Honest question: What would be wrong with forcing banks to eliminate reserve ratios... forcing them to loan out only what they have? By real money, yes I mean hard valued instruments instead of paper phoney money based upon leverage and debt, but that is not the heart of this question, unless the thread is driven that way. Yes, I know that credit would be limited to those who don't really need it. Same question, what would be wrong with that? Yes, I know the economy would be cut while we got back to fiscal reality instead of fiscal idealism. Same question... Is the answer so simple as 'the American people would never accept such a reduction in lifestyle to gain economic balance'? Do you actually believe the Fed and the Treasury give a rip about what the people want?
I don't think there's any other choice than to increase oversight right now. The system is currently flawed and corrupt. After a time of control, a stronger system that does not lend itself to corruption could be introduced, and a Gold Standard is something tangible keeping everyone with their feet on the ground. At least for the foreseeable future.
Get rid of the fed and base money on an actual commodity or basket of goods. Then use interest as a revenue stream to offset taxes through a nationalized democratically controlled banking institution.
Couldn't agree more, GermanTrader. From my admittedly ignorant perspective, it seems clear. Why should banks get to practice fractional lending and fractional reserves and I can't? I would certainly like the ability to "lend" my money out to collect interest at 16X my actual deposit amount and more. And the time to strike is now, especially if the bailout goes thru, this reform MUST be tied to it. If it doesn't happen now, it never will. These sweetheart arrangements, laws, and privileges for wall street will never be voluntariy relinquished, they make too much money from them. It HAS to be tied to the bailout or it won't happen. Seems simple (nearly): ***no lending allowed that is not backed by immediate assets by the lender.*** No loaning out more than you actually have. Mortgage loans are OK per the above even if the lender doesn't have 100% of the funds (when fairly appraised), because the house is the asset backing at least a portion of the loan. Car loans too. Derivatives of derivatives -- no, the lender has to have 100% assets that are lost if the lendee defaults. Insurance is a special problem though. It's unreasonable to expect that all insured houses will burn down simultaneously, and so an insurance writer need not have enough assets (money) to cover all of them simultaneously. The only thing I can think of for that is that all insurance writers be forced by law to make their statistical models transparent and public so they can be free-market-compared and that they are govt-regulated to abide by their own models. If their models are ridiculous, then the prospective insurance buyer could at least have some knowledge to avoid them as a risk of maybe not getting the insurance payoff, if needed. So maybe the free market could work with some regulation included there. Just my take. Fractional lending must be stopped or severely curtailed and the only time is now. Call your congressmen, this is far more important than restricting CEO salaries (although that's fine with me too). If this can be knocked back now, then the cycle can begin again so that it will take another 50 years or so for the sweetheart deals to creep back in. If it isn't, then I think the US economy will remain on a precipice until it inevitably crashes now or later by unchecked greed.
I do not think you could call it socialism if the people get to vote democratically where the capital will go along with elected representatives who could be voted out of office if the results are unsatisfactory. If that is socialist then the whole entire idea of government is socialist.