Another 2.5 million votes for Democrats in November

[top gun]

Perfect visual analogy here PLC1.

It's good when the ultra rich get a big kick back... but terrible when hard working Americans get a pittance of unemployment benefits as to not have to lose their homes or go hungry. PERFECT!

That's uber Conservative America for ya.

 

[BigRob]

Any other system is fraud. If you, as an individual, operated your personal finances on a partial reserve system, you would be put in jail for fraud. Just because Government tells banks it's OK for them to do it changes nothing... Government sanctioned fraud is still fraud.

Let me back up for a moment, what is your vision of a "full-reserve" system? Just that a bank has to hold 100% in reserve?

 

[GenSeneca]

It could also be argued that people who suffer a serous car crash get more out of their auto insurance than they have put in.

So now you want to compare a mandatory government monopoly with private insurance companies that have to compete for business? I don't even know where to begin on that one...

Exactly, and that is just what the government failed at doing. The practice of making questionable mortgage loans, then packaging them as reliable assets should never have been allowed.

It was done with the full support and financial backing of the US government, another case of government sanctioned fraud.

Doing so was a real redistribution of wealth, as well as a violation of the rights of all of us.

Under a Capitalist system, such things would not be tolerated, much less fully supported, by the government.

Laissez fair capitalism means that there are no rules to protect the individual.

"Laissez-faire capitalism is the only social system based on the recognition of individual rights and, therefore, the only system that bans force from social relationships." - Ayn Rand

"The recognition of individual rights entails the banishment of physical force from human relationships: basically, rights can be violated only by means of force. In a capitalist society, no man or group may initiate the use of physical force against others. The only function of the government, in such a society, is the task of protecting man’s rights, i.e., the task of protecting him from physical force; the government acts as the agent of man’s right of self-defense, and may use force only in retaliation and only against those who initiate its use; thus the government is the means of placing the retaliatory use of force under objective control." - Ayn Rand

Again, your entire notion of what Capitalism is and what Laissez Faire entails is flawed and certainly didn't come from an advocate of Capitalism.

Capitalism has to be monitored and regulated by a government of the people in order to protect our individual rights.

A Capitalist system limits the government to one job, protecting our individual rights.

Unfortunately, what we have today is the corporations running that government. In large part, our government of the people has become a government of the special interests and big money.

Because people like you think the government should have the power to violate rights... Then you complain when the "wrong" people have their rights violated. Ban the government from being able to violate the rights of any individual, limit government's authority to protecting individual rights and then you will have a system where no individual can legally violate the rights of another - Capitalism.

It is if the strong are in control of the government.

Define "strong"... The top 50% of taxpayers pay the way for the bottom 50%, seems in that scenario the bottom 50% are stronger.

It is collectivism within the tribe, but there is no central authority to control the country.

So it is the absence of a federal government that you consider to be Anarchy? Anarchy is the absence of rule, authority, laws... Within tribal cultures they have rules and laws, the tribes are the authority, i.e. the "government", therefore they are not existing in a state of Anarchy.

 

[GenSeneca]

Let me back up for a moment, what is your vision of a "full-reserve" system? Just that a bank has to hold 100% in reserve?

Full-reserve banking is a banking practice in which the full amount of each depositor's funds are available in reserve (as cash or other highly liquid assets) when each depositor had the legal right to withdraw them.

Such a system would dramatically stabilize the economy by severely limiting the "bubbles" caused by fractional reserve banking... Full reserve banking almost completely eliminates the possibility of a Dot Com, Housing, or other bubble from forming, therefore eliminating the disastrous effects of them bursting.

And despite the fearmongering of people who support the fractional reserve system, such things as loans and credit would still be available. The primary difference would be that a bank who issues a loan or credit to one of it's customers would be risking the bank's money, not their depositors money, when making these business decisions.

 

[Gipper]

 

[BigRob]

Full-reserve banking is a banking practice in which the full amount of each depositor's funds are available in reserve (as cash or other highly liquid assets) when each depositor had the legal right to withdraw them.

Such a system would dramatically stabilize the economy by severely limiting the "bubbles" caused by fractional reserve banking... Full reserve banking almost completely eliminates the possibility of a Dot Com, Housing, or other bubble from forming, therefore eliminating the disastrous effects of them bursting.

And despite the fearmongering of people who support the fractional reserve system, such things as loans and credit would still be available. The primary difference would be that a bank who issues a loan or credit to one of it's customers would be risking the bank's money, not their depositors money, when making these business decisions.

What is the incentive for a bank to then pay interest to it depositors? Also, how does a bank make money if it has to loan out "its own money." Where does that money come from?

 

[GenSeneca]

First, my apologies... This reply has been sitting on my work comp for 3 days and I didn't post it till now.

What is the incentive for a bank to then pay interest to it depositors?

Consider their current incentive... They give you, lets say, 2% interest on your deposit. They turn around and lend your money out to someone else at 5% interest and they keep the 3% difference. Banks could still do this on a full reserve system but it would function much more like certificates of deposit, where the depositor agrees to have X amount of money unavailable for Y amount of time getting Z amount of interest added to the principle when the CD matures.

Also, how does a bank make money if it has to loan out "its own money."

Safe Deposit Boxes are not free, you have to rent those from the bank for a fee. Full reserve would essentially transform every bank into a giant safe deposit box.

The depositors who didn't want to pay the fee could agree to have a % of their money tied up in a CD style account, the acrued interest would then cover the fee, essentially making it "free" for the depositor. If the depositor wanted to tie up a larger % of his money in the CD style account, he could actually earn interest on his account.

Doesn't sound much different from the current partial reserve system, does it?

 

[PLC1]

First, my apologies... This reply has been sitting on my work comp for 3 days and I didn't post it till now.



Consider their current incentive... They give you, lets say, 2% interest on your deposit. They turn around and lend your money out to someone else at 5% interest and they keep the 3% difference. Banks could still do this on a full reserve system but it would function much more like certificates of deposit, where the depositor agrees to have X amount of money unavailable for Y amount of time getting Z amount of interest added to the principle when the CD matures.



Safe Deposit Boxes are not free, you have to rent those from the bank for a fee. Full reserve would essentially transform every bank into a giant safe deposit box.

The depositors who didn't want to pay the fee could agree to have a % of their money tied up in a CD style account, the acrued interest would then cover the fee, essentially making it "free" for the depositor. If the depositor wanted to tie up a larger % of his money in the CD style account, he could actually earn interest on his account.

Doesn't sound much different from the current partial reserve system, does it?

If the bank is paying you 2%, then loaning your money at 5%, then it does not have your money in reserve, does it? If the bank holds my CD, then pays out all of the money it takes in, it has a zero reserve. If I want to cash in my CD early, I can't, as it has loaned out my money to someone else and no longer has it.

A 100% reserve would mean that the bank has to keep all of the money I and all my neighbors have in CD. If it did that, it would have no money to loan at all. A zero reserve, on the other hand, would leave the bank in trouble if a few of us wanted to cash in. A reserve allows the bank to loan out money, yet keep a reasonable amount on hand to pay depositors.

When everyone wants to cash out their accounts at once, there are a couple of choices: close the bank, as they did in '29, or depend on FICA, as they do now.

 

[GenSeneca]

A 100% reserve would mean that the bank has to keep all of the money I and all my neighbors have in CD.

No, it doesn't, but I understand why you are confused about it. When you tie up your money in a CD, you are signing a legal contract agreeing to have your money lent out for interest and not be available for X amount of time.

The bank is just a middle man between the lender and borrower. If you loaned me $1000 and we signed a contract saying that I had one month to give you back $1100, you wouldn't have legal grounds to demand the $1100 at any time before the month is up.

The bank will currently let you cash in a CD before it's matured but you lose some of your principle as a penalty and get no interest. Under full reserve, you could not cash in a CD before it's matured as it would be a violation of your contract, unless of course the bank lets you out of your contract.

A reserve allows the bank to loan out money, yet keep a reasonable amount on hand to pay depositors.

A partial reserve allows for dangerous credit bubbles to form, like we saw with the Dot Com and more recently the Housing market. When a bank only needs 10% on reserve, they can issue a line of $1,000,000 worth of credit on a deposit of only $100,000. When, or if, that line of credit defaults on the loan, it creates the kind of banking crisis that required the federal government to bail out some banks while letting others fail.

In a full reserve system, the bank would need $1,000,000 in deposits to issue a $1,000,000 line of credit and make things like FICA and bailouts superfluous.

 

[PLC1]

No, it doesn't, but I understand why you are confused about it. When you tie up your money in a CD, you are signing a legal contract agreeing to have your money lent out for interest and not be available for X amount of time.

The bank is just a middle man between the lender and borrower. If you loaned me $1000 and we signed a contract saying that I had one month to give you back $1100, you wouldn't have legal grounds to demand the $1100 at any time before the month is up.

The bank will currently let you cash in a CD before it's matured but you lose some of your principle as a penalty and get no interest. Under full reserve, you could not cash in a CD before it's matured as it would be a violation of your contract, unless of course the bank lets you out of your contract.


A partial reserve allows for dangerous credit bubbles to form, like we saw with the Dot Com and more recently the Housing market. When a bank only needs 10% on reserve, they can issue a line of $1,000,000 worth of credit on a deposit of only $100,000. When, or if, that line of credit defaults on the loan, it creates the kind of banking crisis that required the federal government to bail out some banks while letting others fail.

In a full reserve system, the bank would need $1,000,000 in deposits to issue a $1,000,000 line of credit and make things like FICA and bailouts superfluous.

I get what you're saying about a CD, but what about a regular passbook savings account? Banks wouldn't want to even have savings accounts if they couldn't use the money. Such accounts would, in fact, be a net loss for the banks.

 

[ktucan1]

Here's an easy solution to our unemployment problem. Put them to work on the border??? Also how about we spend 59 billion dollars here on fixing our borders then worrying about Iraq and Afghanistan???

 

[GenSeneca]

Banks wouldn't want to even have savings accounts if they couldn't use the money.

Again, if you agree to have X amount of your money unavailable, calling it whatever you like, so the bank can loan that money out and pay you interest on it, then where's the confusion/problem?

Checking accounts would be like a safe deposit box, whatever you put in, the bank cannot touch and you can make deposits or withdraws but you would be charged for the service of a checking account and for keeping your money safe.

Savings accounts would be like a CD, you agree to have your deposits tied up in bank sponsored loans and the bank would pay you interest on your money but you would not have access to that money for X amount of time. For example, if you put in $100 a week for a year, the following year you could remove $100 (plus interest) a week, or roll over the deposits so the interest would compound.

 

[PLC1]

Again, if you agree to have X amount of your money unavailable, calling it whatever you like, so the bank can loan that money out and pay you interest on it, then where's the confusion/problem?

The problem is that the system you're describing is not a 100% reserve, and that the reason people keep passbook saving accounts despite lower interest rates than they could get elsewhere is liquidity.

Checking accounts would be like a safe deposit box, whatever you put in, the bank cannot touch and you can make deposits or withdraws but you would be charged for the service of a checking account and for keeping your money safe.

My Credit Union does better than that, as the checking account I have not only doesn't cost me, it pays a small interest rate. Why would I want to go to a bank that charges for a service that I can get for free?

Savings accounts would be like a CD, you agree to have your deposits tied up in bank sponsored loans and the bank would pay you interest on your money but you would not have access to that money for X amount of time. For example, if you put in $100 a week for a year, the following year you could remove $100 (plus interest) a week, or roll over the deposits so the interest would compound.

Again, the attraction of a savings account is liquidity. You can get your money any time you need it. If you want to keep it tied up, you can make a much higher interest rate, or you can invest aggressively in stocks and bonds, and still come out with a pretty safe investment if you're willing to wait out periods of economic downturns.

 

[GenSeneca]

The problem is that the system you're describing is not a 100% reserve

If a bank wants to issue credit on a full reserve system, it needs to have matching deposits. $1 deposit = $1 available credit.

Partial reserve means that a $1 deposit can be good for a $10, or even $100, line of credit. It doesn't take a math wiz to see the danger and instability of that system.

I can't help but notice that whether we're discussing Laissez Faire Capitalism or Full Reserve banking, your "information" about the system seems to come from the mouths of those opposing, rather than supporting, the system. If I was interested in learning about the benefits of owning a Ford, I wouldn't go to a Chevy dealer to get that information... This seems to be what has happened with you.

 

[PLC1]

If a bank wants to issue credit on a full reserve system, it needs to have matching deposits. $1 deposit = $1 available credit.

Partial reserve means that a $1 deposit can be good for a $10, or even $100, line of credit. It doesn't take a math wiz to see the danger and instability of that system.

I can't help but notice that whether we're discussing Laissez Faire Capitalism or Full Reserve banking, your "information" about the system seems to come from the mouths of those opposing, rather than supporting, the system. If I was interested in learning about the benefits of owning a Ford, I wouldn't go to a Chevy dealer to get that information... This seems to be what has happened with you.

My information came from you. Your description of full reserve banking is not, in fact, full reserve banking. If the bank has to keep all of the money you've put into a passbook savings account, then it has nothing to loan. If the depositor has to tie up his deposit so that the bank can make loans with it, then the savings account is more like a money market or a CD than a savings account. Either way, the advantages of having a savings account at all are compromised, both for the bank and for the depositor.

I think you're the one who has run out of arguments, as shown by your supposed analysis of where my information is coming from.