I meant to go back to this. 2% doesn't sound like a great margin. But when you consider that this 2% is 2% of our entire money supply, it's stupendously massive. No wonder bankers can take such huge salaries, and they have the flashiest buildings in town!
This was the other point I wanted to come back to. Overall (counting the banks as one) the banks can do fantastically well with this. Their money costs nothing to produce and as the money comes in to repay loan principals, it simply disappears anyway! If they get to take real assets, that is gaining real wealth.
You've really shot yourself in the foot this time, Jazzz. Because, surely, an interest margin is still going to exist with "full reserve banking", i.e banks will charge borrowers a higher rate of interest than they pay to those with time-deposits with them, won't they? I imagine the margin between the two will also be of the order or 2-3%. What do you think it will be?
Jazzz has a point, though, eh? That's a massive amount of money.
Maybe, but banks are not the only enterprises that make profits. All capitalist enterprises try do and generally succeed. I suspect that bank profits will only be a relatively small proportion of total profits. Why just pick on bank profits? All profit-making firms have an income that exceeds their expenditure, ultimately from paying those who produce less than the value of what they produce.
Private entities should not be able to lend money at interest. A full nationalisation of the money-creation process in which state entities and genuine cooperatives are the only ones allowed to lend money at interest. That is the only way to prevent the inevitable conflict of interests that private money creation entails - getting people into debt is good for business; hiking up asset values is good for business; what is good for the bank, generally, is not good for everyone else.
Yes. That is what banks do when they make loans. Money is created with the loan (a promise is made); that money is then destroyed when the loan is repaid (promise discharged). That is the process of money creation.
You clearly haven't read any of the papers I've linked to. Do so. Steve Keen is a very good place to start.
Before you start trying to patronise me, try reading some of my links. These are not links to cranks.
No, you started the patronising with your 'have you been following the thread'.
Exactly. You haven't read any of the links I've given, have you?
But the point is that with a great deal of our money circulating in demand deposits as now - and crucially with us making the money up ourselves interest-free, the banking loan market would reduce hugely. Also, note that if interest rates on savings accounts became zero, that is in keeping with an inflation-free and more equal economy.
When you say it will be "us" who will be making the money I assume you mean the government or some State body (which is not at all the same as "us")? I agree that, under your proposed Banking Reform, bank loans would be reduced, but the economy's demand for loans wouldn't. So you are being logical here in seeking an alternative supply: fiat money created by the State by a keyboard stroke (which is what you imagine commercial banks do today). I don't know whether or not this would work, but I suspect the temptation would be too strong and that more than the economy requires will be "printed", which would cause inflation, possibly run-away inflation. Presumably your scheme includes a way of preventing this?
You're leaving your Nobel Prize winners behind again here. The three you mentioned by name (Irving Fischer, James Tobin and Milton Friedman) all accepted that interest was a fact of economic life under capitalism and made their mark by analysing various aspects of it. Fischer, incidentally, wasn't a Nobel Prize winner. This prize was only set up in 1969 and he died in 1947. He was however a keen campaigner for "full reserve banking". None of them wanted to abolish interest. Neither does the main thinktank in this country advocating "full reserve banking", Positive Money. In their booklet Full-Reserve Banking in Plain English the say (page 21) that what will be the same under this banking reform would be:
If interest rates on savings were zero why would anybody lend their savings to a bank to relend at interest? This wouldn't make sense (unless there was deflation or fall in the general price level). I don't think you've thought your reform proposal through. You can't have capitalism and abolish interest. I know the view that you can goes back a long way (Karl Marx encountered it in the 1840s). In fact it could be said to be the original currency crank theory.
So, under your reform of capitalism only the central bank or perhaps some government department, the Co-operative Bank, building societies and credit unions would also be allowed to lend money at interest. I don't think this would make much difference to the way the capitalist economy works. It would still be dominated by profit-seeking corporations, most of which are non-financial. Capitalism misfires not because there's some flaw in the banking system, but because it's a system based on the competitive pursuit of profits by private and/or state enterprises. If they are to survive co-operative enterprises have to play by the same rules, i.e seek to make profits to re-invest in cost-cutting innovations so as to be competitive and stay in the race for sales and profits.
I've been talking about the conditions that need to exist for it to happen - someone wanting that money, prepared to get into debt, and someone else prepared to accept the money in return for some thing of real value. You're arguing with someone else on that point.
the 'money first' analysis never seem to see capitalist social relations as the problem though Jean - it's all about getting rid of the pope, not the system of catholicism which is the essence that ultimately manifests itself in pope like phenomenal forms - it's the 21st century equivalent of 19th century vulgar political economy
Oh fuck off with your patronising shit. Changing patterns of ownership is crucial to making any real change. I've never denied this, and in fact, I would see nationalising the banking system as a necessary step to achieve it.
Not nonsense. The difference may not be huge, but it is better to work for Waitrose than Tesco.
Yes, most Banking and Money reformers are free-marketeers who think that, once their banking reform has been implemented, capitalism should be allowed to operate without state interference and will then function in a crisis-free way without booms and slumps. The left-wing variety goes back to the anarchist Proudhon and his crack-pot scheme for "free credit", ie interest-free loans from a People's Bank.
