epiphany Posted February 10, 2012 Share Posted February 10, 2012 Again, this isn't FR banking. What makes you think that all the money originally came from the BoE with an interest rate attached to it. I'm not talking specifically about fractional reserve banking. The problem exists regardless of whether you have a fractional or full reserve system. The BoE is also irrelevant, since 97% of all existing money is still loaned through commercial banks, with interest. Try again. Link to comment Share on other sites More sharing options...
Longcol Posted February 10, 2012 Share Posted February 10, 2012 I'm not talking specifically about fractional reserve banking. The problem exists regardless of whether you have a fractional or full reserve system. The BoE is also irrelevant, since 97% of all existing money is still loaned through commercial banks, with interest. Try again. How could you have a "full reserve system" without the economy grinding to a halt? How can you have loans without interest (or a fee as in the case of Sharia)? Link to comment Share on other sites More sharing options...
epiphany Posted February 10, 2012 Share Posted February 10, 2012 How could you have a "full reserve system" without the economy grinding to a halt? How can you have loans without interest (or a fee as in the case of Sharia)? I'm not suggesting we have a full reserve system. I don't think there is anything inherently wrong with fractional reserve. I'm not suggesting we have loans without interest. There are just better ways of ensuring that interest gets put back into the economy, i.e. public banking, for which there are several models. The problem stems from the profit from interest being taken out of the real economy. Link to comment Share on other sites More sharing options...
Longcol Posted February 10, 2012 Share Posted February 10, 2012 I'm not suggesting we have a full reserve system. I don't think there is anything inherently wrong with fractional reserve. I'm not suggesting we have loans without interest. There are just better ways of ensuring that interest gets put back into the economy, i.e. public banking, for which there are several models. The problem stems from interest being charged and the profit being taken out of the real economy. How is "profit" taken out of the real economy? For example a profit would be paid to a shareholder, say a pension company, which uses it to pay the pension to a saver in the pension company, who uses it to pay for shopping, heating bills etc. Link to comment Share on other sites More sharing options...
epiphany Posted February 10, 2012 Share Posted February 10, 2012 How is "profit" taken out of the real economy? For example a profit would be paid to a shareholder, say a pension company, which uses it to pay the pension to a saver in the pension company, who uses it to pay for shopping, heating bills etc. I can see why you chose that example, but you know that's only one part of the profit share. Let me put it another way - even if we knew 100% of the profit from interest on money lending (97% of all money) ended up back in the real economy (i.e. producing goods and services - wealth creation), what is wrong with encouraging a system which ensures it and reduces/eliminates its parasitic elements? Do we actually want reform or shall we just nibble around the edges by adjusting a few capital reserve ratios and taxing bankers' bonuses? Pff. Link to comment Share on other sites More sharing options...
Hairyloon Posted February 10, 2012 Share Posted February 10, 2012 How could you have a "full reserve system" without the economy grinding to a halt? It worked before they invented fractional reserves. Link to comment Share on other sites More sharing options...
Hairyloon Posted February 10, 2012 Share Posted February 10, 2012 How is "profit" taken out of the real economy? For example a profit would be paid to a shareholder, say a pension company... Why not say a fat cat billionaire who stuffs it under his mattress? Link to comment Share on other sites More sharing options...
Longcol Posted February 10, 2012 Share Posted February 10, 2012 It worked before they invented fractional reserves. Banks have always used FRB - your point was? Link to comment Share on other sites More sharing options...
Longcol Posted February 10, 2012 Share Posted February 10, 2012 I can see why you chose that example, but you know that's only one part of the profit share. Let me put it another way - even if we knew 100% of the profit from interest on money lending (97% of all money) ended up back in the real economy (i.e. producing goods and services - wealth creation), what is wrong with encouraging a system which ensures it and reduces/eliminates its parasitic elements? Do we actually want reform or shall we just nibble around the edges by adjusting a few capital reserve ratios and taxing bankers' bonuses? Pff. Now we have moved a long way from the original premise of the thread that "banks create money out of nothing" - which is a fallacy. I have stated previously on this thread that the reward system for bankers is wrong - although their bonuses will be spent on (luxury?) goods and services (see all those expensive restaurants in London) or be re-invested. So what we seem to have arrived at is how we have a system that tries to ensure that investment reaches the parts of the country where the economy is suffering - or something similar? Link to comment Share on other sites More sharing options...
Cyclone Posted February 10, 2012 Share Posted February 10, 2012 I'm not talking specifically about fractional reserve banking. The problem exists regardless of whether you have a fractional or full reserve system. The BoE is also irrelevant, since 97% of all existing money is still loaned through commercial banks, with interest. Try again. I don't need to try again, you've just agreed that your example was broken and doesn't explain the current system. Link to comment Share on other sites More sharing options...
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