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The only way out of debt
Comments
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I understand that. Debt is what makes the monetary system work. If you were to rely on the Bank of England printing precisely the right amount of money so that assets are efficiently allocated, you might as well go the whole hog and change to a communist society. The reason capitalism works is that banks allocate resources efficiently... that is, banks allocate money so that it makes them as much money as possible.
If they fail to allocate money efficiently, their competitors will eat them alive.
It's called capitalism, baby.
You my just have hit the nail on the head there
I wonder if the parents of the 60's students were as confused 'What! everyone receives the same pay whether they work hard or not, how is that gonna work'
Reminds me of Bob Newhart, remember this?
[FONT=Arial, Helvetica, sans-serif][/FONT][FONT=Arial, Helvetica, sans-serif]Telephone rings
Yeh?...
Who is it, Frank?...
Sir Walter Raleigh?...
Yeh?...
Yeh, put him on, will you!
Hey, Harry... you wanna pick up the extension?... yeh! it's nutty Walter again!
Hi, Walter baby, how are you, guy? How's everything going?...
[/FONT][FONT=Arial, Helvetica, sans-serif]Oh, things are fine here, Walt!...
Did we get the what?...
[/FONT][FONT=Arial, Helvetica, sans-serif]Oh!, the boat load of turkeys, yeh! They arrived fine Walt, as a matter of fact they're still here, they're wonderin' all over London...
Well, y'see, that's an American holiday, Walt!!!...
What you got for us this time, Walt, you got another winner for us?
Tob-acco... er, what's tob-acco, Walt?...
It's a kind of leaf, huh?...
And you bought eighty tonnes of it?!!...
Let me get this straight, Walt, you've bought eighty tonnes of leaves? This may come as a kind of a surprise to you Walt but come fall in England, we're kinda upto our...
It isn't that kind of leaf, huh?...
Oh!, what kind is it then... some special kind of food?...
Not exactly?...
Oh, it has a lot of different uses, like, what are some of the uses, Walt?...
Are you saying 'snuff', Walt?...
What's snuff?...
You take a pinch of tobacco... and you shove it up your nose. ha! ha!... and it makes you sneeze? ha! ha! ha!...
Yeh, I imagine it would, Walt! Hey, Goldenrod seems to do it pretty well over here!
It has other uses though, huh?...
You can chew it!... or put it in a pipe!... or you can shred it up... and put it in a piece of paper. ha! ha! ha!... and roll it up. ha ha ha... Don't tell me, Walt, don't tell me. ha! ha! ha! you stick it in your ear, right? ha! ha! ha!...
Oh! between your lips!...
Then what do you do, Walt? ha! ha! ha!...
You set fire to it! ha! ha! ha!...
Then what do you do, Walt?...
Ha! ha! ha! You inhale the smoke, huh! ha! ha! ha!...
You know, Walt... it seems you can stand in front of your own fireplace and have the same thing going for you!
You see, Walt... we've been a little worried about you, y'know, ever since you put your cape down over that mud.
Y'see, Walt... I think you're gonna have rather a tough time selling people on sticking burning leaves in their mouthes...
It's going very big over there, is it?...
What's the matter, Walt?...
You spilt your what?...
Your coff-ee?.
What's coff-ee, Walt?...
That's a drink you make out of beans, huh? ha! ha! ha!...
That's going over very big there, too, is it?...
A lot of people have a cup of coffee right after their first cigar-ette in the morning, huh?...
Is that what you call the burning leaves, Walt?... cigar-ettes?...
I tell you what, Walt!, why don't you send us a boatload of those beans, too!
If you can talk people into putting those burning leaves in their mouthes... they've gotta go for those beans, Walt!... right?
Listen, Walt... don't call us... we'll call you!...
G'bye![/FONT]'Just think for a moment what a prospect that is. A single market without barriers visible or invisible giving you direct and unhindered access to the purchasing power of over 300 million of the worlds wealthiest and most prosperous people' Margaret Thatcher0 -
You my just have hit the nail on the head there I wonder if the parents of the 60's students were as confused 'What! everyone receives the same pay whether they work hard or not, how is that gonna work'
Reminds me of Bob Newhart, remember this?
I never said any of those things. I didn't say everyone receives the same pay. I never suggested we live in a communist system. The Bank of England and the Monetary Policy Committee already regulate the money supply. The BoE is already churning out tonnes of cash via Quantitative Easing. Are the NHS and State Schools part of a Socialist System? Are our Armies Socialist? Banks don't do their jobs effectively, we bailed them out and they don't use the cash to get the economy going again by lending to small business they just give it to themselves in bonuses. Do like being ripped off?
Did you actually think about what I was saying before? Everyone hear is just dying to jump to their own conclusions without thinking.
You do have one point we would need checks on the government to make sure it was behaving itself but hey that is badly needed right now in our pseudo democratic system. It's called a Corporatocracy baby.0 -
I never said any of those things. I didn't say everyone receives the same pay. .
I know you didn't say that, I was merely comparing one idealistic student quest (60's) with another.'Just think for a moment what a prospect that is. A single market without barriers visible or invisible giving you direct and unhindered access to the purchasing power of over 300 million of the worlds wealthiest and most prosperous people' Margaret Thatcher0 -
I understand that. Debt is what makes the monetary system work. If you were to rely on the Bank of England printing precisely the right amount of money so that assets are efficiently allocated, you might as well go the whole hog and change to a communist society. The reason capitalism works is that banks allocate resources efficiently... that is, banks allocate money so that it makes them as much money as possible.
If they fail to allocate money efficiently, their competitors will eat them alive.
It's called capitalism, baby.
I'm not advocating the OP's link, but the last three years IMO is a pretty powerful rebuttal that the model you describe actually works and maybe that explains why people are questioning not just the financial system but the monetary system.
When banks allocate capital to investments like subprime mortgages, speculative commercial property and risky proprietary trading positions because they trying to make as much money as possible and the government bails them out, I don't think that's a sign that the system works particularly well for the majority of the population.0 -
There is no question that the system doesn't work perfectly. Which is why we don't run a perfectly capitalist society. The question is, do you believe that a system where government allocates resources is likely to work better? The problem is that when you remove debt from the equation, you need some method to allocate resources. How do you do it?
The essence of communism is that the state has control of the means of production (capital). The essence of capitalism is that private individuals and companies control the means of production (capital), and the essence of feudalism (or oligarchy, or corporatism, or whatever you want to call it) is that a ruling elite of nobles controls the means of production. None of these systems guarantees any kind of fairness, or guarantees that things will work out well for the majority of the population.
The problem with the system samclam is advocating is that it essentially moves the allocation of resources from the private sector to the government. Which means, sooner or later, the government will obtain control over the means of production.
I think the results of this are likely to be bad, because when you combine control of the means of production with control of the states paramilitary force... well... history says that you can't keep banks or governments honest if they don't want to be.
Not that we can't discuss ways to improve the situation but I don't think Samclam's ideas move us towards a better future.“The ideas of debtor and creditor as to what constitutes a good time never coincide.”
― P.G. Wodehouse, Love Among the Chickens0 -
I'm not advocating the OP's link, but the last three years IMO is a pretty powerful rebuttal that the model you describe actually works and maybe that explains why people are questioning not just the financial system but the monetary system.
When banks allocate capital to investments like subprime mortgages, speculative commercial property and risky proprietary trading positions because they trying to make as much money as possible and the government bails them out, I don't think that's a sign that the system works particularly well for the majority of the population.
I agree with you; but isn't there a distinction to be made between trading in dodgy financial instruments, and a bank's traditional role of financing business and home purchases etc.“I could see that, if not actually disgruntled, he was far from being gruntled.” - P.G. Wodehouse0 -
I agree with you; but isn't there a distinction to be made between trading in dodgy financial instruments, and a bank's traditional role of financing business and home purchases etc.
True, but even some of the Building Societies dabbed into risky investments and got burnt on commercial property deals. The temptation is too great – I don't blame them, but the the regulatory framework doesn't work at the moment.tomterm8 wrote:There is no question that the system doesn't work perfectly. Which is why we don't run a perfectly capitalist society. The question is, do you believe that a system where government allocates resources is likely to work better? The problem is that when you remove debt from the equation, you need some method to allocate resources. How do you do it?
It's maybe possible to have a mix of both. You can have a privatised banking system where the government retains significant power to influence the allocation of capital – say China today, or South Korea a few decades ago. It alleviates the issue we have at the moment where it makes much more business sense for banks to lend money for things like credit cards than manufacturing companies, because although credit card lending doesn't generate jobs it has a much higher return. I suppose ultimately the problem is that allowing government interference could possibly have worse consequences than a completely private system.
Or the government can set up one or more state owned banks alongside the private banking system, that perhaps focuses on different priorities (e.g. exclusively lends for government infrastructure projects) than mainstream commercial banks. North Dakota has its own bank for example.0 -
To try and answer the OP, which oddly enough no-one seems to have tried to do....
Lets give a simple example of why his proposal doesnt work. I am sorry if it sounds condescending but the OPs proposals really are errr a little simplistic.
We go back to a rural economy where peasants are paid to work on the land and use the money to buy food for which they bargain with the farmers. If a farmer charges too much they can go to another one and so the overcharging farmer loses a sale. So farmers dont overcharge.
There is a poor harvest so what happens is that prices rise. This is because any farmer charging less than the average quickly sells off all his already depleted stock and loses subsequent sales to the farmers charging more.
The peasants complain that they dont have the money to buy enough food.
The benevolent local ruler decides to give a cash handout. Does this help anyone? No, because the farmers can now charge even more, because the peasants can afford to pay more. It doesnt actually solve the problem that there isnt enough food to go round.
So cash handouts without balancing removal of cash by, say, taxes doesnt do anything except cause inflation.
Now where do debts come from? The problem is people want goods before they can afford to pay for them. They wouldnt be happy if they didnt get access to their house until they had saved up the full price.
Similarly companies have to make a product and then sell it to get the money. Unfortunately their workers wont wait - they want their weekly pay packet, even though what they have made hasnt yet been sold. So, just like the people buying houses companies want to buy their workers labour and the raw materials before they have the money to pay for them.
Where does this cash come from? It cant be a handout because of inflation. It must come from someone else.
It can come from the government, but then the government has to tax people to prevent inflation. So the government has to decide who to give money to and who to take money off by tax. This is what the planned economies tried to do at a detailed level in the 20th Century both in the Communist world and in the USA and Britain during the 1930's and 40's. It worked well enough during the 2nd world war when the national objective was clear but couldnt cope with the vast complexities of the post-war world.
The alternative is that the cash comes from someone who has spare. But why should this person lend his money out - he might not get it back? The best way to persuade him is to pay him interest. Thus we get debt.
For the past few thousand years this system has on the whole worked. Sure, there are problems but these have mostly been worked around. More to the point no-one has come up with a better way of supplying cash to where it is temporarily needed to enable the economy to function smoothly.
OK far too over-simplified but I havent time to write a book. Hope it helps.0 -
It's maybe possible to have a mix of both. You can have a privatised banking system where the government retains significant power to influence the allocation of capital – say China today, or South Korea a few decades ago.
We do have a mixture of both. The Government exerts power ordinarily via the Bank of England. When this is not enough, as a sovereign entity it has the power to take whatever exceptional measures it deems necessary. The question is always to what degree the government should intervene, and this inevitably degenerates into an ideological battle between market-worshiping ideologues with a phobia for Governement intervention (aka Tories) and sane people. All I can say is, thank Christ Labour were in charge when things hit the fan.0 -
I dont really get peoples love of debt for housing. From I can see my parents bought a house 25 years ago. Now its worth 10 times what they paid. Unless they down sizes they will not realise any of this wealth. In the mean time their kids who will inherit the wealth if they sell on death but in the meantime they borrow money to buy at vast amounts more than what their parents paid with lots of interest but they should be happy because they will get this money back when their parents die.
Maybe its me but it seems more cost effective to everyone bar banks if the price of the parents house did not rise so much therefore the kids did not have to pay so much debt on the money borrowed therefore meaning that inheritence was not really needed.0
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