Mathwise, a universal bank is the only viable replacement to fractional reserve lending.

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kmarinas86's picture
kmarinas86
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Mathwise, a universal bank is the only viable replacement to fractional reserve lending.

A universal bank where withdrawals=spending, and where any and all spending must be instantly redeposited into that universal bank as transfers to other accounts, is the only way to expand the spread in values (both positive accounts and negative accounts) without having a run on a bank. The possibility of a universal bank proves that the bank bailouts are totally unnecessary. Our system currently requires the tendency for banks to have more assets as more liquidity is satisfied. With a universal bank, bank assets do not need to rise at all to meet rising liquidity needs.

A bank owned by the people for the people has net liabilities equal to net assets: The assets of the bank must equal to the assets owed to the people who deposit the money. If the cost of shareholder equity were not excluded, assets would instead transfer from savers to shareholders and would not be recognized in the value of the accounts unless presented accordingly. Do bankers regularly charge fees described as "cost of shareholder equity fees" on their customer's savings, checking, or credit card accounts? They don't becuase they are not motivated to do so. A bank by the people and for the people cannot have any stockholder equity. It therefore must be a public bank, which means it must have no private ownership.

When someone takes out a loan from a bank, reserves are transferred from the bank. When they are spent, these reserves are deposited into a fund, mostly likely in another bank. However, if it was deposited into the same bank, then these reserves are returned back to that same bank. If we all had the same bank, and if loans were only transferred when spent, then we could take as many loans from that bank without changing the reserves. If we could not take money out of the bank unless if we spent that money at the same time, we could not have in our hand physical cash, but this would also make a run on a bank impossible. Therefore, such a system effectively behaves as though it were a 100% reserve monetary system. Interest rates would naturally be lower. This all sounds counter-intuitive, because the loans would exceed the reserves, yet on the other hand, no amount of loans would deplete the bank's reserves. Sound impossible? It's not impossible if there is just one bank.

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Re: Mathwise, a universal bank is the only viable ...

What I forgot to mention is that this example assumes that loans involve the withdrawal of assets from the bank. Many believe that, on the contrary, when a bank lends money, it does not utilize any of its reserves in contributing to the principal, but rather it creates money out of nothing, or more precisely, creates credit, a process now facillitated using digital technology.

I had also confused a fractional-reserve lending system with my concerns of the current banking system, which I have not yet expressed in detail.

What this post attempts to show is the mathematical possibility of having unlimited liquidity absent of any process of creating money from nothing. More precisely, this post presents the idea that unlimited liquidity can be created without inflating the bank reserves with additional so-called credit-money, but there is one hitch: all banks must be consolidated to a single public bank or universal bank.

kmarinas86 wrote:

A universal bank where withdrawals=spending, and where any and all spending must be instantly redeposited into that universal bank as transfers to other accounts, is the only way to expand the spread in values (both positive accounts and negative accounts) without having a run on a bank. The possibility of a universal bank proves that the bank bailouts are totally unnecessary. Our system currently requires the tendency for banks to have more assets as more liquidity is satisfied. With a universal bank, bank assets do not need to rise at all to meet rising liquidity needs.

A bank owned by the people for the people has net liabilities equal to net assets: The assets of the bank must equal to the assets owed to the people who deposit the money. If the cost of shareholder equity were not excluded, assets would instead transfer from savers to shareholders and would not be recognized in the value of the accounts unless presented accordingly. Do bankers regularly charge fees described as "cost of shareholder equity fees" on their customer's savings, checking, or credit card accounts? They don't becuase they are not motivated to do so. A bank by the people and for the people cannot have any stockholder equity. It therefore must be a public bank, which means it must have no private ownership.

When someone takes out a loan from a bank, reserves are transferred from the bank. When they are spent, these reserves are deposited into a fund, mostly likely in another bank. However, if it was deposited into the same bank, then these reserves are returned back to that same bank. If we all had the same bank, and if loans were only transferred when spent, then we could take as many loans from that bank without changing the reserves. If we could not take money out of the bank unless if we spent that money at the same time, we could not have in our hand physical cash, but this would also make a run on a bank impossible. Therefore, such a system effectively behaves as though it were a 100% reserve monetary system. Interest rates would naturally be lower. This all sounds counter-intuitive, because the loans would exceed the reserves, yet on the other hand, no amount of loans would deplete the bank's reserves. Sound impossible? It's not impossible if there is just one bank.

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Re: Mathwise, a universal bank is the only viable ...

Byron Dale was just interviewed about what it takes to have a sustainable money system.  You might find this interesting.

 

http://podcast.gcnlive.com/podcast/erskine/0529102.mp3

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Re: Mathwise, a universal bank is the only viable ...

Once more we have a proposal for some universal, unified money system.  We are in the mess we are in because we have a enforced monopolistic money system now (the FED and the dollar reserve).  What we need it to get rid of laws that force the public to use any one bank and let competition prevail.  You may have entities that do a gold standard, fiat currency, non fractional reserve and fractional reserve banking, ... Let people and businesses decide what they want to use.  Anytime you force a system on people you are going to have bad results that are far from optimal.

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Re: Mathwise, a universal bank is the only viable ...
rhare wrote:

Once more we have a proposal for some universal, unified money system.  We are in the mess we are in because we have a enforced monopolistic money system now (the FED and the dollar reserve).  What we need it to get rid of laws that force the public to use any one bank and let competition prevail.  You may have entities that do a gold standard, fiat currency, non fractional reserve and fractional reserve banking, ... Let people and businesses decide what they want to use.  Anytime you force a system on people you are going to have bad results that are far from optimal.

The more I learn, the more I realize I agree with this exactly. However, I have a very hard time conceptualizing what this would look like in the real world.

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Re: Mathwise, a universal bank is the only viable ...

Has it occured to any of you that the bull run in gold in silver is in fact a de facto return to a hard money standard?  Since both are rising in all currencies, it's safe to say that the free markets are voting with their wallets.  What more proof do we need?

As for fractional reserve banking, I say to you that there is no need for it.  I don't mean maybe we need it a little, or we need a moderate amount.  I mean exactly what I said.  We don't need it at all.

The Glass Steagall act was a step in the right direction, but it didn't go far enough.  Seperating investment banks from commercial banks went in the right direction, but it was incomplete.  A simpler, more effective approach would solve so many problems.  Banking should be one and only one thing: safe storage of money.  No interest is paid; the depositor pays a small fee for safe storage.  No loans are made from these deposits.  The bank makes it money from the storage fees.  Nothing more, nothing less.  The role of government would be to ensure that strict accounting rules kept the banks honest.  Anything bearing interest should lie entirely outside the banking system and be called something else.  Let's call this other system Investment Houses.  Money deposited here could be lent out, with the explicit understanding that there is risk involved and the possibility that the money could be lost.  This would be just like any other investment.  Banking and investing are NOT the same thing.  If this distinction is made clear, it would discourage the people from risking money they can't afford to lose. 

The best way to deal with fractional reserve banking is to abolish it altogether. 


 

 

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Re: Mathwise, a universal bank is the only viable ...

compinthegroove,

I think you're on the right track, but how would you have new money created?  Right now banks are the only creators of money.

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Re: Mathwise, a universal bank is the only viable ...
compinthegroove wrote:

Has it occured to any of you that the bull run in gold in silver is in fact a de facto return to a hard money standard?

I actually do believe that the rise in gold and silver is exactly that, but as long as we have central banks and governments supporting central banks and forcing citizens to use their currency, we can never get to a truly market/free money system.

compinthegroove wrote:

As for fractional reserve banking, I say to you that there is no need for it.  I don't mean maybe we need it a little, or we need a moderate amount.  I mean exactly what I said.  We don't need it at all.

I completely agree, however, I also know that I may not be right.  Therefore I would like to see people free to choose, perhaps a fractional reserve system is best, perhaps not, let the market and people be free to choose, including free to loose if they choose poorly.

compinthegroove wrote:

Banking and investing are NOT the same thing.

Completely agree, but you can have many different combinations in between the two extremes allowing for differing amounts of liquidity.

BigBadBakken wrote:

I have a very hard time conceptualizing what this would look like in the real world.

We already have the ability to change between currencies like the dollar, yen, euro.  Some tax consequences of doing so.  Just imagine that you could do that within a country and business could choose to take whatever currency they pleased, maybe multiples.  Yes, it would be a bit chaotic for a bit, but I believe clear preferred currencies would become prominent in a short period of time.  The ability however for competition to occur keeps currencies honest.

Ron Paul has the "Free Competition in Currency Act", which would be a good start.

 


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Re: Mathwise, a universal bank is the only viable ...
Thomas Hedin wrote:

I think you're on the right track, but how would you have new money created?  Right now banks are the only creators of money.

Anyone could create money.  There is no magic in this act.  I could create a currency if I like and decide it's based on Cheetos, gold, silver or nothing at all.  The only thing that makes money special is that people (perhaps only 2) have to agree that it is money.  When things fall apart, I firmly suspect gold, silver, or other PM will be money because they can't be forged, are rare, are easily divisible, and have in the past been money.

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Re: Mathwise, a universal bank is the only viable ...

comp,

I meant, who would manufacture the medium of exchange?

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Re: Mathwise, a universal bank is the only viable ...

I am not an advocate of gold money. Nor silver money as a long-term solution. 

Bill Still has a compelling argument in his documentary Oz

It's not what backs the currency that matters, but who controls it's supply. 

Precious metal allocation can still be controlled. Panics and depressions occurred on a metal system all throughout history folks. We need a benevolent entity to control the money supply. Replacing fiat with a rare fungible metal only changes the mechanism of control over commerce by nefarious interests. 

Like it or not, government is all we've got.

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Re: Mathwise, a universal bank is the only viable ...
Morpheus wrote:

Precious metal allocation can still be controlled. Panics and depressions occurred on a metal system all throughout history folks. We need a benevolent entity to control the money supply. Replacing fiat with a rare fungible metal only changes the mechanism of control over commerce by nefarious interests. 

Like it or not, government is all we've got.

There will never be a benevolent entity, power always corrupts.  Anytime you have force to make one use your money, then the battle is lost.  I believe free market forces in the money supply will keep things under control.  I don't mind if governments are part of that market, for instance let them keep running the dollar as they always have as long as I can choose to store or transact in another currency.  This means if a merchant I want to use doesn't accept my current currency then I have to find a way/someone to convert it or not do business with that merchant, but at least I have a choice.

Also, I don't believe metal based currencies are near as bad as fiat.  You may be able to manipulate but you can not print without limit like we see today.  Also, actual coin (not paper representing gold/silver) means physical possesion is possible which means you can't manipulate it.   You say "Panics and depressions occurred on a metal system all throughout history", do you have examples? Particulary any examples where FRB is not involved where paper was being used as a representation for metal?

People say you can use gold and silver now, but you can't due to legal tender laws and capital gains taxes. 

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Re: Mathwise, a universal bank is the only viable ...
Thomas Hedin wrote:

I think you're on the right track, but how would you have new money created?  Right now banks are the only creators of money.

I view gold and silver as money.  We have various private mints to choose from who issue what I view as money.

 

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Re: Mathwise, a universal bank is the only viable ...
rhare wrote:

You [user Morpheus] say "Panics and depressions occurred on a metal system all throughout history", do you have examples? Particulary any examples where FRB is not involved where paper was being used as a representation for metal?

There are not many examples. but there existed many bank panics in the US before the Federal Reserve. Bank panics also occurred when proprietary currencies existed. You would have to be over 100 years old to remember them.

[The fall of Rome doesn't count, because the metals they used were "deflated" through using cheaper and cheaper metals.]

A universal bank does not require a universal currency.

Keep in mind (in keeping with the topic introduced in the opening post), this universal bank is not a claim to a single currency. All currencies, whatever their number, could be traded for within the same bank. Currency competition does not dissappear just because you conslidate the banks in a universal bank. It is basically a universal exchange for both savings and credit. The math is so different than our current system. With a single bank, issuing credit does not add to the assets to the banking industry. Liquidation of a universal bank cannot be done, except by fracturing it into many banks. You might even say that the universal bank is a point system. Imagine two buckets.

Bucket of positive accounts - Bucket of negative accounts = Total assets of the bank

If no one was in debt, "Bucket of positive accounts" would equal "Total assets". However, if profits increase to certain extent in one area, a corresponding debt will appear in another, and bucket of positive accounts will be greater than the total assets of the bank. In here, this not money as we know it. The banks may only "possess" an amount equal to its assets, but it really can't, because it is all liability to the account owners. There is no possibility of a run on a bank in this system, and liquidity won't make bankers rich. Anybody getting rich of liquidity must do so without controlling the monetary system. Auditing would be simpler than ever. For once, you would actually know where money is, because all money of all currencies would be inside a clearing house. For the first time in history, it would be actually possible to fully audit national banks, corporations, etc.

Accounts might also not be limited to money. It could be possible to incorporate journal entry information, balance sheets, and income statements of all companies in the world so that auditing of finances could be completely done by computers with no human intervention allowed. Journal entries would not only have to balance within a company, but also between companies. You cannot do that kind of accounting without having all savings and credit tallied up. It is impossible to regulate financial derivatives with this kind of reform, otherwise they are just wasting money. Until they set up a clearinghouse that tracks the abstract financial value of all these products, business assets, liabilities, equities and so forth, we are scammed. A universal bank can help businesses outside of the auditing industry, because why worry how the money was lost when its all at the same bank. The computer can easily retrieve it for you.

Our current financial system is actually less secure, because information is scattered, copied, and modified in redundant places and as a result you have to pay priviledge to protect your identity because it costs too much. Better information actually makes markets more efficient and less involved in goverment. Look what happens to our government when the Fed cannot audited by design. The information is simply not recorded for us to see. We ask for the permission to audit, but it is like asking for a leprechaun to give you a pot of gold. The Fed is a non-person and it controls even those who "run" it. All possibility for remediation is lost. This is not right. Scrap our current system, because we can do much. much better than that.

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Re: Mathwise, a universal bank is the only viable ...
rhare wrote:
Morpheus wrote:

Precious metal allocation can still be controlled. Panics and depressions occurred on a metal system all throughout history folks. We need a benevolent entity to control the money supply. Replacing fiat with a rare fungible metal only changes the mechanism of control over commerce by nefarious interests. 

Like it or not, government is all we've got.

There will never be a benevolent entity, power always corrupts.  Anytime you have force to make one use your money, then the battle is lost.  I believe free market forces in the money supply will keep things under control.  I don't mind if governments are part of that market, for instance let them keep running the dollar as they always have as long as I can choose to store or transact in another currency.  This means if a merchant I want to use doesn't accept my current currency then I have to find a way/someone to convert it or not do business with that merchant, but at least I have a choice.

Also, I don't believe metal based currencies are near as bad as fiat.  You may be able to manipulate but you can not print without limit like we see today.  Also, actual coin (not paper representing gold/silver) means physical possesion is possible which means you can't manipulate it.   You say "Panics and depressions occurred on a metal system all throughout history", do you have examples? Particulary any examples where FRB is not involved where paper was being used as a representation for metal?

People say you can use gold and silver now, but you can't due to legal tender laws and capital gains taxes. 

A few thoughts for you...

Your comment about there never being a benevolent entity is spot on.  No central authority can be trusted, and history is very clear about this.

As for panics/depressions under a gold/silver standard, refer to the various essays written by Martin Armstrong.  You can download them here: http://www.martinarmstrong.org/economic_projections.htm 

A few problems with gold and silver money:

1) Discoveries of major ore deposits cause inflation of the money supply.  Think gold rush of 1849 and the discovery of the Comstock Lode.  I don't see that being much of a problem for gold since most of the "low hanging fruit" has already been exploited.  This is also largely true for silver, but as monetary demand increases, the industry will respond by increasing the amount of silver available for investment.  Silver above ground in investable form is rarer than gold, and even at today's prices, this presents an enormous bargain for people like me who love to clean out coin shops.  I expect a sharp spike in price to come at some point, followed by a gradual fall as supply increases to meet demand.  I'll be looking for signs that the time is right to trade some silver for gold.

2) Governments tend to want to fix the gold to silver ratio, which creates arbitrage opportunities in the free markets, particularly at the international level.  The US Government repeated this mistake over and over again throughout the 19th century, which caused gluts and shortages in the money supply.  The best way to avoid this is to simply let the ratios float on the market.  In keeping with this, coins should not be denominated in dollars, euros, or the like.  They should simply have a fixed weight and purity.  A more honest way to determine gold and silver prices (along with ratios) would be to establish a large exchange where currencies are traded for physical metals only.  No bogus paper proxies like we find on the Comex.  How can we have true price discovery when both the supply and the demand are false?

3) Governments monetize one metal and demonetize the other.  When Germany demonetized silver, silver rushed out of the country into other countries where silver was still considered money.  This caused inflation in these other countries due to the increase in silver, while causing deflation in Germany because the money supply decreased.  When the US did the same thing in 1873, the effects were the same.  If the public wants to use different metals as money, the government should leave well enough alone.  

4) Governments debase the currency.  This is what caused the economic decline of the Roman Empire.  The evil here is that when they debased the silver content in the denarius, it was accompanied by a fiat decree that the new less valuable denarius would have the same purchasing power as the old more valuable denarius.  This is the same crap we saw in this country in 1965 when the US coinage was no longer silver.  This is driven by the same mentality that drives governments today to adore the printing press.  It's not the metal, it's the fiat that causes problems!  Abolish the fiat and the problem goes away.

5)  From a longer term perspective, hard money tends to be deflationary because the population tends to expand faster than the money supply.  Is this necessarily a problem?  If we take the reforms I've suggested above, money will be much more stable and stability encourages capital formation.  Over time, prices would fall gradually.  This would vastly simplify saving for a rainy day.  If I know that my bullion will gradually increase in purchasing power over time, why bother with interest rates?  Put another way, I wouldn't have to chase the best rate of interest because there would be no inflation to worry about.  This would encourage people to save money, and no banks would be required for people to benefit from their savings. You might be asking yourself if saving would become hoarding.  I doubt it, since money earned in the near term would yield increased purchasing power in the future.  This would attract investment.  

6) Add bankster fraud to the above problems.  I won't bother to elaborate on this, but I will encourage you to read Modern Money Mechanics, published by the Chicago Fed.  I see a lot of misconceptions on these forums about how the banking system works.  Ignore all this noise and go straight to the source. 

As a side note, platinum and palladium would make excellent alternatives to gold and silver.  If the world returns to hard money, would platinum and palladium take a role as alternative currencies?  This would represent quite a psychological shift, but I could see it being plausible.  

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Re: Mathwise, a universal bank is the only viable ...

 

The key word is voluntary.    

The Spanish silver dollar was the money being used by the early American colonies as a result of Britains policy keeping precious metals away from the colonies.   When Jefferson investigated to see what the people were using, it was this silver dollar.   No one forced its acceptance. 

Later,  Bank notes circulated along with precious metal coins.     Banks issued their own  notes but they were all redeemable in actual money (specie) . This did not prevent some banks in issuing more notes than they had specie to back them. Were they commiting fraud?  Absolutely.    Why?   It's profitable.   The only thing that kept this in check was the customers themselves.  When they distrusted a particular bank they would demand their money pronto.     The fraud is revealed and the bank is no more,  and kept potential offenders in check.    The Bank Run was  the peoples way of voting with their money.

At this point in our history,  would any American support a taxpayer funded bail out of the perpetrators?   I don't think so.   Then why do the politicians of today do it?      The answer is the final solution.

   What the bankers needed was a lender of last resort  to bail them out ,  and a way to monopolize the issuing of notes (too many competitors in the West)   by one entity.    An entity they could own and influence.   But they needed to change existing laws and for that they needed the politicians.      To convince the politicians and public,    the Treasury Secretary was to be part of the entity  (they will remove him later) and the notes would be fully redeemable in specie  (they'll fix this later)       We had the power to stop the fleecing.

 

 

 

:

 

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Re: Mathwise, a universal bank is the only viable ...
rhare wrote:
Morpheus wrote:

Precious metal allocation can still be controlled. Panics and depressions occurred on a metal system all throughout history folks. We need a benevolent entity to control the money supply. Replacing fiat with a rare fungible metal only changes the mechanism of control over commerce by nefarious interests. 

Like it or not, government is all we've got.

There will never be a benevolent entity, power always corrupts.  Anytime you have force to make one use your money, then the battle is lost.  I believe free market forces in the money supply will keep things under control.  I don't mind if governments are part of that market, for instance let them keep running the dollar as they always have as long as I can choose to store or transact in another currency.  This means if a merchant I want to use doesn't accept my current currency then I have to find a way/someone to convert it or not do business with that merchant, but at least I have a choice.

Also, I don't believe metal based currencies are near as bad as fiat.  You may be able to manipulate but you can not print without limit like we see today.  Also, actual coin (not paper representing gold/silver) means physical possesion is possible which means you can't manipulate it.   You say "Panics and depressions occurred on a metal system all throughout history", do you have examples? Particulary any examples where FRB is not involved where paper was being used as a representation for metal?

People say you can use gold and silver now, but you can't due to legal tender laws and capital gains taxes. 

Panic of 1837. Depression of 1839, The Long Depression, Panic of 1907. There are many many more. The ones that I listed came AFTER Jackson killed the bank. 

 

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Re: Mathwise, a universal bank is the only viable ...

That evil, cursed metal.

Panic Of 1837  ----  (wikipedia)   Built on a speculative fever. The bubble burst on May 10, 1837 in New York city when every bank  stopped payment in specie.

Depression of 1839 --       between 1839 and 1843,  real consumption increased by 21 percent,  and real gross national product increased by 16 percent,  despite the fact that real investment fell by 23 percent and the money supply shrank by 34 percent.

Panic of 1907  --- there were numerous runs on banks and trust companies.

The common denominator were  run on banks caused  by excessive floating of paper money without adequate backing of specie, leading all the way to the Panic Of 1929 which was also a banking panic.     

The slow end  to run on banks  coincided with the slow severance of  the nations money's tie  to gold,   effectively  ending  in 1973.    And mark the beginning of a truly fiat money.   From that point on,   only the politicians self restraint can hold off unrestrained money creation and debt.

 

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Re: Mathwise, a universal bank is the only viable ...

Thanks Carl, I was working on pretty much the same response. 

All these events brought up by Morpheus were caused by banks behaving badly, and of course you have the government involved keeping the banks in business and forcing them upon the citizens.  Government forces people to use banks, government regulations keep banks in power and encourage them to behave badly, banks fail, government comes to the rescue.  Hmm, perhaps it's time we remove the power of money from sole purview of the banks and govenrment. Surprised

That's why I have problems with all these solutions people keep proposing, they have to be the only solution and they have to be run by governments.  It's time for a change, at least with gold/silver/other PM you have distributed power with no single entity in charge and as someone pointed out, even though you can mine the stuff, it takes a lot of work and the low hanging fruit is now gone. 

 

 

 

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Re: Mathwise, a universal bank is the only viable ...
rhare wrote:

Thanks Carl, I was working on pretty much the same response. 

All these events brought up by Morpheus were caused by banks behaving badly, and of course you have the government involved keeping the banks in business and forcing them upon the citizens.  Government forces people to use banks, government regulations keep banks in power and encourage them to behave badly, banks fail, government comes to the rescue.  Hmm, perhaps it's time we remove the power of money from sole purview of the banks and govenrment. Surprised

That's why I have problems with all these solutions people keep proposing, they have to be the only solution and they have to be run by governments.  It's time for a change, at least with gold/silver/other PM you have distributed power with no single entity in charge and as someone pointed out, even though you can mine the stuff, it takes a lot of work and the low hanging fruit is now gone.

A system of multiple banks means a playground where the elites can hide their money wherever they want, where no one can actually know how much they have. With the advent of derivatives, a system of multiple banks implies a system of many clearing houses, giving the illusion of transparency. You can have a universal bank without having any universal government, universal justice, or universal currency. What it does is create transparency (=ease of audit) and flexibility. You can create any currency you like. And the great advantage is that, if you like, you create your own self-controlled currency whose supply you limit on your own terms, and you could have exchange rates to go along with that. You could choose whether that currency may be "transmutated" into others, or whether it can only be traded with other currencies. With a multiple bank system, that is logistically impossible. Not so with a universal bank.

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Re: Mathwise, a universal bank is the only viable ...
kmarinas86 wrote:

A system of multiple banks means a playground where the elites can hide their money wherever they want, where no one can actually know how much they have.

So what?  Why does it matter?  Why do you or anyone get to know how much money anyone else has?  Should everyone know what you or I have/make?  We need transparency in government, not into private lives or businesses.  Of course this get's into a whole other realm of issues other than banking.

kmarinas86 wrote:

You can have a universal bank without having any universal government, universal justice, or universal currency.

I'll postulate that the other 3 (government, justice,currency) don't matter at all.  Whomever controls the money, controls everything else.  Just look at the US and the Fed.  The US controls or at least massively influences much of the world becuase of the dollar and it's not completly universal, but close (international settlement).

kmarinas86 wrote:

What it does is create transparency (=ease of audit) and flexibility.

How can you possibly believe this?  Look at the Fed? How transparent is it?

kmarinas86 wrote:

You can create any currency you like. And the great advantage is that, if you like, you create your own self-controlled currency whose supply you limit on your own terms, and you could have exchange rates to go along with that.

When you say you, I assume you mean the collective you, as in the bank.  This is where we differ the most. When I say you and mean "YOU" or "I" or anyone or any entity?  Why should money creation be left to any single entity?  It results in corruption on massive scale, just look at the central banks now? I would also say it doesn't matter if they are public or private.  Look at the corruption in many government entities.  Would you have corruption in an entirely private/distributed system?  Of course, but at least people would have a choice and could vote with their feet.  You could even choose to only use precious metals or other hard substance and be free of any money creation authority.

kmarinas86 wrote:

You could choose whether that currency may be "transmutated" into others, or whether it can only be traded with other currencies. With a multiple bank system, that is logistically impossible.

Why do you think it's impossible?  Right now we have currency exchangers for nearly all currencies (probably not Zimbawean dollars).  Most are private and competition keeps currency exchange inexpensive.

I think the key difference, I want people to be free to choose their money. I want competitioin.  I want self reliance.  I believe any system that puts a large entity in charge over a critical aspect of our lives will result in abuse, and I'm still waiting for a single compelling reaons why any one system has to be put in place other than for "social justice" purposes which may be your central purpose based on your first comment about elites.

Just one question, not meaning this to be inflamatory, but who are these elite you have a negative view of?  Is it only based on how much money they have?  At what amount of wealth do you consider them to be unworthy?  For those who want to pass judgement on others wealth, I think "Button, Button" is an excellent article.

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kmarinas86
Status: Silver Member (Offline)
Joined: Dec 29 2008
Posts: 164
Re: Mathwise, a universal bank is the only viable ...
rhare wrote:
kmarinas86 wrote:

A system of multiple banks means a playground where the elites can hide their money wherever they want, where no one can actually know how much they have.

So what?  Why does it matter?

It is fundamentally impossible to audit the Fed in anyway complete. It would be like auditing McDonald's by asking one franchise how much it charges its fries.

rhare wrote:

Why do you or anyone get to know how much money anyone else has?  Should everyone know what you or I have/make?  We need transparency in government, not into private lives or businesses.  Of course this get's into a whole other realm of issues other than banking.

What do they not know already huh?

Why so paranoid?

rhare wrote:
kmarinas86 wrote:

You can have a universal bank without having any universal government, universal justice, or universal currency.

I'll postulate that the other 3 (government, justice,currency) don't matter at all.  Whomever controls the money, controls everything else.  Just look at the US and the Fed.  The US controls or at least massively influences much of the world becuase of the dollar and it's not completly universal, but close (international settlement).

The US is losing control of the economy.

rhare wrote:
kmarinas86 wrote:

What it does is create transparency (=ease of audit) and flexibility.

How can you possibly believe this?  Look at the Fed? How transparent is it?

A central bank does not a universal bank make.

You cannot audit the Fed. There is no matching between transactions. The Fed can make up shit and hide it somewhere else. How tranparent is it? It has zero transparency. What would the point of a proposal be if it did not believe that had to be fixed.

The Fed cannot be remediated. The Fed will die.

rhare wrote:
kmarinas86 wrote:

You can create any currency you like. And the great advantage is that, if you like, you create your own self-controlled currency whose supply you limit on your own terms, and you could have exchange rates to go along with that.

When you say you, I assume you mean the collective you, as in the bank.

But I'm not.

rhare wrote:

This is where we differ the most. When I say you and mean "YOU" or "I" or anyone or any entity?

Let's put it this way. You (Joe Smith) can create a currency. Say you "upload" it to the bank. It can be whatever you like: Proprietary alloys, pictures of something, who cares. The key is that it is a universal bank. It is a universal exchange for mediums of exchange where all the savings and credits must be tallied up.

rhare wrote:

Why should money creation be left to any single entity? It results in corruption on massive scale, just look at the central banks now? I would also say it doesn't matter if they are public or private.  Look at the corruption in many government entities.  Would you have corruption in an entirely private/distributed system?  Of course, but at least people would have a choice and could vote with their feet.  You could even choose to only use precious metals or other hard substance and be free of any money creation authority.

Money creation should not be a single entity or single currency. There should be a common exchange for all currencies, and no other, only one exchange. Now, this does not mean there must be more than one currency, but this is for the people to decide. If people wanted, they could merge currencies to maintain competitiveness, just as companies sometimes merge to become stronger. This could lead to one currency, but it is not necessary.

rhare wrote:
kmarinas86 wrote:

You could choose whether that currency may be "transmutated" into others, or whether it can only be traded with other currencies. With a multiple bank system, that is logistically impossible.

Why do you think it's impossible?  Right now we have currency exchangers for nearly all currencies (probably not Zimbawean dollars).  Most are private and competition keeps currency exchange inexpensive.

Today you are not able to "transmutate" money. This would be like destroying 100 yen to create a dollar. This could be used to prevent inflation of a currency in a nation having massive trade deficits. To the exporting country, this would be debt-free money, stimulating their exports even more, and for the massively importing country, this prevents their currency from being dumped into its economy when it defaults. That's a win-win situtation. Tell me how current exchanges and all those experts who run them can say "let me destroy this bill to create x amount of Euros". If "transmutation" were allowed without a universal bank, it would cause a lot of problems.

rhare wrote:

I think the key difference, I want people to be free to choose their money. I want competitioin.  I want self reliance.

What difference?

I believe in those things too.

rhare wrote:

I believe any system that puts a large entity in charge over a critical aspect of our lives will result in abuse

Money creation will no longer be centralized. We can all be money creators. However, this functions a bit like "counterfeit". Therefore, a universal bank is required to make it all work.

rhare wrote:

and I'm still waiting for a single compelling reaons why any one system has to be put in place other than for "social justice" purposes which may be your central purpose based on your first comment about elites.

How the hell do you properly audit a central bank without a universal bank to match all the transactions up? Answer: You can't, because it is not possible.

rhare wrote:

Just one question, not meaning this to be inflamatory, but who are these elite you have a negative view of?  Is it only based on how much money they have?  At what amount of wealth do you consider them to be unworthy?  For those who want to pass judgement on others wealth, I think "Button, Button" is an excellent article.

I'm talking about those who commit fraud to get rich, not those who earned their riches.

Morpheus's picture
Morpheus
Status: Diamond Member (Offline)
Joined: Dec 27 2008
Posts: 1200
Re: Mathwise, a universal bank is the only viable ...
Carl Veritas wrote:

That evil, cursed metal.

Panic Of 1837  ----  (wikipedia)   Built on a speculative fever. The bubble burst on May 10, 1837 in New York city when every bank  stopped payment in specie.

Depression of 1839 --       between 1839 and 1843,  real consumption increased by 21 percent,  and real gross national product increased by 16 percent,  despite the fact that real investment fell by 23 percent and the money supply shrank by 34 percent.

Panic of 1907  --- there were numerous runs on banks and trust companies.

The common denominator were  run on banks caused  by excessive floating of paper money without adequate backing of specie, leading all the way to the Panic Of 1929 which was also a banking panic.     

The slow end  to run on banks  coincided with the slow severance of  the nations money's tie  to gold,   effectively  ending  in 1973.    And mark the beginning of a truly fiat money.   From that point on,   only the politicians self restraint can hold off unrestrained money creation and debt.

 

Yes. I can read wikipedia also. 

You prove my point. Gold was the standard during those bust cycles and it was inadequate backing that contributed to the problem. That is, the supply of money was, for whatever reason throttled. Gold did nothing to prevent it, demonstrating, at least to me, that gold is not the cure all. 

Let me ask you this Carl. If tomorrow we switched to a gold standard who would win? Besides you and I as I assume that you have an open interest in gold. 

The major bullion banks and sovereigns that have large holdings of gold. 

The money supply would be controlled by the gold holders. Now, how is this advantageous to the present situation? You're replacing one cartel with another. 

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rhare
Status: Diamond Member (Offline)
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Posts: 1325
Re: Mathwise, a universal bank is the only viable ...

kmarinas86, I don't see why you think you need a central authority.  You keep talking about auditing, but why do you think having a single giagantic entity is going to be easy to audit?  Also, why do think you have to match things up?  You seem to want a decentralized money system, at least you seem to agree, but insist that we have to have some central clearing authority.  Your points about the Fed above only support that you don't want a large central authority for anything.

I don't think it really matters, we are going to be forced into more local living, and I suspect that will be local currencies as well, with no central authority. 

Morpheus wrote:

You prove my point. Gold was the standard during those bust cycles and it was inadequate backing that contributed to the problem.

I think you missed the root cause, it's not that there was inadequate backing, it's that the banks inflated the money supply too much.  Had we kept only a gold standard, this could not happen as there would be exactly as much money in the economy as gold (or other PM).  Also, it's only a problem if you don't make the population responsible for their own interests.  If anytime a bank does stupid things like inflate too much, and you then make people whole by moving the debt from private to public (ie FDIC), then you will never get to a system that is stable.  Now you can debate if FRB is good/bad.  I personally think it's bad and that you should now allow withdrawl of deposits that are lent to others, but I may not be right, so we get back to my point, let competing systems operate and people will decide.  A few bank failures with all the depositors loosing their money and a few bank executives being jailed or executed and pretty soon everyone learns to be responsible.  The system we have now is based on no one being responsible.

kmarinas86 wrote:

What do they not know already huh? [Why so paranoid?

If this type of thing doesn't matter to you, then how bout telling us all your real name, net worth, income, who you work for, family members, what you spend your money on, religious beliefs, group affiliations, etc... Would doing this make you uncomfortable?  If so, why so paranoid? 

 

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compinthegroove
Status: Silver Member (Offline)
Joined: Nov 8 2009
Posts: 113
Re: Mathwise, a universal bank is the only viable ...
Morpheus wrote:

Let me ask you this Carl. If tomorrow we switched to a gold standard who would win? Besides you and I as I assume that you have an open interest in gold. 

The major bullion banks and sovereigns that have large holdings of gold. 

The money supply would be controlled by the gold holders. Now, how is this advantageous to the present situation? You're replacing one cartel with another. 

Here I have to disagree with you.  You would not be replacing one cartel with another for the simple reason that there is only one cartel.  Ask yourself, why do central banks cling to their gold if money isn't tied to gold? Here you will find the answer.  If the fiat experiment fails, the same people hold the power!

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kmarinas86
Status: Silver Member (Offline)
Joined: Dec 29 2008
Posts: 164
Re: Mathwise, a universal bank is the only viable ...
rhare wrote:
kmarinas86 wrote:

What do they not know already huh? [Why so paranoid?

If this type of thing doesn't matter to you, then how bout telling us all your real name, net worth, income, who you work for, family members, what you spend your money on, religious beliefs, group affiliations, etc... Would doing this make you uncomfortable?  If so, why so paranoid?

Who said that information was going into the universal bank?

In fact, no personal information should be attached to assets.

Personal information = Hard to change

You can change passwords easily, and for good reason-it is more secure.

Why does my name need to be on my credit card and all of that jazz?

You could track who stole what and be able to locate that person if he stole it. But it should not be based on personal information you cannot change easily or not at all. Instead, it should be based on anonymous data, such as time, location, proof of purchase, and other such things.

Personal information is cross-referenced too much, but non-personal information not enough.

You would need a single clearing house system (no central authority implied) to make a system where you can safeguard your assets in total anonymity, either that or you have to pay a special privelege to have it done manually, but not everyone can afford that.

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kmarinas86
Status: Silver Member (Offline)
Joined: Dec 29 2008
Posts: 164
Re: Mathwise, a universal bank is the only viable ...
compinthegroove wrote:
Morpheus wrote:

Let me ask you this Carl. If tomorrow we switched to a gold standard who would win? Besides you and I as I assume that you have an open interest in gold. 

The major bullion banks and sovereigns that have large holdings of gold. 

The money supply would be controlled by the gold holders. Now, how is this advantageous to the present situation? You're replacing one cartel with another. 

Here I have to disagree with you.  You would not be replacing one cartel with another for the simple reason that there is only one cartel.  Ask yourself, why do central banks cling to their gold if money isn't tied to gold? Here you will find the answer.  If the fiat experiment fails, the same people hold the power!

The gold standard is not coming back.

We will have the gold option. Forever! Muahahahhahahah

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Carl Veritas
Status: Gold Member (Offline)
Joined: Oct 23 2008
Posts: 294
Re: Mathwise, a universal bank is the only viable ...

Morpheus:

"The money supply was, for whatever eason, throttled"                The bankers throttled the issuance of their notes, not for whatever reason.

"It was inadequate backing that contributed to the problem"      Bank runs occur precisely because of the opposite:      Too much notes issued on top of its gold backing,  not the other way around.

The need for " elastic money" is another bs reason used by banks to bamboozle the politicians in helping them fleece the flock.    The social "engineers" concurs.

kmarinas86's picture
kmarinas86
Status: Silver Member (Offline)
Joined: Dec 29 2008
Posts: 164
Re: Mathwise, a universal bank is the only viable ...
Carl Veritas wrote:

Morpheus:

"The money supply was, for whatever eason, throttled"                The bankers throttled the issuance of their notes, not for whatever reason

True.

Carl Veritas wrote:

"It was inadequate backing that contributed to the problem"      Bank runs occur precisely because of the opposite:      Too much notes issued on top of its gold backing,  not the other way around.

Inadequate backing means too many notes for a given amount of gold, silver, etc. What do you mean that is the opposite?

Carl Veritas wrote:

The need for " elastic money" is another bs reason used by banks to bamboozle the politicians in helping them fleece the flock.    The social "engineers" concurs.

Yes, these people know that what they are doing is defying justice, but they are doing it anyway.

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rhare
Status: Diamond Member (Offline)
Joined: Mar 30 2009
Posts: 1325
Re: Mathwise, a universal bank is the only viable ...
kmarinas86 wrote:

Inadequate backing means too many notes for a given amount of gold, silver, etc. What do you mean that is the opposite?

  • Start
  • Bank Note = 1 oz gold
  • Bank prints extra notes (primarily to help fund big government).
  • Public wants 1 oz gold for their note.
  • Bank doesn't have it.
  • Run on bank.

Solution you and others seem to propose: Get rid of gold.  That way there is no limit to the number of notes that can be printed.

Solultion those of us in the gold/hard currency camp: Get rid of the notes and just use gold.  Gold will stay stable, it's when you let politicians and bankers (or any entity) manipulate the quantity of money that you have a problem.  With gold the quantity is held constand (or very close) over time and is not manipulatable.

kmarinas86's picture
kmarinas86
Status: Silver Member (Offline)
Joined: Dec 29 2008
Posts: 164
Re: Mathwise, a universal bank is the only viable ...
rhare wrote:
kmarinas86 wrote:

Inadequate backing means too many notes for a given amount of gold, silver, etc. What do you mean that is the opposite?

  • Start
  • Bank Note = 1 oz gold
  • Bank prints extra notes (primarily to help fund big government).
  • Public wants 1 oz gold for their note.
  • Bank doesn't have it.
  • Run on bank.

Solution you and others seem to propose: Get rid of gold.

Wow! Just where do you get that idea from?

rhare wrote:

That way there is no limit to the number of notes that can be printed.

What do you mean? Gold never created any limit to the number of notes that can be printed.

rhare wrote:

Solultion those of us in the gold/hard currency camp: Get rid of the notes and just use gold.

Ok then, I'll get a wallet that can store speck of gold and dispense them with relative ease. Call me back so I can move to that camp.

rhare wrote:

Gold will stay stable, it's when you let politicians and bankers (or any entity) manipulate the quantity of money that you have a problem.  With gold the quantity is held constand (or very close) over time and is not manipulatable.

Again, create technology to make me able to trade speck quanities of gold. At the current price of gold, a 2.3 millimeter cube of gold is worth $10.

You wages could be litterally swallowed by someone else as an act or revenge. Or they could mix in with the soil and you would never find it again.

That is a very, very, very, funny idea.

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