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Global financial system implosion begins

If any banks do fuck off, (which I very much doubt), it'll be the investment shysters. I'm sure that those retail/corp banks remaining would continue with their fractional reserve money creation.
Of course but alas the fractional reserve £ created (and destroyed) by investment shysters are pretty similar to the £ created by the retail banks.

The flipside to money creation is money destruction; the banking system destroys stupendous sums of money every day as existing loans are repaid. If this money being destroyed is not countered by new loans (money creation), then there's a 'credit crunch'. Like if you are having a bath with no plug, you're going to need to keep the taps running.

As long as we have fractional reserve banking this is a poison we are dependent on.
 
Of course but alas the fractional reserve £ created (and destroyed) by investment shysters are pretty similar to the £ created by the retail banks.
no it's not, financial institutions mostly deal with each other in real money from their bank of england settlement accounts, they can't simply magic up the money to pay to each other in the same way they can to you or me.

The flipside to money creation is money destruction; the banking system destroys stupendous sums of money every day as existing loans are repaid. If this money being destroyed is not countered by new loans (money creation), then there's a 'credit crunch'. Like if you are having a bath with no plug, you're going to need to keep the taps running.

As long as we have fractional reserve banking this is a poison we are dependent on.
that's also complete bollocks.

The credit crunch occurred because of the lack of hard reserve currency within the banking system for the banks to settle their interbank accounts with, which in some ways was related to the levels of credit (loans) they had created, but the other way around to the way you've got it.

You've picked up the stick, but are currently holding it by the shitty end.
 
no it's not, financial institutions mostly deal with each other in real money from their bank of england settlement accounts, they can't simply magic up the money to pay to each other in the same way they can to you or me.
This is a non-sequitur. What you say is entirely true, but it has no bearing on my observation.
that's also complete bollocks.

The credit crunch occurred because of the lack of hard reserve currency within the banking system for the banks to settle their interbank accounts with, which in some ways was related to the levels of credit (loans) they had created, but the other way around to the way you've got it.
1) I didn't say there's only one antagonist to provoke a credit crunch; just that a credit crunch will occur when there's a significant drop off in banks making new loans.

2) What you are explaining is the fundamental fraud of fractional reserve banking. The money isn't there. Any bank will go bust with a run on it. If and when the bubble bursts that's what happens.
 
How the bubble bursts has an unpredictable nature: if it was generally understood what was to happen, it would already have happened.
 
looking for a word that rhymes with cruise and also booze. Any help? I can't think why a mention of fractional reserve banking might make start to look for said rhyme but by golly it has
 
I've watched the same youtube videos as you have I think squirrelp but that was a while ago, in the years since have come to understand that maybe the global financial system is not quite as simple as an evil magic trick that the fat cartoon characters with top hats on and big noses don't want you to know about.
 
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looking for a word that rhymes with cruise and also booze. Any help? I can't think why a mention of fractional reserve banking might make start to look for said rhyme but by golly it has
tbf, it was me what raised the term in the first place. I hope correctly.
 
looking for a word that rhymes with cruise and also booze. Any help? I can't think why a mention of fractional reserve banking might make start to look for said rhyme but by golly it has
Conflation of anti-zionism with anti-semitism is lazy enough intellectually.

Conflation of monetary reform with anti-semitism is just nonsensical
 
Conflation of anti-zionism with anti-semitism is lazy enough intellectually.

Conflation of monetary reform with anti-semitism is just nonsensical

In principle, yes. In reality the crossover between anti Semitic conspiracy theorists and fractional reserve banking obsessives is quite high, for fairly obvious reasons, as the anti Semite sees frb as part of the global banking conspiracy those Jews are pulling on us.

On those terms it's not nonsensical to conflate the two, and with this, the fotl stuff, Orlando/Paris conspiracy theory, you are swimming in that same pond, you must see the racism, and/or choose to ignore it. It's always there, usually just one or two clicks away if not right on the surface.
 
Mate questioning the nature of fractional reserve banking is featured on radio 4 these days. This is the main website of the frb 'obsessives' www.positivemoney.org

I think the simplest way I can put it is this.

If we rely on private banks to create money, in the form of loans to us, then it is mathematically certain that, at any time, we will owe, as a society, more money to the private banks than we have.

It doesn't matter how hard we work.

It can be no other way. All the money we have to play with has been loaned to us, and we owe it back with interest.

And that's why we never have enough of the stuff. It's literally impossible.
Every man, woman, and child in the country could work 100 hours a week and it would do nothing to get us out of it, as a society.

But if we create our money ourselves, then that's not true at all. It's mathematically certain that we would have more money than we owed to the banks - indeed the role of banks in society would diminish hugely. We often wouldn't need their loans because we'd already have the money.

Call me crazy but I'd rather have the latter
 
The worst fractional reserve-obsessed dribbling loons are those that dont even understand what money is or what it is for - ie those who think the problem is that more money keeps being creating, and start parping on about fucking tally sticks etc. They havent a clue that money is more like the oil in an engine and if the engine gets bigger you need more oil.

You clearly dont fall into that camp so any criticism of your stance is going to involved more nuanced detail and I've no time to study and absorb right now.
 
Mate questioning the nature of fractional reserve banking is featured on radio 4 these days. This is the main website of the frb 'obsessives' www.positivemoney.org

I think the simplest way I can put it is this.

If we rely on private banks to create money, in the form of loans to us, then it is mathematically certain that, at any time, we will owe, as a society, more money to the private banks than we have.

It doesn't matter how hard we work.

It can be no other way. All the money we have to play with has been loaned to us, and we owe it back with interest.

And that's why we never have enough of the stuff. It's literally impossible.
Every man, woman, and child in the country could work 100 hours a week and it would do nothing to get us out of it, as a society.

But if we create our money ourselves, then that's not true at all. It's mathematically certain that we would have more money than we owed to the banks - indeed the role of banks in society would diminish hugely. We often wouldn't need their loans because we'd already have the money.

Call me crazy but I'd rather have the latter
This mate of yours, which r4 programme is he on?
 
As long as we are reliant on private bank-created money, which 97% of our money is, it probably is an issue if they upped and left. If we rediscover how to create our own credit, then we wouldn't need the banks anymore to drive our economy and most of their operations would vanish.

But we have to work that out though.

I dont think thats the reason concerns get expressed about banks moving their operations away from the UK. I dont see why changing the location of some large offices changes the fractional reserve & credit picture directly?

Rather I am under the impression that the concerns are more like what gets stated in the mainstream press - large employer whose activities and profits makes up a notable chunk of uk economic activity.

I tend to think of much of this sort of banking as being the UK's latest way to 'take their cut' from economic activities performed elsewhere. Just a modern, 'legitimised' version of 'Mr ten percent'.
 
They havent a clue that money is more like the oil in an engine and if the engine gets bigger you need more oil.
Define "gets bigger".

I think you'll find you've just suggested that, if you have more oil, you need a bigger engine. Which is true, but isn't a rebuttal of the criticism of fractional reserve based money systems.
 
Define "gets bigger".

I think you'll find you've just suggested that, if you have more oil, you need a bigger engine.

Not to be a pedant, but saying a bigger engine requires more oil does not imply that having more oil requires a bigger engine. Maybe more barrels to store the oil, but certainly not an engine to use it.
 
Not to be a pedant, but saying a bigger engine requires more oil does not imply that having more oil requires a bigger engine. Maybe more barrels to store the oil, but certainly not an engine to use it.
Nope. In his analogy, he's overlooked the fact that the abstract financial system is an emergent property of the physical one, not (as commonly misunderstood) the other way round.

Analogies are almost always a bad idea in these discussions as you invariably end up in a mad conversation about the analogy that has nothing to do with the system you are attempting to discuss.
 
Nope. In his analogy, he's overlooked the fact that the abstract financial system is an emergent property of the physical one, not (as commonly misunderstood) the other way round.

I'm not really sure I understand how this claim, whether it is true or not, invalidates the idea that money is in some sense lubricating the economic system. Maybe you could expand?

Analogies are almost always a bad idea in these discussions as you invariably end up in a mad conversation about the analogy that has nothing to do with the system you are attempting to discuss.

Can you explain to me in concrete terms what 'emergence' is without resorting to analogies yourself?
 
I dont think thats the reason concerns get expressed about banks moving their operations away from the UK. I dont see why changing the location of some large offices changes the fractional reserve & credit picture directly?
You might be right, I don't know if there's a direct effect (i.e. investment banks moving = less loans made to the UK from those banks) but certainly the economy is this very unstable thing (due to our monetary system), and anything that produces a 'lack of confidence' can lead to less such investment. It's pretty crazy. If you built an aeroplane and said, yes it can fly really well, but if you stop believing it can fly, it's going to crash... well that's kind of our economic system.
 
You might be right, I don't know if there's a direct effect (i.e. investment banks moving = less loans made to the UK from those banks) but certainly the economy is this very unstable thing (due to our monetary system), and anything that produces a 'lack of confidence' can lead to less such investment. It's pretty crazy. If you built an aeroplane and said, yes it can fly really well, but if you stop believing it can fly, it's going to crash... well that's kind of our economic system.
The plane crashes if the exact right mix of fuel and air aren't constantly fed to the engines, or the pilot doesn't keep the flaps trimmed exactly how they should be, the speed isn't kept up right etc etc then the plane stops flying along smoothly and plummets to the ground, causing panic in both the passengers and crew, which makes the situation and chances of survival worse.

Same applies to the economy.
 
The plane crashes if the exact right mix of fuel and air aren't constantly fed to the engines, or the pilot doesn't keep the flaps trimmed exactly how they should be, the speed isn't kept up right etc etc then the plane stops flying along smoothly and plummets to the ground, causing panic in both the passengers and crew, which makes the situation and chances of survival worse.

Same applies to the economy.

Nah, airline goes bust coz they've had two crashes so people would rather not risk it.
 
Cometh the hour, cometh the cliché. In the case of Wolfgang Streeck, an influential German sociologist who is emeritus director of the Max Planck Institute in Cologne, that cliché is “the end of capitalism”. Countless intellectuals, including Karl Marx, have forecast the imminent or at least inevitable end of capitalism. Capitalism has always survived. This time, argues Streeck, is different. Capitalism “will for the foreseeable future hang in limbo, dead or about to die from an overdose of itself but still very much around, as nobody will have the power to move its decaying body out of the way”.


How Will Capitalism End?, a collection of somewhat overlapping essays, envisages a “society devoid of reasonably coherent and minimally stable institutions capable of normalising the lives of members and protecting them from accidents and monstrosities of all sorts”. This will offer “rich opportunities to oligarchs and warlords, while imposing uncertainty and insecurity on all others, in some ways like the long interregnum that began in the fifth century CE and is now called the Dark Age”.

Streeck is a mixture of the analyst, the moralist and the prophet. As an analyst, he challenges the stability of democratic capitalism. As a moralist, he dislikes a society founded on greed. As a prophet, he declares that the wages of this sin are death.

Streeck does not believe in the inevitable arrival of a socialist paradise. On the contrary, his is a dystopian vision in which capitalism perishes not with a bang, but a whimper. Since, he argues, capitalism can no longer turn private vice into public benefit, its “existence as a self-reproducing, sustainable, predictable and legitimate social order” has ended. Capitalism has become “more capitalist than is good for it”.

The postwar marriage between universal-suffrage democracy and capitalism is ending in divorce, argues Streeck. The path leading to this has gone via successive stages: the global inflation of the 1970s; the explosion of public debt of the 1980s; the rising private debt of the 1990s and early 2000s; and the subsequent financial crises whose legacy includes ultra-low interest rates, quantitative easing, huge jumps in public indebtedness and disappointing growth. Accompanying capitalism on this path to ruin came “an evolving fiscal crisis of the democratic-capitalist state”. The earlier “tax state” became the “debt state” and now the “consolidation state” (or “austerity state”) dedicated to cutting deficits by slashing spending.

Three underlying trends have contributed: declining economic growth, growing inequality and soaring indebtedness. These, he argues, are mutually reinforcing: low growth engenders distributional struggles, the solution too often being excessive borrowing. His views on the absurdity of quantitative easing as a palliative mirror those of the Austrian economists he despises. This is not the only case in which Streeck echoes rightwing views: his discussion of increasing female participation in the labour market, for example, finds much to regret and nothing to celebrate in this trend.

In one of his few telling phrases, he describes the response of ordinary people to pressures on them as “coping, hoping, doping and shopping”. But, above all, Streeck stresses the dire consequences of an out-of-control financial system, a predatory tax-evading and tax-avoiding plutocracy, the transfer of substantial parts of the public realm into private hands and resulting corruption of political and economic domains.

Streeck also writes devastatingly and cogently on the euro as an assault on democratic politics. “Germany”, he argues, “on account of its regained economic power after 2008 and as the main beneficiary of the EMU [economic and monetary union] due to its export strength … de facto governs the EMU as a German economic empire.”

The eurozone, notes Streeck, seeks to bring together countries with irreconcilably different economic cultures. A democratically legitimate resolution of the resulting tensions is impossible. The euro will either fail or survive as an undemocratic structure subservient to the whims of the financial markets and managed by a technocratic central bank and a hegemonic Germany.

Streeck’s views on the folly of the euro are convincing, but the forecast that today’s Europe will end up in something like the Dark Ages seems ludicrous. Contemporary Europeans enjoy standards of living, life expectancies, personal freedoms and levels of security that people of the Dark Ages or indeed of the Roman empire could not even imagine.

Moreover, pace Streeck, today’s world does not consist only of failures. He notes, correctly, that the emergence of the globalised market economy has reduced the effectiveness of the mid-20th-century compromise between democracy and national capitalism. But his enthusiasm for deglobalising capitalism misses altogether the immense opportunities increased trade and foreign direct investment have brought, notably to China and India.

In addition, while the trends and stresses in the functioning of the contemporary market economy and its relationship with democratic politics are part of the story, they are not the whole of it. Streeck is right that no stable equilibrium exists in any society. Both the economy and the polity must adapt and change.

Yet the relationship between democracy and capitalism is not, as Streeck seems to believe, unnatural. On the contrary, both systems derive from a belief in the role of people as active citizens and economic agents. In the former role, they make decisions together; in the latter, they make decisions for themselves. The boundaries and modes of operation of both systems are open to constant renegotiation. But both are essential.

Moreover, democracy cannot function without a market economy. The alternative — a thoroughly politicised economy — cannot function properly: just look at today’s Venezuela. The market protects democracy from becoming overstretched, while democracy provides a legitimate framework for the market. Just as the market economy is the least bad way to generate prosperity, so is democracy the least bad way to manage social conflicts.

Capitalism and democracy: the strain is showing
To maintain legitimacy, economic policy must seek to promote the interests of the many not the few

Furthermore, in today’s world, it is not capitalism that is in imminent danger, but rather democracy. A predatory form of post-democratic capitalism, not the end of capitalism, is the threat. Correspondingly, authoritarianism seems a far greater peril than the anarchy of a dark age.

The challenges we confront in bringing finance under control, rebalancing corporate governance, remedying inequality, sustaining demand and, above all, managing the tensions between the democratic nation state and the global market economy are genuine. The answers should include a modicum of deglobalisation, notably of finance, and greater co-operation among democratic governments, notably on taxation and the provision of global public goods. Will this be difficult? Yes. Will the answers work forever? No.

Is the task possible? Absolutely, yes. Streeck condemns this “technocratic-voluntaristic doability worldview” as hopelessly naive. Such defeatism before supposedly unmanageable social forces is characteristic of a certain sort of intellectual. But the “doability worldview” saved civilisation in the middle of the 20th century. It can (and must) do so again, even if its old institutional bases, particularly trade unions and political parties, have weakened.

How Will Capitalism End? provides not so much a convincing forecast as a warning. Its analysis is exaggerated and simplistic. Streeck correctly identifies some disturbing trends. Nevertheless, the history of the 20th century shows we do not have to be victims of forces beyond our control. We can choose the worse, or the better. We should choose the better.
 
The plane crashes if the exact right mix of fuel and air aren't constantly fed to the engines, or the pilot doesn't keep the flaps trimmed exactly how they should be, the speed isn't kept up right etc etc then the plane stops flying along smoothly and plummets to the ground, causing panic in both the passengers and crew, which makes the situation and chances of survival worse.

Same applies to the economy.
The economy is much weirder. It is inherently a complex and unstable system with all kinds of positive feedback loops.

A plane does not fly on confidence; our banking and monetary system does.
 
Wolf offers a pretty good précis of Streeck's worldview, but his critique essentially boils down to one that derives from him being a capitalist economist. Wolf contends that the institutions of the neoliberal project are reformable and criticises Streeck for his dystopian pessimism, but in doing so he criticises Streeck's positivist analysis for not offering a normative solution. Tilting at windmills...again.
 
Incidentally it may be worth pointing out for the nth time by myself and others that you can register with the FT for free and you get three or maybe five articles a month (I can't remember). Thanks though to pocketscience the review was interesting, if flawed. :)
 
I'm not really sure I understand how this claim, whether it is true or not, invalidates the idea that money is in some sense lubricating the economic system. Maybe you could expand?
The claim is that money stands in relation to the economy in the same way that lubricant stands in relation to an engine. If this correspondence was real, then we would infer that, just as bigger engines require - and benefit - from more lubricant, bigger economies require - and benefit - from more money.
Can you explain to me in concrete terms what 'emergence' is without resorting to analogies yourself?
The economy is a complex system. Emergence in complex systems is the process by which larger entities arise through interactions among smaller or simpler entities such that the larger entities exhibit properties the smaller/simpler entities do not exhibit (Wikipedia). Life is an emergent property of chemistry. Money is an emergent property of the economy. There is no 'money' that stands apart from and lubricates an 'economy'.

By selecting the wrong analogy he has constructed a fallacy, the conclusion of which is not merely wrong, but not even wrong.
 
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