Forum adverts like this one are shown to any user who is not logged in. Join us by filling out a tiny 3 field form and you will get your own, free, dakka user account which gives a good range of benefits to you: No adverts like this in the forums anymore. Times and dates in your local timezone. Full tracking of what you have read so you can skip to your first unread post, easily see what has changed since you last logged in, and easily see what is new at a glance. Email notifications for threads you want to watch closely. Being a part of the oldest wargaming community on the net. If you are already a member then feel free to login now.

I completely agree. Even now German policy is based on protecting private bondholders. It's a perversion of capitalism.

olympia wrote:

Da Boss wrote:Yes, another bailout would simply allow the EU to continue with broken policies and pretend there isn't a problem. We need to sort out the damn situation not wish it away.

Recall that Ireland would be fine right now if it were not for Lenihan's (may he rot in hell) decision to guarantee the banks--evidently U.S. secretary of state Geitner refused any "haircut" for bond holders because that would have harmed u.s. banks. The systemic problem is not public sector spending it is the policy decision to protect sovereign debt at all costs.

The systematic problem is a common currency between nations that do not possess other forms of common monetary or economic policy. Therefore one state can be in severe recession while another booms and the common currency magnifies the situation by preventing the bust country from having its currency devalue while everyone reinvests in the boom country (further depressing the bust). Without common travel, banking, and tax laws between countries like we have in the states then common currencies are a risky endevour.

Shuma, I agree. For Europe to survive we must either federalise or disintegrate. It is merely nationalistic nostalgia that prevents federalisation- that and a distrust of the technocratic institutions of the EU.

The technocratic institutions of the EU are highly worthy of suspicion. I say that as a keen European. There needs to be more democratic accountability of the decision making process.

Also ShumaGorath is right about the financial difficulties of the Euro. Greece needs to devalue its currency by at least 25% but cannot because its currency is the Euro whose value is largely underwritten by the much bigger and more successful Germany economy.

Lastly, neither the Irish nor UK governments should have underwritten the private debts of the investment banks. They should have been allowed to go bankrupt, then bought cheaply in order to operate their retail arms.

However the UK suffers from a structural deficit, meaning that government spending almost always exceeds tax income. The bank bailout was not the cause of this problem. It just made the annual deficit a lot worse for one year.

I agree that there needs to be more democratic accountability. I think that it is most likely that we won't be able to "get there" fast enough to save the Euro though.

As the the UK structural deficit, man, that is just crazy. They should be pummelled by the opposition and media whenever they overspend.

Help me out, without fully integrating (or just a mere free trade zone or some expanded version of it) whats the problem with going back to multiple currencies again?

The interconnected nature of EU banks right now, pretty much. From what I understand it would asplode the system.

Frazzled wrote:Help me out, without fully integrating (or just a mere free trade zone or some expanded version of it) whats the problem with going back to multiple currencies again?

Every bank in that hemisphere would run at the same time. Also it was a bad system before so going back to it isn't good.

ShumaGorath wrote:

Frazzled wrote:Help me out, without fully integrating (or just a mere free trade zone or some expanded version of it) whats the problem with going back to multiple currencies again?

Every bank in that hemisphere would run at the same time. Also it was a bad system before so going back to it isn't good.

It worked forever before. Yes forex guys make money on the arbitrage but its so? That woudln't run the banks. Its the governments not paying their bonds that would run the banks. The Euro is a cover for it.

Frazzled wrote:

ShumaGorath wrote:

Frazzled wrote:Help me out, without fully integrating (or just a mere free trade zone or some expanded version of it) whats the problem with going back to multiple currencies again?

Every bank in that hemisphere would run at the same time. Also it was a bad system before so going back to it isn't good.

It worked forever before. Yes forex guys make money on the arbitrage but its so? That woudln't run the banks. Its the governments not paying their bonds that would run the banks. The Euro is a cover for it.

Every country would see a significant draw from its banks as people attempt to pull or reinvest all of their money simultaneously in reaction to the declaration of the end of the euro. That would cause a run instantly. Aside from that every business deal in the last 15 years would have to be restructured heavily.

Also, it worked forever before, but so did horses and wind powered shipping. Having 20 currencies stopped working the moment their economies started becoming interconnected. It also helps to keep them from shooting eachother.

ShumaGorath wrote:

Frazzled wrote:

ShumaGorath wrote:

Frazzled wrote:Help me out, without fully integrating (or just a mere free trade zone or some expanded version of it) whats the problem with going back to multiple currencies again?

Every bank in that hemisphere would run at the same time. Also it was a bad system before so going back to it isn't good.

It worked forever before. Yes forex guys make money on the arbitrage but its so? That woudln't run the banks. Its the governments not paying their bonds that would run the banks. The Euro is a cover for it.

Every country would see a significant draw from its banks as people attempt to pull or reinvest all of their money simultaneously in reaction to the declaration of the end of the euro. That would cause a run instantly. Aside from that every business deal in the last 15 years would have to be restructured heavily.

Also, it worked forever before, but so did horses and wind powered shipping. Having 20 currencies stopped working the moment their economies started becoming interconnected. It also helps to keep them from shooting eachother.

1. That wouldn't draw on the banks. The fear that a government will default on its loans will draw on the banks if there is a fear the banks will be insolvent.
2. Why do I want to keep them from shooting each other again? Playing devil's advocate we're the CHina of military manufacturing. Time for Northrup to make it some bank!
Query - are any bonds against the entire "Euroland" or all tied to governents?

Also ShumaGorath is right about the financial difficulties of the Euro. Greece needs to devalue its currency by at least 25% but cannot because its currency is the Euro whose value is largely underwritten by the much bigger and more successful Germany economy.

That plus Greeces prime was forcefully removed and a gakking eurocrat formerly serving goldman sachs was installed.

But then again democracy died a long time ago in euroland.

Devalving will never help either since that is only treating the symptoms, the disease that is fiat monetary system that is built and based on intergraited debt that can only grow is what needs to be changed. Sadly nobody knows of any "working" alternative.

So shortest straw goes first to withdraw from the Euro? I much perfer one at a time and not all at once.

Just think, have the Germans paid their reperations from WW1/2?

ShumaGorath wrote:You should be safer-er, Australia does most of it's business with China doesn't it?

Who in turn use the raw products to manufacture goods for export to Europe and the USA.

Little known fact about the GFC is that China had 40 million newly unemployed, before China's own stimulus package kicked in (it was the largest stimulus package as a % of GDP of any nation). That stimulus kept the Chinese economy


Automatically Appended Next Post:

Phototoxin wrote:I don't understand wheer all this hypothetical money is owed to. The whole thing seems like a pyramid scheme that is bound to collapse

Private lenders. The funds come mostly from Asia, and from the ultra-rich.

Fun fact, if you track income inequality against debt to GDP ratios, the two lines match incredibly closely. Turns out income inequality gets hidden by the rich lending the middle and poor classes, until the middle and the poor can't pay anymore, and we get the mess like we're in now.

Now we'll get more economic upheaval, lots of instability and hardship. We'll come out the other side and we'll go through this whole charade again. Next time around you can be part of the fun of seeing it all unfold just like it did the time before.


Automatically Appended Next Post:

Do_I_Not_Like_That wrote:Yeah, I've asked myself that same question, who do they owe money to? China only accounts for a third? I think, so where does the rest go? Some sinister James Bond style villian holding america to ransom...

In reply to earlier comments:
1) I really like krispy kreme - I wish I had one now
2) 15 trillion is still a shed load of cash
3) UK has its tripple A status still, USA lost their triple A. I'm no economist, but I don't think Obama inspires confidence.

In terms of US government debt, the funniest thing to realise is that much of that 15 trillion is owed by the US government to other US government departments. Seriously. US government accounting is just weird.

Most of the rest of the debt is owned by domestic investors in the US, corporations and immensely wealthy private individuals for the most part.

That leaves about a third, which is owed mostly to China.


Automatically Appended Next Post:

ShumaGorath wrote:The systematic problem is a common currency between nations that do not possess other forms of common monetary or economic policy. Therefore one state can be in severe recession while another booms and the common currency magnifies the situation by preventing the bust country from having its currency devalue while everyone reinvests in the boom country (further depressing the bust). Without common travel, banking, and tax laws between countries like we have in the states then common currencies are a risky endevour.

Sort of, the bigger issue is that lack of control over individual government's fiscal policies. Forming a combined currency but placing little effective control over the borrowing practices of individual nations was a terrible idea.


Automatically Appended Next Post:

Frazzled wrote:Help me out, without fully integrating (or just a mere free trade zone or some expanded version of it) whats the problem with going back to multiple currencies again?

It's certainly doable, it's just that while everything is on a knife edge that kind of structural reform is made near impossible.

Basically, it can't be used to settle everything down, because it couldn't be done until everything was settled down.

Fun fact, if you track income inequality against debt to GDP ratios, the two lines match incredibly closely. Turns out income inequality gets hidden by the rich lending the middle and poor classes, until the middle and the poor can't pay anymore, and we get the mess like we're in now.

This is basic child level social economy.

-The rich person lends the bank a million gaining 5% profit from interests.
-The poor person lends the million from the bank giving the bank 10% profit in interests.

And the bank only has a minuscale percentage of the money as most are just made up numbers supported by a fractioning monetary system.


Gotta give creds for the dudes who came up with this

We did this after WW2 and the European markets have been in our pockets ever since... at least from what I've heard secondhand from raving family members. Odd that they're turning to us and not the asian markets.

You know what this world's struggling economic system needs? Another World War! Bwahaha

Colonization of the moon...world goal...before a asteroid hits us....or man creates dinosaur....dinosaur eats man....last few men are going to be damn lucky

I believe the UK at least paid off the last of the WW2 debt a few years ago. May be wrong, but I remember it (or something like it) being on the news.

Phototoxin wrote:I don't understand wheer all this hypothetical money is owed to. The whole thing seems like a pyramid scheme that is bound to collapse

The debt comes up when a country purchases things it doesn't have the money to pay for up front. It happened alot after WWI when the US pretty much double dipped, lending money to Germany who had to pay Britain for supplies ( while Germany couldn't pay off their debt to the US) then the Brits had to pay us for supplies. After the intrest on the loans, American banks were supposed to get rich, instead it forced the great depression because the money people owed didn't exist, anywhere.


Automatically Appended Next Post:
Intrests seem to be the problem, they create debt that is really hard to fix, the debt gets transferred over to another country, printing more money only makes the problem much much worse as money becomes worth less and less...

Pyriel- wrote:This is basic child level social economy.

-The rich person lends the bank a million gaining 5% profit from interests.
-The poor person lends the million from the bank giving the bank 10% profit in interests.

And the bank only has a minuscale percentage of the money as most are just made up numbers supported by a fractioning monetary system.


Gotta give creds for the dudes who came up with this

I've heard it likened to a poker game, where a couple of players hold almost all the chips. All the advantage is held by the players with big stacks, and the can never compete for more than a couple of lucky hands before they're forced out. The rich players keep winning, and the game only continues as long as the rich players are willing to keep lending to the poor.

I hope Obama didn't even bother with the pleasantries and told him to feth off.

The "change" guy you mean?
http://www.usnews.com/news/blogs/washington-whispers/2011/11/29/obamas-job-approval-drops-below-carters
Yeah, "change" is all you´ll have left when he´s done with you.

Bailout is much a lost case already.
http://online.barrons.com/article/SB50001424052748704760604577011852238080484.html?mod=BOL_twm_col

Phototoxin wrote:
I don't understand wheer all this hypothetical money is owed to. The whole thing seems like a pyramid scheme that is bound to collapse

Think of this veeery simplified explanation:

All the world contains 100$, this is the global economy.
You lend your friend your 100$ on the condition he pays you back with 10% interest.
Now the time is for you to collect the 100$ but due to interest he owes you 110%.
So where do the extra 10$ come from, there were ever only 100$ to begin with.

This is what is called "fiat money", money that dont exist and that no one can actually collect and hold in the hand.
This is also debt and how debt grow, money that arent there are growing and growing and growing.

To battle this, or rather temporarily steer it of the fed bank prints more money to cover the demands but as you know, everything that gains in numbers looses in value, thus is inflation created out of debt that was created out of interest that is the basis pillar of our very economy.

This is extremely simplified but the basis is that debs IS money and there can be NO stable economy with no debt. The entire system is built on rising debt and it is impossible not to create growing debt with time. Thus even if todays bad economy and debt are somehow fixed it is as inevitable as the rising of the sun that this cycle will occur again as debt rises in time to new catastrophic proportions.
The system itself is flawed and for it to work like it does in the world right now it must be flawed.

Sick yeah, but there you have it.



Want to know something more sick?
Think of the mechanics of how a bank loan works (again, very simplified).
You go to a bank and ask for 100 000$ so that you can buy your house.
How do the bank give you the money?
They dont!
They simply open an account for you (electronically) and write 100 000 in it. They create the money for you out of thin air, they dont have the 100 000 you just borrowed from them, they created them for you. Legally the banks are required to only have a minuscale percentage of "real" money as cover for the fractionalised (the empty air) money they create, this technically speaking the money you get into your account you will not be able to get them in your hand should all other people who borrowed money from the bank want to have them pay it out.

For this privilege YOU owe the bank interest, that is you are to pay back more then they borrowed you from money they actually dont have in the first place.
Yes you just managed to royally screw yourself over since the money that dont actually exist were given to you on the condition that you create even more money that dont exist based on the growth of the money you just got.

The worst thing on top of all this is also that the house you just bought for the money you borrowed that dont exist is most probably owned by the bank itself since the last idiot who borrowed from the bank didnt manage to pay back his loans to the bank and so they confiscated his house...that you are now buying with yet another loan of money that dont exist.

This is also why it is so "easy" to get loans and pay on credit since now YOU are stuck in the system and cannot escape. You are forced to work in a squirrel wheel of paying back debt and by working increase profit for the same sector that got you to borrow the money that dont exist in the first plac. You are now what is called a "wage slave" completelly trapped in the system.

The whole house/real estate bubble is based on this plus the fact banks, in their greed granted loans to people that they knew wouldnt be able to pay it back since they wanted to make quick profits.


Again, simplified like hell but still true.
It is so disgustingly sick and ingenious that I cannot but admire the f*ks who came up with this.

This is also the reason I feel sorry for people who take bank loans since it is nothing else but basically an veiled way to get people to voulentarily submit to economic slavery.
This is also the reason I will never in a million years be caught taking a bank loan. All I buy I pay with saved money.



The economically savvy people in here, feel free to correct my simplified explanation of how the system works. I´m sure I forgot to mention something or got some detail wrong but it´s really educational to know what the hell you are doing when taking a loan and how debt is created.

I blame Capitalism...yes, really.

Wow, I think that is the best post ever on dakka. Thank you for explaining it all.

FabricatorGeneralMike wrote:
Wow, I think that is the best post ever on dakka. Thank you for explaining it all.

\

I never thought about it that way! Guess you're right. When you're right, you're right!


Automatically Appended Next Post:

InquisitorVaron wrote:Just think, have the Germans paid their reperations from WW1/2?

They paid their initial reparations in the late twenties, I believe. They were fantastically prompt, if my sophomore history textbook is correct.

Pyriel- wrote:Think of this veeery simplified explanation:

All the world contains 100$, this is the global economy.
You lend your friend your 100$ on the condition he pays you back with 10% interest.
Now the time is for you to collect the 100$ but due to interest he owes you 110%.
So where do the extra 10$ come from, there were ever only 100$ to begin with.

That example doesn't make any sense. When you look at debt borrowings on the level of 100% of GDP, you aren't paying it back in one year, you're paying it back over decades, and likely reborrowing to make payments along the way. Your worry over the sudden appearance of an extra $10 is a thing that simply doesn't exist in the real world.

This is what is called "fiat money", money that dont exist and that no one can actually collect and hold in the hand.
This is also debt and how debt grow, money that arent there are growing and growing and growing.

No. Fiat money is simply money with no backing from gold or some other precious commodity. Instead of having the prop of 'this dollar has value because if you really wanted to you could exchange this dollar for a dollar worth of gold, but we all know you're actually going to use it in exchange for bread' we cut out the unnecessary step and say 'this dollar is valuable because we all know you're going to exchange it for bread'.

To battle this, or rather temporarily steer it of the fed bank prints more money to cover the demands but as you know, everything that gains in numbers looses in value, thus is inflation created out of debt that was created out of interest that is the basis pillar of our very economy.

Again, no. Inflation existed before fiat currency. In fact, that inflation was much harder to control, because if the value of gold would grow of itself, inflating the value of money.

Think of the mechanics of how a bank loan works (again, very simplified).
You go to a bank and ask for 100 000$ so that you can buy your house.
How do the bank give you the money?
They dont!
They simply open an account for you (electronically) and write 100 000 in it. They create the money for you out of thin air, they dont have the 100 000 you just borrowed from them, they created them for you. Legally the banks are required to only have a minuscale percentage of "real" money as cover for the fractionalised (the empty air) money they create, this technically speaking the money you get into your account you will not be able to get them in your hand should all other people who borrowed money from the bank want to have them pay it out.

No, that isn't how it works. What's happened here is that someone has explained the basics of the accelerator on a broad level to a conspiracy minded loon, who's misunderstood it, invented a whole level of crazy, and then repeated it to you, almost certainly on a youtube video with some simple but appealing cartoon animation.

First up, the bank needs to have $100,000 in order to lend it to you. They simply do, there's no way around that. That's always been the case, and is still the case today. It's why they take deposits off people, so they can lend them to other people. That's what banking is, taking deposits and paying 3%, and then lending that money out to someone else at 6%.

The accelerator is the realisation by economists of what this does on the money supply, because they might have printed and put into the system $100 billion in coins and notes, but that money is then deposited in banks, and lent out, then deposited again, before being lent out, over and over again so the effective level of money in the economy is far greater than just the amount of notes and coins.

Fractional banking, in turn, is the requirement placed on the banks to keep a set percentage of the deposits placed with them, both to insure the banks maintain liquidity, and to keep some measure of control over the money supply. So, if people deposited $100 in the banks, and the fractional reserve was 10%, the bank would be required to keep $10 and could only loan out the remaining $90. The thing is that $90 would then be deposited back into the banking sector, of which $9 would have to be kept, and the other $81 could be lent out. This process would continue until there was $1,000 lent out, and $100 kept in deposits in the bank.

That last bit is what was twisted around in your description, into the claim that banks can just invent money they don't have. It was just ignoring the actual process, of lending money out, then receiving it back in deposits.

The economically savvy people in here, feel free to correct my simplified explanation of how the system works. I´m sure I forgot to mention something or got some detail wrong but it´s really educational to know what the hell you are doing when taking a loan and how debt is created.

Please believe me when I tell you that what you've described above simply isn't how the system works, at all.

No, that isn't how it works. What's happened here is that someone has explained the basics of the accelerator on a broad level to a conspiracy minded loon, who's misunderstood it, invented a whole level of crazy, and then repeated it to you, almost certainly on a youtube video with some simple but appealing cartoon animation.

First up, the bank needs to have $100,000 in order to lend it to you. They simply do, there's no way around that. That's always been the case, and is still the case today. It's why they take deposits off people, so they can lend them to other people. That's what banking is, taking deposits and paying 3%, and then lending that money out to someone else at 6%.

Got it mostly from reading things like this:

How banks create money from nothing:
http://prosperityuk.com/2002/02/how-banks-create-money-out-of-nothing/
http://www.trcb.com/finance/economics/how-banks-create-money-out-of-thin-air-525.htm
http://ezinearticles.com/?How-Banks-Create-Money-Out-Of-Thin-Air&id=921796

There is also a very good example, I dont remember the details nor have a link but I am certain you know what I am talking about and can correct any errors that I make.
A man in the US some decades ago sued a bank over a foreclosure the bank had over his house. He claimed that a contract couldnt be valid as the bank didnt follow the definition of a contract, meaning two (in that case) parties both had to exchange something of value. He claimed that whereas he gave the bank something of value (a debt) the bank didnt give him anything since it basically invented the money he was to owe them out of thin air. He won.

Do give me a link to the story since I lost it and it was a very good read.

First up, the bank needs to have $100,000 in order to lend it to you

That is not true. The whole issue with a "bank run" plus the bank doesnt have to have the whole sum it wants to lend to someone.
I dont remember the numbers but I think it is something like 5 or 10% of money lent needs to actually be had in the bank. No wonder there are no money then if the banks customers decide to withdraw all they put in since the money are on most part invented out of thin air.

What then is a "bank run" if not the inability of the bank to actually show people there is physical money in it.
The best example being what happened during the great depression. People rushed the banks to withdraw their savings but the banks couldnt give it to them.

Your worry over the sudden appearance of an extra $10 is a thing that simply doesn't exist in the real world.

Yes it does. We are not talking about 10% but far greater numbers. It's the basics of interest, you add up debt to a pool of money that in theory make the money grow but is not represented by actual money. Printing new is a temporary way out but causes inflation. Look up germany when bread cost wheelbarrows of money.

Answer me this: How much money is there roughly in the world?
How much of this does actually exist in a physical form, 5%?
What happens when the system crashes (depression) and scared people run to the banks wanting to withdraw all their savings to put under the pillow due to lack of trust in the economy/bank but there are actually no money?

Of course this happens over time but the same mechanic apply. Interest from a set amount of money create "invented" money that increase the sum but those are never there since interest is just a percentage growth.

My example is thus sound in its simplified state.
If we only have 100$, you have 0 and I have 100 and I lend you my 100 for a yearly interest rate of 20% and you pay me back the next year I would get 120$ from you but you only have 100$.
Thus interest created out of thin air 20$.
Throw in fractal banking making banks create 1000$ out of only 10$ that they have and pile interest on top of the created part and the end sum would be enormous, far far greater then the actual printed 10$ that do exist.

If you do study economy (which I dont) please do educate me on this (since I want to learn and know more) by explaining in simple terms how it is that actual money are so much less then "invented" money, how it is that interest does not create money out of thin air, how debt and inflation are a part of the economical system and how on earth does a bank lend you 100 000$ when all it is actually required to hold in its vault is some 10-100 bucks and not call it invented/made up money.

Da Boss wrote:Shuma, I agree. For Europe to survive we must either federalise or disintegrate. It is merely nationalistic nostalgia that prevents federalisation- that and a distrust of the technocratic institutions of the EU.

Its more than that, there's also legitimate reservations about how a federal Europe would be governed. I mean, look at the US and how volatile the political system is here. Now apply a similar federal system to the EU, where there is no common language (or lingua franca), no common culture, and a significantly larger population. Its a mess, though a mess that leads to many beneficial outcomes if muddled through.

Surprised EU hasn't already ditched Greece....

guyperson5 wrote:Surprised EU hasn't already ditched Greece....

I'm fairly certain that they can't, they can sanction Greece, but not just outright remove them.