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Supercilious
10-02-08, 02:39 PM
I think serious discussion of banking system is needed. We are going now towards a fractional or 0 reserve banking system based on fiat money as bank reserves.



I hope we will be a great country again, but to do that we will need at least a parallel system with metallic money competing with paper money. I would argue that is the BEST system to pursue at this time, you get the flexibility of FIAT with the ability to opt out and have the security of a Gold/silver based system.

You need to have both because you will need the unlimited credit potential of the first (to save the economy and fund the next bubble) backstopped with the safety of the second.

This is what have now and it's not stable. Even bimetallism standards proved unstable.

Gold standard and fractional reserve banking don't work well together resulting invariably in deflationary collapses.

Gold standard and full reserve banking is crippling for the economy and was abandoned in the middle ages.

There are too many unbound variables in the classic banking systems and stability cannot be achieved. They are torn apart by money demand pressure or out of control expansion of money supply. Unstable evolution can be corrected only through major ... corrections :D

Is there any system out there that allows for a dynamic feed-back system without significant oscillations (boom-bust cycles)?

There is a lot of buzz lately about these self regulating banking systems. I'm talking about linking the minimum bank lending rates to the levels of their reserves (reserves with a standard made of a basket of high velocity- high volume commodities such as: oil, kilowatt hour, wheat etc)

Anybody knows more about this? I find the subject very challenging and intriguing.

jtabeb
10-02-08, 04:00 PM
I think serious discussion of banking system is needed. We are going now towards a fractional or 0 reserve banking system based on fiat money as bank reserves.



This is what have now and it's not stable. Even bimetallism standards proved unstable.

Gold standard and fractional reserve banking don't work well together resulting invariably in deflationary collapses.

Gold standard and full reserve banking is crippling for the economy and was abandoned in the middle ages.

There are too many unbound variables in the classic banking systems and stability cannot be achieved. They are torn apart by money demand pressure or out of control expansion of money supply. Unstable evolution can be corrected only through major ... corrections :D

Is there any system out there that allows for a dynamic feed-back system without significant oscillations (boom-bust cycles)?

There is a lot of buzz lately about these self regulating banking systems. I'm talking about linking the minimum bank lending rates to the levels of their reserves (reserves with a standard made of a basket of high velocity- high volume commodities such as: oil, kilowatt hour, wheat etc)

Anybody knows more about this? I find the subject very challenging and intriguing.


There you go Klutzing it all up.:D

1. I think serious discussion of banking system is needed. We are going now towards a fractional or 0 reserve banking system based on fiat money as bank reserves.

No we are NOT. We are going to go to a multi-metallic / Fiat currency system.
The mint is going to release all of the US vault gold in 2009 as part of the
new 2009 Ultra High Relief Coin Program.

http://www.usmint.gov/mint_programs/ultrahigh/

That will provide the basis for the Multi-metallic/ fiat currency system.

2. This is what have now and it's not stable. Even bimetallism standards proved unstable.

NO, this is most certainly NOT what we have now. Currency appreciation in dollars is not taxed, currency appreciation in gold is taxed at 35%. I said dual parallel system. For that to happen the currency appreciation in gold would be taxed at 0%, to make things equal. AND currency appreciation in Platinum, Palladium and Silver WOULD ALSO HAVE TO BE TAXED AT 0%.

Bi-Metalism is stupid, you can't fix an (any) exchange rate (the gold/ silver ration in this case) and expect something good to happen. Haven't we PROVED THAT by now?

3. Gold standard and fractional reserve banking don't work well together resulting invariably in deflationary collapses.

3.1 Gold standard and full reserve banking is crippling for the economy and was abandoned in the middle ages.

Duh? And Duh? Did I say that we are going to either of THOSE systems? NO. I said we are going to a parallel Multi-metallic currency AND a FIAT currency. Read what I said, please.

4. There are too many unbound variables in the classic banking systems and stability cannot be achieved. They are torn apart by money demand pressure or out of control expansion of money supply. Unstable evolution can be corrected only through major ... corrections :D

Wrong, all you have to do is set up a boundary condition that permits flows from the unstable system into the stable system, then ultimately, you end up with one stable system at the end. Initially you will have instability in ONE SYSTEM, Not BOTH, because flows will only be one-way on a net basis. Guess which one will have the instability? This is why you have to have two systems, to provide for a evolution of the of the process from a chaotic system (fiat), transition (dual parallel), to stable (muliti-metallic only).

5. Is there any system out there that allows for a dynamic feed-back system without significant oscillations (boom-bust cycles)?

THIS IS NOT desireable until you get the economy to the end state. (transformed into an alt-e and infrastructure machine). You do NOT WANT STABILITY at this point. You WANT STABILITY after the transformation IS COMPLETE.

6. I ignored the rest, not material.

(P.S. I lied, 187, symbols will get the significance:))

Rajiv
10-02-08, 04:26 PM
See the suggested sites I just posted (http://itulip.com/forums/showthread.php?t=5635)

along with some of Margrit Kennedy's work (http://www.margritkennedy.de/index.php?lang=EN)

Also Ellen Hodgson Brown's "The Web of Debt" (http://www.webofdebt.com/)

Supercilious
10-02-08, 05:27 PM
See the suggested sites I just posted (http://itulip.com/forums/showthread.php?t=5635)

along with some of Margrit Kennedy's work (http://www.margritkennedy.de/index.php?lang=EN)

Also Ellen Hodgson Brown's "The Web of Debt" (http://www.webofdebt.com/)
Thank you Rajiv. Do you also have any materials on these new dynamic feed-back systems?



There you go Klutzing it all up.:D

1. I think serious discussion of banking system is needed. We are going now towards a fractional or 0 reserve banking system based on fiat money as bank reserves.

No we are NOT. We are going to go to a multi-metallic / Fiat currency system.

Could you please define the "multi-metallic/Fiat currency system"? Especially the "multi-metallic" part...



The mint is going to release all of the US vault gold in 2009 as part of the
new 2009 Ultra High Relief Coin Program.

http://www.usmint.gov/mint_programs/ultrahigh/

That will provide the basis for the Multi-metallic/ fiat currency system.

I don't understand. If the mint releases all US vault gold, it seems to me that this looks more like an effort of total demonetization of gold (elimination of gold as a power money/banking reserve class). This, incidentally confirms my tinfoil hat theory, but it looks more like a fractional reserve system based entirely on fiat money (treasuries) as reserve/power-money.

Could you expand on this subject?

phirang
10-02-08, 05:31 PM
There is no problem with a gold standard. In the middle ages, there WAS credit: italy had credit. The medici were money lenders.

If you lived in post-napoleon egypt, you could get credit at 80% interest to go harvest slaves in central africa. Clearly, slave-trading was incrediably profitable, because it could jsutify 80% interest rates with effectively 0% inflation.

i think what happens is that easy credit reduces rate of returns necessary to payback the debt, and so you end up with massive malinvestmet. I agree with the austrians on this bit.

jtabeb
10-02-08, 05:54 PM
Thank you Rajiv. Do you also have any materials on these new dynamic feed-back systems?




Could you please define the "multi-metallic/Fiat currency system"? Especially the "multi-metallic" part...

"Parallel" as in two operative simultaneous systems.

"Multi-metallic" as in Gold, Silver, Platinum, and Esp. Palladium, all floating against one-another and FIAT currency. But all equally fungible.




I don't understand. If the mint releases all US vault gold, it seems to me that this looks more like an effort of total demonetization of gold (elimination of gold as a power money/banking reserve class). This, incidentally confirms my tinfoil hat theory, but it looks more like a fractional reserve system based entirely on fiat money (treasuries) as reserve/power-money.

Could you expand on this subject?

You are right and wrong at the same time.

You need to maintain the usefullness of the FIAT system up until the point where the economy is sufficiently transformed (nearly off of Oil based transport fuels and with required upgrades to transport infrastructure, esp electrical grid, highway systems, communications backbone, and rail systems) . What I mean to say is that this is the necessary boundry condition to allow net one-way capital flows. You can't ruin the fiat system right now, we are not in sufficient conditon to press forward with transformation.

So you are seeing the necessary "treasury standard" as you put it, to give the US the lion's share of global capital flows. Then, when we get all of this inflow (and we will, becasue we are bailing out everybody) you go to parallel systems (multi-metalic and fiat). Eventually, you would, by default, end-up with only the multi-metallic currency, because no one in their right mind would take a pig's ear over a silk purse.

So you are correct, initially 100% FIAT treasury reserve system, then you progress to parallel systems and then via forcing function end up at multi-metalic.

(sorry, hope that makes sense, gotta run kids to soccer practice, I'll fix it later)

Rajiv
10-02-08, 06:40 PM
Thank you Rajiv. Do you also have any materials on these new dynamic feed-back systems?

You may want to look at "The How and Why of a New Monetary System" (http://userpage.fu-berlin.de/~roehrigw/gloetzl/howand.htm) by Dr. Erhard Glatzl

It is similar to the work of Margrit Kennedy

A few more articles here - http://userpage.fu-berlin.de/~roehrigw/Welcome.html#english


This article discusses the meaning of money and why interest is an important cause of increasing economic, ecological and social problems in our society. It shows how our monetary system has to be reformed to overcome these problems.

Abstract

Interest causes a consecutive growth of monetary assets and their concentration in the hands of a few (see section 7). The destabilisation of society caused by these facts have been realized in former centuries. But because interest is necessary to insure traditional money circulation (see section 4.2) and the system would crash without interest (see section 4.4), interest was never abolished. After World War II the negative effects of the interest orientated system could be compensated by a growing economy but the effects get worse as the economy ages (see section 7.7). This is the origin of various social tensions. In the long term there is the danger of an economic, ecological and social crash of society.

In section 8 I show that a reduction of debts is not possible within the actual economic system.

By introducing a new monetary system by means of a royalty, hoarding of money can be prevented, as shown in section 9.1. Combined with a credit fee the general level of interest can be decreased so that the rate for long term capital assets can be set near zero, whereas on the other hand the rate of credit interest is set on the free market as it is today. At the same time it is shown, that the national bank can keep inflation at exactly 0 % by prohibiting money creation by business banks.

The main consequence of the new monetary system is that the actual incomes from monetary unearned incomes from credits would be transferred to the public via the state by means of the user and credit fee (see section 9.2.). This is the price for ensuring the stability of society in the long run.

This type of money system was already put into practice with success on two occasions: once inadvertedly in the middle ages (see section 9.5) and once deliberately in 1933 in Worgl (see section 9.6). It is mainly built on the ideas of Silvio Gesell (1916) and was discussed positively in the main work of the famous British economist John Maynard Keynes (1936).

Supercilious
10-14-08, 07:18 PM
You may want to look at "The How and Why of a New Monetary System" (http://userpage.fu-berlin.de/%7Eroehrigw/gloetzl/howand.htm) by Dr. Erhard Glatzl

It is similar to the work of Margrit Kennedy

A few more articles here - http://userpage.fu-berlin.de/~roehrigw/Welcome.html#english (http://userpage.fu-berlin.de/%7Eroehrigw/Welcome.html#english)
Rajiv, thanks for all the links (finished reading them all), but I still couldn't find what I was looking for. IMHO none of the proposed systems is viable (at least not in competition with the current system).
IMHO neutral money system cannot survive in competition to an usury based system if a free currency exchange regime is imposed.

What I was looking for was dynamic feedback (real time) self regulating systems and I couldn't find anything about that In the links or for that matter anywhere else on the internet. I guess I have to go in the library.

marvenger
10-14-08, 07:48 PM
I know steve keen is very keen on dynamic modelling, both the real economy and the monetary system. He may not be personally involved in the areas you're interested in but the guy is an encyclopedia and will probably know where to point you if you contact him.

Supercilious
10-14-08, 09:10 PM
I know steve keen is very keen on dynamic modelling, both the real economy and the monetary system. He may not be personally involved in the areas you're interested in but the guy is an encyclopedia and will probably know where to point you if you contact him.
Thank you marvenger. At least some some basic pointers to links or tiles of articles that can start from. Everywhere I search there are only variations of neutral/lease currency models.

Rajiv
10-14-08, 11:03 PM
Ah! You mean to say that the Central bankers would never let such a system happen! That is indeed true, as was shown by the Worgl system -- also, the system tends to be egalatarian -- as was shown by the middle age experience.

The usury based system concentrates money and power in the hands of a few people while the other system tends to spread the money and power. That could be one reason that such a system has been opposed.

See Chapter 9 of the glatzl book!

Supercilious
10-15-08, 03:45 AM
Ah! You mean to say that the Central bankers would never let such a system happen! That is indeed true, as was shown by the Worgl system -- also, the system tends to be egalatarian -- as was shown by the middle age experience.

The usury based system concentrates money and power in the hands of a few people while the other system tends to spread the money and power. That could be one reason that such a system has been opposed.

See Chapter 9 of the glatzl book!
Not only that the Central banksters would not let such a system happen, but if such an ideal currency establishes a free convertibility regime or free trade with an usury-based currency, inevitably a carry trade occurs and the neutral currency is conquered or the country having it as a national currency becomes bankrupt or weaker and is conquered by the country/countries governed by usury.

How do you think the Western European civilization began it's road to global dominance after the dark ages ???
Remember what happen to Hapsburg Spain after they took a "medieval" approach to usury. After the Jewish bankers were killed or went to exile, the Christians who wanted to get into the banking business needed a special sanction from the religious/state authorities. Such an usury sanction, when granted, was equivalent to booking a ticket with the Inquisition's travel agency: Dark Cellars Adventure Tours. So, after the Spanish Empire strangled its own usury-based banking system, all the gold and silver from The New World, brought back by conquistadors, ended in Netherlands and England fueling the economic and trade development there.

Even the Catholic Church had to step over the biblical percepts and create it's own (100% Christian and without sin :D) usury banking system. It started camouflaged as pawnbroker houses, and of course, it was properly branded: Monti del Pieta (Mountains of Piety).. and that was ok, because the profits were going only to charity work ... Catholic charity ... and the charity funds were of curse controlled by the Catholic Church.:)

A country with an usury banking system would always outperform (and eventually conquer) a country with limited usury in banking if those countries have interconnected economies. It's a matter of economic darwinism.

marvenger
10-15-08, 08:55 AM
nice guys finish last

marvenger
10-15-08, 09:07 AM
how about all usurers get neutered, a little man influenced darwinism. probably going too far.

I think you're on the right track though symbols. In this modern internet age we need to try to educate as much as possible that a monetary system does not need to be usurous and legislation against it is necessary. Usury is the weed that competes very well and we all need to become vigilant gardeners....sorry that's the best analogy I can come up with

Rajiv
10-15-08, 09:50 AM
The carry trade will be difficult -- because the interest free currency has an automatic demonetization built into it (it does respect the time value of money - it has to be spent fast - and exchanged for something of lasting value relatively soon -- or exchanged for new currency after paying signatory fees -- just no interest is paid!) -- so the risks for the carry trader are quite large -- and I am presuming that the interest free currency will be in a greater demand than the interest bearing one, and since there are automated supply constraints built into the system -- the scenario you outline is less likely to occur.

Read again about how the Worgl system worked -- I am fairly sure that there was a de facto dynamic feedback loop system that worked quite well to regulate the money supply.

Supercilious
10-15-08, 12:23 PM
The carry trade will be difficult -- because the interest free currency has an automatic demonetization built into it (it does respect the time value of money - it has to be spent fast - and exchanged for something of lasting value relatively soon -- or exchanged for new currency after paying signatory fees -- just no interest is paid!) -- so the risks for the carry trader are quite large -- and I am presuming that the interest free currency will be in a greater demand than the interest bearing one, and since there are automated supply constraints built into the system -- the scenario you outline is less likely to occur.
IMHO there is no realistic possibility to prevent carry trade between a neutral currency and a usury based currency. When franciscans had their war against usury, the jesuits invented the usance game, which was usury disguised as currency exchange.




Read again about how the Worgl system worked -- I am fairly sure that there was a de facto dynamic feedback loop system that worked quite well to regulate the money supply.

IMHO Worgl was a constraint case not a real dynamic feedback.

The dynamic feed back currency systems are based on usury and can thrive in competition with a non self regulating usury system. The closest to such implementation to such a model is Grameen Bank, but it's still not a real dynamic feeback system, being limited mostly to destitute people expelled from the official banking system. ( Some of the loan sharks in Banghladesh were actually primitive SIV's ).

How can you make a Grameen bank to work as a CB at national level in condition of free trade and free currency exchange?

ocelotl
10-15-08, 01:03 PM
There you go Klutzing it all up.:D

1. I think serious discussion of banking system is needed. We are going now towards a fractional or 0 reserve banking system based on fiat money as bank reserves.

No we are NOT. We are going to go to a multi-metallic / Fiat currency system.
The mint is going to release all of the US vault gold in 2009 as part of the
new 2009 Ultra High Relief Coin Program.

http://www.usmint.gov/mint_programs/ultrahigh/

That will provide the basis for the Multi-metallic/ fiat currency system.

2. This is what have now and it's not stable. Even bimetallism standards proved unstable.

NO, this is most certainly NOT what we have now. Currency appreciation in dollars is not taxed, currency appreciation in gold is taxed at 35%. I said dual parallel system. For that to happen the currency appreciation in gold would be taxed at 0%, to make things equal. AND currency appreciation in Platinum, Palladium and Silver WOULD ALSO HAVE TO BE TAXED AT 0%.

Bi-Metalism is stupid, you can't fix an (any) exchange rate (the gold/ silver ration in this case) and expect something good to happen. Haven't we PROVED THAT by now?

3. Gold standard and fractional reserve banking don't work well together resulting invariably in deflationary collapses.

3.1 Gold standard and full reserve banking is crippling for the economy and was abandoned in the middle ages.

Duh? And Duh? Did I say that we are going to either of THOSE systems? NO. I said we are going to a parallel Multi-metallic currency AND a FIAT currency. Read what I said, please.

4. There are too many unbound variables in the classic banking systems and stability cannot be achieved. They are torn apart by money demand pressure or out of control expansion of money supply. Unstable evolution can be corrected only through major ... corrections :D

Wrong, all you have to do is set up a boundary condition that permits flows from the unstable system into the stable system, then ultimately, you end up with one stable system at the end. Initially you will have instability in ONE SYSTEM, Not BOTH, because flows will only be one-way on a net basis. Guess which one will have the instability? This is why you have to have two systems, to provide for a evolution of the of the process from a chaotic system (fiat), transition (dual parallel), to stable (muliti-metallic only).

5. Is there any system out there that allows for a dynamic feed-back system without significant oscillations (boom-bust cycles)?

THIS IS NOT desireable until you get the economy to the end state. (transformed into an alt-e and infrastructure machine). You do NOT WANT STABILITY at this point. You WANT STABILITY after the transformation IS COMPLETE.

6. I ignored the rest, not material.

(P.S. I lied, 187, symbols will get the significance:))

From this I see that somehow the ideas behind the silver monetizing proposal on Mexican Congress have permeated outside... Good for you.

As you say, jtabeb, it will be better and more stable if the value rate between gold and silver is determined by the market, as it has been since 1933. Point is that a multimetallic/fiat system benefits from Gresham law, instead of being damaged by it. The way it must be handled is by weight, not by fixing the value of coinage to a number, as was done last time the worls had multimetallic system.

For savings and large local transactions, PM's can stand as the base store of value, and for international trade, fiat can be used whenever it is accepted.

A multimetallic/fiat system has another benefit. It can rationalize trade, since no country will be able to run large deficits for an extended time without risking its fiat to devalue against the rest of fiats and PM's.

Eventually, due to lack of demand and generalization on the use of the multimetallic system, fiat will turn from computer numbers to mint/vault certificates, that must be controlled carefully. Actual technology allows us to track each certificate without problems.

Rajiv
10-15-08, 01:14 PM
IMHO Worgl was a constraint case not a real dynamic feedback.

How can you make a Grameen bank to work as a CB at national level in condition of free trade and free currency exchange?

Yes you could be right on that -- some serious modelling work would have to be done. A Grameen Bank model may well be the answer

Here are some links on that on appropriate-economics.org (http://www.google.com/custom?hl=en&client=pub-8663056167417275&channel=4422128524&cof=FORID%3A1%3BGL%3A1%3BL%3Ahttp%3A%2F%2Fwww.comp lementarycurrency.org%2Fcc_logo_100x100.jpg%3BLH%3 A50%3BLW%3A56%3BLBGC%3AFFFFFF%3BLC%3A%230000ff%3BV LC%3A%2399cc66%3BGFNT%3A%2399cc66%3BGIMP%3A%2399cc 66%3BDIV%3A%2399CC66%3B&domains=www.complementarycurrency.org%3Bwww.approp riate-economics.org%3Bwww.network-economies.com&q=grameen+bank&btnG=Search&sitesearch=www.appropriate-economics.org)

Judas
11-12-08, 12:19 AM
The following gives an explanation of the "real bills", and the use of bills of exchange for clearing in a metallic standard environment.

http://www.financialsense.com/editorials/fekete/2008/1107.html