Labour pays homage to Iron Lady

Well, we all knew they were true blues on the inside didn't we?

I am not shocked but I am angry.

http://http://www.independent.co.uk/news/uk/politics/for-sale-one-bridge-a-bookmaker-and-millions-of-student-loans-1801328.html

I fail to see how this will help Labour one inch, can they even be called Labour anymore?
What will the sale of student debt do to the country? I'm not sure but I have few guesses. I am sure however, that it will ensure no student votes Labour in a long time.
Well done Gordon!

What do my fellow orgahs think?

http://www.independent.co.uk/news/uk...s-1801328.html

This it?

Selling assets on the cheap is never a good idea as the very small short term benefit makes for no long term advantage.
Selling assets on the cheap when the market is buggered means the very small short term benefit is even smaller

Gordons got form for selling low and buying high. Moron.

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Originally Posted by InsaneApache

http://www.independent.co.uk/news/uk...s-1801328.html

This it?

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Yep, Ithink the linky is fixed now.

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Originally Posted by InsaneApache

Gordons got form for selling low and buying high. Moron.

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To be fair, he slavishly followed the Iron Lady in this too. The price obtained for the country's infrastructure, from water to railways was hardly market value, was it?

Though even Gordon should have clicked that gold might possibly rise in value at some future date - oh, of course not, his world view was that there would never be a bust again. :laugh4:

Selling off the URENCO stake sounds risky, and concerns more than just the UK. Do the other 2 partners (Netherlands & Germany) have some say in the matter? Is that sale merely for the real estate, or the entire uranium-enrichment business?

God knows what is happening. Anything is possible with Elmer Fudd in charge. If they manage to get £16 billion, and it's a big ask in this day and age, it's eqivalent to one months debt, So that's October sorted. Roll on November. :dizzy2:

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Originally Posted by Banquo's Ghost

To be fair, he slavishly followed the Iron Lady in this too. The price obtained for the country's infrastructure, from water to railways was hardly market value, was it?

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Private Finance Initiatives routinely screw the public over, yet nothing is ever done to combat that load of waste.

Besides, this sale is practically irrelevant. What matters is debt to GDP, rather than gross debt.

When I see Gordon Brown and selling in the same sentence, the first thing I think of is gold.

This is what happens when the government is ran by monkeys with typewriters.

Given an infinite amount of time they may produce...well, nevermind. You already had one.

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Originally Posted by Subotan

Private Finance Initiatives routinely screw the public over, yet nothing is ever done to combat that load of waste.

Besides, this sale is practically irrelevant. What matters is debt to GDP, rather than gross debt.

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PFI was a god awful mess and I've no idea how it were to be otherwise. If the government needs more money, it is cheaper to go on the gilts market.

Debt to GDP is what got us into this mess. "Geniuses" such as Brown can then continue borrowing as everything is fine as the GDP goes up. When the crash happens we then need to borrow even more - AND the GDP plummets.

In times of plenty the government should be running at a surplus to insure against the next downturn.

~:smoking:

Government should do only what its people allow it to do.

In times of plenty, good government should be running at a surplus to insure against the next downturn. If they don't, people should grab a pen instead of standing with their hands out.

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Originally Posted by rory_20_uk

In times of plenty the government should be running at a surplus to insure against the next downturn.

~:smoking:

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That is something I agree with. Also, I think banks should keep a surplus of money and never go into debt at all.

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Originally Posted by Beskar

That is something I agree with. Also, I think banks should keep a surplus of money and never go into debt at all.

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Ever wondered where that money goes when it takes three banking days to clear a cheque? Way back in '95 I was told by my business bank manager that there was no reason why it takes three days. They could do it instantaneously back then.

NB: If you're a BIG business you can get your money the same day. Fancy that! :whip:

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Originally Posted by Beskar

That is something I agree with. Also, I think banks should keep a surplus of money and never go into debt at all.

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Nonsense. You do realize how banks run, right? Banks borrow and lend from each other all of the time, on daily, sometimes hourly cycles. To ban banks from ever having debt is tantamount to economic suicide. They'd stop functioning, and credit would dry up faster then you can say "recession".

You don't do it straight away, you do it overtime. You allow them to go into surplus first.

Once the surplus is done, you remove their ability to go into debt. It would radically change the credit system for the better and there would never be a bust like we have seen, because the banks would never go bankrupt.

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Originally Posted by Beskar

You don't do it straight away, you do it overtime. You allow them to go into surplus first.

Once the surplus is done, you remove their ability to go into debt. It would radically change the credit system for the better and there would never be a bust like we have seen, because the banks would never go bankrupt.

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Except what you propose is basically impossible. Its utterly idealistic, and not in tune with how business works. A bank is not meant to have large stores of money sitting around at all times. Why? Because of their function as creditors. Without credit, new/small business and innovation cannot get started. You would essentially leave an old economic order intact, which can operate with near impunity because of severe market entry barriers which would be erected by the minimal levels of credit available. Thus, the economy stagnates, and divides into increasingly disparate income levels and socio-economic hierarchies, as the "haves" that operate business easily maintain their position by leveraging a couple banks into being their personal creditor, and the "have nots", who do would not have the influence to get the credit in the first place. Small business dies, and corporatism thrives. Not really my ideal world.

Also, to suggest that no bank would ever go bankrupt is, economically, absurd and laughable.

Well, for a bank to go bankrupt, it would be because they got no money at all. Since they would be in surplus and not in-debt at any point at all, it would be basically impossible, unless the ultity of the bank is not needed, so then, it doesn't have further reaching consequences.


You have to make a choice - Good Economics with no boom/bust cycles, or continue boom/bust cycles. You don't get all the highes of a boom, and you never get the lows of a bust, however, that is the price to pay for fininical security. If more people were money wise, the first world would be a far better place.

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Originally Posted by Beskar

Well, for a bank to go bankrupt, it would be because they got no money at all. Since they would be in surplus and not in-debt at any point at all, it would be basically impossible, unless the ultity of the bank is not needed, so then, it doesn't have further reaching consequences.

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Again, idealistic. Do you realize how banks profit, right? Banks profit by going into debt- that is how they generate revenue. Your idea contradicts the very fundamental aspect of how banks run. If a bank cannot lend out enough money, it will go under, because it is paying people interest on deposits they give to the bank. Deposits which(again, theoretically) serve as part of their "surplus", even though said deposits are actually net losses.

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You have to make a choice - Good Economics with no boom/bust cycles, or continue boom/bust cycles. You don't get all the highes of a boom, and you never get the lows of a bust, however, that is the price to pay for fininical security. If more people were money wise, the first world would be a far better place.

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The thing is, I've been pointing out exactly why what you're proposing is not good economics, and you are not debating my actual points. So no, those aren't the choices. You literally cannot have "Good Economics" without boom/bust cycles. Boom/bust cycles are an integral part of economics, and if you think they can be eliminated while still maintaining growth, you aren't dealing in reality. Eliminating boom/bust cycles is like thinking communism works great- it assumes people are innately driven, ethical, and unselfish. Which are all fallacious assumptions.

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Originally Posted by Beskar

You don't do it straight away, you do it overtime. You allow them to go into surplus first.

Once the surplus is done, you remove their ability to go into debt. It would radically change the credit system for the better and there would never be a bust like we have seen, because the banks would never go bankrupt.

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No person ever buys a large asset with the entirety of the amount on the barrel thats why we borrow.

A Bank is no differant telling banks not to take on debt will not safeguard banks as the money will errode through inflation very fast once the money starts to be worth less you would stop them borriwing to try to make profit in various ventures and effectively the bank would bust as the shareholders would pull out.

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Originally Posted by Beskar

Well, for a bank to go bankrupt, it would be because they got no money at all. Since they would be in surplus and not in-debt at any point at all, it would be basically impossible, unless the ultity of the bank is not needed, so then, it doesn't have further reaching consequences.


You have to make a choice - Good Economics with no boom/bust cycles, or continue boom/bust cycles. You don't get all the highes of a boom, and you never get the lows of a bust, however, that is the price to pay for fininical security. If more people were money wise, the first world would be a far better place.

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If every bank in the world is in surplus the cash will have to come from someone meaning you. Someone will have to take the debt somewhere its almost like the ideas of thermodynamics

You could use a voucher economy. But now that would be really showing my red stripes.

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Again, idealistic. Do you realize how banks profit, right? Banks profit by going into debt- that is how they generate revenue. Your idea contradicts the very fundamental aspect of how banks run. If a bank cannot lend out enough money, it will go under, because it is paying people interest on deposits they give to the bank. Deposits which(again, theoretically) serve as part of their "surplus", even though said deposits are actually net losses.

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I was using surplus in the context of money extra than deposits. A business in debt is a bad business model. Any debt should be temporarily in times of an emergency or as a repayable investment. If the actual instituitions don't even have the money themselves to cover the debts, you have the credit crunch and the great collapse we just had as the bank gave out money it didn't even have. It is a very flawed system, and yes, banks can actually work without going into such dangerous waters.

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Someone will have to take the debt somewhere its almost like the ideas of thermodynamics

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The banks are there so we can go into debt. We aren't there for the banks to go into debt and bail them out.

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Eliminating boom/bust cycles is like thinking communism works great- it assumes people are innately driven, ethical, and unselfish. Which are all fallacious assumptions.

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Yet there are many people who are driven, ethical and unselfish, how did they become like that? It is their upbringing and environmental factors. It will take generations for it to truely work, nothing can be done overnight, that is your fallacious assumption.

One solution is for bonds based on the project itself. So for example if you wanted to build a dam you'd sell bonds that pay interest which is a function of the value the dam brings, most obviously by selling electricity.

Banks theoretically help spread the risk by investing in many such projects, but as there are so many new and exciting things to do they increase their risk in chasing profit.

~:smoking:

What needs to happen is nothing the world is not broken just broke.

The world is broke, so leave it how it is?

Sounds like a smart plan. I think you should run for government.

On the plus side, you won't be breaking it more.

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Originally Posted by rory_20_uk

PFI was a god awful mess and I've no idea how it were to be otherwise. If the government needs more money, it is cheaper to go on the gilts market.

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The guy who first thought that contracting out projects to private companies, so they can make a profit out of the taxpayer's pocket is a good idea has the economic competence of a badger.

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Originally Posted by rory_20_uk

Debt to GDP is what got us into this mess. "Geniuses" such as Brown can then continue borrowing as everything is fine as the GDP goes up. When the crash happens we then need to borrow even more - AND the GDP plummets.

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It wasn't governments borrowing that caused the recession, it was private institutions. Brown did make a mistake in running a budget deficit prior to the recession (Although to be fair, public services were pretty grim), and the Iron Chancellor should have foreseen the recession.

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Originally Posted by rory_20_uk

In times of plenty the government should be running at a surplus to insure against the next downturn.

~:smoking:

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Exactly. :yes:

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Originally Posted by Beskar

The world is broke, so leave it how it is?

Sounds like a smart plan. I think you should run for government.

On the plus side, you won't be breaking it more.

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Banks lent too much leveraged money they are now not lending.

Bailing out banks is one thing but stopping them lending like you want is madness none of us would even get a loan for car in your universe.

There must be a certain level of debt in the system this requires people to work to pay it off generating all sorts of activety this is good

As has already been pointed out your system will return the world to a place where only the toffs get credit and the rest of us are locked out of a system where we couldnt even borrow to fix the roof on our houses.

We are in debt it will pass just not quickly enforcement of current regulation allied with a de-emphasis on investment in housing not banning mind cos that wont work will eventually sort it.

Some goverment spending is also not a bad idea but it must be taken away quickly lest it become intrinsically part of the system of saving the economy.

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Originally Posted by Beskar

That is something I agree with. Also, I think banks should keep a surplus of money and never go into debt at all.

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Dear Lord. I thought we got rid of this after the Black Death.

This kind of thinking is why I disagree so strongly with economic leftists. They think the world operates on a tangible basis (forget what it's called. speices economy or something?). Thus, there's a limited amount of wealth and therefore the more someone has, the less someone else has. Dark Age thinking. It's like they want the Church to ban interest on loans again.

Money, even gold, isn't worth much. It is the perception of its worth that is important. What's the difference between a $1 bill and a $5 bill: The ink pattern. The differing in perception of value is largely what causes market swings.

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Originally Posted by Vladimir

Dear Lord. I thought we got rid of this after the Black Death.

This kind of thinking is why I disagree so strongly with economic leftists. They think the world operates on a tangible basis (forget what it's called. speices economy or something?). Thus, there's a limited amount of wealth and therefore the more someone has, the less someone else has. Dark Age thinking. It's like they want the Church to ban interest on loans again.

Money, even gold, isn't worth much. It is the perception of its worth that is important. What's the difference between a $1 bill and a $5 bill: The ink pattern. The differing in perception of value is largely what causes market swings.

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Couldn't put it better myself

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Originally Posted by gaelic cowboy

As has already been pointed out your system will return the world to a place where only the toffs get credit and the rest of us are locked out of a system where we couldnt even borrow to fix the roof on our houses.

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???

You can't just invent things. There are things such as "insurance" you know, there is saving money opposed to mass spending like we did. There is still normal people taking out small loans which they can repay. :book2:

Also, why would a toff need to take a loan? They got the money already.

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Originally Posted by Vladimir

This kind of thinking is why I disagree so strongly with economic leftists. They think the world operates on a tangible basis (forget what it's called. speices economy or something?). Thus, there's a limited amount of wealth and therefore the more someone has, the less someone else has.

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There is a total of 8 apples. I have 5 apples, you have 3. Are you saying you can magically pull apples out of thin air? I think that is called Money Laundering.

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Dark Age thinking. It's like they want the Church to ban interest on loans again.

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This was never mentioned?

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Money, even gold, isn't worth much. It is the perception of its worth that is important. What's the difference between a $1 bill and a $5 bill: The ink pattern. The differing in perception of value is largely what causes market swings.

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???

I wished I lived in this fantasy land where the only difference is the ink pattern. I mean, there would be no world hunger, no suffering, everyone is happy with wealth to fill long fulling lives without work, afterall, the only difference in money is the ink pattern!

and I thought I was meant to be the crazy loony one.

:inquisitive:

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Originally Posted by Beskar

You could use a voucher economy. But now that would be really showing my red stripes.

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Well, there's really not much I can tell you at this point if you think voucher economies thrive.

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I was using surplus in the context of money extra than deposits. A business in debt is a bad business model. Any debt should be temporarily in times of an emergency or as a repayable investment. If the actual instituitions don't even have the money themselves to cover the debts, you have the credit crunch and the great collapse we just had as the bank gave out money it didn't even have. It is a very flawed system, and yes, banks can actually work without going into such dangerous waters.

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No. Again, you demonstrate a misunderstanding of how business works. DEBT is not a "bad" business model. Debt is not some all consuming monster, its not the boogyman. Debt is potentially harmful, as well as potentially beneficial. It depends entirely on what the money that is borrowed is used for. Was it bad for the United States to go into debt to help fix Europe after WWII? Of course not.

Most businesses start their youths in quite a bit of debt, and many find ways of doing pretty well. The guy I worked for over summer had a 10 employee company, and he got loans from a big bank so he could get the business going. Debt is THE business model, debt is how anything gets done. Very few people have the necessary capital to start a business, or buy the house they want, just with what they have in savings or checking. You say that debt should only be used as "emergency" or "a repayable investment". What on earth do you think 99% of of debt is? :dizzy2: Do you think businesses get debt for the sheer fun of it? They do it because they think the money they're getting will make them more profitable! That's the whole point of business, to make more money.

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The banks are there so we can go into debt. We aren't there for the banks to go into debt and bail them out.

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And yet, when banks allow us to go into debt, they deplete the very surplus you demand they have. Ifso facto, there's a lot less credit and opportunity for everyone. Which, as I stated earlier and you refuse to acknowledge or contest, hurts society as a whole by leaving those in power now with the leverage to maintain their financial autonomy at the sufferance of everyone else.

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Yet there are many people who are driven, ethical and unselfish, how did they become like that? It is their upbringing and environmental factors. It will take generations for it to truely work, nothing can be done overnight, that is your fallacious assumption.

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Hardly. I look at history, and history tells me that nearly every generation has the same concerns. Socrates was accused of "corrupting the youth", as is rap music today. People worry whether the newer generation will be as hard working as the last. People worry whether their futures are secure. The history of Psychology is a giant record that's skipping on the same beat.

To illustrate a point:

Beskar, how much are you willing to pay for an apple?

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Originally Posted by Beskar

???

You can't just invent things. There are things such as "insurance" you know, there is saving money opposed to mass spending like we did. There is still normal people taking out small loans which they can repay. :book2:

Also, why would a toff need to take a loan? They got the money already.

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Ah but you would not allow this to happen because often insurance companies take on risk which you are adverse to so eventually even I would not be insured for my house.

Toffs have always borrowed money at very nice interest rates thats why when my dad borrowed years ago he practically needed a letter from the bishop as to his character for the bank manager and it was at a cruel interest rate which took years to pay off.

So you see no small person will get past the door and will generally be barred from taking that small loan you talk off

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Originally Posted by Yaseikhaan

Well, there's really not much I can tell you at this point if you think voucher economies thrive.

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In an economic downturn, on a local scale such as that used by the ROC (which lead to a 1% increase in GDP this year) and things like the "Brixton Pound" actually does.

However, the goal of life isn't to make as much money as possible, unless you are a capitalist. Standard of living, welfare of the poorest of society are far more important. Also, a Voucher system based on Labour.

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Beskar, how much are you willing to pay for an apple?

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Too many factors. From the taste of the apple, to the situation, the relative value to other products. If Melon is cheaper than Apple, and I like Melon more, I would obviously buy Melon. The value and price is depicted by the supply and demand, even in socialist economies this is the case.

So the answer to your question is simply this "I am willing to pay whatever I feel like paying in what circumstance and situation". Your question is akin to "How much wood can a wood chuck, chuck, if a wood chuck could chuck wood?", it is too non-specific.

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Originally Posted by gaelic cowboy

Ah but you would not allow this to happen because often insurance companies take on risk which you are adverse to so eventually even I would not be insured for my house.

Toffs have always borrowed money at very nice interest rates thats why when my dad borrowed years ago he practically needed a letter from the bishop as to his character for the bank manager and it was at a cruel interest rate which took years to pay off.

So you see no small person will get past the door and will generally be barred from taking that small loan you talk off

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Not really, insurance works on the statistical chance of you not claiming for anything, thus receiving money for nothing. It depends on situation and people are willing to pay.

Also, not they wouldn't unless they have a poor credit rating or simply have no chance or repaying it back. It is a case-by-case basis, and since we are talking about something different, you cannot use the current system to say the flaws, as it is a different situation. It would be like talking about the flaws of a car in a sandpit, opposed to a car on the road.

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Originally Posted by Beskar

In an economic downturn, on a local scale such as that used by the ROC (which lead to a 1% increase in GDP this year) and things like the "Brixton Pound" actually does find.

However, the goal of life isn't to make as much money as possible, unless you are a capitalist. Standard of living, welfare of the poorest of society are far more important. Also, a Voucher system based on Labour.

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And this is what I don't get. You claim to want to improve the lives of everyone, and yet you would deliberately sabotage the only way for the poorest to improve their lives. A poor person has no capital from which to buy a house, or car, or start a business. If you bar banks from dipping into debt, they will NEVER get a house, or car. Large businesses can and do leverage banks by giving them favorable terms. Its a bit of a problem now, with a tight credit market. You want to make it air-tight. When a person has a loan to pay, no matter what for, they are given an incentive, nay, an obligation, to pay it. That will improve their lives.

If the poor have no option for credit, there is no "light at the end of the tunnel". There is no better apartment, or house, or car. At best, they will struggle and languish for years upon years on lesser standards of living than otherwise. At worst, they give up and become dependent on gov't handouts.

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Originally Posted by Yaseikhaan

And this is what I don't get. You claim to want to improve the lives of everyone, and yet you would deliberately sabotage the only way for the poorest to improve their lives. A poor person has no capital from which to buy a house, or car, or start a business. If you bar banks from dipping into debt, they will NEVER get a house, or car. Large businesses can and do leverage banks by giving them favorable terms. Its a bit of a problem now, with a tight credit market. You want to make it air-tight. When a person has a loan to pay, no matter what for, they are given an incentive, nay, an obligation, to pay it. That will improve their lives.

If the poor have no option for credit, there is no "light at the end of the tunnel". There is no better apartment, or house, or car. At best, they will struggle and languish for years upon years on lesser standards of living than otherwise. At worst, they give up and become dependent on gov't handouts.

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Few fundamental errors, you are assuming debt is the only way through those situations when it isn't.

Starting new business? Investment, either by yourself from working, or by other companies or enterprises. Even then, you can still have a bank loan if you can afford to repay it.

House - Mortgage, I see no problems there, unless you are in a situation where house prices are too expensive, so it is simply something you do without, there are other options such as renting. In Europe, majority of houses and apartments are rented, NOT bought. It is only common in the USA and the United Kingdom to generally have bought accommodation. You are inserting cultural bias.

Car - There is always public transport, a car is not the end of the world. You simply pay for a car if you need to. Again, if you save money, you can easily pay for a car, unless you are going for something completely out of your price range.

Again, House and Car ownership is not the end of the world, there is still other forms of transport and other forms of shelter.

Again, what happened to these people having jobs?

Also, welfare can be implemented in a number of ways. However, since we are not actually talking about that as that is a different situation, I won't comment further.

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. DEBT is not a "bad" business model.

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Constantly Running into Debt and staying in Debt is a very bad model. Yes, Debt can be really good in temporarily situations, or for doing a money and finical investment into something. Since we are talking about a current situation where there is constant debt, thus making everything go bankrupt, I think the evil's of abusing the debt function is pretty well obvious. Debt is temporary thing, not a life-style, if you make it a life-style, it is just a path to your own destruction.

I never go into debt and when I do, I pay it off as soon as possible, I actually know how to handle my money. I have food on the table, shelter, even afford luxuries. Guess what? I basically never even been in debt. Guess what? I have working class parents thus no money from them. My money is my own and I am living on my own in my own place.

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Originally Posted by Beskar

Few fundamental errors, you are assuming debt is the only way through those situations when it isn't.

Starting new business? Investment, either by yourself from working, or by other companies or enterprises. Even then, you can still have a bank loan if you can afford to repay it.

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I repeat, will you ever actually counter my argument? How many times must I repeat myself? Big corporations can and DO leverage banks into giving them loans before all others, by taking out more money than other people could conceive of. When you take away the bank's ability to go into debt, their surplus is easily eaten through by corporate giants, and little is left for everyone else.

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House - Mortgage, I see no problems there, unless you are in a situation where house prices are too expensive, so it is simply something you do without, there are other options such as renting. In Europe, majority of houses and apartments are rented, NOT bought. It is only common in the USA and the United Kingdom to generally have bought accommodation. You are inserting cultural bias.

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Again, you're not accounting for the point that big corporations can and do get loans before all others, because they can borrow so much more.

And renting is indeed an option, but it should not be the only option.

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Again, House and Car ownership is not the end of the world, there is still other forms of transport and other forms of shelter.

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Again, previous point. I might be biased on the car thing, but in the US, its pretty rough trying to rely on public transport. Of course, Europe is much better at this sort of thing.

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Again, what happened to these people having jobs?

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Never said they wouldn't. However, without credit, again, because banks won't have any left to give since they can't go into debt, it will take much longer. Additionally, without the obligation to pay, the importance of the job is not the same as if they have very few financial obligations.

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Also, welfare can be implemented in a number of ways. However, since we are not actually talking about that as that is a different situation, I won't comment further.

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Same.

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Constantly Running into Debt and staying in Debt is a very bad model. Yes, Debt can be really good in temporarily situations, or for doing a money and finical investment into something. Since we are talking about a current situation where there is constant debt, thus making everything go bankrupt, I think the evil's of abusing the debt function is pretty well obvious. Debt is temporary thing, not a life-style, if you make it a life-style, it is just a path to your own destruction.

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Again, you are being out of touch with how business works. And no, we're really not talking about "just now". If you want to ban debt for banks, that impacts the future as well. The current situation does demand limitations on how far banks should be allowed to go into debt. But again, you must remember that banks don't operate on the same business model as most businesses. When they have lots of money(ie deposits), they lose money. When they have debt(ie- loans), they increase their revenue, assuming its paid back. That is why banks have so much "debt", they aren't meant to have a huge amount of cash on hand. Because of the prior assumption, there should be limits on just how far they go into debt, but barring them from debt causes havoc with the entire model and will likely run a large number of banks out of business entirely, with those surviving being crippled both in their ability to finance average folks and aspiring entrepreneurs, and their own fiscal ability to expand business and pay their employees a good wage.

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Originally Posted by Yaseikhaan

Again, you are being out of touch with how business works. And no, we're really not talking about "just now". If you want to ban debt for banks, that impacts the future as well. The current situation does demand limitations on how far banks should be allowed to go into debt. But again, you must remember that banks don't operate on the same business model as most businesses. When they have lots of money(ie deposits), they lose money. When they have debt(ie- loans), they increase their revenue, assuming its paid back. That is why banks have so much "debt", they aren't meant to have a huge amount of cash on hand. Because of the prior assumption, there should be limits on just how far they go into debt, but barring them from debt causes havoc with the entire model and will likely run a large number of banks out of business entirely, with those surviving being crippled both in their ability to finance average folks and aspiring entrepreneurs, and their own fiscal ability to expand business and pay their employees a good wage.

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I will accept this argument I am slightly out of touch, because I have to say, how do banks lose money when they have lots of money?

Obviously, working on interest of the deposit and the interest of the repayment would correct the balance out? Also, I was meaning surplus money as being its own money, not actually deposits.

Yes, there is possibly the chance that deposits could revert just to keeping that money in storage (after all, who wants to carry all their money around in their house where they could lose it for good?) however, I don't see how banks could actually lose money, unless no one invested and the loans were not repaid and they weren't secured against property or anything like that.

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Originally Posted by Beskar

I will accept this argument I am slightly out of touch, because I have to say, how do banks lose money when they have lots of money?

Obviously, working on interest of the deposit and the interest of the repayment would correct the balance out? Also, I was meaning surplus money as being its own money, not actually deposits.

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On deposits, yes. Depending on the type of account, they are required to pay interest to the person as payment for giving the bank the money.

Banks lose on money that's just sitting in a vault because of inflation- its sitting there, being slightly less valuable each day. Plus, if they could find someone who was a worthy candidate for a loan, they could give that money to them, and earn interest on it. Of course the loan could bust, but then, that's the nature of banking.

Also, just as an interesting tidbit- the money you deposit in your bank usually doesn't stay in it. :quiet: Usually its sent out to other people/banks/businesses as a loan, and when you ask for your money back, you get some other person's cash that's on its twentieth loan trip through the banking system.

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Originally Posted by Yaseikhaan

Also, just as an interesting tidbit- the money you deposit in your bank usually doesn't stay in it. :quiet: Usually its sent out to other people/banks/businesses as a loan, and when you ask for your money back, you get some other person's cash that's on its twentieth loan trip through the banking system.

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We call this "The Credit Crunch" due to them relieving money against a wall and when people took out their deposits, the bank is left completely vulnerable and bankrupt.

Hence why the bank shouldn't go in the negative, and the surplus is there so any changes in the equilibrium can be cushioned.

Hence "Money has to come from some where", and as such, there needs to be some one, some where, which doesn't actually go into debt, unless it is a recipe for devastation.

I am fully aware that banks skate on a thin-line where they just give away money they don't have, relying on the future, but it really is a very poor practise. Debt overall needs to shrink everywhere.


As for inflation, I believe it is zero at the moment, or was it actually negative? Only good inflation has is for those indebt, as they only have to repay less, while people with savings lose out.

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Originally Posted by Beskar

We call this "The Credit Crunch" due to them relieving money against a wall and when people took out their deposits, the bank is left completely vulnerable and bankrupt.

Hence why the bank shouldn't go in the negative, and the surplus is there so any changes in the equilibrium can be cushioned.

Hence "Money has to come from some where", and as such, there needs to be some one, some where, which doesn't actually go into debt, unless it is a recipe for devastation.

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Again, we're at a wall here. Simply put, your solution is far too extreme. As I've pointed out repeatedly, if you mandate that, credit slowly dries up and tightens the noose of too many banks. The credit market for those outside the larger business cycle will be vitally threatened, and you risk the very health of the economy by hoping that those that are benefited by the new barriers to entry will not fail. I agree that there's to be some limits in place, but limits that actually allow for credit to be available to those that need it.

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Originally Posted by Yaseikhaan

Again, we're at a wall here. Simply put, your solution is far too extreme. As I've pointed out repeatedly, if you mandate that, credit slowly dries up and tightens the noose of too many banks. The credit market for those outside the larger business cycle will be vitally threatened, and you risk the very health of the economy by hoping that those that are benefited by the new barriers to entry will not fail. I agree that there's to be some limits in place, but limits that actually allow for credit to be available to those that need it.

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You could always just have one bank. The lack of competition would ensure money would flow easier (as it has a monopoly on the market).

As I said, this wouldn't be an overnight thing, and the good thing is, if it ends up being a little too extreme, you could always relax it by undoing the top button to find that happy place. As I am some one who does things in stages anyway, it probably would get to a point it would be too negative.

I think it is a difference in that I am far more optimistic and you are far more pessimistic about the possibility. There are millions of other factors we haven't even discussed and working out all of those, I believe a very stable and solid banking system could be done.

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Originally Posted by Beskar

You could always just have one bank. The lack of competition would ensure money would flow easier (as it has a monopoly on the market).

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You may as well just bring back the gold standard.

The reason we are in trouble today is not because banks had debt, but because they had too much debt. When you deposit money into a bank, you are essentially loaning the bank money (usually at a fairly low interest rate). The bank makes money by then loaning money from deposits (or loans from the federal banks) out to people or companies at a higher rate. The payback of these loans are at a planned, scheduled rate, with some magic math added in to account for defaults. What is unscheduled and unplanned for is the amount of money deposited or removed by the account holders, so a bank run will crush the bank since it can't demand full loan repayments to cover. Bank runs are caused by the perception of vulnerability, even the best run bank in boom times could potentially be hit under the right circumstances.

What you seem to be proposing is that a bank must build up a huge amount of capital of it's own, independent of it's deposits, before making loans. This would pretty much kill the economy. A better solution would be to properly regulate the banks (holding and investment) so they do not become over leveraged. A debt-to-equity ratio of ~15:1 is fine, not the ~30:1 the US investment banks got to before the crash.

Another major issue is that they took on debts they didn't know the value of.

The world works like this, there are 8 screwdrivers, we can either have 4 each, or we can swap around as we need them. Some days I have all 8, sometimes I have none; but it's like we both have 8. The problems only start when one of us decides not to share.

The problem with socialism is it tries to give everyone eight screwdrivers, socialists are greedy.

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Originally Posted by Philipvs Vallindervs Calicvla

The problem with socialism is it tries to give everyone eight screwdrivers, socialists are greedy.

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:inquisitive:

8 screwdrivers, 4 people.


Capitalist - One person has 5, one has 2, one has 1, the other with none.

Socialist - Everyone has 2.

Only one person actually lost out, the person who had 5, while it is the same for one, and the other two benefitted.


Problem is, capitalists are greedy as they want the 5 screwdrivers and more, at the expense of the other 3.

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Originally Posted by Beskar

:inquisitive:

8 screwdrivers, 4 people.


Capitalist - One person has 5, one has 2, one has 1, the other with none.

Socialist - Everyone has 2.

Only one person actually lost out, the person who had 5, while it is the same for one, and the other two benefitted.


Problem is, capitalists are greedy as they want the 5 screwdrivers and more, at the expense of the other 3.

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Actually shouldnt that read everyone has one screwdriver the other 4 were never made because the quota for four people was already reached. As a result actual electricians never got their screwdriver cos the quota for this year was done.

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Originally Posted by Beskar

:inquisitive:

8 screwdrivers, 4 people.


Capitalist - One person has 5, one has 2, one has 1, the other with none.

Socialist - Everyone has 2.

Only one person actually lost out, the person who had 5, while it is the same for one, and the other two benefitted.


Problem is, capitalists are greedy as they want the 5 screwdrivers and more, at the expense of the other 3.

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Not quite. The idea behind capitalism is that the manufacturer of screwdrivers -- trying to sell as many as possible -- will come up with a less expensive way to make them. This should drive down the price of screwdrivers allowing the "rich" fellow to acquire 7, both of the "middlers" 2 each, and the "poor" chap can now actually get one because 12 can be made for the price that used to get 8.

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Originally Posted by Seamus Fermanagh

Not quite. The idea behind capitalism is that the manufacturer of screwdrivers -- trying to sell as many as possible -- will come up with a less expensive way to make them. This should drive down the price of screwdrivers allowing the "rich" fellow to acquire 7, both of the "middlers" 2 each, and the "poor" chap can now actually get one because 12 can be made for the price that used to get 8.

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But Socialism doesn't equal Planned Economy. There is still supply and demand controlling prices and other things.

So while you are in the situation some guy now has 7, the other two has 2 and the poor has 1, in a ideal socialist, it would be 3,3,3,3 so in other words, everyone benefits except for one. However, it is usually not like that, so there might be some discrepancy like 4,3,3,2 since getting it truly equal is near impossible. Also, since it is possible for people are happy working for a 2 wealth as it makes them comfortable, they get more time off to do other things like leisure activities.

It is all a balancing act.

Surely you would only ever need one screwdriver? This is a screwy analogy.

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Originally Posted by Subotan

Surely you would only ever need one screwdriver? This is a screwy analogy.

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Different heads and sizes, no USB ports for DIY just yet. :sad: