On Fri, Jul 19, 2013 at 5:34 AM, chris peck <chris_peck...@hotmail.com> wrote:
> @ Telmo
>
> Hi Telmo
>
>
>>> The key word here is "leveraged". Ultimately, this level of leveraging
> is only possible because the Fed can create money out of thin air.
>
> You'll have to elaborate on that. As far as I am aware the banks were
> leveraged by money currently in circulation. Loans made by insurance
> companies, pension schemes, hedge funds etc.

Banks themselves have the ability to create money because of
fractional reserve banking:
If the lend money and their clients deposit it, they can lend a good
chunk of it again. Banks act as money supply multipliers.

http://en.wikipedia.org/wiki/Fractional_Banking

> Of course, central banks can print money and they will do that in a crisis
> to ensure liquidity, but Im not aware that they do it to support leverage in
> investment banks.

http://www.federalreserve.gov/faqs/banking_12841.htm

> And they are reluctant to do it at all because of the
> dangers of inflation. But maybe I don't really get your gist here and you
> are saying something more fundamental ...

I'm just an amateur, but I essentially subscribe to the ideas of the
Austrian School of Economics. If you have some time to spare, you can
listen to proper lectures on the subject here:
http://www.youtube.com/watch?v=3vcFJSkYFB8&list=PL1DE4ABD960EC3B2D

>
>>> In a rational resource based economy, this entire situation would not be
> possible to begin with.
>
> Again, you have the edge here because Im new to economics and had to look up
> 'resource based economy'. As attractive as the idea seems to me one thing
> strikes me as essential about it right off the bat and that is that they
> must emerge rather than get imposed. This, to stop them becoming the very
> kind autocracy that they don't wish to be. From a brief read I gather there
> is agreement about that, advocates do not wish to be seen as revolutionary.
> Given that, we seem stuck with the current system for the time being.

Right. There is a group that uses the term, I forgot about that. They
have some nice ideas, but I meant it in the more general sense of:
money as something directly linked to real resources. Not necessarily
gold, but maybe a basket of commodities. Money as non-fiction, if you
will.

>
>>>If you begin with the dogma that government must control the money
> supply, then sure. But it might be a bit early to claim that the
> economy was saved. What I see is western governments accumulating
> unprecedented levels of debt. China seems to be winning the game, but
> then what?
>
> When I say that in mid sept. 2008 the global market was in cardiac arrest I
> really mean that. I think there's a strong case that argues capitalism would
> have come to an end there and then had the central banks not stepped in.

I have no doubt that the current financial system would have
collapsed. I also have no doubt that this would have dire social
consequences. But my view here is that then, capitalism would have had
a chance to actually start. I don't think what we have now is a free
market at all.

You mentioned deregulation before, but I think it's fake deregulation,
because it only applies to the already powerful. The middle class is
still in a prison of red tape. Why can't me and my friends start a
micro-bank, for example? That would be real deregulation.

> Of
> course, solutions to that issue might cause subsequent problems. An
> immediate catastrophe was averted but that isn't to say the system is not
> still in crisis. I can certainly agree with you there. There will be another
> crisis sooner or later and the question is whether we fix the problems we
> observed in 2008 (ie. regulate) or carry on as normal...
>
> As for China, I think the relationship is pretty symbiotic. China, being an
> export economy, can't 'win the game' without US Debt. So what you see
> emerging is less China vs. US and more China + US.

That's well put, I agree.
But I don't think this situation is stable at all. This is all
maintained by a lot of fiction. Money is an abstraction. Contracts are
an abstraction. In the real, physical world, China is accumulating
physical means of production while the USA is losing them (just now
Detroit, a previous American industrial powerhouse, went bankrupt).
This is what disturbs me about contemporary mainstream economists:
they think in abstractions on top of abstractions and forget the cold
harsh reality of stuff. Energy, heating, food, housing. The stuff that
people actually need. In this China/USA "symbiosis", one of the sides
can decide to stop believing in money and survive, and the other side
will perish. Of course I'm being dramatic, the USA would not perish,
but those would not be fun times :)

>
>>> My hope is that bitcoin or something like that will finally set us
> free from the criminals that have been running the financial systems.
>
> I don't think you eliminate fraud by decentralizing a currency and a fair
> amount of fraud has already been associated with bitcoin.

I think we have different meanings for the word. Most of the "fraud"
associated with Bitcoin is in the form of economical transactions
between consenting adults which I don't think the government has any
business interfering with.

What I do mean by fraud is an entire financial system that is rigged
at its core, and when it fails this results in an astronomical
transfer of money from the middle class to the already super-wealthy.
I see no reason why this won't happen over and over again under the
current system of "too big to fail". Politicians will always show up
with their suits and grave faces and explain that there are very
sensible reasons why X has to be done, and every fucking single time X
= transfer more money to the already obscenely rich. Sometimes it is
necessary to use the illusion of choice to appease the people, as in
replacing Bush with Obama.

> Plus, the value of
> a bitcoin seems to fluctuate wildly. Isn't that the kind of value activity
> that necessitates central banks in the first place? Whatever currency the
> future uses it will need to be stable rather than jump and drop in value
> just because a server crashes or an exchange's database gets hacked. Those
> are the cyber equivalents of bad weather and a currency needs to ride them.

You're right, these are real problems. The proponents of bitcoin hope
that the currency will stabilise as it's market cap increases, has the
idea becomes more mainstream, as more and more businesses use it in
physical transactions and so on. I don't think anybody knows for sure
if this is a pipe dream or not. It's a hope...

> And as a side point, you can't have both bitcoin (money) and a resource
> based economy (moneyless).

Again, I didn't mean resource based economy in that sense. Bitcoin
configures a limited supply of money, so it might converge to being
resource-bound *if* it survives for long enough.

Cheers,
Telmo.

> ________________________________
> Date: Thu, 18 Jul 2013 10:15:49 -0700
> From: meeke...@verizon.net
>
> To: everything-list@googlegroups.com
> Subject: Re: Capitalism : the way of creating wealth OUT OF THIN AIR
>
> On 7/18/2013 2:27 AM, Telmo Menezes wrote:
>
> Also, it's a funny moment in History to pretend that giving this much
> power to governments does not have consequences. What if the economy
> is saved but we end up living under a modern global Stasi? This
> sounded like "conspiracy theory" stuff a few weeks ago, but what about
> now?
>
> My hope is that bitcoin or something like that will finally set us
> free from the criminals that have been running the financial systems.
> I still believe in technology more than I believe in politics.
>
>
> But it's technology that's enabling the global Stasi.  If someone had to
> actually listen to your phonecalls and take notes our privacy would be
> secure.
>
> Brent
>
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