On Mon, Dec 23, 2013 at 4:55 AM, Jason Resch <jasonre...@gmail.com> wrote:
>
>
>
> On Tue, Dec 17, 2013 at 6:34 AM, Telmo Menezes <te...@telmomenezes.com>
> wrote:
>>
>> On Mon, Dec 16, 2013 at 9:02 PM, meekerdb <meeke...@verizon.net> wrote:
>> > On 12/16/2013 12:53 AM, Telmo Menezes wrote:
>> >>
>> >> On Mon, Dec 16, 2013 at 5:59 AM, meekerdb <meeke...@verizon.net> wrote:
>> >>>
>> >>> On 12/15/2013 4:23 AM, Telmo Menezes wrote:
>> >>>
>> >>>
>> >>>
>> >>>
>> >>> On Sun, Dec 15, 2013 at 9:49 AM, Bruno Marchal <marc...@ulb.ac.be>
>> >>> wrote:
>> >>>>
>> >>>>
>> >>>> On 14 Dec 2013, at 23:27, LizR wrote:
>> >>>>
>> >>>> I haven't had a chance to watch it, but I do know that banks are
>> >>>> stealing
>> >>>> our wealth - as indeed are rich people generally, since "wealth
>> >>>> breeds
>> >>>> more
>> >>>> wealth" and that more wealth has to be extracted from you and me.
>> >>>>
>> >>>>
>> >>>>
>> >>>> Money and richness is not a problem. It is the blood of the social
>> >>>> system.
>> >>>>
>> >>>> Money and richness is a problem only when it is based on lies, and
>> >>>> when
>> >>>> it
>> >>>> is used to hide the lies and perpetuate them.
>> >>>>
>> >>>> Honest money enrich everybody. True, it is slower for poor, and
>> >>>> quicker
>> >>>> for the rich, but when people play the game "honestly", everyone win,
>> >>>> and
>> >>>> poverty regress.
>> >>>>
>> >>>> In a working economy, there are few poor. Presence of poverty means
>> >>>> that
>> >>>> there are stealers and bandits (or war or catastrophes). Accusing the
>> >>>> system
>> >>>> and money itself is all benefices for the bandits. It dilutes their
>> >>>> responsibility and wrong-doing in the abstract. It helps them to feel
>> >>>> like
>> >>>> not guilty.
>> >>>>
>> >>>> As I said, criticizing the economical system is like attributing to
>> >>>> the
>> >>>> blood cells the responsibility of some tumor since the blood cells
>> >>>> feeds
>> >>>> it.
>> >>>> It hides the real root of the problem, and focus on the wrong target.
>> >>>
>> >>>
>> >>> I agree, unsurprisingly. :)
>> >>> I also agree with Liz, in that it is clear who is stealing the money.
>> >>>
>> >>> The "rich get richer" is a very fundamental phenomenon. Even if we
>> >>> remove
>> >>> money from society, it will still happen because it also applies to
>> >>> social
>> >>> interactions. The more friends and alliances you have, the more likely
>> >>> you
>> >>> are to get new ones. This is the reason why every entrepreneur seeks
>> >>> the
>> >>> allegiance of celebrities. It's a more subtle form of currency.
>> >>>
>> >>> However, we got trapped into a system that effectively amplifies "rich
>> >>> get
>> >>> richer" dynamics. This system is central banking -- since the powerful
>> >>> have
>> >>> the capacity to issue fiat money in the form of debt, two things
>> >>> happen:
>> >>>
>> >>>
>> >>> It doesn't take central banking to make the rich get richer.
>> >>
>> >> Yes, that is what I said. My claim is that central banking amplifies
>> >> the
>> >> effect.
>> >>
>> >>> Ever since
>> >>> civilization began the rich have been able to get richer just by
>> >>> owning
>> >>> stuff. For a couple of millenia it was owning land.  If you owned land
>> >>> then
>> >>> serfs and peasants had to pay you for working the land.  Then
>> >>> merchantilism
>> >>> added ships to what you could own.  Then industrialization added mines
>> >>> and
>> >>> oil and factories.  Banking and insurance added financial instruments
>> >>> that
>> >>> you could own.  But it's all of a piece.  If you own stuff that you
>> >>> can
>> >>> rent/lend you're rich and you can get richer.
>> >>
>> >> But central banks can print new money. This new money is lent. The
>> >> more money you have, the more new money the banking system will lend
>> >> to you. Thus the amplification. Also, the marginal value of money
>> >> decreases the more you have, so this devaluation and speculation with
>> >> new money exposes the poor to more risk, while they don't actually
>> >> have access to the investment opportunities that the rich have.
>> >
>> >
>> > You always refer to "central" banks.  But all banks always did this.
>> > The
>> > bank would take 1M$ in deposits and then make 10M$ in loans, depending
>> > on
>> > the fact that statistically only a few depositors would ask for their
>> > money
>> > at any one time.  So they collected interest on 10M$ while only having
>> > to
>> > pay interest on 1M$ (if at all).
>>
>> I agree. It is interesting to notice that it is highly illegal if a
>> private citizen does this, but it is the business model of modern
>> banks. An advantage of bitcoin is that it removes the need for the
>> bank as a storage facility. It will still be useful to have security
>> experts providing safe wallets, but they will not be able to behave as
>> banks and lend your money.
>>
>> We already have pear to pear lending, although it is illegal in many
>> places. Again, with bitcoin, it will be very hard to regulate against
>> such behaviours, and I think that is a good thing.
>>
>> The current situation is very unfair. We need banks to store our
>> money, and they get to invest it in ways that we are not allowed.
>> Then, we don't get any of the profit the bank generates from our own
>> money. This also amplifies "rich get richer" dynamics.
>>
>> > Of course this occasionally resulted in
>> > "runs" on banks and consequence failure of the bank.  Central banks were
>> > set
>> > up as part of a system to regulate this.  The central bank insures
>> > deposits,
>> > but also the same regulatory system limits the discount rate, i.e. the
>> > amount of money a bank has to have as a fraction of what it can loan.
>> > So
>> > Central banks exist to *limit* the "printing" of money.
>>
>> I guess you buy into the narratives of power more easily than I do. We
>> have different personalities in that regard. Maybe you're right, but I
>> don't think you are.
>>
>> What I observe is that central banks control the supply of money and
>> the price of money. This is bound to create an elite that has
>> incredible power over the rest of us, including power over
>> governments.
>>
>>  "Let me issue and control a nation's money and I care not who writes the
>> laws."
>> - Mayer Amschel Rothschild
>>
>> A simple, straightforward solution in terms of regulation would be to
>> forbid fractional-reserve banking by default. No central banking
>> needed. If banks wanted to loan my money, then they would need my
>> agreement and they would need to share the profits, and I would share
>> the risk. But this is never on the table.
>>
>>
>> In the same vein that politicians tell us that bailing out the big
>> banks is unfair but unavoidable, but they never comment on why not
>> bail out the people who's lives have been destroyed by the banks, and
>> who payed the taxes that make the bailout possible in the first place.
>> Again, never on the table.
>
>
>
> Telmo,
>
> I would be interested to hear your thoughts about the "one dollar of
> capital" idea, explained here: http://market-ticker.org/akcs-www?post=209282
>
> In short, it is the idea that for every dollar of money lent by an
> institution must be backed by one dollar of capital held by that same
> institution.  This would forever prevent the need to "bail out" failed
> institutions.

Hi Jason,

I think this would be a much better financial system, and I agree with
all the advantages that the author mentions. I don't think it's a
perfect system because central banks would still control the interest
rate, but the damage that could be made by this would be much lower
without leverage. My main scepticism is over the ability to implement
this:

- It appears that this would only be possible if it also came with
regulations over campaign funding, including repealing the decision
that corporations are people and have free speech rights. I don't see
how it could happen otherwise, because politicians who agree with "one
dollar capital" would not have access to the levels of funding of
their competition. This is the sort of idea that sounds sensible (and
it is), but would require some revolution.

- Even if it went through, how could it be guaranteed to be stable
against future tampering? Wouldn't it just be repealed sooner or
later, like Glass-Steagall? Regulation and norms that produce
prosperity tend to be paradoxically self-defeating. Sooner or later
"this is different now" thinking creeps in. This is different now: the
NSA is not like the Stasi at all, etc...

So, in short: I would definitely vote for this, but wouldn't feel too
optimistic about it.

The reason why I put more faith in cryptocurrencies is that, if one or
several of them succeed, then it won't be possible to tamper with what
made them work in the first place. The other thing that excites me is
that more and more cryptocurrencies are being tried. If I have an
ideology, it's experimentalism. Technology finally allows us to
experiment with currency, weather the politicians like it or not.

Telmo.

> Jason
>
>>
>>
>> > And the policy is generally adjusted to try produce small, but positive
>> > inflation.  This is because deflation is considered unstable.  Inflation
>> > is
>> > stable and encourages investment because just holding money loses value.
>>
>> Yup, it's the current dogma. Infinite growth. I would argue that if
>> you want to cut CO2 emissions, this would be a good place to start.
>>
>> >
>> >>
>> >>>   Of course you can also
>> >>> influence government and governments exist largely to protect your
>> >>> property
>> >>> rights.
>> >>>
>> >>>
>> >>>
>> >>> - The money I have in my pocket is not safe. They can devalue it and
>> >>> there
>> >>> is nothing I can do about it. They have a strong incentive to devalue
>> >>> my
>> >>> money because they can give the new money they created to their
>> >>> allies,
>> >>> through sophisticated mechanisms. It is very cleverly disguised, but
>> >>> it's
>> >>> still plain old theft;
>> >>>
>> >>>
>> >>> That means you have a strong incentive to invest/spend your money.
>> >>> And
>> >>> that
>> >>> applies also to a rich person that has a lot of money - inflation
>> >>> encourages
>> >>> him to spend it on something.
>> >>
>> >> Right, and this prevents the bulk of the population from escaping wage
>> >> slavery even though technology could replace labour.
>> >
>> >
>> > The reason technology doesn't allow them to escape is that they
>> > generally
>> > can't buy the technology to replace their labor.  When they can, as for
>> > example farmers do by buying tractors, cultivators, etc, then they
>> > replace
>> > the laborers they would otherwise employ. This causes the latter to
>> > escape
>> > wage slavery by being unemployed.
>>
>> True, but in other models, like the deflationary model implied by
>> bitcoin, as the need for human labour contracts, the fees for the
>> remaining that is necessary increases (in a free market). A good
>> direction for society would be to reduce the amount of years one has
>> to work to pay for one's life. Imagine the deal: maybe society doesn't
>> really need any more physicists urgently, but maybe it needs plumbers.
>> What if you could work as a plumber for 5 years and then spend the
>> rest of you life pursuing your own interests? I don't see why we
>> couldn't create a system with this type of incentive, except that it's
>> never on the table. Democracy provided for a very limited menu.
>> Sometimes there's a special, but unlike nice restaurants, you get last
>> week's meal with some food colouring to pretend it's lobster
>> casserole.
>>
>> >
>> >>
>> >>> So one of the reasons for the current
>> >>> recession is that wealth is very concentrated by inflation is quite
>> >>> low,
>> >>> so
>> >>> corporations and wealthy persons are not motivated to take much risk
>> >>> on
>> >>> investing their money; they can easily wait and see.
>> >>
>> >> I would argue that a deeper reason is that technology made many jobs
>> >> disappear, but the inflationary economic system we live under cannot
>> >> accommodate that.
>> >
>> >
>> > I'd say it accommodates that just fine from an economics standpoint.
>>
>> If it did we would need to work less years to pay for our lives.
>> Instead, we have to work more and get less money for it.
>>
>> > In the
>> > U.S. the recession only lasted a year after the mortgage crisis; the GDP
>> > started back up.  BUT unemployment has remained high for three years.
>> > And I
>> > think you are right that technology is a good part of the reason for
>> > that.
>> > But the other part is just because many are unemployed and many more are
>> > concerned about their economic security, consumer spending is low.  The
>> > rich
>> > won't invest in making stuff if they think it will be hard to sell it.
>> > So
>> > there's a negative feedback - deflationary instability.
>> >
>> >
>> >>
>> >>> - The more wealthy, who can invest, can leverage their investments by
>> >>> orders
>> >>> of greatness. The more money you have, the more you can leverage it
>> >>> (by
>> >>> effectively creating new "fake" money). The poor are the most
>> >>> vulnerable
>> >>> to
>> >>> the inevitable systemic collapse that a debt-based economy will
>> >>> create.
>> >>> The
>> >>> poor implicitly risk their homes and means of survival when the rich
>> >>> play
>> >>> the big casino game of leveraged investments, derivative markets and
>> >>> so
>> >>> on.
>> >>>
>> >>>
>> >>> But that money isn't fake.
>> >>
>> >> Yes, maybe a better word is stolen, because it was created by diluting
>> >> the value of the money in people's banks accounts, but it is then
>> >> given to other people.
>> >>
>> >>> The poor may lose their home which has real
>> >>> value.  And even if they don't lose their home they end up paying
>> >>> excessively for the money they borrowed to buy it - that's real labor
>> >>> value.
>> >>> The rich gain real money, not just fake.  All over Southern California
>> >>> houses whose value dropped and are threatened with foreclosure are
>> >>> being
>> >>> bought up for cash.  It's not poor people who can pay $500,000 in cash
>> >>> for a
>> >>> house.
>> >>>
>> >>>
>> >>>
>> >>> Bitcoin might solve these two problems.
>> >>>
>> >>>
>> >>> Naah.  It's just another medium of exchange.
>> >>
>> >> Unlike the existing mediums of exchange after the end of the gold
>> >> standard, a central authority cannot issue more bitcoins. Bitcoins can
>> >> only be produced by mining, with a predictable and increasing
>> >> computational effort, and up to a certain amount. So in some point in
>> >> the future the last bitcoin will be mined, and that's it. If I own a
>> >> bitcoin right now, I do not have to fear that it will get devalued by
>> >> political decisions. Also, it is not possible for a bank to lend
>> >> bitcoin that it doesn't own or that were lend to it, so there is no
>> >> amplification effect.
>> >
>> >
>> > That's like going on a gold standard.  There's only so much gold. Which
>> > is
>> > both an advantage, in that is prevents inflation devaluing the gold, but
>> > also a disadvantage in that there's not enough to support the level of
>> > international trade.  But ultimately trade depends on trust in the
>> > system.
>> > There's nothing to prevent a bank that owns 1M bitcoins from lending 10M
>> > in
>> > bitcoin value.  It's all numbers in ledgers.
>>
>> With bitcoin, why would I risk my money with fractional-reserve
>> banking when I can store it myself with some strong cryptography,
>> including backups in services that are much cheaper than banks and
>> gain no control over it?
>>
>> >
>> >>
>> >> I'm not saying that Bitcoin is a silver bullet that will solve all of
>> >> the problems, but I find it hard to argue that it does not prevent
>> >> inflation by the actions of central authorities and that it does not
>> >> prevent the ability of the rich to leverage their investments by 1000x
>> >> like they can do in derivative markets with fiat currency.
>> >>
>> >>>   Whoever owns a lot of stuff
>> >>> will still be able to use it to get more -
>> >>
>> >> Yes, this is true even without money, as I said before.
>> >>
>> >>> without actually producing the
>> >>> extra value, rather by taking it from those who have little.
>> >>
>> >> One advantage of having rich people is that they can tolerate more
>> >> risk. This allows for the allocation of resources to speculative ideas
>> >> that could improve everyone's lives in the future.
>> >
>> >
>> > That's fine and companies like H-P and Apple and Google were started
>> > that
>> > way.  But some enterprises are too big and risky for private investors.
>> > So
>> > satellites, vaccination, GPS, the internet, radar,...were underwritten
>> > by
>> > government investment.
>>
>> It's hard for me to argue against this because it's circular. The
>> private sector is not allowed to do certain things under free
>> competition (as is he case with communications and health care), and
>> then people argue that the government is needed to do these things.
>> Maybe you're right, but we don't really know. I think it's worth a
>> try, but that is not on the table. Also, notice that all of the
>> above-mentioned innovations were motivated by increasing military
>> power. Then they had nice externalities for the general population,
>> but I very much doubt that the government would care if it weren't for
>> the military applications. I would rather have a slower pace of
>> innovation and no wars.
>>
>> > The problem with rich people is many just inherited their wealth and
>> > then
>> > they grow it just by "renting" it, without contributing anything
>> > actively.
>>
>> I agree, this is a problem. However, I cannot think of any way to fix
>> it that doesn't introduce even more unfairness (because it doesn't
>> matter what regulations you come up with, a lot of money will buy you
>> a way around them). You see this with taxes, where the power narrative
>> is social fairness but the reality is that the middle class ends up
>> paying all of them.
>>
>> > I always find it fascinating when a candidate for the U.S. Presidency is
>> > asked about his wealth (and most of them are wealthy).  He generally
>> > disclaims any knowledge of how it is managed and says he has put it in a
>> > blind trust.  This always raises the question in my mind, "If you're not
>> > even managing the money (and you probably haven't for years) why should
>> > any
>> > of the proceeds go to you?  It's just money earning money."
>>
>> This is similar to the height of the Roman Empire. I think there are a
>> lot of similarities between the US and the Roman Empire, especially in
>> their respective transitions from Republic to Empire.
>>
>> "History doesn't repeat itself, but it does rhyme."
>> -- Mark Twain
>>
>> Telmo.
>>
>> >
>> > Brent
>> >
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