fractional reserve

[ninjamik]

No you couldn't have seen Jill take any physical gold... Banks never pay out in gold, they don't have any! only ever promise notes. and i ask again promise to pay what??
they may have given her the $100,000 that was created by Jack promising to pay them back? which they only needed $10.000 which never gets touched in the vault to do!.
they can give her this easily as it was created by them when jack promised to pay them extra for paying her for his house with his money!!! she then deposits this in her account! simples!
it wont even need to be in notes, they just simply initiate the transaction then pass on the debt, with no initial input. like the judge ruled in an american court!!
No gold involved ever! cos like i said they aint got any!!

[ninjamik]

like I said! FIAT!!! let it be so! alakazzam n piff poff pooff!!

all done without one outlay for the bank! whatever % interest on a 100K house transaction. all they have to do is pay a teller! to press the button and wait for either the money back of jack or to collect his house if he cant pay! all the while having never touched a penny of their own money!! just promises! Nice scam boys, no wonder your so rich n were so poor! ;P

its a lot like the way the criminal world especially the drugs world works if you can find a dealer to Tick/Lay you on a large amount (promise to pay) then sell that amount on instantly for a profit then you have just performed the same trick, you have made mass profit of a double transaction with no outlay yourself! you just charged for being the privileged guy that can get drugs gratis or at least on a promise to pay...thats usually why drug lord is a very high paying job (although illegal) but it still doesn't pay as good as banking!!!

not that i have anything to do with that!! just its the only example i can think of at this moment to explain similar circumstances.

[Gordo]

No you couldn't have seen Jill take any physical gold... Banks never pay out in gold, they don't have any! only ever promise notes. and i ask again promise to pay what??
they may have given her the $100,000 that was created by Jack promising to pay them back? which they only needed $10.000 which never gets touched in the vault to do!.
they can give her this easily as it was created by them when jack promised to pay them extra for paying her for his house with his money!!! she then deposits this in her account! simples!
it wont even need to be in notes, they just simply initiate the transaction then pass on the debt, with no initial input. like the judge ruled in an american court!!
No gold involved ever! cos like i said they aint got any!!

Absolutely untrue. We have gold available at the market price in bars and coin every day of the week. Do you want an order form?

[deVries]

To the person that asked about loans helping to save someone's life. I have a pretty crazy opinion on that. I think Darwin laid it out pretty well and getting loans, using insurance, and using welfare to "save" people back into their life of financial slavery goes totally against the natural order of things. If you're hurt so bad or so sick that your family and or community can't help you, you are supposed to be dead.....in nature's eyes that is. But you ask, what about human compassion???? Well, that's what your family, friends, and community (including the doctors and hospital board members) are there for. If they don't want to help you for some reason and you have to rely on a bank, insurance, or other parasitic social system to save your life, you probably shouldn't be here.

What about interest free loans? What about the Stock Market & investment in bonds or stocks?

What is the solution to transfer easily some symbolic form of work-exchange beyond bartering or coins? How would we make the most efficient market of work-exchange?

The Black Box OTC derivatives market was 595 Trillion dollars ... That 595 Trillion market in 2007 is many times the size of the entire economies of the world... it is still unregulated... new rules are being written & are open for public comment now... I think this Black Box Free Market without any rules or regulation Fracked the entire world to kingdom come... so called Free Market Philosophies based on the Greenspans' of the world are insane & do NOT work. Why?

Because criminals & fraud are everywhere. That's why we have prisons & rule of law to protect us, but we just don't understand the most dangerous criminals are highly attractive & intelligent & can seduce you into their game plan & destroy you personally and/or the world at large. Sociopaths are attracted to power, money, and politics. Alan Greenspan's hero Ayn Rand blinded him inside an "ideology religion" that left him in denial of this fact of life. Think I'm wrong? Every one of you that believes otherwise must see this program below, and you also need to read the book "The Sociopath Next Door" to begin to understand the danger we are all in from this type of dangerous personality. It's in the torrents as a .pdf or audiobook.

I suggest everyone needs to seriously review this PBS special... then come back & post why it's wrong...

The Warning

If you want the torrent: magnet:?xt=urn:btih:BF91DCB162760DFC6F5E5CC9C67871286F882BAC

In The Warning, veteran FRONTLINE producer Michael Kirk unearths the hidden history of the nation's worst financial crisis since the Great Depression. At the center of it all he finds Brooksley Born, who speaks for the first time on television about her failed campaign to regulate the secretive, multitrillion-dollar derivatives market whose crash helped trigger the financial collapse in the fall of 2008.

"I didn't know Brooksley Born," says former SEC Chairman Arthur Levitt, a member of President Clinton's powerful Working Group on Financial Markets. "I was told that she was irascible, difficult, stubborn, unreasonable." Levitt explains how the other principals of the Working Group -- former Fed Chairman Alan Greenspan and former Treasury Secretary Robert Rubin -- convinced him that Born's attempt to regulate the risky derivatives market could lead to financial turmoil, a conclusion he now believes was "clearly a mistake."

Born's battle behind closed doors was epic, Kirk finds. The members of the President's Working Group vehemently opposed regulation -- especially when proposed by a Washington outsider like Born.

"I walk into Brooksley's office one day; the blood has drained from her face," says Michael Greenberger, a former top official at the CFTC who worked closely with Born. "She's hanging up the telephone; she says to me: 'That was [former Assistant Treasury Secretary] Larry Summers. He says, "You're going to cause the worst financial crisis since the end of World War II."... [He says he has] 13 bankers in his office who informed him of this. Stop, right away. No more.'"

Greenspan, Rubin and Summers ultimately prevailed on Congress to stop Born and limit future regulation of derivatives. "Born faced a formidable struggle pushing for regulation at a time when the stock market was booming," Kirk says. "Alan Greenspan was the maestro, and both parties in Washington were united in a belief that the markets would take care of themselves."

Now, with many of the same men who shut down Born in key positions in the Obama administration, The Warning reveals the complicated politics that led to this crisis and what it may say about current attempts to prevent the next one.

"It'll happen again if we don't take the appropriate steps," Born warns. "There will be significant financial downturns and disasters attributed to this regulatory gap over and over until we learn from experience."

[ninjamik]

of course you do... for sale!! but you will never back any promissory notes with it! just a promise!! i ask for a 3rd time a promise to pay what?
if all promises were collected at once the whole pack of cards comes tumbling down!..that's the difference between reserve banking backed by gold and FIAT let it be so magick!
gold standard was dropped in 1971 so no gold for poor jill since then:(.. told you it must have been your eyes playing tricks on you! actually all federal reserve (remember private company) gold was handed over to us treasury in 1934 so although a brief return to a sort of gold/dollar standard after world war 2 really the "fed" had issued gold certificates! not made of gold! obviously this isn't willy wonka, just more golden promises! then they issue federal reserve promises!...bloody hell if you got the choice of having not to trust anyone's promise, pretty much the top of the list after your general rapists and murderers would be a banker!! hehe

sorry! I presume seeing as you said we have gold for sale I presume you work at a bank! if this is correct i truly don't mean to offend you! i was just making a quite true statement about peoples opinions of bankers. there is a reason many thousands of people started to occupy wall street! it is the greed of a select few of the higher up that actually caused this it has been done many time before. they buy all the bankrupt stock of competitors at pennies in the pound/cents in dollar with our bailout money. and conglomerate into super entities.. don't tell me this isnt what happened it is clearly visible in the accumulation of wealth. they have got very rich while the rest of the world cant pay there rising all the time bills or get a less of them all the time job I mean, countries like italy greece ireland all developed! some of the larger economies of the world but bankrupt! absolutely Rupt by Banks!:) on the point of revolt or civil war nearly...look at the greek riots.
if you do work in a bank you are part of the problem but i don't blame you for wanting to make a living...especially a high paying easy one! I wont lump you in with the term! Bankster...by that i truly mean the owners of the banks and the corporate bosses....like the Chief exec of lehman bros, he walked out with 2.5billion HOW...his company was bankrupt and owing billions why was that not ceased from him.. but aig via a bit of goldman help bought him up under consultation with the fed...so he actually gets his profits? back out!!! hahahaha.
or actually the super giants! the invisible money! the rothschild dynasty the rockerfellers Jp morgan and such....the carnagie and ford foundations..the ones who are transacting over 30% of the worlds economy through off shore invisible private banks... and actually hold around 90% of it. like visa. who cannot be audited by any government or you must know the swift payment scheme that happens with any international bank transfer..who are they what country are they beholden to?? or like I said the bank of england Nominees, a totally private non disclosure buying group that has the ability to inside trade backing stock or a business deal on both sides totally anonymously!!

and then there is the biggest scam bank of them all, the imf and the world bank! a giant fed for the world! feed you with one hand but put economic conditions with the other to mainly make your economy work to the advantage of international corporatism owned by guess who?...No way its the "Banksters" Again!!

and dont even get me started on the road to fiat...you see we left the gold standard because apparently there was no longer enough to back the amount of money in circulation. because it was being inflated so much by banking tricks so was worth less so we had to move into Let it be so magick land! but we had actually left an even better standard where basically your precious metal was your money the silver standard! even if you didn't carry it round with you there was plenty enough to back all money in the system, especially in combination with gold. But problem is the people own all the silver, and keep it at home in their own safes, or at least some of it. this is no good for banking there needs to be a shortage of precious stuff that people need to use a service of collecting there gold from another bank of the same group at their destination instead of carrying it with them, because the banks own all the gold its much more expensive the ordinary man only really has silver...

did you know that the wizard of OZ is actually about the dismay about the loss of the silver standard!....in the book Dorothy's slippers are actually silver (hollywood covered this up and made them ruby) so in a strange world where an evil wicked witch (of the WEST) has terrorised the world, she even drugs the heroes with opium poppies just like the empire she represents, they follow a golden paved road, gold bullion yellow bricks to a mystical future city, where a man who doesn't actually know what he's doing "hides behind a curtain, using a smoke screen and light show to pretend hes all powerful. when his golden road didn't actually lead the way out of the strange and scary kand, and he couldnt fix the problems of the woodsman/engineers, of the tin man, farmers and field workers of the scarecrow etc its down to dorothy to get her self out of the nightmare..how...the answer was always there..tap her silver slippers together...in other words a return to the silver standard would fix the problems of financial conglomeration into the hands of a few that the gold standard caused. because who owned all the gold" The Banksters, the rothschild banking house still sets the international gold price from its office in the london stock exchange, Tavistock square? in the again private, sovereign state within a state,( like D,C) the city of london Inc.

so again no gold standard since 1971- jill is an unlucky girl, just promises again no bullion, so again i ask for just one final time, promise to pay what??

Bank of England (private company owned by rothschilds until 1979, nationalised then but still 3% secret shares kept (B.O.E Nominees) had gold too once, but again we just get "chief cashier" dunno what tribe he is!;P to promise to pay! all our gold got sold litterally by gordon brown. so we couldnt even back it if we really wanted too!! ha

Ps i mean no personal offense to you, Its just the world needs to wake up to the fact banking right back from europe has pretty much owned the world since the 1800s, it causes all the wars in the world for profit and is now trying to construct the final phase of ultimate control. a one world government. they have even addmited it themselves. just read the autobiographies of people like david rockerfeller..or the statement of Amschel Mayer Bauer(later- Rothschild the inventor of reserve banking, give me the power to issue a nations money supply and i care not what puppet you place upon the throne. for whomever controls the money supply controls the country... or his wife the mum of the 5 Rothschild brothers that set up the first international bank...this world would not know war if my boys did not wish it!!!

p.p.s well said deVries....you seem like a well informed guy...i was about to get on to that subject soon. derivatives ans stock put options are all basically like goin down to the bookies to put a bet on for you customer...so if it wins you get a share of the winnings but, you then put a bet that it will actually go down with the right odds to make you basically always profit..at the expense of your investor!! thats why investment banks with peoples cash shouldnt be also playing the stock market... and our Randian Utopia of a system that runs its self!!! hahahahahaha....

[mdd0127]

Also, to chop down another point. There are no such things as "zero percent" loans. The only people they would give those to would never have the need to apply for one. It's a scam to get people in the door, tell them they don't qualify, then string them up at 21%apr.

Thanks ninjamik for covering everything so thoroughly! Fiat = lies!

And the whole derivatives market is a complete scam. There's no common sense or honesty to it....period.

I have to quit reading this thread. It's making me want to clean house

Off to watch some Animals as Leaders videos and get reminded that there is some good happening in the world!

[Gordo]

mik,
You are a well written knowledgeable guy. Why do you mix, truth, with half-truths and total nonsense in a futile attempt to get your point across? Do you not realize that in a public forum you will run across those who recognize the difference? You remind me of the eco-nuts we quit supporting 40 years ago, when caught out, they declared the truth did not matter, as long as they got their point across.
Everyone in the entire world has the option to hold their wealth in physical gold. The fact that it is $1670 US today is proof that many have decided to do just that. Demand pressure is the sole reason for this increase of 24% in the past year. Only fools purchase paper gold, the same fools who hold paper money.
Jill has her $100,000 in physical gold (or any one of 1000's of other hard assets available) and your model bank business collapsed.

[Sunder]

*sigh* There's no helping some people.

Go on, hold physical gold. Just trade it for fiat for the shortest time possible to trade with the rest of society. Just pray real hard that we don't have another 79 to 82 period, where gold halved in value in 3 years... or worse, a 87 to 2000 period, where for more than a decade, gold went backwards 30% - in nominal terms, let alone real terms.

I'm no advocate for the American banking system. But some people will always want to blame the system for their own failures, and reality is just an inconvenience.

[nechaus]

*sigh* There's no helping some people.

Go on, hold physical gold. Just trade it for fiat for the shortest time possible to trade with the rest of society. Just pray real hard that we don't have another 79 to 82 period, where gold halved in value in 3 years... or worse, a 87 to 2000 period, where for more than a decade, gold went backwards 30% - in nominal terms, let alone real terms.

I'm no advocate for the American banking system. But some people will always want to blame the system for their own failures, and reality is just an inconvenience.

I agree with a lot of things you say, but disagree with a lot to.

The system simply does not work for everyone, and this thread is proof. Because of this, that is the perfect reason for a change.
I think everyone should be equal. And that is it! Simple. Who can complain then?
The system should be based on equality. We are still living in the times of kings, queens and slavery and money is the thing that controls everyone.
Why do so many people get jobs they hate? because of money..
I have a friend who works in realestate, crappy job if you ask me, He hates it, but he will never change because of the huge amount he earns.
His going to live his life doing something he hates because of money. Yes i know his choice, but if you take money from the world, what would happen to him then? I can tell you know, he would be building beautiful houses with his bare hands. Build them just for the hell of it.

Can you imagine the human potential if Everyone was doing something they loved not because they have to but because they truly enjoyed it.. Not everyone is going to be doing the same thing because everyone is different and has different interests.

We would go forward instead of circles

[Sunder]

Just because a system isn't working for some, doesn't mean that there is a conspiracy behind it to control the masses though.

If you want, learn to play the system and get rich - or get self sufficient and do something you love. If you want, go on the dole, share a house with 6 others and surf every day. If you want, you can complain that the system is unfair. They're your options, and you're well entitled to them - at least under capitalism. Think you had that freedom under any other form of economics or government?

However, just because you feel you need to work a job you don't love, doesn't mean you are being "oppressed by the man". Life. Is. Hard. We don't need to delude ourselves that it should be easy, if only we could get "the man" out of our way.

I agree with you that the system is not ideal, but to paraphrase Winston Churchill capitalism "is the worst form of government (economy) except all those other forms that have been tried from time to time". You said that everyone should be equal - tell me, how did communism work out, earlier last century? Are those people happier than the capitalistic west? I won't comment on wealth. Wealth has little to do with happiness. Were they happy in their equal poverty? Did they have better bonds with their peers and better families? Lower mental health problems, use of alcohol and other drugs? Can you honestly say yes?

If people want to protest the fallacies of capitalism, go for it. If they want to peacefully and legally change the system, go for it. But to change the course of something, you need to understand it... Let me ask you a hypothetical. If you wanted to change the direction of a car, how would you approach it? Would you stand in front of it, hoping it would swerve, or would you learn how to control the car and do that? Sure, if you're lucky, you can make a car change direction by standing in front of it, but I'm putting the odds on the car.

Those that want to change capitalism, yet cannot even grasp the basic fundamentals of how our system works, are putting themselves in front of a 6 billion person Juggernaut, hoping it will swerve for them. They are the person who carelessly stepped out from a kerb once, saw a car swerve to miss them, and now think this is how you direct a car. These are people who are under the delusion that retail banks can just issue more money in the form of loans out of thin air - despite the fact that every day we have news articles that state the banks are finding it more expensive to fund their lending - or are raising their deposit rates to fund lending - or that from time to time, banks like Lehman's fail. How can anyone logically reconcile that contradiction? That banks can make money out of thin air, but still go bust?

And no, if anyone "explains" it to me, I'm not going to bother responding - I already have in the first five pages of this thread.

[Gordo]

Come on Sunder. The only reason the banks went bust is they forgot how to issue paper gold certificates when they were stopped from issuing loans out of thin air. They were making so much money on credit default swaps and ninja loans they closed down the gold certificate business years ago. This is what got them in trouble. If they had of stuck to this good solid legal scams they would have never gone broke. After all gold certificates can be levered 100:1 much better than the 10:1 limit on consumer loans and even this ratio has never been checked.

[nechaus]

I have read all the pages of this thread, took me bloody ages.

I believe the problem is capitalism. As long as people have the goal of being on the top, that is the problem. and as long as this type system is in place there will be those type of people, that is the problem. So basically there will always be that huge gap with rich and poor.

what can i do ? not sure just keep on going working my ass off and enjoy my fitness and ebikes, but i don't want to get into politics as a profession seems like the only way i could change things . Im lucky I own a house at a young age and have a good job. but i feel sorry for people living on the streets, they cannot even get land to make their own house.

Perhaps they should split the world again, people who want capitalism can live on the left, people that don't can live on the right.
I don't know i don't have the answers, i just know this is less than ideal for most of the population.

If i had 1 billion dollars, i would go buy an island and build sustainable housing that provides food water and electricity, let anyone who has been living on the streets live on it.

[Gordo]

If i had 1 billion dollars, i would go buy an island and build sustainable housing that provides food water and electricity, let anyone who has been living on the streets live on it.

Your money would be better spent on educational scholarships for people who come out of high school with 85%+. At least you would have a large group of people smarter than you and I who would understand the system and possibly improve it.

[Sunder]

Perhaps they should split the world again, people who want capitalism can live on the left, people that don't can live on the right.
I don't know i don't have the answers, i just know this is less than ideal for most of the population.

If i had 1 billion dollars, i would go buy an island and build sustainable housing that provides food water and electricity, let anyone who has been living on the streets live on it.

The problem with unqualified equality, is that instead of everyone striving to be at the top, everyone will strive to be at the bottom in the sense that they will take the path of maximum comfort and minimum effort, not make trade offs as they do now.

Sure, you will get the odd person who will study medicine for the love of people - or professional curiosity, but will you have enough doctors? Who will service your sustainable houses? people from the other side of the world? Although its often misquoted Gordon Gecko had a point - " Greed
clarifies, cuts through, and captures the essence of the evolutionary spirit. " Greed means people work hard, better themselves, betters humanity. For want of more food, hunters and gatherers became farmers. For want of a better life, people researched, innovated and enterpreneured. Without greed, we would still be in caves. Without greed, we'd be back there in a few generations.

Greed is not a problem - senseless, meaningless, selfish greed is a problem.

Oh, and by the way? If you're on the dole, you're in the top 5% of the world's earners. On the minimum wage? Top 2%. On the median wage? Top 0.5%. No, capitalism hasn't worked for all, but if you're saying it hasn't worked for you, then I think your perspective is skewed.

[Philistine]

I love your work Sunder, I don't think I have seen you post a single thing on this forum that I disagree with.

I just posted this on the book thread I started, but I actually think it is relevant to this thread as well. I am halfway through this book at the moment, and it is awesome. I highly recommend everybody interested in the topics covered in this thread read it. It is called "Thinking, Fast and Slow". THis is a review that appeared in this weekends Australian.

NUDGED TOWARDS BETTER THINKING

THIS book should be required reading this summer. Not because it is entertaining or a mere diversion but because it is a subtle and beautifully scientific guide for the perplexed. If you see yourself as a citizen in a democratic polity, read Thinking, Fast and Slow. Self-indulgent cynics and self-important ideologues probably won't read it, but they are most in need of what it has to teach. Do yourself a favour, whoever you are: buy this book and read it quietly and thoughtfully, absorbing its insights.

Daniel Kahneman was awarded the Nobel Prize in Economic Sciences in 2002 for his work on prospect theory. To understand what this is, how Kahneman got into thinking about it and what his key insights were (in collaboration with his long-time research partner Amos Tversky), go straight to chapter 26, Prospect Theory. It's a fascinating excursion into clear thinking all on its own. Prospect theory is about gambling, risk-taking and expected returns. It's a body of theory with considerable practical relevance to the king-sized mess welfare economics and financial markets got themselves into by the late 2000s.

Kahneman re-examined the fundamentals of utility theory, articulated by Daniel Bernoulli, almost 300 years ago. He did this long before the extravagant follies of the past decade or two came close to wrecking economies from California to Greece.

Utility theory lies at the foundation of modern economics. There is a rather urgent need right now to understand what has gone so awfully wrong in so many economies. Falling back on Marxism or some kind of self-satisfied ideological cliche does not amount to understanding. Kahneman confers considerable understanding. That's why he deserved his Nobel Prize.

Thinking, Fast and Slow has five parts: Two Systems; Heuristics and Biases; Overconfidence; Choices; and Two Selves. It also contains, as appendixes, two of the classic papers for which Kahneman won his Nobel: Judgment under Uncertainty and Choices, Values and Frames.

Part I sets cognitive science in an accessible of reference that acts as a disciplined corrective to a good deal of pop psychology and a lucid introduction to the theoretical work in the following four parts of the book.

Kahneman suggests we think of our brain -- our "machine" for making judgments -- as consisting of two basic systems, which he calls System 1 and System 2. He describes the characteristics of each and explains how their faults and standard ways of interacting result in many kinds of error, bias and illusion -- universally and predictably, not in merely unusual or idiosyncratic cases.

System 1 is the intuitive, unconscious, fast reaction part of the brain. It is emotional, holistic and instinctual. It is, as he expresses it, "a machine for jumping to conclusions".

In certain circumstances and often in everyday life, its functions are reliable, rapid and even remarkable. But when it comes to matters that require complex, abstract thinking it is in deep trouble. System 2 is better equipped -- if trained and switched on -- to handle such matters. The problem with System 2 is that it is lazy and highly inclined to rationalise rather than critically examine the intuitive judgments of System 1.

In Parts II, III and IV of the book, drawing on the work of many psychologists and cognitive scientists, Kahneman offers a fascinating dissection of the brain of homo sapiens. The chapters include The Law of Small Numbers, Anchors, The Science of Availability, Availability, Emotion and Risk, Causes Trump Statistics, Intuitions vs Formulas, Risk Policies and Frames and Reality. At every point Kahneman exhibits a demeanour at once keenly curious, meticulously scientific and utterly unpretentious.

The implications of what he imparts are enormous and need to be digested by our education institutions (not least all business administration courses), our public policy systems and our methods for public debate.

An indication of the ways in which such insights can be applied was offered several years ago, in Richard Thaler and Cass Sunstein's Nudge: Improving Decisions About Health, Wealth and Happiness. Originally completed in 2007, it was reissued in 2008 with a postscript titled The Financial Crisis of 2008. The authors drew attention to the alarming reality that almost no economists or financial analysts had foreseen the crisis, or issued public warnings as it approached. They praised the behavioural economist Robert Shiller for having done so.

Shiller's warning in 2005 had been that "social contagion" was creating a housing market bubble that inevitably would burst. Shiller's books, Irrational Exuberance (2000), and The New Financial Order: Risk in the 21st Century (2003), are recommended. Thaler and Sunstein argue that sound public policy, informed by the insights of cognitive science and behavioural economics, must invent ways to prevent or defuse such outbreaks of social contagion, or what Charles Mackay long ago called "extraordinary popular delusions and the madness of crowds".

As Michael Lewis's peerless writing shows, a little thoughtful analysis can reap enormous dividends. If markets and capitalism are to flourish and the costs of human stupidity are to be contained in future, then many things will need to be rethought and reformed. Lewis's latest book, Boomerang: The Meltdown Tour, a characteristic tour de force shows this from Iceland and Ireland to Greece, Germany and California.

Kahneman, meanwhile, is hard at work trying to engineer better thinking in the marketplace, or at least to nudge the unwilling and unwitting in that direction. He is a partner in a firm called Greatest Good, committed to applying cutting-edge data analysis and the insights of behavioural economics to real business challenges.

His associates are a highly impressive group, including Steven Levitt of Freakonomics fame, Gary Becker, John List, Atul Gawande and Lisa Randall. Now that, to adapt Groucho Marx, is a club of which I'd like to be a member.

Thinking, Fast and Slow
By Daniel Kahneman
Allen Lane, 500pp, $29.95

Paul Monk is founder of Austhink Consulting. His most recent book is The West in a Nutshell.

[nechaus]

Perhaps they should split the world again, people who want capitalism can live on the left, people that don't can live on the right.
I don't know i don't have the answers, i just know this is less than ideal for most of the population.

If i had 1 billion dollars, i would go buy an island and build sustainable housing that provides food water and electricity, let anyone who has been living on the streets live on it.

The problem with unqualified equality, is that instead of everyone striving to be at the top, everyone will strive to be at the bottom in the sense that they will take the path of maximum comfort and minimum effort, not make trade offs as they do now.

Sure, you will get the odd person who will study medicine for the love of people - or professional curiosity, but will you have enough doctors? Who will service your sustainable houses? people from the other side of the world? Although its often misquoted Gordon Gecko had a point - " Greed
clarifies, cuts through, and captures the essence of the evolutionary spirit. " Greed means people work hard, better themselves, betters humanity. For want of more food, hunters and gatherers became farmers. For want of a better life, people researched, innovated and enterpreneured. Without greed, we would still be in caves. Without greed, we'd be back there in a few generations.

Greed is not a problem - senseless, meaningless, selfish greed is a problem.

Oh, and by the way? If you're on the dole, you're in the top 5% of the world's earners. On the minimum wage? Top 2%. On the median wage? Top 0.5%. No, capitalism hasn't worked for all, but if you're saying it hasn't worked for you, then I think your perspective is skewed.

How can you say that, people will strive to the bottom? How can you know? Because of what happens with people and the current system now.
A system that is equal for everyone has never been done in history... unless i missed something.
I think we have enough tech to really sustain ourselves. If I was to live in a cave, It would be an amazing cave.

[Sunder]

I love your work Sunder, I don't think I have seen you post a single thing on this forum that I disagree with.

I just posted this on the book thread I started, but I actually think it is relevant to this thread as well. I am halfway through this book at the moment, and it is awesome. I highly recommend everybody interested in the topics covered in this thread read it. It is called "Thinking, Fast and Slow". THis is a review that appeared in this weekends Australian.

Thanks Philistine... Must mean you're a right thinking person! Or right leaning... Or something

The book looks interesting, but I don't know that I got quite enough detail from the review to justify buying it. I might have a look for it on Amazon or Book Depository later tonight. Now that I've studied basic economics but don't work in that field, I prefer to read "lighter" books on economic, such as books written by Ross Gittens. The book I've been meaning to order is Freakonomics. It's meant to be a humourous application of economics into every day life - but holding on to the economic principles.

May have to do another big book order soon

[Sunder]

How can you say that, people will strive to the bottom? How can you know? Because of what happens with people and the current system now.
A system that is equal for everyone has never been done in history... unless i missed something.
I think we have enough tech to really sustain ourselves. If I was to live in a cave, It would be an amazing cave.

Did you miss the entire communism thing? You know, the story of the 10,000 pairs of shoes that were made with the heel on the front. Every factory worker knew and saw, but no factory worker had any incentive to correct the problem? You know, one of the biggest and richest nations of the time, that virtually bankrupted itself during the cold war? Okay, so it wasn't perfectly equal. After all "All animals are equal, but some animals are more equal than others".

One day we might get a utopia where robots do everything. But for now, the question is - who runs the tech? Who repairs the tech when it breaks? Who advances the tech, or do we just stay stagnant?

[deVries]

Also, to chop down another point. There are no such things as "zero percent" loans. The only people they would give those to would never have the need to apply for one. It's a scam to get people in the door, tell them they don't qualify, then string them up at 21%apr.

No, what I was suggesting was having a banking system that lends at 0%, since you seem to suggest a Banker is The Evil Empire. Banks do provide a service of growing the economy by lending & creating new jobs where there were none before. How do you plan to do a better job that is more efficient?

What is the solution to transfer easily some symbolic form of work-exchange beyond bartering or coins? How would we make the most efficient market of work-exchange?

Again, I ask anyone here including mdd0127 what is your solution for an efficient economy?

Quit bitching at "the man" & offer what is better?

[nechaus]

This is making me tired thinking about it. Iv had a big day.
perhaps im thinking about this in the wrong way.
Maybe there is no such thing as being equal as we are all so different.
but i think no one should have to live in poverty, and there should be a standard.
Walking through the city, i see this same homeless women sitting on this same chair everyday.
i don't like that, and think there should be a way around this so it never happens to anyone, unless they want to live like that.

[deVries]

I believe the problem is capitalism. As long as people have the goal of being on the top, that is the problem. and as long as this type system is in place there will be those type of people, that is the problem. So basically there will always be that huge gap with rich and poor.

There are Sociopathic financial-political criminals that will game *any* system. The more unregulated with no rule of law the more the potential there is for damage to the system. This is why The Black Box OTC system of derivatives at 595 Trillion dollars (in 2007) that is unregulated has destroyed & will continue to destroy our capital markets worldwide.

If i had 1 billion dollars, i would go buy an island and build sustainable housing that provides food water and electricity, let anyone who has been living on the streets live on it.

No need to do that, since we have a welfare system supported by your taxes *if* done effectively it can keep people off the streets with food in the belly. The more the wealth is concentrated into fewer hands the more unfair the system becomes, because Criminal Sociopaths are concentrated in this upper strata of society. Too much wealth in too few hands produces Fascism & Socialism in its extremes doing the most damage. That's why the middle way of the middle class is the best form of society. The countries with the largest middle classes are by far the most developed countries in the world, IMO.

Prove me wrong please!

Maybe there is no such thing as being equal as we are all so different.

Right, exactly, but the bigger the middle class the more fair society is as a whole. That means in terms of money there is more equality, but people can & should compete for the "better jobs" without having to worry about poverty on the streets & old age insecurity as the basis for survival. Otherwise, society will degenerate as a whole & become weaker & less moral, and then it opens to the "energies of evil" & Sociopaths Rule the System.

Eugenics is still in effect now, but it's just done through the ideology of Survival of The Fittest & you "less-fit" unproductive people die, otherwise, while we send you into the streets with inadequate food too.

I think no one should have to live in poverty, and there should be a standard. Walking through the city, i see this same homeless women sitting on this same chair everyday.

See above for the best solution, imo, otherwise someone please step forward with a better solution.

[Tom Tom]

I have read all the pages of this thread, took me bloody ages.

I believe the problem is capitalism.

Disagree. I believe the SOLUTION is Capitalism.

You state you are young and have a good job and a house and feel sorry for someone on the street that they cant even get land to build there own house.

Nothing is preventing YOU from giving them YOUR land or YOUR job or YOUR house. Bam! Problem solved right?

When people are born into this world there is no guarantee of success and it can not be given, it must be earned.

Life is the sum total of the choices one makes. Capitalism in its truest form provides that. Work hard and smart and you are rewarded.

Problem is true Capitalism is eroding before our eyes. Again the SOLUTION is capitalism.

[deVries]

They were making so much money on credit default swaps and ninja loans they closed down the gold certificate business years ago. This is what got them in trouble.

Who is "they"

The local banks were not the masterminds. In fact, most ninja liar loans were just hired guns as agents for finders fees to keep the big banks off the books of direct involvement. Wall Street & the largest banks got their politicians they control, own, bribe, this is Fascism, btw, to legalize what had been regulated & governed by rule of law & took it off the books to not regulate it. Alan Greenspan is one of the main henchman that was delusional in the ideology of Ayn Rand, and he essentially was insane or sociopathic in its belief system by pinning Ayn Rand onto the entire economies of the world in the secrecy of the 565 Trillion dollar Black Box of the OTC derivatives market.

REP. HENRY WAXMAN:You have been a staunch advocate for letting markets regulate themselves. And my question for you is simple... Were you wrong?

ALAN GREENSPAN: Yes, I found a flaw, but I've been very distressed by that fact.

REP. HENRY WAXMAN: You found a flaw in the reality...

ALAN GREENSPAN: Flaw in the model that I perceived is the critical functioning structure that defines how the world works, so to speak.

REP. HENRY WAXMAN: In other words, you found that your view of the world, your ideology, was not right?

ALAN GREENSPAN: Precisely. No, that's precisely the reason I was shocked, because I had been going for 40 years or more with very considerable evidence that it was working exceptionally well.

Why aren't any of these people investigated, put in jail, publicly disgraced, etc. Because these people have made themselves Above the Law, and so we have a Fascist system of governance that complains about the socialist blood suckers of society, the poor! & the middle class shrinks rapidly too!

[deVries]

Problem is true Capitalism is eroding before our eyes. Again the SOLUTION is capitalism.

Under the US Constitution any market system must be based on the rule of law & its enforcement of these laws. It is especially true in the financial markets, since the WMD derivatives are not enforced by rule of law or enforcement in its Black Box OTC. It's the largest economy in the world bar none & it is "off the books", and will screw you & everyone to kingdom come... ...until it is regulated & enforced by rule of law.

Hmmm, that is not "true capitalism" what we have now. What we have is illegal under the US Constitution, imo.

"The Constitution guarantees the rights of “life, liberty, and property” in the 5th Amendment to the Constitution, and then again in the 14th Amendment, which protects those rights against interference by the states."

"The US Supreme Court did belatedly discover the “pursuit of happiness” when interpreting the 14th Amendment to the Constitution. In the 1923 case of Meyer v. Nebraska, there was a challenge to a state law prohibiting the teaching of foreign language to elementary and middle school children. Speaking for the court, Justice McReynolds stated that the liberty guaranteed by the 14th Amendment includes not only freedom from restraint, but also, the right to work, to raise a family and, “generally to enjoy those privileges long recognized as essential to the orderly pursuit of happiness by free men.”

You’ll note that the court referred not to an unfettered pursuit of happiness, but to the “orderly” pursuit of happiness; in other words, you can’t pursue happiness to the point of breaking the law or violating other people’s rights. Fair enough."

This is a National Security Issue of the greatest importance. Who the frack is doing what? Well, so far we are allowing our Financial & Political conspirators to rapidly destroy our economy & wealth in a raging sea of WMD OTC Fiat Derivatives destroying our personal financial property without our ability to regulate & prosecute the illegal operations that are at the very top of the pyramid dominating every economy in the world.

I consider this the new form of Warfare on the USA & world at large. Who are these warriors hidden behind the curtain? Are these enemies within, traitors, or other nation states & wealthy elites that want to destroy America or our systems of governance? Or, just unregulated sociopathic greed with no rules or laws that sucked in our public trust of banks, Wall Street, Insurance companies that are publicly traded & not private?

Is this the new war of tyranny & real financial terrorism?

[deVries]

The Taxpayer Is the Lender of Last Resort to the Bankrupt CDS Casino. In this case, Paulson won betting that homeowners would default, while his counterparties lost the same amount taking the opposite side of the bet. Because these OTC transactions were not properly capitalized, the losing counterparties would have collapsed under the strain of paying these bets; in addition, because of interconnectedness among financial institutions, any single collapse of a major financial institution would have destabilized the worldwide economy. Only the intervention of taxpayers as the lender of last resort stemmed the onset of a worldwide depression.
The analysis surrounding this subject estimates that there may have been three to four times as many ―naked‖ CDS instruments extant at the time of the meltdown than CDSs guaranteeing actual risk (Kopecki and Harrington 2009; U.S. Congress, Senate 2008). This means that to the extent that the guarantors of CDSs (e.g., AIG) had to be rescued by the U.S.
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taxpayer, the chances were very high that the ―bail out‖ was of failed naked CDS bets that mortgages would be paid (prominent Members of Congress have maintained that the holders of bets that mortgages would fail have formed a strong political constituency against the ―rescue‖ of subprime borrowers through the adjustment of mortgages to keep homeowners from defaulting; Grim 2009).
The fact that ―naked‖ CDS and ―synthetic‖ CDOs were nothing more than ―bets‖ on the viability of the subprime market also demonstrates the importance of the CFMA expressly preempting state gaming and anti-bucket shop laws (Johnson and Hazen 2004, 975). Had those laws not been preempted, it is almost certain that at least some states would have banned these investments as unlicensed gambling or illegal bucket shops. An action of this sort by even a single state would have disrupted the ―naked‖ CDS market throughout the country.
Interconnectedness: The Systemic Risk Derived from All Types of Swaps
Swaps Other Than CDS Have Caused Serious Financial Dislocations. While CDSs and synthetic CDOs almost certainly lit the fuse that led to the recent explosive financial destabilization, the remainder of the OTC market has historically led to other destabilizing events in the economy. These include the recent energy and food commodity bubble, the near failure of LTCM in 1998, the Orange Country bankruptcy of 1994, and now, through cross currency swaps masking the full extent of sovereign debt, a causative factor of the European sovereign debt crisis (Greenberger 2008, 2-3; Greenberger 2009, 4-5; Story, Thomas, and Schwartz 2010).
Unregulated OTC Derivatives of All Kinds Cause “Too Big To Fail.” However, even if looking only at the financial crisis of 2007 and beyond, the remainder of the unregulated OTC derivatives market was central to the crisis‘s causation. That is because the remainder of the OTC derivative market relates directly to the interconnectedness that made large financial
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institutions ―too big to fail,‖ and the prevention of a cascading collapse of the financial system therefore required calling upon the American taxpayer to bail out many of those huge financial entities (Greenberger 2008).
The Lehman Bankruptcy. As now can be seen from the Lehman bankruptcy proceedings, Lehman was a counterparty or guarantor of over 930,000 OTC derivatives. (Charles 2009, 16). To the extent that these contracts did not involve CDS, they certainly involved unregulated interest rate, currency, foreign exchange, and energy swaps. The Lehman liquidators are now embarked in a huge battle with Lehman‘s OTC derivative counterparties, claiming that those counterparties have greatly exaggerated the value of amounts owed by Lehman pursuant to those derivatives (Murphy and Sakoui 2010).
AIG Interconnectedness. Of course, it was the very failure of Lehman, and the cascading adverse and substantial impacts its bankruptcy has caused, that led the Federal Reserve and the Treasury to alter course on the day after Lehman‘s failure, and to prevent AIG‘s bankruptcy and then to recommend the TARP bailout. Those actions revealed to the world the correlation between interconnectedness of unregulated OTC swaps transactions and the too big to fail doctrine (Congressional Oversight Panel 2010, 9).
All Swaps Are Masked By Opaque Accounting Principles. A final reason all derivatives—not just credit derivatives—played a role in the onset of the crisis is that they were by virtue of swaps dealer lobbying never properly accounted for on balance sheets. Because of a major lobbying effort by ISDA,
banks and corporations that trade swaps do not play by the same rules as other individuals and businesses. Banks are permitted to exclude their full exposure to swaps from their financial statements and instead report only the ―fair value‖
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changes in those swaps over time. Such reporting is like an individual reporting only the change in their debt balances, instead of reporting the debts themselves. (Partnoy and Turner 2010, 88)
Thus, prior to the meltdown, swaps of all kinds were masked by a double barrier of opacity, i.e., not only were they private and bilateral, but they were even hidden on the balance sheets of those institutions most likely to suffer from their adverse impact. This kind of balance sheet opacity blinded regulators and market observers from the explosive and toxic nature of the contractual obligations embedded in swaps. And, when the crisis became full blown in September 2008, this opacity led both the extenders of credit and policy makers to fear the worst. As a result, bank lending froze up, causing the credit crisis.

Conclusion
By officially removing the multi-trillion dollar swaps market from the traditional norms of market regulation in 2000, a highly speculative derivative bubble was created that was opaque to federal regulators and market observers alike. Thus, there were no capital adequacy protections, and the lack of oversight allowed trillions of dollars of financial commitments to be made with no assurance that those commitments could be fulfilled beyond the highly illusory AAA ratings of the counterparties in question.
Had the norms of market regulation been applicable, these swaps transactions would have been adequately capitalized by traditional clearing norms; and the dangers building up in these markets would otherwise have been observable by the transparency and price discipline that accompanies exchange trading.