I like where you head is at, but nationalizing a broken system won't solve the problem. The problem is the system itself. It needs to be replaced. The concept of Fractional Reserve is the problem. While I agree that Gold Standard was probably best, it was never going to last for an economy now tipping the scales at $17 trillion. The real issue is the Federal Reserve and the charter Congress gave it back in 1913. Central Banks around the world are now the problem - Public Enemy Number #1, with the IMF and World Banks running a close Number #2. Pumping more "money" into the system won't solve long range problems and will only lead to more stagnation in economic growth. Money "is" debt because of the 9:1 leverage that Banks get to use each time they put a buck on the street. They are making money through the back door of the Fractional Reserve system while the rest of society picks up the tab. All the while, the USD because even more devalued over time, both here at home and abroad. 1913, was probably "one" of the worst years in all of American history, if the real truth be told. The solution? Eradicate the Fed, break private banking monopolies, "re-set" the intrinsic "value" of the dollar to some reasonable level and establish a network of community based banks with local roots and a charter to support their respective communities. In the meantime, force Congress to balance the budget through a national referendum called The People's Constitutional Amendment, which can never be violated by an act of the Executive or Congressional branches of government, nor repealed. Finally, force Congress to halt all Omnibus spending until a full and clear accounting can be made on what precisely is worth spending taxpayer dollars on each fiscal year. Do that and you will have a good economic foundation for returning manufacturing back to America, along with Middle Incomes which by the way, built this country during the post industrial period. Fail to do that, and we will see new forms of unparalleled economic bubbles with horrific negative impact on our future economic stability as a nation. I am saying that our Economic, Fiscal and Monetary models have become a matter of National Security at this point. We either solve these problems now, or we will lose our Republic - as we now know it.
Geez, Bonds, why the venom? Take it easy. For the record, I don't eat processed food. And I never said I was doing this without drugs or alcohol.
The point is banks aren't lending out "their" money, or private capital. Banks create money via fractional reserve banking. The value from that money comes from diluting the existing stock of dollar holders (ie the people who work and hold dollars). The money loaned out and risked belongs to the People, not the banks. Banks are just an intermediary. They risk virtually none of their own "private" capital. Therefore, the people should receive the overwhelming share of banking profits, since it's THEIR money that's being loaned out (via reduced purchasing power). Real simple. Seems to me you enjoy debating straw men. What I proposed is a nationalized banking system, run by managers whose pay is dependant on performance targets (2%< loan default = 350k a year.....>2% loan default = shit canned or 60k a year). Be creative. You act like this is the only possible money system in the world when it's the most destructive!!!
Can't happen and won't happen are totally different things. Your original statement, along with Martin, implied nationalized banking can't happen. IOW, it's unworkable. When in fact, it is VERY workable. You and Martin now appear to be back peddling on the workability of it, and now just settle for a "won't happen" argument. Sure, I would agree with that. Politically, like you mentioned, it's suicide for the ruling class. I would also agree that the United States and Europe are close to a financial implosion as they quickly approach the end of this fiat fractional reserve system. You realize that US debt-to-gdp > 103%, ya? Will you and Martin be smugly pleased when the Treasury market goes off a cliff in a few years? Will that be a glorious day for you cheerleaders of fractional reserve banking? Have you realized that you and I are on the same boat? Or did you think you'll be safe from the teaming masses in your armored redoubts and island compounds?
This is a very very common misconception, and when someone makes a statement like this, it proves the poor thing is reading Mainstream Business Articles. Now I am going to blow your mind, AND SET YOU FREE There is not enough gold in the world to be the standard for the US or any large economy. UNLESS YOU PRICE THE DAMN THING TO 10 000 an ounce, or 40 000 an ounce And suddenly, the gold can back up whatever you need it to back up. Interesting isn't it. In fact, if gold was not being manipulated down by the FED, it would already be 4000
Firstly, like I said, there is no dilution and no reduction of purchasing power. Secondly, are the bank shareholders not "people"? I mean it's the beauty of capitalism that you can become one of the recipients of banking profits, simply by buying a share of, I dunno, JPM or Citi or whatevers... Thirdly, banks risk virtually none of their own "private" capital? As a UK taxpayer I am a proud owner of RBS and lemme tell you, they sure did risk a lot of their capital on all sorts of random sh1t. They weren't alone, either. I don't see how I am debating straw men. You specifically talk about the evils of fractional reserve and the nationalization of the banking system. I am trying to suggest to you that, while certainly far from perfect, our current system is, most crucially, capitalist. You want to replace it with a basically socialist setup to fix what you perceive as an "unfair" distribution of wealth and income. As I have a bit of personal experience with socialist experiments, I disagree and am arguing against your suggestions. I never said anything of the sort.
As a full-time Trader and student of history (among other things) I'd take a closer look at the largest economic downturns in U.S. history and what do I find? The Federal Reserve having engaged in the manipulation of the USD through supply and interest rates, to a point where a bubble forms in some critical area of the economy which ends up being the embedded "host" (much like researching and finding a viral host in biological infectious diseases) that lies at the causation of the economic turmoil that ensues. Standing by... Let me get this straight: You would hyper-inflate Gold to artificially off-set its demand by making it less available on a par dollar basis? That's not just scary - that's downright dangerous. This "solution" would have so many deleterious consequences that I hardly know where to start. Right off the bat, this would compress the trading range of Gold and Gold Futures to near zero. You are fully aware of what happens to a traded market when its Delta reaches zero, don't you? News Flash: The Market Stops Being The Market. Who will be left to trade at those levels? Second, with a single swipe of the pen you have just shifted the risk model for any Gold Risk Evaluation Calculation into the real of absurdity and near impossible to rationalize. By artificially hyping Gold to such levels absent natural causation for such price increases, you mathematically draw potential to near zero while at the very same time pushing risk all the way to plant Pluto. No. Outside our own Milkyway Galaxy. Why? Because the delta between psychological risk and physical risk has just been widened to encompass the Grand Canyon itself. Sure, doing something like this would turn the central banks now holding all the gold into the most wealthiest earthbound entities the universe has ever known, but that would only be on paper, because you would have at the same time created a non-transactional market with not so much as a rip chord to save itself if/when prices begin to fall and the Shorting Fest begins in earnest. On second thought. Hmmmm. Let me short the sucker. Nope. My personal financial gain is not worth destroying the United States of America as we know it (economically speaking, of course). Having said that, I do appreciate the outside the box thinking. Creative solutions come from creative minds and just because one idea is the whackiest thing since Boy George, it should not stop you from going for the gusto! Drop another quarter and try again! Ok, now that is something we agree on - but, I don't see Gold 4000. What do you think people use as the Cost Basis for taking a position in Gold? That's right, Fiat Money, that is STILL predicated on the underlying fundamentals of a 9:1 Fractional Reserve system that has no chance whatsoever, of doing anything but retarding the valuation of that same Fiat Currency over time. Sorry, the mathematics just won't work. It sounds interesting on the surface, but the numbers don't have a snowballs chance outside on the ramp of Phoenix Sky Harbor International Airport in mid July at 12pm. But, I like the creative thought process!
Well actually there is a critical difference between what Zimbabwe did and what the other countries you mentioned do. Though the lay person refers to either what Zimbabwe did or what the Fed does as "money printing," and even economists may sometimes refer to what the Fed does as "printing," economists know the difference between what Zimbabwe did and what the others countries do. They correctly refer to what Zimbabwe did as "money printing". What the U.S. and other countries generally do, however, is to issue bonds that the central banks buy. When those bonds are purchased by the central bank with newly created money, the new money becomes linked to debt. (This is probably the origin of the idea of money as debt.) In Zimbabwe's case they simply printed money without linking it to debt, and used that newly printed money to pay on debt! I believe this critical difference between money printing the Zimbabwe way and creating money the Fed way, by linking the new money to debt, is the Reason Bernanke, when questioned about "money printing" in a Senate committee hearing, responded, "We're not printing". And technically he was correct. Technically, printing is what Zimbabwe did. When new money tied to debt is created, the new money will have value so long as the credit of the issuer is good and the issuer may continue to borrow, from other than their own central bank, at reasonable rates. If a countries credit is so bad that no one other than their own central bank will buy newly issued sovereign bonds, or only at usurous rates, money in circulation will rapidly decline in value and hyperinflation occurs. (At one point Argentina printed new money so rapidly that she actually ran out of paper on which to print currency. It became a moot point whether the newly issued currency was linked to new debt because no one, other than the central bank, wanted their bonds. Hyperinflation set in.) Zimbabwe, of course, also suffered hyperinflation. In their case, no one wanted their currency. Since their newly created money was not linked to debt with a reasonable credit risk, there was no limitation on how much could be printed. It seems a key word in your statement I quoted above is the word "bad" to characterize U.S. debt . Is the debt really "bad"? The way that is typically decided is through the market, is it not? I would have to say that so far, according to the market, the U.S. and Japan have not been pushing "bad debt". I am one of the few, however, that believes that the market is often wrong.
This is precisely right and common sense should dictate this reality to all of us - including those in Congress who keep spending us down the toilet decade after painful decade. Just look at what happened in 2006. The Current Account was cut by more than half before 2010. Oh, sure. They will say that it was because our economy was slowing down. But, will they actually take a look at the data: The contraction in the economy did stall growth in the Current Account, no doubt. However, we could have had the same result with a growing Middle Class, the return of Middle Income Jobs, less borrowing from China/Germany/Japan and more inherent (homegrown) buying here in the U.S. instead of the overflow of buying we do from foreign sources. We've got the script entirely backwards and at some point we need to start asking whether or not someone is doing this on purpose and to what end.
I have been calling for the replacement of the Legislative Branch of government since September 11th, 2001, when two F-15s received scramble orders out of Otis, to fly a heading to an altitude where no commercial Boeing 767 had existed for more than nine (9) minutes - taking both F-15s up to an altitude that would guarantee absolutely no contact with a commercial aircraft, whatsoever. Government is not the problem. We The People, are the biggest problem our nation faces. We don't have our act together and therefore, government is having its way with us. We are uneducated in the things that matter most. We are so blinded by the here and now that we fail to study the mistakes of yesterday and by definition plan to fail in the future. We think we live in a Democracy when the founders gave us a Republic. Jefferson, told us explicitly what to do when things get this bad - and they have been bad since 1913 - not with the election of Obama, Clinton or Bush 41\43. But, who the heck knows what Jefferson, said anyway or why it matters. I worry for my country. I worry a great deal. I don't know that we have another 200 years left as a free standing Republic. I just don't know. $17 trillion in debt. Nearly 3 times that much in outstanding netted credit. Sigh. We've got ourselves into some serious trouble. China, is getting stronger - not weaker. The tide is changing directly under our feet and our generation is just sitting by and letting it happen. We could have had Thorium Reactors up and running, providing the energy needs for ALL American Households from coast to coast and lowering our energy dependence on foreign entities, but no. We ran for the profits in oil instead of fueling the future with cleaner and virtually unlimited (for all practical purposes) supplies of energy. Meanwhile, China, develops it own clean reactors with the nice little added benefit of never undergoing a meltdown by design. We've got it all sdrawkcab.