taking it out - you can't because I haven't actually got it - it only exists on the ledger. So to give it to you I have to borrow it from someone else.

This is why there was a financial crisis - for various reasons that I'm not going to go into because it would take too long to check the specifics, banks were unable to borrow the money to cover their liabilities. If they'd really been 'creating money out of thin air' this wouldn't be a problem - they'd just pay you the money they 'created' and everyone would be happy.

That's an excellent explanation.
 
If the banks were creating money at a rate of knots as jazzz and the ill-starred prof aver then presumably inflation would be running at a rather higher rate than it is.
 
Thanks sihhi - been really enjoying reading your posts lately.

Ford's Dearborn Independent is closed down in 1928, and there are wildly conflicting stories about what happens to his personal wealth where it is invested. Keeping to the religious principles etc Ford does not like ostentation or luxury spending, so there is almost certainly a place where his private wealth is channeled before the formation of the Ford Foundation. There are few records of Ford's decisions at the Dearborn Independent itself although he is often there at weekly editorial meetings - his word just outright accepted (Neil Baldwin's Henry Ford and the Jews the Mass Production of Hate is a key compiling source). The strong suspicion is that Ford gives assistance to FrCoughlin also in Detroit who is sort of campaigning back in 1926 on the idea of Protestant-Catholic unity (a KKK cross burning accompanies the opening of this new parish in a formerly all-Protestant suburb), defending prohibition, opposing gambling, very much on a scripture basis at this time.

There's a sort of breach in the middle when Roosevelt becomes a kind of Second Coming in 1932. At the time nearly everyone projects what they want to see onto him (not too dissimilar to aspects of the Obama crescendo in 2007-8). But when Roosevelt rescinds prohibition, doesn't form a Gold Standard etc, the radio talks return to praising Ford at the same time as praising Huey Long populist senator of Louisana. The NUSJ is still praising Ford in 1937. Although it is based in suburban Detroit, there is a not insignificant following in the South and the NUSJ tries to promote the Ford promise of harmony between labour and capital in the industrial sector, by picture articles such as the following extolling the virtues of a new Ford plant in otherwise peripheral Georgia in the Deep South - attacked by bankers (not capitalism naturally). Ford is again mythologised as a sensible engineer - the bedrock of the 'American way'. The call in the model factory villages is for a return to a more moral, religious way of life - a time when banking was local and not based around Wall Street, a time when all had jobs - maybe the 1880s. To facilitate this return Ford brings out a book of dance patterns authored by "Mr & Mrs Henry Ford" - they are based around white American traditional customs it is very popular - the unspoken opponent is ragtime and jazz.

popularise.jpg


(Note the bit about "the girls will be trained homemakers" - Ford is one of the most resistant to hire women workers as a result of religious as well as general social objections - and when he is finally forced to do so as a result of the second world war he does so on pay scales that are the most extreme of inequalities of all US vehicle producers - male workers receiving 85c an hour, women receiving under 50c for identical labour (provoking a male-majority-UAW-led strike, a collective agreement at Ford won in 1941 after a decade of struggle). Bizarrely, the power of Ford Co. propaganda has Ford as being a strong ally of women during the war because the Rosie the Riveter from the We Can Do It morale posters is exemplified in a real-life Ford female worker called Rose Will Monroe who appears in promo films for war bonds, which are shown before nearly every cinema screening of anything during the war. Once the war is over, most women are expelled from their Ford plant jobs and only in the 1970s does Ford in America begin hiring women workers on any scale.)

Ford often waxes lyrical about his early years as a true American - ie native born and farmer-born, in an attempt to make Ford the wholly American alternative to General Motors. General Motors is buying up foreign car firms to shift production there (fears of outsourcing, giving American jobs to foreigners) in a bad way, when Ford does it, it does it well in the good way - it's contradictory/nonsensical but that was the line.
Ford is also opposed, from religious roots, to the idea of giving credit to consumers, regarding it as a form of usury encouraging moral depletion in the giver (expecting later reward, encouraging idleness now) and the receiver (not sound household budgeting, one step away from gambling to meet loans). GM's monthly and quarterly payments reach more buyers meaning GM overtakes Ford at some point in the mid-1920s in outright sales numbers, so eventually Ford does allow credit and hire-purchase arrangements in the late 1920s and early 1930s. Eventually, Ford, even forms partnerships with belligerent nations in 1939 even though he claims he is opposed to war and is a pacifist on religious grounds, his private thoughts are fixated by the conspiracy idea of Jews in Wall Street and Congress encouraging US to go to war (a common strand in isolationist thought) - including the notorious use of prisoner-of-war labour in Nazi Germany beginining in 1940.

In other words virtually all of Ford's pronouncements are backward religious nonsense or hypocritical statements to bolster his brand - everything he says about banks and banking should be carefully used as an example of the dangers of conspiracism over banking, intentionally or unintentionally, giving vile figures like Ford leeway and popularity.
*** *** ***
This part is slightly off-topic, the article in the previous post above goes on to describe banking as the cause of recession in Germany, following basically the lines the Dearborn Independent took in the 1920s (which based around attacking the financiers for blocking American exports): "For fifteen years Germany was held in the Red Talons of Bolshevism. During that time its press was taken over, its commercial life was ruined. The currency of the nation was debased to ridiculous extremes. ... German international financiers, through the iniquitous levies of the Treaty of Versailles, were profiting on the miseries of the German people. The simple historical fact is that for fifteen years Germany was throttled by a combination of international Jewish financiers and Russian Communism, inflicted by Jews upon the nation. This is not anti-Semitism. Neither is it an extenuation of the vengeance now being wreaked by the German people on Jews. It is merely cited as another example in world history of the natural reaction which a regenerated people will exercise upon those they regard as their former persecutors. The present unfortunate conduct of the German government towards the Jews could have been obviated by the leaders of Jewry after the close of the World War. These giants of Judaism throughout the world applauded the rise of Bolshevism in Russia. They gloried in the murder of the Romanoffs. They remained silent during the years in which 17* [seventeen] million Christians were slaughtered by actual co-operation they encouraged the rape of Germany. The reaction was inevitable. Regardless of what America might think of Chancellor Hitler, he succeeded in unifying the German people. With this rebirth of national spirit came the desire to even the score with the Jews.
...
The significant fact in connection with conditions in Germany at present is the frantic attempt to enlist American sympathy for the Jews in
the Reich. It is out of all proportion to any previous effort to soften the heart of America in favor of an "oppressed minority.""...
The world did not resound with lamentations when the British forces, spurred on by international bankers, tied the leaders of the Sepoy mutiny in India to the mouths of canons and blew them to bits. More recently, there was little weeping and wailing when thousands
of Christian priests and nuns were slaughtered in Communist Spain. There has been no loud and vociferous protest against the exiling of
bishops, priests and nuns from Communist Mexico. The conclusion is inevitable that the turning on of American spigots of sympathy depends upon whose ox is being gored." (Social Justice, 12 Dec 1938, explaining the events of Kristallnacht the month before -the two days leaving every single German synagogue destroyed/damaged in some form, over 7,000 Jewish-linked shops destroyed, dozens of Jewish cemeteries attacked, 200/300/? killed, around 30,000 Jewish men arrested for detention camps, ostensibly in connection with the assassination of the one German ambassador)

* the number 17 million deaths under the Soviet Union where is its source- I don't know.
 
This is why there was a financial crisis - for various reasons that I'm not going to go into because it would take too long to check the specifics, banks were unable to borrow the money to cover their liabilities. If they'd really been 'creating money out of thin air' this wouldn't be a problem - they'd just pay you the money they 'created' and everyone would be happy.

Yes, and the US financial crisis emerges at least, in part, as a result of liabilities that other forms of capital (ie industrial and agricultural) in seeking out profitability in changing conditions - which means higher land and housing prices at the same time as stagnating real wages - have imposed (via intermediaries).
In short, it's not the financial sector alone causing the crisis - that looks like how it is (love detective's analogy of the sun moving round the earth while the earth stays still), if the financial sector hadn't lent out money the crisis would have come 20 years sooner, it's something to do with general decline in profitability, in rich people being able to stay sufficiently rich compared to those below them due to changes as a result of the whole system going forward. Not as eloquent, but that's my stab.
 
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