Author Topic: Banking  (Read 1826 times)

Offline Ryex

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Banking
« on: October 08, 2015, 03:45:07 AM »
This topic remarkably is at the root of so many of our modern day problems like income inequality. When we can't even answer question like "what is money?" and "where does money come from?" how do we make meaning full discussion of how to solve problems of money?

I came across a documentary, it's an hour and thirty minuets long. The title, Century of Enslavement: The History of The Federal Reserve.
It explains the history of the current baking system known as Fractional Reserve Banking (all new money is issued out of thin air as debt owed back to a bank which keeps only a fraction of the capital reserve necessary to back these loans), and how the baking sector is designed by law to have conflicts of interest with the bakers themselves regulating the baking sector with no oversight.
[youtube]5IJeemTQ7Vk[/youtube]

After you've watched the documentary (preferably all the way through, the first half roughly is history meant to help establish context, the next 1/4 is explaining the current system and the next 1/4 is a discussion of what can be done to solve the problem. standard documentary format) I have some question I'd like to debate the answers to here.

1) There ARE alternative to Fractional Reserve Banking, should they be explored?

2) If we were to keep a Fractional Reserve Banking system would handing all regulatory power over to the public be enough to start solving current problems?

3) In light of the fact that all money is issued as debt is there any other sector of current economic policy that needs to change?


All money is debt and it's been that way for roughly a century

Note that inflation was stable and was effectively zero until 1913 the founding for the FED. current policy is to aim for 2%/year as that's "healthy"

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« Last Edit: October 08, 2015, 04:11:30 AM by Ryex »
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Offline winkio

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Re: Banking
« Reply #1 on: October 08, 2015, 05:11:54 AM »
Inflation is healthy.  The (way way way oversimplified) idea is that money should grow in value.  If I invest 1 million in computer parts and labor, I should be able to sell the completed computers for more than 1 million dollars.

Now injecting 'Enslavement' into the discussion is definitely not going to add any intelligence.  The whole point of banking is investment (aka loans aka debt).  The whole reason debt exists is so that people can get funding for their business.  Basically, banks will provide a certain amount of money with a certain amount of risk for a certain amount of interest, and if your business is successful it can pay the loan back with (relative) ease.  This means that instead of unwealthy people having to start small businesses and gradually scale them up, they can start big using a loan, and then pay it off in a few years.  This provides an explosion in economic growth.

Now the banks figure that since they already are handing out loans to businesses, they can do the same thing to consumers, so now you have a loan for your house or your car.  The rates are based off the same rates that businesses use, although the risk factors are quite different.  There is one big problem though.  When a business can't pay back the loan, it shuts down, but that's not too bad.  When a person can't pay back the loan, they can't do shit.  Of course, you can file for bankruptcy, but in general losing everything you have is going to cripple your ability to work a job and restart your income.

The other problem occurs when the banks mess up.  If they don't assess risk correctly, and give out too many loans at rates they shouldn't, they can lose a lot of money.  This is not money that they are losing to someone else, this is money that is taken directly out of the economy.  If they mess up spectacularly and the banks themselves run low on money, they can no longer make new loans, and the whole economy grinds to a halt.  This is the basic problem we are seeing around the world.

Now it's begun to get popular to hate the very existence of banks, but what it really started as was a call for regulation.  The idea is that increased regulation would stop banks from making too many big mistakes, but that can also come at the cost of slightly slower growth.  Overall, it's probably a good trade, but it still won't 100% prevent a recession from occurring again.

The only reason these recessions exist in the first place is because the banks that were driving the economy suddenly slow or stop.  Completely shutting down the banking sector will mess up the economy so, so, so badly.  Same thing with erasing debt (which would effectively cut the banks' finances by a large percentage, 90% or so).  What we want is for banks to run smoothly and as well as possible, because that gives us a constant, steady growth like that 2% the FED is aiming for.

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Re: Banking
« Reply #2 on: October 08, 2015, 08:13:39 AM »
Winkio's above post about banks was probably the best piece of information about banking I've read in years. <3
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Offline Ryex

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Re: Banking
« Reply #3 on: October 08, 2015, 08:32:51 AM »
the the whole idea of inflation is the money is LOSING value thus the price of goods inflate. if money GAINS value it's called deflation as in deflation of the price of goods. The title of the documentary is trying to catch attention which in forgivable, it's the content that is important. Nothing is talking about shutting down the banking sector the documentary is arguing against the existence of a central bank that regulates it self with no oversight and full power to do with the money supply as it sees fit, WHICH IS EXACTLY WHAT WE HAVE.

neither of you actually watched the video or you would know what I'm talking about.

it's not popular to hate the existence of banks, it's reasonable to fear the existing system as it IS corrupt, blatantly so, and HAS misused it's power numerous times.

Banking was never intended to be about investment it was originally a way to protect money from theft. The function of banks to hand out loans so that people have capital to do things is undoubtedly useful but, when the fact is they create money from thin air by doing so such power needs to be well regulated.

"The only reason these recessions exist in the first place" is because the banked knowingly create bubbles because they are profitable.

The banking system is set up in such a way to INSENTIVIZE banks to make risky loans and then sell them off. The documentary describes how this came to be. the 1913 Federal Reserve Act which established a PRIVATELY OWNED bank to issue it's own money to loan to the US Government. Which, is directed not by a government agency, but a private board of directors whose members are a who's who of the banking industry.
Take the 2008 bailouts for example, as covered in the documentary the Directors of the Federal Reserve Bank which handed out the money for bail outs (note handed not loaned) directed 4 Trillion to their own Companies, which I might on to STILL made record profits that year. That's right, the big banks effectively lost NO money in the 2008 financial crisis. That's the epitome of corruption. This is not talking about removing the banking sector it's talking about taking the power to issues money away form it. What we have now is like asking a child to decide how much ice cream it eats on it's own.

Seriously just find some time to actually watch it, THEN come back and give me your opinion and thoughts on the matter. If their are the same pro bank perspective that's fine, but you'll be able to tell me why the point of view presented in the video is wrong because you'll actually know what that point of view is. Until then what you add to the discussion is distractionary.
« Last Edit: October 08, 2015, 08:45:18 AM by Ryex »
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Offline ForeverZer0

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Re: Banking
« Reply #4 on: October 08, 2015, 09:25:53 AM »
Printing money only makes it loses it's value. There may be some short-term gain, that if it gets a foothold may manage to keep it's value up, but it pretty much always balances itself out.

And honestly, the title is not quite so forgivable. It really just shows its extreme bias. It was interesting to you because it simply said what you already wanted it to hear. This is the case for what a very many base their opinion on what makes a good documentary. If you have a solid piece if informative media, you don't need to sensationalize. I honestly liken this to printing a feminist movement "documentary" entitled "The Oppressive Male Hate Machine". Title says it all, pages be damned. It automatically tells me that every fact given is skewed to deliver that type of a message, and that it was sole made so feminist could hear their own thoughts told them to them in a different way, which is exactly what they want to hear already. Hardly educational or thought provoking, simple, run-of-the-mill, everyday propaganda.

Now obviously are political viewpoints are different. From what I have seen in our years here, you are liberal-left, although you may have some different name, definition, classification, or new edgy politically correct term for it (which is the liberal way, you go!), and I am conservative-right. I love capitalism, you seem to think there is a problem with it. I am the furthest thing from someone who is interested in big-government. I am an honest-to-God (see that capital G thar?!) registered and voting libertarian. Although that I am in extreme favor of a small federal government to oversee federal matters, and do not want anarchy, I think the best thing for economies is very plain and simple: for governments to get their asses out of it. Businesses make money because that is what they do, and their motives are obviously different. Those hated, greedy, terrible, evil men twiddling their mustaches on Wallstreet plotting all of starvation and financial destitution, well, we all want them to be greedy. The more greedy they are, and the more money they make, the more that we all do eventually. Sure, they get the biggest percent, but hell, they earned it. I don't know how to begin to do that stuff, nor have the balls to risk it. I do not want government interferring with that at all, or even getting near it. Government's have historically taught us that they are terrible managing money simply because that is their nature, and always will be.

I just noticed that I just really digressed here, and went a little off tangent. My point was, I really don't see the point watching a video where the title already says it all. I have no doubt it will be filled with facts debating that viewpoint, all the while seeming truthful, fact-filled, and well researched. We can each pick documentaries to back up whichever agenda we prefer that day, that shapes the facts most to their liking, and this is the nature of political debates. Everyone walks out with the same opinion they came with, their mind only more resentful towards the other viewpoint because now they feel frustrated over the other one's silly beliefs and inability to see clearly. Everyone feels right. Nothing ever changes. These are political debates. Religious ones are the same. Hence the absurdity even wasting 1:30 hours watching a documentary that holds little to no chance changing my view. Let alone anyone else's who may see my opinion of it.
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Offline Ryex

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Re: Banking
« Reply #5 on: October 09, 2015, 02:21:21 AM »
Again IF YOU WATCH THE VIDEO YOU WILL UNDERSTAND THE TITLE IS TALKING ABOUT THE ENSLAVEMENT OF GOVERNMENT TO PRIVATE BANKS NOT INDIVIDUALS. for the love of all that is good stop making assumptions.

if banks were actually printing money that would be different. they are not, they are literally pulling it out of their collective asses to hand out at interest.  personalty I don't share the view point of the documentary presents at the end. but the facts presented up to that point are very interesting, particularly how the 1913 reserve act was written by the banks themselves then handed off to congressmen to pass. None of it until the end where it advocates getting rid of the central bank is propaganda. It's all well researched, well documented, well cited fact. You'll all making assumption about the content before even watching it which is an academic failure on your part. you can rip the documentary to shreds for all i care but don't dismiss facts on personal bias of the title.

As for your remarks about my own bias:

I share a lot of view points of both typical conservatives and liberals, If you had to classify me with a modern day term the one your looking for is "democratic socialist" which has less to do with socialism and if far more center left than most liberal view points despite it's seemingly far left name. I'm not some far left nutter trying to shout propaganda at you I'm honestly trying to get people to think and discuss the state of our world. The first step to gaining knowledge is challenging what is presumed known.

Your wrong, I don't have a problem with capitalism. I have a problem with bad actors. I have a problem idea that if left alone to be taken over by bad actors "free markets" (which are anything BUT free if they are controlled by bad actors) will fix all our worldly woes.

You want government out of business and the daily lives of the people. That's good, it's something worth advocating for. You want people who work hard and pull themselves up by the boot straps to get their just reward and live a comfortable life. Good those kinds of people deserve that. You don't want a unfair tax burden on the middle class of america. GOOD neither do I. No one should be paying more taxes than are absolutely necessary to keep a functioning society because that is the purpose of tax in the first place. The federalists had it right when they advocated for state powers, a big central government is far too slow and combers om to effectively govern a large population. in passing sweeping laws for all sates they can do disservices to localized area which can be hurt because while the law may by and large be good for most local communities with abnormal circumstances may be disadvantaged. People are smarter then they are often given credit for and communities can effectively govern them selves for the most part with out government interference.

I agree with all of this. In a country as diverse and inclusive as ours proclaims to be these are ecential tenets to design our government by. Personal freedoms should be kept where ever possible to aid in these goals.

I'm pretty sure I understand your view point fairly well, if anything I just does not reflect you view point then please correct me I do really want to understand.


Here's where we apparently disagree, again correct me if I'm wrong.

No one should have to starve or worry about making their next bill or rent payment while making an honest effort, that means there needs to be a safety net in place provided by government because no one else will do it. I believe that those who do well, succeed and gain wealth while fully entitled to do so take on an obligation in the same act, and that obligation is to the world around them. That obligation is to preserve stability and ensure their action don't prevent others from living a stable life. To ensure those obligations are met government must impose resonable regulation because there is no other power in place to do so. No activity that presents a danger to the community's or individual's current or future physical well being should be a free action thus laws must prevent such action, producing pollutants that can effect the local air and water quality are an example of this. Selling a dangerous drug or contaminated food is another example.

And here we tie back into the banking problem. The banks ecentialy have absolute control over money. They "print" it by handing out credit at interest. They speculate on industry with quantities of capital so great as to render the actual value of the industry in question insignificant. They in a nut shell and bring everything crashing down with one slip up. Granted it is in their best interest NOT to slip up because doing so cuts into their profits. but can you really trust them with their current track record?

You love capitalists, great so do I. It is the best economic tool ever invented to insentivize the solving of problems. Here's the thing is has two great flaws and their existence can not be argued. 1) it only solves profitable problems (i'm sorry to say curing cancer is not profitable, far more money can be gained from treating it indefensibly)). 2) it only works if EVERYONE has disposable income to spend across the board on problems they want solved. thus if the majority of the population only makes enough to bay bills and feed themselves the only problems that get solved are the provision of utilities and the production of food.

Now please, watch the documentary, you can skip the opinionated last 20 minutes or so if you wish. Learn how banking and money actually works in this world, THEN come back and tell me  what you think should or should not be done.

those three question I posted in the topic opener? I was dead serious in answering them as written. you'll notice they are neutral to any one particular viewpoint. if you digresses on THAT then please by all means revise them, I want honest debate not a bunch of grand standing on ideals.
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Offline ForeverZer0

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Re: Banking
« Reply #6 on: October 09, 2015, 07:41:08 PM »
I may actually give it a watch if I find the time. Maybe.
I just think the solution is exactly as I stated. Government and banks should be separate. Bail-outs and all that bullshit are terrible. Capitalism is similar to Darwinism. Let giants fall, the strong will survive. If they all fall, new will rise to take their place, and take advantage of the new demand. Government should just stay the hell out of it, let the businesses and the people rebuild.

I have simply given up debating politics, as I stated earlier, it is quite useless.
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Re: Banking
« Reply #7 on: October 11, 2015, 10:16:15 PM »
Then I think you might agree with the view of the documentary at least somewhat. The federal reserve is after all a central bank created to be a power unto itself over all banks with exclusive rights to print the government's money.

I don't thing debate of anything is pointless. even if one side or the other starts out assuming they are entirely right  or that the other side will never understand there is sill a chance that through clear expression of one's thoughts on a given subject matter the other-side will come to understand their point of view. Convincing the other side is not the point of debate, coming to an understanding is. Understanding the opposition is the first step to compromise. A principle I feel modern politicians have forgotten or stopped caring about. There are fall to many people who are convinced they know the absolute truth. We can all learn something by taking to time to understand the opposition.
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Offline winkio

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Re: Banking
« Reply #8 on: October 12, 2015, 08:49:44 AM »
Alright, I'm just going to sidestep all the opinions and talk about theory for a moment.

Let's ignore interest for a bit and say a person makes a loan to another person for $100.  So person A gives person B $100, and then later on, person B pays $100 back to person A.  However, in the time between when the loan is made and when the loan is repaid, something interesting happens.  Person A treats his accounts as though he still has the $100 that he loaned person B, because he knows he will be repaid.  So person A counts the $100 towards his wealth at the same time that person B counts the $100 towards his wealth.  Suddenly, it seems like we have pulled $100 out of thin air, thanks to the accounting practices of person A.

But wait, we missed something.  If person A is claiming the loan for $100, should person B account for the fact that he has to repay the loan, and add negative $100 to his wealth?  It sounds like a simple idea, and it stops money from appearing out of thin air when loans are made.  However, after applying this idea, person B ends up with a net change of $0 (+100, -100) after taking out the loan.  Clearly, we need a more intricate answer to this problem.  That is where banking comes in.

Now, here are 3 videos (8 minutes each) on fractional and full reserve banking from Khan academy:
https://www.khanacademy.org/economics-finance-domain/macroeconomics/monetary-system-topic/fractional-reserve-banking-tut/v/overview-of-fractional-reserve-banking

They are all super easy to follow, completely unbiased, and give a very simple overview of the two types of banking and how each works.  I'm not saying you have to watch them, but if you are actually interested in the subject and not just your personal stance, you should find them interesting.




Now for some direct responses.

Quote
the whole idea of inflation is the money is LOSING value thus the price of goods inflate
While your tone suggests that you think that you are correcting my assertion that money should grow in value, I don't think you understand that we are agreeing with each other.  Whether we say invested money gains value relative to saved money, or saved money loses value relative to invested money, it is the same statement.

Quote
the documentary is arguing against the existence of a central bank that regulates it self with no oversight and full power to do with the money supply as it sees fit
A central bank is necessary no matter if there is a fractional reserve system or a full reserve system, with the same purpose.  The federal reserve is subject to the laws made by Congress, and is overseen by Congressional committee.  The board of governors (like board of directors, except they don't have any ownership), are appointed by the government and confirmed by Congress.  So while the federal reserve is a separate entity, it is subject to plenty of oversight from our government.

Quote
neither of you actually watched the video or you would know what I'm talking about.
Correct!  I have already watched plenty of 90 minute long documentaries about biased views on controversial subjects.  I know that they will make persuasive arguments based on incomplete information and flawed logic.  While you derived your perspective from the video, that does not make it relevant to the discussion I am having with you.

Quote
it's reasonable to fear the existing system as it IS corrupt, blatantly so, and HAS misused it's power numerous times.
I'm interested to know how you think your solution would be immune to corruption.  I agree that the federal reserve has made some bad decisions at great economic cost, but it has also made some good decisions as well, and many more decisions that are sort of in the gray area that are hard to judge.  It is easy to judge the entity by cherry picking certain events, but hard to completely replace them with a better performing entity.

Quote
Banking was never intended to be about investment it was originally a way to protect money from theft.
Neither true nor relevant.  Early banks offered a variety of services, from loans, to safeguarding valuables, to making transactions with distant merchants.  The banks that we use today do have safety deposit boxes that you can rent to store money and other valuables, but that is mostly independent from the bank accounts where people usually store their money.

Quote
"The only reason these recessions exist in the first place" is because the banked knowingly create bubbles because they are profitable.
Sure, banks know that they create bubbles, and the reason that they do create bubbles is related to them trying to increase their profits, but when the bubbles collapse, it is the banks that they collapse on, and they suffer huge losses, which ripple out across the rest of the economy.  So to frame it as though they cause damage with no consequences is disingenuous.

Quote
The banking system is set up in such a way to INCENTIVIZE banks to make risky loans and then sell them off
Well to some extent, risky loans are more profitable, but you cannot just walk into a bank and get a loan for any random business plan.  Plenty of loan applications are rejected due to risk.  When you try to get a loan for a house or a car, banks are more willing to give the loans to people with better credit scores because they are less risky.

Quote
Take the 2008 bailouts for example, as covered in the documentary the Directors of the Federal Reserve Bank which handed out the money for bail outs (note handed not loaned) directed 4 Trillion to their own Companies
Ah yes, the "too big to fail" banks.  This was the big issue that became widely publicized, and caused everyone to hate banks for different reasons.  Some think they should have let the banks fail, take the economic hit, and then rebuild.  Some think the should have punished the banks greed by going after their profits.  Some called for increased regulation to prevent the situation from occurring in the first place.  The point of the bailout was to stop banks from losing too much money, with the idea that it would mitigate some of the effects of the recession.  Did it achieve its purpose?  Yes it did.  Was there a better decision?  We can argue that out, but there is no clear cut answer.

Quote
Printing money only makes it loses it's value.
True.  In fact, there are times where the federal reserve stops printing money and starting taking existing money out of circulation.  But in general, as an economy grows, it makes sense to print money in proportion to growth.  For an oversimplified example, imagine a fruit growing community that has $100 between all the citizens.  Let's say they harvest 100 pieces of fruit this year, which sell for $1 each.  What happens when they use the seeds to plant more trees?  In a few years, the trees mature, and now they are harvesting 120 pieces of fruit.  If they still only have $100, now each piece of fruit is going to cost 83.33 cents.  Now we can print $20 and keep the prices the same as before.  So that is the bare minimum that the central bank should be doing.  At present, banks print extra money such that the prices go up year to year, which has the effect of devaluing savings while keeping the value of investments constant.  This is meant to discourage wealthy people from sitting on all of their money (which effectively takes it out of circulation), instead encouraging them to invest it (which allows others to borrow it).

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Re: Banking
« Reply #9 on: October 12, 2015, 01:28:38 PM »
Thank you for providing an easier swallow introduction to the topic. those video give a good overview of the positive and negatives of our current system. indeed it makes the same point I make here, that we need to scrutinize out current system. He even brings up "A Program For Monetary Reform". which was a majority supported proposal for a transition to Full reserve banking back in 1939.

moving on,

you keep talking about "my solution" as if I've presented one, I haven't. I'm only asking people think on and talk about these issues with me you;ll notice the first question I asked was if another solution was even needed!
1) There ARE alternative to Fractional Reserve Banking, should they be explored?

But now that we're talking about things even if we're being complacently dismissive of other points of view let us continue.

Quote
A central bank is necessary no matter if there is a fractional reserve system or a full reserve system, with the same purpose.
but what purpose does a central bank serve?  lets enumerate the possible purposes:

1) issue money.
do you really need to be a bank to do this? historically money was issued by a sovern power but this was less because only they had the right to issue the currency and more because they had the pull to standardize the units of measure making commerce easier. it was only recently (historically speaking) we moved away from a solid store of value in out money. lets play devils advocate. Crypto-currencies are slowly making a name fore themselves, even banks are jumping on the tech stating an interest in blockchain tech to provide a secure transaction log of money and stock transfers internationally. The idea of a decentralized issue of a common currency wasn't feasible until recently but would it's use not make the purpose of a bank to issue currency irrelevant?

2) Loan money.
Capitalism works best if there are large stocks of capital available for people to use to invest in projects and build. Clearly there is some need for loaning money, indeed fractional reserve banking works quite well for this goal, and as long as the banks don't over leverage themselves on high risk assets it's effective and stable,
Personally I think it's a problem to make the method of issuing money the same method as loaning money but that's not reverent to this particular topic. suffice it to say that some entity like a bank needs to exist in a capitalistic society to loan money.

3) take deposit from customers to keep their money safe.
regardless of what banks do now or even what early banks expanded to do the FIRST purpose of the first banks was to protect their customers deposits. Because they had these deposits they could then leverage the capital they held to make loans. which initially was a secondary purpose. Early banks rarely leverage themselves over 10x because it was risky and dangerous, and if they were to fail law at the time held the bank owners AND it's investors liable for all of their customers deposits. if a bank went under because of bad loans or over levering the customers got paid and the owners/investors wen't bankrupt. Fast forward to now and it's the other way around it not uncommon for a bank to leverage itself over 500x, the owners are only partially liable and investors are exempt from liability. of course the deposit of customers at a given bank are suposibly insured but not from the bankers pockets but from the government's.

putting aside a defunct universal need to secure a deposit in this day in age and the founding reason for the existing of banking is shaken to it's core. if a bank has no assets, and doesn't issue it's own money, then how is it supposed to loan out money it's most useful function?

again, playing devil's advocate. Should we not at least for a moment question the very need for any bank at all? if we conclude that yes we absolutely need banking as it exists to day because no other options could provide it's functions/make them irlelavent then so be it. but if we don't question first then we are failing ourselves.

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The federal reserve is subject to the laws made by Congress, and is overseen by Congressional committee.  The board of governors (like board of directors, except they don't have any ownership), are appointed by the government and confirmed by Congress.  So while the federal reserve is a separate entity, it is subject to plenty of oversight from our government.
I think you've been misled. here's an exert from the transcript of the documentary
Quote from: Andrew Gavin Marshall
Federal Reserve Board in Washington appointed by the President. That’s the only part of this system that is directly dependent on the government for input that’s the “federal” part: that the government–the president specifically–gets to choose a few select governors. The twelve regional banks–the most influential of which is the Federal Reserve Bank of New York which is essentially based in Wall Street to represent Wall Street–is a representative of the major Wall Street banks who own shares in the private, not federal, but private Federal Reserve Bank of New York. All of the other regional banks are also private banks. They vary according to how much influence they wield but the Kansas City fed is influential, the St. Louis fed, the Dallas fed, but the New York Fed is really the center of this system and precisely because it represents the Wall Street banks who appoint the leadership of the New York fed.

So the New York fed has a lot of public power, but no public accountability or oversight. It does not answer to Congress the way that the chairman of the Federal Reserve Board of Governors does and even the chairman of the Federal Reserve board who is appointed by the President, does not answer to the President, does not answer to Congress. He goes to Congress to testify but the policy that they set is independent. So they have no input from the government. The government can’t tell them what to do legally speaking, and of course they don’t.
The Federal Reserve is governed by a committee of chair members appointed form each of the branch Fedral Reserve Banks across the country. The Federal Reserve Board of Governors is only part of that comity. the majority of the committee consists of the heads of the twelve Federal Reserve banks. And even then that Federal Reserve Board of Governors does not answer directly to anyone in government it is it's own power unto itself. A new law would have to be passed be ore any member of that Federal Reserve Board of Governors could be ordered to do anything by congress or the president.

That hardly sound like "plenty of oversight" to me but if you believe it's sufficient your welcome to tell me why and we can have a debate about how much direct control and oversight the FED should have like I intended form the beginning.

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I know that they will make persuasive arguments based on incomplete information and flawed logic.  While you derived your perspective from the video, that does not make it relevant to the discussion I am having with you.
good to know we're staring the straw-man arguments early. And again, what conversation are you having with me, so far all you've done is give a superficial summery of items only partially relevant to the discussion I want to broach and then dismiss the entire topic out of hand as if it's a settled manner. I'm not saying your ignorant or stupid, I'm asking for intelligent conversion, I want people thinking. If you don't want to think that your decision, please refrain from distracting from the discussion. Also, please don't talk down to me like your communicating some higher truth that I in turn am failing to comprehend. That's what your tone seems to convey.

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agree that the federal reserve has made some bad decisions at great economic cost, but it has also made some good decisions as well, and many more decisions that are sort of in the gray area that are hard to judge
I'm interested to know what these good decisions are, no really there is a sad lake of any published positive commentary of their actions. I want to know, that whats this is all about. I'll admit this "quantitative easing" farce had done an good job of appearing to work while prolonging the inevitable but the GDI (Gross Domestic Income, the GDP's flip side) has been flat for over half a year which means no growth what so ever for over half a year, that's BAD (as in, 2008 is here again bad). QE doesn't and was never designed to stimulate the economy it only lightens the risk load of banks, they get to sell off risky debt at interest.

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but when the bubbles collapse, it is the banks that they collapse on, and they suffer huge losses
again, how is making record profits through the 2008 financial crisis "huge losses"? it hurt the little guys banks and credit union sure. but the bank that actually had the capital necessary to manipulate the market like that came out with a handsome profit. Bad actors ruin it for everyone.

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Ah yes, the "too big to fail" banks.  This was the big issue that became widely publicized, and caused everyone to hate banks for different reasons.  Some think they should have let the banks fail, take the economic hit, and then rebuild.  Some think the should have punished the banks greed by going after their profits.  Some called for increased regulation to prevent the situation from occurring in the first place.  The point of the bailout was to stop banks from losing too much money, with the idea that it would mitigate some of the effects of the recession.  Did it achieve its purpose?  Yes it did.  Was there a better decision?  We can argue that out, but there is no clear cut answer.
Your right, we could sit for years asking "what if" question about a better way to have handled 2008, it's pointless. but we dam well better be sure we never HAVE to ask out selves this question again. the part I have a problem with is that people seem to think the banks actually had losses that needed bailing out. Of the "too big to fall" banks all of them had "record profits"  that year AFTER the bailout, as in, higher than any previous year. if they were  really "bailed out" from a critical situation where they would of gone under then the only profit they should have had after payroll should be equal to inflation that year. Now to be fair of the 30 trillion that went to bail out banks only 4 trillion went to these "too big to fail" banks, that only 13%. 13% sounds a number that would pop up in an embezzlement case. No matter what the final answer is we can't be bailing out the banks every time they make a bad decision. And if that's the case why are the "to big to fail" banks bigger now (as in hold a larger share of the market, not just richer) then they were before 2008? "Why are we letting ourselves be held hostage?" that's the question the documentary asks. I'm asking "are we being held hostage?" as a starting point.


We should not be leaving this kind of thinking solely to the economists, politicians, an lobbyists. that would be a great disservice to both ourselves and our communities.
« Last Edit: October 12, 2015, 01:48:25 PM by Ryex »
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Offline winkio

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Re: Banking
« Reply #10 on: October 13, 2015, 02:04:25 AM »
On the topic of oversight, you are saying that since the federal reserve can make it's own decisions independent of the government, there is no oversight.  I am saying that they are still held accountable by the law and by a congressional committee, which seems like a reasonable amount of oversight.  As you say, a new law would have to be passed before any member of that Federal Reserve Board of Governors could be ordered to do anything by congress or the president.  This seems like the same way that Congress orders any other government agency to do something, which is by passing a law.  The federal reserve still has to release weekly reports, and present operations in detail at congressional hearings.


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I know that they will make persuasive arguments based on incomplete information and flawed logic.  While you derived your perspective from the video, that does not make it relevant to the discussion I am having with you.
I was explaining why I didn't watch the video.  I was trying to convey that the discussion we are having is centered around the topic of banking, and not the video itself.  This topic is each of us discussing our views on the matter, and so all we need to do is understand each others views as they are presented.  I did not watch the video because I had presumptions about the content, but I dismissed the video because it is separate from your views.  It was basically me saying "here is why I didn't watch the video and here is why I think that is okay."


The fed basically gets credit when the economy is doing well and takes a beating during downturns, even though it's easy to keep a good economy running and hard to manage recessions.  This article shows how back in 2009, the fed's approval rating was terrible, yet just 6 years earlier in 2003, it was above 50%: http://economix.blogs.nytimes.com/2009/07/28/nobody-likes-the-fed/

If you want some concrete examples of the fed making good decisions, you can look here: https://www.federalreserveeducation.org/about-the-fed/history
In particular, these few sentences:
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Throughout the 1990s, the Fed used monetary policy on a number of occasions including the credit crunch of the early 1990s and the Russian default on government securities to keep potential financial problems from adversely affecting the real economy. The decade was marked by generally declining inflation and the longest peacetime economic expansion in our country’s history.


Why do we have a Central bank in the first place?  Let's check wikipedia:
https://en.wikipedia.org/wiki/Federal_Reserve_System#History

Under the section "Creation of Third Central Bank, 1907-1913"
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During the last quarter of the 19th century and the beginning of the 20th century the United States economy went through a series of financial panics. According to many economists, the previous national banking system had two main weaknesses: an inelastic currency and a lack of liquidity.
The economy got so unstable without a central bank that Congress set up an emergency currency and spent 6 years arguing over how to respond, before finally settling on the creation of the Federal Reserve (among much dissent, even when the law the made).


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again, how is making record profits through the 2008 financial crisis "huge losses"
Part of this is that we gave money to the banks that lost money, essentially covering their losses.  Another part is that banks that didn't make risky loans and didn't need to be bailed out were able to take advantage of the volatility to make even more money.  The losses were "huge" in a numerical sense because the bailout was over a trillion dollars.

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Your right, we could sit for years asking "what if" question about a better way to have handled 2008, it's pointless. but we dam well better be sure we never HAVE to ask out selves this question again
Of course everyone is looking for one big change that will solve everything, but as I hinted at with my comments on regulation, we can only decrease the chances of it happening again, and it comes at the cost of slightly less economic growth.

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We should not be leaving this kind of thinking solely to the economists, politicians, an lobbyists. that would be a great disservice to both ourselves and our communities.
If you want to study economics and actually work in this sector and try making some tough decisions that have a positive influence, by all means go for it.  But in terms of discussing it from an amateur perspective with friends online, you aren't having an impact.  Any candidate you vote for is either going to follow their party's economic policies or their own personal ideas, but either way they will have to people with experience and expertise in the field to positions of influence.

I'm not saying that you have no right to talk about the subject, or to have an opinion or passion for it, because those are all good things.  I am saying that you should respect the people that are doing the actual work on the problem, from all sides of the spectrum.