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Jason Joy

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The actual banking system has to be dissolved.

The actual banking system has to be dissolved. The system with its interests and interest on interest, which leads to exponentially growing debt, lets go whole companies and now countries bankrupt. This is an absurd system, which is only made for the 1 % richest, the bankers. They have the exclusive right to print money (central banks which are a private institution consisting of a committee of all participating banks) and lend to every project that seems to make the most of money. With this exclusive printing rights, combined with interest, money gets channeled constantly from the 99 % of population to the 1 % rich without us even noticing it. What happens when we cant pay back our debt anymore, which has to happen in an interest on interest system where dept is growing exponentially? We are getting really enslaved by the banks. Expenses for health care, education and infrastructure has to be cut, the age of retirement is raised constantly only to pay the rich bankers. So we effectively live and work for them, for financing their luxurious houses, parties and vacations. Slavery, not anymore by force, but with system. This system has a catastrophic side effect: - Exponentially growing debt demands for infinite growth. On a planet with limited resources this cannot work. Companies have to pay back exponentially growing debt and therefor have to grow infinitely. In a system where money is the only incentive this leads to the exploitation of natural resources and our all living basis, our earth. This exploitation in the last 200 years already threatens all our future(CO2- emission, global warming).

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    Jan 13 2012: In yhe 1800's when banks insurance and railroads were making it finnacally impossible for small farmers to continue to opperate an organization called the Grange was founded toi pprovide a insurance company and credit union as alternatives, maybe this would be a helpful concept to look into?
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    Dec 27 2011: Jason..I agree with you 10000%.

    Our present economic model of continuual growth ( and ever growing debt) and our fiat banking system with its fractional reserve model is not sustainable or even sensible.

    We need an economy that seeks to achieve a place of balance that is not only sustainable but thrievable..for earth, its people, for future generations.

    What I am not sure of is how we navigate from here to there.

    We obviously have to change the FED..radically..but I truly don''t see how to do that

    Lindsay Newland Bowker
    Member New York Banking Board 1986-1997


    PS How about adding "Central Bank reform" and "Federal Reserve Bank" to your list of tags?
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    Dec 14 2011: sigh.

    it is getting boring that this "interest creates more money" argument comes up every now and again, i'm explaining why it is totally off base, the conversation sinks, then a new one comes up.

    explain to me people, how is that you work as a carpenter, programmer or lawyer or whatever, you read an article, and you suddenly feel like knowing the Reason Behind Things? why don't you try to question your views, think deeply, analyze, come up with counterexamples, find weaknesses, etc? why do you accept everything on face value just because you like how it sounds?

    interest is at least 2000 years old. inflation, exponentially growing public debt and such things are much much younger. just this alone should ring the alarm that this theory stinks. don't it?

    i'm not sure if you guys want to hear the explanation why interest does not lead to increase in money supply. anyone wants to hear?
    • Dec 14 2011: Krisztian,

      "Anyone wants to hear?"

      Of course I do.

      BUT - you and I both know that exactly 2000 years ago there was a economic-political unit that was suffering from inflation, exponentially growing public debt and overt financial corruption. So to claim inflation is a relatively new phenomenon seems misguided. Rome is a perfect case study for why our cutter t system fails. Besides, I was under the impression that you (being an Austrian) would claim that inflation and innovation are what is realized as 'profits' so I am once again confused with your claim that inflation and exploding public debt are relatively new.

      Clarify?

      SEP

      * I am assuming that by 'inflation' you are referring to a general rise in prices, due to a debasement of the currency. There are analysts who now use 'inflation' and 'deflation' to refer to the expansion or contraction of credit in the economy. This is a new angle of analysis, and thus you would be corewct, under this new definition, in stating that 'inflation is younger' but then you would be incorrect, under this new definition, to state that inflation does not contribute to the money supply.
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        Dec 14 2011: before i start, let me clear out some confusion, ok?

        we austrians consider your two definitions of inflation interchangeable. it is the increase in the total amount of money, whether it is credit expansion or physical money creation. the mainstream definition is different. it is an increase in the general price level. we austrians deny the existence of a "price level" in the first place, let alone wizardry like "velocity of money". we claim that long term rise in prices always due to an increase in the amount of money in circulation. and if it is present for many years, it can not be a free market phenomenon (like a decrease in the amount of money "hoarded" by people), it must be new money creation.

        i can't really see what do you mean by "inflation and innovation are what is realized as 'profits'". first, inflation and innovation are very different. second, inflation has nothing to do with profit. innovation is in fact related to profit, if you use it in the broad sense of "doing something differently", not necessarily technological or scientific innovation. but this entire thing is totally unrelated to interest rates, so i'm lost what your point is here.
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          Dec 15 2011: I think I see where you're coming from here... but I would argue that new money creation, tends to go hand in hand with the "amount of money hoarded by people". As money becomes more available, without an increase in production, people spend it at the same corporations they have spent it at in the past, and thus profits go back to the top of the system right?

          So there does tend to be a correllation, between printing money, and a decrease in wealth distribution, as bureaucrats tend to keep the printed money, near themselves, and so do lobbyists, and corporations.

          I think a problem here is one of narrative. People are angry, so they don't express themselves well, but the anger at "hoarding", as you put it, is actually more of an anger at a lack of merit among hoarders. I think the anger at the 1% in America specifically, is that a lot of them didn't do anything. They haven't fixed any problems, they haven't produced any great products, for the most part they're inherited wealth, oil barons, celebrities, and business majors. We wish they were inventors, and scientists, and politicians that actually created solutions to some of our problems.

          This is leading people to embrace sociallist ideas, because the free market isn't creating reasonable prices for certain things... I think this may be the way you're leaning Jason, and I would say it's a big mistake. The current banking system needs dramatic reform, we should probably close the fed and create a more open participatory system. The end to the banking system as a whole however, I think would be catastrophic, you have to remember that free people chose to incur these debts, and to give them all a "you don't have to pay them back card", while closing the banks that could lend money to their children, seems hideously unfair to our generation.
        • Dec 15 2011: Krisztian,

          When I proposed 'innovation and inflation are realized as profits' I was using the broad definition for innovation, as well as the 'mainstream' definition of inflation - 'a general rise in prices'. As I said, I assumed you meant the same but now know you define inflation solely in terms of the money supply. Very well.

          But it seems contradictory to claim 'credit expansion' is interchangeable with physical printing, or quantitative easing. During QE1 and QE2 we saw credit contraction. Thus you would be arguing that we were suffering from inflation and deflation simultaneously. Paradox.

          I would still argue that interest loans are necessary for an increase in the money supply. How else would you allow an increase in the monetary base to translate into an increase in the money supply? I'd still like to hear your thoughts on that.

          Finally, do you concede that inflation and exponential public debt did occur in ancient Rome and thus are not 'young' as you claimed but have in fact existed alongside the practice of usury for the last 2600 years?

          SEP
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        Dec 15 2011: seth, QE is credit expansion. basically what happens is that they give new money to banks, which they can multiply lend out (fractional reserve). the targeted money form is M2, not M1 or M0. because that is the money that supposedly available for businesses to borrow. QE is inflationary by its nature. many times governments explicitly want to cause inflation with it, because the keynesian theory is that inflation counters unemployment.

        with fractional reserve, money can be multiplied without interest. of course, banks don't do that, since they want to earn something. that is my point. not interest, but fractional reserve is the cause of increase of the money supply.

        if you have any articles or anything about inflation in rome, i would like to read it. it is easy to see that long term inflation in a world of physical gold coins is rather problematic. you can either set the value of money higher than its gold content by force, or you can dilute the gold content secretly. both are very limited, especially in that early stage of statism. another possible way would be a large continued influx of new gold. but it has nothing to do with interest.
        • Dec 16 2011: Krisztian,

          "QE is credit expansion" - available to banks. The point being that while the bank's credit was expanding, the credit the banks offered to the public was contracting. The further point being that the increased amount of money available to the banks can not be realized without an expansion of credit to the consumer, i.e. interest loans, which in layman's terms would be an "increase in the money supply." I do not think Jason was defining money supply in terms of M.

          My computer crashed several weeks ago and I am having to type everything up on my cellphone. This is the reason for both my sporadic involvement with the site, as well as my excuse for not being able to copy and paste links to articles for you. I can not figure out how to paste. But I assure you that any scholarly (and most casual) writings on the decline of Rome will mention inflation and I can summarize the facts as follows:

          It is a common tension for complex societies to want to grow faster than mining or conquest can increase their money supply. And being that all forms of government, out of sheer necessity, must conform to the will of the people (particularly wealthy, productive people) this tension is eventually conceded to and systematic inflation begins. In Rome, this demand grew loudest in the time of Nero and he acquiesced to his people's desire. The government.t began debasing the currency, and to satisfy the demand for more circulating money, began issuing coins with less silver than claimed. This continued, with more and more audacity, until the empire was no more. In the end, like the citizens of Weimar, Romans had all the money in the world but could not afford what is moat valuable le in it - bread and safety.

          "But it has nothing to do with interest." True enough. This was in response to your claim that inflation and exponential public debt are 'young' economic phenomena, which is not true. Ancient Rome suffered both.

          CONTINUED
        • Dec 16 2011: I do not think anyone is attempting to argue that usury leads to an increase in any particular M-level. Reading the prompt, I believe Jason's "money supply" contains aspects of both M0 and M1. Furthermore, if you had read the prompt in an attempt to find something you agreed with, instead of picking out a single sub-topic you could exploit to highlight how well your Austrian homeschool course has inflated your ego, you might have found someone sympathetic to your opinion. He IS calling for an end to a system you ought to find deplorable on Austrian grounds. Why are you not explaining to him that yes the system should be abolished and this is why it does not function in terms of Austrian economics, instead of being a jerk and assuming a haughty tone and mocking him(along with everyone else you seem to interact with on here) in your original post?

          Does your Hungarian bond laden portfolio have you pissed?

          Or maybe it is just me. Maybe I misread your comments. Perhaps I am stabbing in the dark and you are completely genuine in your dialogues. It just seems to me that when you preface a conversation with " explain to me people how it is that... you read an article and suddenly you want to know the reason behind things?" you are unnecessarily being a dickhead.

          As an interesting and not completely unrelated aside, do you believe that if the corporate structure had been realized earlier (the idea of limiting personal risk to investment) we would have seen the Industrial Revolution sooner?

          Also, what is your take, as an Austrian, on the corporate legality? And further, doesn't the assumption of business law preclude a fully free economy? Or does the free market entertain competing legal systems?
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        Dec 17 2011: seth, the usual goal of QE is to create money for businesses. the current situation is rather unique, because banks don't lend out that money. but it does not change fact that QE is money creation, just this time it didn't arrive to its destination.

        there can be inflation in coins, for a short period of time. but interest were always there in most societies, not only in the short inflationary periods. and i don't know how did you get the impression that i would say public debt is new phenomenon. i was not talking about public debt at all.

        i do thing that they argue interest leads to ever increasing money supply. i have heard that reasoning already, it is not new. btw what this supposed to mean otherwise?: "interests and interest on interest, which leads to exponentially growing debt"

        i do have hungarian treasury bonds, but luckily not much. and i don't care too much, as it is not my choice, it is mandatory (retirement plan).

        i think i was appropriate with my tone. i have the right to be angry when people take sides without thinking. it is tribal behavior which has no place in a modern society. should not have place in fact. nor calling the other person dickhead for that matter. i have never said "you read an article and suddenly you want to know the reason". that would be a good thing. that is what you should do. what i condemned is " read an article, and you suddenly feel like knowing". that is bad.

        about the questions: i don't know what would have happened. but economic freedom always creates great development. corporation: austrian economy is a science, it does not recommend law or policy. however, libertarianism goes hand in hand with it. according to that, only people can have property and rights. the corporation is nothing but cooperating individuals in a contractual relationship. in libertarian world, there is no law, only contract.
        • Dec 26 2011: Krisztian,

          "...the usual goal of QE is to create money for businesses."

          Not necessarily. The point is to expand credit across the board. In this case, the hope was that by allowing banks access to additional credit it would enable them to begin refinancing mortgages (aka expanding credit for consumers). This has not happened. As you say,

          "..the current situation is rather unique."
          And for a variety of reasons. First, our entire financial system us over leveraged. They will not be able to cover the losses of a. the relatively low yield a mortgage brings over its lifetime (assuming they keep it) or b. the devaluation of the property through refinance.
          Second, many banks are being paid by the taxpayer to foreclose rather than refinance. See FDIC, Shared Loss Agreement, IndyMac. The taxpayer pays the financial institution up to seventy percent of the original (overpriced) loan AND the bank keeps the property its balance sheets. Suffice it to say: this is profitable - for them.

          "..there can be inflation in coins, for a short period of time."

          In Ancient Rome it lasted for several hundred years. If you need to categorize this as a 'short period if time' for ideological purposes, so be it.

          "..and I don't know where you get the impression that I would say public debt is a new phenimenon. I was not talking about public debt at all."

          Well somebody, on the 14th of December, and under your name, wrote:

          "..inflation, exponentially growing public debt and such things are much younger.."

          Was that not you? Krisztian, if you cannot even keep your own password a secret, how am I to take you seriously?

          CONTINUED BELOW
        • Dec 26 2011: CONTINUATION

          "..btw what this supposed to mean otherwise?: 'interests and interests and interests, which leads to exponentially growing debt'?"

          I believe he is speaking to the absurdity of governments borrowing money from quasi-private institutions (central banks). Perpetually rolling over debt to external entities is not a sustainable economic model. He was not saying 'a one percent borrowing rate causes a perpetual increase in the money supply', he was saying the entire SYSTEM is an unsustainable, runaway freight train kept moving only by its own inertia and needs to be dismantled before causing catastrophic harm.
          Once again, you probably could have seen that for yourself if you attempted to UNDERSTAND WHERE THE GUY IS COMING FROM RATHER THAN BEING DELIBERATELY DISMISSIVE. Or, as I put it, being a dickhead.

          "..has no place in modern society, like calling someone a dickhead.."

          If you reserve the right to be a condescending prick, I reserve the right to call you a dickhead. There is a name for anarcho-capitalists who also insist on political correctness: pansies. You want to radically transform society and culture, demean your opponents in debate with your tone, and mock other people's ideas as beneath your own but do expect good manners in return. Presumptuous, don't you think? That so many on here acquiesce to your pretentions is not any validation of them, only a signal that to them attempting to engage you is not - worth the effort.

          You do believe the current banking/financial structure should be dismantled, correct?

          Merry xmas, buddy.

          SEP
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          Jan 13 2012: There are some really great science fiction works that revolve around the concept of contracts. I like the idea that everything between individuals can be handled as contracts I am at my political root an Anarchist which is not to say a Nihilist or an Barbarian , more of a proponent of voluntary cooperation and an opponent of force.
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        Dec 27 2011: seth: hm. you want me to "UNDERSTAND WHERE THE GUY IS COMING FROM", but you yourself didn't even try to understand that, rather, you just started to project your own agenda on his text. plus you don't work very hard to understand where i'm coming from either. i recommend spending half the time on writing, and twice the time on reading.

        understanding that physical coins can't be inflated is not that hard actually. you continue to refer to facts and details about such events, in order to cloud and derail the conversation. it is enough to imagine a gold coin inflated in 1:10 ratio. it either does not look like a gold coin, or it has one tenth the size. it is obvious. nobody will take it. actually it did happen many times in history. kings had to force people to take their money with soldiers. but it is nothing but armed robbery. the money is just a mockery in these cases. people trashed the money right after, since it did not buy them anything without the said soldiers. it works well in an economy where people actually don't use money that much.

        but it is NOT IMPORTANT. it is a completely irrelevant detail. such inflationary periods, as i explained, are short and/or otherwise insignificant, local, ineffective. while interest was widespread, global, and accepted throughout the entire human history. which underlines, please note, only underlines, the fact that interest and inflation has NOTHING TO DO with each other. we don't need such things to prove it though, because it is easy to comprehend. understanding is better than observation.

        so it would be very much advisable for you to take some pills or drink a whiskey, and try to be less hostile, less hysteric, but more rational. or else you might present yourself the very dickhead you accuse others to be. and it would be a shame.
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      Jan 13 2012: What is the difference between he creation of more money, and the creation of inflation please/ and why has it been deemed better to move money away from a gold or silver based system?? What is the relationship of generating new wealth and inflation? also what about a currency system based on manpower hours? For example this car represents this many man power hours from mining the metal on, plus the equivelent in manpower hours required to clean up after it plus X hours as profit. Now some manpower hours require more training and are worth more , a Doctor say versus a ditch digger. Can you talk a bit about how thaat could be made to funtion or its primary reasons for not being possible?
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    Dec 14 2011: +1 mate. We need more people who think like you. But the problem is that our Politicians can't control these banks, because where else would they work after they retire from Politics?
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    Dec 14 2011: So what do we have to do? We have to dissolve the actual banking system, which consists on enslaving population by interest and only giving to money to projects which promise the most profit. Giving the right to print money to private institutions is absurd. Money is a means to exchange goods and should be therefor in public hand. The money issuing organization should be under control of the government. This organization should not evaluate projects anymore just by their outlook for profit, but also by environmental, sustainable, social criteria. So a project isn’t evaluated only on the basis if its good for the company, but also for the whole society. Society pays the price for the higher costs of these companies (eco-friendly, social shaping of organizations and processes costs money) for their own good. This leads to a more social, eco- friendly society overall. Cleary, in such a system, the threat of corruption is big. Normally, bankers are incentivized by the profitability of their investments directly. When the new bankers have the more sophisticated job to evaluate projects on “soft” criteria (social, eco-friendly... ), this is a high risk. Evaluation can be manipulated easily. Therefor these government- reigned banks have to be controlled strictly by another, independent organization. Further, companies should be punished harder if they transgress environment protecting regulations. The money of these penalties should be used by the government for environmental or social projects.
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      Jan 13 2012: I believe the very first thing we need to do is spend a little time to learn exactly what the system we want to change is doing before we think of how to change it. But I am in favor of some one putting togeather a economics breif that TED members could reference, onr thing we need is to be sure we are defining words the same way.