[starsmodelmgmt]

I was just watching a short video about the Banking system in the UK.
http://www.youtube.com/watch?v=CrKV6bfqOck&sns=em. They state that loans can be created by banks without any savings whatsoever . I’ve always thought that banks needed depositors to make loans. Their argument is that money should be debt free. They believe money should be created first then injected into the economy. I don’t think it’s possible but they sure do. What do you think about debt free money? Would it work better than our present banking system?

[dardner]

Hello nymanager,
I watched the vid and then the banner vid on their channel, which better describes their solution. Try as I may, I still don’t fully understand fractional reserve banking. If I am understanding correctly, while the bank can make loans beyond the amount of assets or reserves it is holding, the amount it may lend is related to a percentage of those reserves. http://mises.org/daily/4631 an article by Bob Murphy.

From what I gather from the videos, they want to create a new Bureaucracy, shielded from corporate and political interests (unicorn), that will create money out of thin air and decide how to spend it into the economy.
Of course this merry band of experts will be accountable, whatever that means. When they speak of debt free, they seem to mean that the government will be free from debt, not that ordinary consumers would cease to take on future debt for present wants.

So, how does this money get “injected” into the economy? Who gets it? Why do they get it? If this committee is supposedly shielded from politicians, how does government cover their short falls on all their “necessary and proper” programs? I can think of many scenarios, none of which improve our lot by any degree. To me this all sounds like “abolish the fed and create a new one”

[starsmodelmgmt]

Hi osgood401, thanks for that link to Professor Bob Murphy article at mises.com That answered a lot of questions I have about debt free money and how our banking system actually works.

You brought up some very interesting questions about implementing a debt free money system. I hope that one of the Professors here can help answering those questions.

[dardner]

Hi nymanager,
Here is a link to one theory of debt-free money, among many different theories with similar short falls. Such as Monetarism, MMT and Greenbackers. Tom takes on some greenbacker claims. I have yet to find the guru of this group but if frequent Tom Woods antagonist, FauxCapitalist, gives any indication, then Anthony Migchels might be the guy to checkout. He has a blog and some truly snooze worthy youtube videos, Enjoy.

While perusing the Fauxcapitalism site I came across a remarkable comment by one of their readers. I do not wish to conflate this persons views with that of anyone else, but coming from a self professed “recovering austrian”, I can not imagine how little effort must have been employed in considering himself an Austrian in the first place. So purely for shock and jaw dropping befuddlement, I present:

Carlos

Thanks for the site!

Another “recovering austrian” here, hehe.

But I’ve come to the conclusion money is evil, it’s a bad,unnecesary invention, help yourself, in rural communities.

World before money was better.

They try to contain the debate in the “the current system is bad,banks, bad economy, not working for us… so they attack first with oh, the current system is bad,it’s temporary, just let’s go back to gold/silver and forget this episode…”
No, this is a continuation of the scam known as money.

Freemen have LAND, that’s it, not coins of adamantium or whatever,I don’t care.
Freemen have LAND and communities/tribes,a “folk”.

Money was IMPOSED BY FORCE.

The bigest austrian lie is the “spontaneous” evolution of the “institution of money”.

Money is roman, positive, state law. Not “natural”.

Gold was in very few places,and hard to extract and manufacture, and unnecesary, humanity survived for long without it, so, why the need?

Capitalism is not economics, it’s control, a tractor is not more efficient than 50 neighbors working their own field in a day.

Think on the real cost of the machine, the mines, the development, the needed highways, the petrol, the seller, technicians, the bankers who would OWN now the fields as “security” for the machine…

And they would then centralize the food production in one person, the machine.
Before, working the fields was your right and your food, your security.

If a machine from someone else does it… you’ll have to beg the owner, work in his system…

Cheers!
RC

[jmherbener]

The policy proposal by the greenbackers is to abolish the Fed and turn the power of the printing press over to Congress. Here is Bob Murphy on why that’s a bad idea:

http://www.theamericanconservative.com/articles/the-follies-of-the-modern-greenbacker-movement/

[starsmodelmgmt]

So the money multiplier is wrong and banks don’t need savings to make loans. If this is true I don’t see how we can avoid inflation.

[jmherbener]

Fractional-reserve banks supply credit in two ways: they intermediate the savings of their customers and they credit credit out of thin air by issuing fiduciary media, i.e., checking account balances of their customers that are not backed by a corresponding reserve of cash.

There is no “money-multiplier” for the savings of people that banks intermediate into the credit markets. The “money multiplier” refers only to fiduciary media that banks create out of thin air on the basis of their cash reserves. If the Fed provides prints more money and buys securities from banks, then the banks banks can create a multiple amount of checkable deposits on top of those addition cash reserves.

A monetary system with a central bank and fractional-reserve banks is inherently inflationary, as you say.

Take a look at Murray Rothbard’s book, the Mystery of Banking:’

http://library.mises.org/books/Murray%20N%20Rothbard/Mystery%20of%20Banking.pdf

[starsmodelmgmt]

Thank you Professour Herbener for the information and the link to the Mystery of Banking. I got a much better understanding of how the banking system works.

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