We're so money
January 24, 2004 9:59 AM Subscribe
An interesting documentary I stumbled across about international banking's rise to power through history. It features poor quality video with not-quite-synced audio, yet it kept me riveted. Part two goes on to explain how the country will never be able to escape debt under the current monetary system.
Yeah just checking that site out now they have a lot of whacky stuff. But watch this video and see what you think, don't bother with the site that's hosting them.
posted by timb at 10:23 AM on January 24, 2004
posted by timb at 10:23 AM on January 24, 2004
On a hunch, I seached the rest of their site for the word "jew", and low and behold:
there were some results...
We at Veritas feel that the term "Jews" mentioned in this article are not the Jewish people in general, but rather they are the secret society Jews that have used there position and power to betray humanity. We feel that the media is being used by the global secret societies to further there covert agenda, and they care not what race or group of people must pay for there crimes....
(later)
...to permit the Jews, with their 3,000-year history of nation-wrecking, from ancient Egypt to Russia, to hold such power over us is tantamount to race suicide.
I did this because "international banking" is a euphemism for elders-of-zion anti-semitic conspiracy nuts.
Thanks, but I think we can safely dismiss anything on this site as completely wacko.
posted by malphigian at 10:36 AM on January 24, 2004
there were some results...
We at Veritas feel that the term "Jews" mentioned in this article are not the Jewish people in general, but rather they are the secret society Jews that have used there position and power to betray humanity. We feel that the media is being used by the global secret societies to further there covert agenda, and they care not what race or group of people must pay for there crimes....
(later)
...to permit the Jews, with their 3,000-year history of nation-wrecking, from ancient Egypt to Russia, to hold such power over us is tantamount to race suicide.
I did this because "international banking" is a euphemism for elders-of-zion anti-semitic conspiracy nuts.
Thanks, but I think we can safely dismiss anything on this site as completely wacko.
posted by malphigian at 10:36 AM on January 24, 2004
Once again, the video DOES NOT have anything to do with the site it is hosted at. Yes we know that who ever runs that site is loony.
The video doesn't have anything to do with or mention jews except at the beginning, where it mentions the famous moneylenders in temples that exploited jews who wished to give money to the church.
posted by timb at 10:42 AM on January 24, 2004
The video doesn't have anything to do with or mention jews except at the beginning, where it mentions the famous moneylenders in temples that exploited jews who wished to give money to the church.
posted by timb at 10:42 AM on January 24, 2004
If this video is actually masked anti semitism please point it out to me... I thought it was just an interesting anti-fractional-reserve-banking piece... but I could be wrong.
posted by timb at 11:01 AM on January 24, 2004
posted by timb at 11:01 AM on January 24, 2004
Well, the title of the video is "The Money Masters," which is itself a euphemism for the Jews who allegedly control the world economy. I haven't watched the videos, nor do I plan to, but a simple google search indicates both that term generally, and these videos in particular, are linked to anti-Semitism.
posted by monju_bosatsu at 11:11 AM on January 24, 2004
posted by monju_bosatsu at 11:11 AM on January 24, 2004
Alright timb, fine...
This appears to be the real creators of the video:
http://www.themoneymasters.com/...
I watched part one of the video, and it's solidly conspiracy-nut as well. Silly examples (really, you could get a car for $2000? What was the average salary then genius?), "Experts" presented with vague credentials, bizarre inflammatory rhetoric.
I mean, sheesh, they make this big fuss about the big secret that the federal reserve is associated with the government, but lo:
it's right there on the feds site. Amazing, the evil moneychangers admit their guilt!
Most importantly, the point of the video is that a bunch of "international bankers" are the source of all our companies economic issues and moneychanges have secretly "completely seized control" of the government. There argument is that is has nothing to do with policies, it only has to do with a secret cabal of moneylenders controlling all policy.
Even if these guys aren't using these "international bankers" as a euphemism for jews, it still a bunch of crap. Blaming "all our problems" on one thing, more specifically a secret cabal of people operating for centuries, is a hallmark of the tinfoil hat set.
This video has everything to do with the site it's hosted at.
posted by malphigian at 11:20 AM on January 24, 2004
This appears to be the real creators of the video:
http://www.themoneymasters.com/...
I watched part one of the video, and it's solidly conspiracy-nut as well. Silly examples (really, you could get a car for $2000? What was the average salary then genius?), "Experts" presented with vague credentials, bizarre inflammatory rhetoric.
I mean, sheesh, they make this big fuss about the big secret that the federal reserve is associated with the government, but lo:
it's right there on the feds site. Amazing, the evil moneychangers admit their guilt!
Most importantly, the point of the video is that a bunch of "international bankers" are the source of all our companies economic issues and moneychanges have secretly "completely seized control" of the government. There argument is that is has nothing to do with policies, it only has to do with a secret cabal of moneylenders controlling all policy.
Even if these guys aren't using these "international bankers" as a euphemism for jews, it still a bunch of crap. Blaming "all our problems" on one thing, more specifically a secret cabal of people operating for centuries, is a hallmark of the tinfoil hat set.
This video has everything to do with the site it's hosted at.
posted by malphigian at 11:20 AM on January 24, 2004
EDIT: "companies" should have read "countries'" above (some kind of freudian slip, eh? :) ).
posted by malphigian at 11:21 AM on January 24, 2004
posted by malphigian at 11:21 AM on January 24, 2004
You are right, a lot of crazy anti-jew sites recommend the video... my apologies. Odd that I didn't notice that earlier. The ADL Militia watchdog says.. "The heart of the Redemption scheme is one of the oldest and most dearly held of all patriot myths: the Federal Reserve conspiracy."
Sorry for the bad links, folks.
posted by timb at 11:31 AM on January 24, 2004
Sorry for the bad links, folks.
posted by timb at 11:31 AM on January 24, 2004
Part two goes on to explain how the country will never be able to escape debt under the current monetary system.
You mean, beyond the fact that the Federal Government (the single largest debtor in the world) is the single largest owner of United States Savings Bonds and Treasury Bills, the fundamental IOUs of the National Debt?
Or the fact that the same low interest rates which the Federal Reserve uses to (theoretically) stimulate business investment and "end recessions" also encourage debt on every level? Why not blame the tax code and Fannie Mae for encouraging people to have DEBT in the form of mortgages?
On preview, Mal, I find it hilarious that the url you posted describes it as a "non-fiction, historical documentary video." I note that the summary mentions that this slide into bankocracy began in the 17th century, but fails to indicate that things were better before then. For goodness sakes, this guy quotes the Pope in an article about monetary policy!
For the record, at the time I considered the idea that World Trade Center might have been targeted because it housed both the IMF and the World Monetary Fund.
posted by ilsa at 11:42 AM on January 24, 2004
You mean, beyond the fact that the Federal Government (the single largest debtor in the world) is the single largest owner of United States Savings Bonds and Treasury Bills, the fundamental IOUs of the National Debt?
Or the fact that the same low interest rates which the Federal Reserve uses to (theoretically) stimulate business investment and "end recessions" also encourage debt on every level? Why not blame the tax code and Fannie Mae for encouraging people to have DEBT in the form of mortgages?
On preview, Mal, I find it hilarious that the url you posted describes it as a "non-fiction, historical documentary video." I note that the summary mentions that this slide into bankocracy began in the 17th century, but fails to indicate that things were better before then. For goodness sakes, this guy quotes the Pope in an article about monetary policy!
For the record, at the time I considered the idea that World Trade Center might have been targeted because it housed both the IMF and the World Monetary Fund.
posted by ilsa at 11:42 AM on January 24, 2004
No worries timb. There were a lot of clues on that site to tip you off that these guys are knobs, but I guess you have to be looking for them. Thanks for finding content, at the least.
posted by Hildago at 11:45 AM on January 24, 2004
posted by Hildago at 11:45 AM on January 24, 2004
Hey, let's back up a little bit here. The video really doesn't seem to have any anti-Semitic connotations in and of itself. I don't think it makes any special effort to link the Hebrew culture or Jewish religion to the "invisible government" it's trying to expose. The idea that the banks are run by Jews is just another racial stereotype, like "black people like fried chicken."
I think that the only reason those anti-Jew sites can use this video as support, is because they have already made the assumption that Jews are intrinsically connected to banks. This video is rhetoric against "The Money Masters." The claim has been made that the video is rhetoric against Jewish people. Therefore, if you make that claim, I think that you are validating this stereotype.
malphigian: I'm glad for this climate of skepticism at MetaFilter, but let's not toss around accusations of racism, especially when they aren't based on the video itself (but on sites that link to it). Your rhetoric is just as bald-faced as theirs, if not moreso.
posted by Laugh_track at 12:09 PM on January 24, 2004
I think that the only reason those anti-Jew sites can use this video as support, is because they have already made the assumption that Jews are intrinsically connected to banks. This video is rhetoric against "The Money Masters." The claim has been made that the video is rhetoric against Jewish people. Therefore, if you make that claim, I think that you are validating this stereotype.
malphigian: I'm glad for this climate of skepticism at MetaFilter, but let's not toss around accusations of racism, especially when they aren't based on the video itself (but on sites that link to it). Your rhetoric is just as bald-faced as theirs, if not moreso.
posted by Laugh_track at 12:09 PM on January 24, 2004
This text might be helpful if you're trying to understand where this particular brand of conspiracy theory is coming from.
I think the only connection with anti-semitism is that they're using some of the same sources, and perhaps that they share a "certain ominous credulity" ...
Indeed, what makes conspiracy theories so widely acceptable is that they usually contain a germ of truth. But there is a great difference between locating conspiracies in history and saying that history is, in effect, a conspiracy, between singling out those conspiratorial acts that do on occasion occur and weaving a vast fabric of social explanations of nothing but skeins of evil plots.
Anyway, I thought the first part of the video was pretty good. There's a lot of interesting historical truth mixed in there with the general kookiness.
posted by sfenders at 1:44 PM on January 24, 2004
I think the only connection with anti-semitism is that they're using some of the same sources, and perhaps that they share a "certain ominous credulity" ...
Indeed, what makes conspiracy theories so widely acceptable is that they usually contain a germ of truth. But there is a great difference between locating conspiracies in history and saying that history is, in effect, a conspiracy, between singling out those conspiratorial acts that do on occasion occur and weaving a vast fabric of social explanations of nothing but skeins of evil plots.
Anyway, I thought the first part of the video was pretty good. There's a lot of interesting historical truth mixed in there with the general kookiness.
posted by sfenders at 1:44 PM on January 24, 2004
By the way, I'd be insterested to hear from anyone who wants to contest the basic premise that the present system of eternally increasing debt isn't necessary or useful. What if anything is wrong with the Thomas Edison quote below? I've had an idle interest in the subject for years, never heard a convincing argument against it. I mean, why would the fed have any more incentive to manage the money supply in the best interests of the nation than would the government itself?
It is absurd to say that our country can issue $30,000,000 in bonds and not $30,000,000 in currency. Both are promises to pay; but one promise fattens the usurer, and the other helps the people.
posted by sfenders at 2:16 PM on January 24, 2004
It is absurd to say that our country can issue $30,000,000 in bonds and not $30,000,000 in currency. Both are promises to pay; but one promise fattens the usurer, and the other helps the people.
posted by sfenders at 2:16 PM on January 24, 2004
Regarding the Edison quote: talk to people from the latter years of the Weimar Republic and you'll see why Edison was wrong.
posted by aramaic at 2:29 PM on January 24, 2004
posted by aramaic at 2:29 PM on January 24, 2004
Is it me or does anyone else find it absurd to find capitalists who are anti capital?
This is the way that capitalist economies grow, they are predicated on debt and power will always be with those who have lots of money.
Or have I missed something?
posted by lerrup at 3:02 PM on January 24, 2004
This is the way that capitalist economies grow, they are predicated on debt and power will always be with those who have lots of money.
Or have I missed something?
posted by lerrup at 3:02 PM on January 24, 2004
Hmm, I asked around, and I don't seem to know anyone from the latter years of the Weimar Republic. But I'll speculate that perhaps being on the losing side of a World War was the source of part of their difficulty..? Perhaps you'd care to elaborate? Anyway, here's what google turned up; nothing conclusive, afaict.
Germany lost 13 per cent of her territory, 10 per cent of her population, 15 per cent of arable land, 75 per cent of iron and 68 per cent of zinc ore, 26 per cent of her coal resources, the entire Alsatian potash and textile industries, and the communications system built around Alsace-Lorraine and Upper Silesia. Huge amounts of ships and shipping facilities and of railway rolling-stock were delivered to the Allies. ... The amount of reparations fixed in 1921 was estimated by J. M. Keynes to exceed by three times Germany's ability to pay.
... that can't have helped much.
The reparations question should be put in perspective by remember that the imperial government had proposed to recoup Germany's financial sacrifices in the war by imposing on the defeated Allies payments four times greater than those eventually demanded of Germany.
... oh, so that was their brilliant plan.
No German government before 1923 made any attempt to stabilize the currency, because German industrialists worked out a system of ''inflation profiteering.'' They would obtain short-term loans from the central bank for improvement and expansion of their plant, and then repay the loans with inflated currency.
... so they had a deliberate policy of high inflation. Probably a mistake, eh?
the Keynesian idea of compensatory spending was not yet generally accepted as a way to fight depression.
... indeed, their economic theory differed in many ways from what's commonly believed today.
Yet many observers agree that the Müller and Brüning cabinets (1928 to 1932) came very close to bringing economic salvation. Reparations were finally cancelled, the budget was nearly balanced, the public debt was low.
... I dunno who these observers are, but whatever.
Article 48, providing for emergency suspension of civil rights, without fear of legal challenge. In 1930 the Prussian government did exclude the Nazis and Communists from municipal offices and the civil service and prohibited the wearing of uniforms. But that was not very effective
... by then of course, they had other things to worry about.
posted by sfenders at 3:10 PM on January 24, 2004
Germany lost 13 per cent of her territory, 10 per cent of her population, 15 per cent of arable land, 75 per cent of iron and 68 per cent of zinc ore, 26 per cent of her coal resources, the entire Alsatian potash and textile industries, and the communications system built around Alsace-Lorraine and Upper Silesia. Huge amounts of ships and shipping facilities and of railway rolling-stock were delivered to the Allies. ... The amount of reparations fixed in 1921 was estimated by J. M. Keynes to exceed by three times Germany's ability to pay.
... that can't have helped much.
The reparations question should be put in perspective by remember that the imperial government had proposed to recoup Germany's financial sacrifices in the war by imposing on the defeated Allies payments four times greater than those eventually demanded of Germany.
... oh, so that was their brilliant plan.
No German government before 1923 made any attempt to stabilize the currency, because German industrialists worked out a system of ''inflation profiteering.'' They would obtain short-term loans from the central bank for improvement and expansion of their plant, and then repay the loans with inflated currency.
... so they had a deliberate policy of high inflation. Probably a mistake, eh?
the Keynesian idea of compensatory spending was not yet generally accepted as a way to fight depression.
... indeed, their economic theory differed in many ways from what's commonly believed today.
Yet many observers agree that the Müller and Brüning cabinets (1928 to 1932) came very close to bringing economic salvation. Reparations were finally cancelled, the budget was nearly balanced, the public debt was low.
... I dunno who these observers are, but whatever.
Article 48, providing for emergency suspension of civil rights, without fear of legal challenge. In 1930 the Prussian government did exclude the Nazis and Communists from municipal offices and the civil service and prohibited the wearing of uniforms. But that was not very effective
... by then of course, they had other things to worry about.
posted by sfenders at 3:10 PM on January 24, 2004
...groan...
OK, look: printing money = inflation risk. You can't just print as much money as you want, because each additional bill printed devalues the preceding ones by a tiny amount. Multiply this by zillions of dollars, and your currency becomes worthless.
Edison was advocating the US gov't print money willy-nilly. This was one of the things the Germans did that nearly destroyed them. It's also one of the tricks the Argentinians tried before their economy collapsed -- except that they tried to hide it behind a bizarre shell-game of "subsidiary" currencies like the patacon.
...modern currencies aren't backed by gold or other solid assets, they're basically backed by trust (OK, it's more complicated than that, but it mostly boils down to trust). That trust is destroyed when you devalue the existing holdings of persons in order to print up extra currency to "pay" someone else.
Because printing money is SO tremendously seductive, and sometimes takes a while to show negative effects, it's an easy way to destroy your economy. Hey, a few mil here & there are no big deal, right? Well, nobody will mind if we print just a few more.....
The inflation profiteering in Weimar Germany was basically a sensible reaction to excessive printing by the central bank. They all knew that more money was going to be printed tomorrow, so they knew that their existing holdings were going to be devalued -- unless they spent as fast as they could, and paid off the loans in freshly-minted devalued money.
posted by aramaic at 3:35 PM on January 24, 2004
OK, look: printing money = inflation risk. You can't just print as much money as you want, because each additional bill printed devalues the preceding ones by a tiny amount. Multiply this by zillions of dollars, and your currency becomes worthless.
Edison was advocating the US gov't print money willy-nilly. This was one of the things the Germans did that nearly destroyed them. It's also one of the tricks the Argentinians tried before their economy collapsed -- except that they tried to hide it behind a bizarre shell-game of "subsidiary" currencies like the patacon.
...modern currencies aren't backed by gold or other solid assets, they're basically backed by trust (OK, it's more complicated than that, but it mostly boils down to trust). That trust is destroyed when you devalue the existing holdings of persons in order to print up extra currency to "pay" someone else.
Because printing money is SO tremendously seductive, and sometimes takes a while to show negative effects, it's an easy way to destroy your economy. Hey, a few mil here & there are no big deal, right? Well, nobody will mind if we print just a few more.....
The inflation profiteering in Weimar Germany was basically a sensible reaction to excessive printing by the central bank. They all knew that more money was going to be printed tomorrow, so they knew that their existing holdings were going to be devalued -- unless they spent as fast as they could, and paid off the loans in freshly-minted devalued money.
posted by aramaic at 3:35 PM on January 24, 2004
Did anybody notice the Schwastika "Seal of Approval" that appears in the very beginning while the presidents are all passing by? Not such a subtle hint.
Also, could this guy stop pointing his pencil at me?
There's nothing particularly evil about the Federal Reserve. If we have to borrow money, would it be better to go to a different lending institution? The World Bank maybe?
Still, there is some worthwhile information here That power rests with the money lenders, but the solution is to not borrow money. Like Suze Orman will tell you, pay off your debts.
posted by destro at 4:17 PM on January 24, 2004
Also, could this guy stop pointing his pencil at me?
There's nothing particularly evil about the Federal Reserve. If we have to borrow money, would it be better to go to a different lending institution? The World Bank maybe?
Still, there is some worthwhile information here That power rests with the money lenders, but the solution is to not borrow money. Like Suze Orman will tell you, pay off your debts.
posted by destro at 4:17 PM on January 24, 2004
OK, look: printing money = inflation risk.
Right, okay.
Inflation is also a risk in the system we have now. It was talked about as being a big problem in the US not too many years ago in the 1980's, even if it wasn't anything like the more extreme cases we've seen elsewhere in recent years.
Governments today can have just as catastrophic an effect on their long-term national economic interest by simply borrowing as much money as possible, rather than printing it. I seem to recall that this was a big part of the problem in Argentina. I suspect that if I looked at many of the other recent episodes of hyperinflation that few of them could be simply blamed on governments deciding to directly issue too much currency, since I'm led to believe that that just isn't done these days.
And of course the US federal reserve system has been known to make mistakes too. Their actions in 1929, you know.
The inflation profiteering in Weimar Germany was basically a sensible reaction to excessive printing by the central bank.
Sure. I included that quote because it claimed that the government was actively encouraging it to continue. In other words, they made dumb mistakes other than simply the mechanism of their money supply. If those in control of our money supply were greedy and short-sighted enough to do that, I'm sure they could manage it too, without making any major changes to the system.
I mean, you're saying that we can't trust our money supply to the government; therefore, we should have no problem trusting it to a privately-run bank?
posted by sfenders at 4:38 PM on January 24, 2004
Right, okay.
Inflation is also a risk in the system we have now. It was talked about as being a big problem in the US not too many years ago in the 1980's, even if it wasn't anything like the more extreme cases we've seen elsewhere in recent years.
Governments today can have just as catastrophic an effect on their long-term national economic interest by simply borrowing as much money as possible, rather than printing it. I seem to recall that this was a big part of the problem in Argentina. I suspect that if I looked at many of the other recent episodes of hyperinflation that few of them could be simply blamed on governments deciding to directly issue too much currency, since I'm led to believe that that just isn't done these days.
And of course the US federal reserve system has been known to make mistakes too. Their actions in 1929, you know.
The inflation profiteering in Weimar Germany was basically a sensible reaction to excessive printing by the central bank.
Sure. I included that quote because it claimed that the government was actively encouraging it to continue. In other words, they made dumb mistakes other than simply the mechanism of their money supply. If those in control of our money supply were greedy and short-sighted enough to do that, I'm sure they could manage it too, without making any major changes to the system.
I mean, you're saying that we can't trust our money supply to the government; therefore, we should have no problem trusting it to a privately-run bank?
posted by sfenders at 4:38 PM on January 24, 2004
Because printing money is SO tremendously seductive, and sometimes takes a while to show negative effects, it's an easy way to destroy your economy. Hey, a few mil here & there are no big deal, right?
Okay, so I just got around to watching the end of the video. It proposes debt-free money printed by the state, yes. But it suggests doing so via a tightly-controlled governing body that would be limited to issuing money in proportion to a formula based on population growth or something. I suppose it could be a semi-independent body much like the federal reserve. So, why not? Is there some other reason why all the money that exists has to be borrowed at interest?
posted by sfenders at 6:02 PM on January 24, 2004
Okay, so I just got around to watching the end of the video. It proposes debt-free money printed by the state, yes. But it suggests doing so via a tightly-controlled governing body that would be limited to issuing money in proportion to a formula based on population growth or something. I suppose it could be a semi-independent body much like the federal reserve. So, why not? Is there some other reason why all the money that exists has to be borrowed at interest?
posted by sfenders at 6:02 PM on January 24, 2004
As far as the anti-semitism charges go, British Humor journalist Jon Ronson wrote a very cool book on his five years amongst the world's conspiracy nuts called THEM.
Much in the same way that eminem has been quoted as somehow considering his use of the word 'Fag' as merely a euphemism for a cowardly jerk-ass playa' hata' -- some extremist groups now use 'Jew' to include all kinds of members of the cabal. Former president George Bush for instance is a jew.
posted by ProfLinusPauling at 8:08 PM on January 24, 2004
Much in the same way that eminem has been quoted as somehow considering his use of the word 'Fag' as merely a euphemism for a cowardly jerk-ass playa' hata' -- some extremist groups now use 'Jew' to include all kinds of members of the cabal. Former president George Bush for instance is a jew.
posted by ProfLinusPauling at 8:08 PM on January 24, 2004
Think of the interest as what the society is willing to repay an individual for postponing his or her consumption. Since any spending of the government uses resources now (goods, machinery, etc.) it should be normal to incur this opportunity cost. Thus, only projects that have a rate of return higher than the interest should be accepted.
There is a classic picture in principle of economics / intro to macro books that shows a negative relationship between inflation and central bank independence [google] (US has low inflation and an independent central bank). Thus, a central bank that does not respond to political pressure is desirable. Question: will the Fed increase the interest rates during this election year?
We run into a different problem when only one central bank determines the interest rate. When external (not money demand related, e.g. velocity changes due to new financial instruments) shocks affect the economy, it is more feasible for the central bank to peg the money supply, the M1, M2, and M3 monetary aggregates measures. When these measures become noisy pegging the interest rates makes more sense (this is what we see now in US).
Over the last 4000 years we have seen a decrease in the overall inequality; the changes were gradual, from the absolute monarch to Magna Charta and the Declaration of Independence. The same is true for the financial power, creating a legal system that allows mortgage is a big accomplishment for the developing world [Hernando de Soto].
The next step would be everybody issuing his (her) own money [Open Money]. In such a system an individual would belong to several communities, each with its own currency. Each community would have some way of determining the credit rating of the individual. We already belong to several such communities: the family, where the credit rating is very high, the credit card company, and the cash system where one's credit rating is backed solely on the amount of cash in the wallet.
I did a quick study looking at the inflation rates world wide using World Bank / IMF data. The distribution is a fat tailed (there are some countries with inflation over 100%) and it has a mode of about 5% (the median and mean are higher) meaning most countries are very close to 5% inflation. Initially I thought that if people were to issue personal currencies the distribution would be similar, so that is OK, we could live with 5% inflation. However, most people do not know how to manage their own money, so when this "fad" is going to arrive we will see high inflation. Over time people will learn and things will come back to normal, but the power of the central bank would be diminished.
[now is time to go back and watch the Mars landing]
posted by MzB at 9:15 PM on January 24, 2004
There is a classic picture in principle of economics / intro to macro books that shows a negative relationship between inflation and central bank independence [google] (US has low inflation and an independent central bank). Thus, a central bank that does not respond to political pressure is desirable. Question: will the Fed increase the interest rates during this election year?
We run into a different problem when only one central bank determines the interest rate. When external (not money demand related, e.g. velocity changes due to new financial instruments) shocks affect the economy, it is more feasible for the central bank to peg the money supply, the M1, M2, and M3 monetary aggregates measures. When these measures become noisy pegging the interest rates makes more sense (this is what we see now in US).
Over the last 4000 years we have seen a decrease in the overall inequality; the changes were gradual, from the absolute monarch to Magna Charta and the Declaration of Independence. The same is true for the financial power, creating a legal system that allows mortgage is a big accomplishment for the developing world [Hernando de Soto].
The next step would be everybody issuing his (her) own money [Open Money]. In such a system an individual would belong to several communities, each with its own currency. Each community would have some way of determining the credit rating of the individual. We already belong to several such communities: the family, where the credit rating is very high, the credit card company, and the cash system where one's credit rating is backed solely on the amount of cash in the wallet.
I did a quick study looking at the inflation rates world wide using World Bank / IMF data. The distribution is a fat tailed (there are some countries with inflation over 100%) and it has a mode of about 5% (the median and mean are higher) meaning most countries are very close to 5% inflation. Initially I thought that if people were to issue personal currencies the distribution would be similar, so that is OK, we could live with 5% inflation. However, most people do not know how to manage their own money, so when this "fad" is going to arrive we will see high inflation. Over time people will learn and things will come back to normal, but the power of the central bank would be diminished.
[now is time to go back and watch the Mars landing]
posted by MzB at 9:15 PM on January 24, 2004
Think of the interest as what the society is willing to repay an individual for postponing his or her consumption.
Yes, that does make some sense. The current system is sophisticated and usually functional, I didn't mean to dispute that. And if you look at one or a few entities in isolation (ie. a national government,) the equations can often be made to work out nicely. But the money-as-debt thing seems to imply a constant drain of some percentage of output by the banking system, leading necessarily to globally increasing debt and/or higher inflation. It's a system that can only work with constant expansion, which I'm not sure is sustainable. And of course it does facilitate to some extent the concentration of capital. That there's been a decrease in wealth inequality over 4000 years doesn't seem particularly relevant if that trend has reversed in the past century since the banking practices under discussion became the standard. Has it? I'm not sure. Certainly it's going towards greater inequality in the US at least.
With something like the system proposed in the video, government spending would be just as effectively constrained. More so, I suppose; but I think a reasonable balance could be struck. The central authority would need some discretionary power of course, and working that out would be the tricky part. But that doesn't seem insoluble. It shouldn't need to disrupt things in the larger economy too much at all, and the basic idea looks to me like it would remove a great deal of lossage.
negative relationship between inflation and central bank independence
Well, I'd expect that some degree of independence has to be necessary, but it's a little more complex than that, naturally.
The "Open Money" thing is interesting. (Reminds me, there was someone advocating a LETS system for exactly the reason that it creates non-interest-bearing money.)
posted by sfenders at 11:33 PM on January 24, 2004
Yes, that does make some sense. The current system is sophisticated and usually functional, I didn't mean to dispute that. And if you look at one or a few entities in isolation (ie. a national government,) the equations can often be made to work out nicely. But the money-as-debt thing seems to imply a constant drain of some percentage of output by the banking system, leading necessarily to globally increasing debt and/or higher inflation. It's a system that can only work with constant expansion, which I'm not sure is sustainable. And of course it does facilitate to some extent the concentration of capital. That there's been a decrease in wealth inequality over 4000 years doesn't seem particularly relevant if that trend has reversed in the past century since the banking practices under discussion became the standard. Has it? I'm not sure. Certainly it's going towards greater inequality in the US at least.
With something like the system proposed in the video, government spending would be just as effectively constrained. More so, I suppose; but I think a reasonable balance could be struck. The central authority would need some discretionary power of course, and working that out would be the tricky part. But that doesn't seem insoluble. It shouldn't need to disrupt things in the larger economy too much at all, and the basic idea looks to me like it would remove a great deal of lossage.
negative relationship between inflation and central bank independence
Well, I'd expect that some degree of independence has to be necessary, but it's a little more complex than that, naturally.
The "Open Money" thing is interesting. (Reminds me, there was someone advocating a LETS system for exactly the reason that it creates non-interest-bearing money.)
posted by sfenders at 11:33 PM on January 24, 2004
I havent watched the video, but I thought this would be a great opportunity to ask something I've always wonered. Who collects the interest on our multi-trillino dollar debt? Is there a website somewhere that breaks it down?
posted by mert at 7:34 AM on January 25, 2004
posted by mert at 7:34 AM on January 25, 2004
Indeed, interest increases inequality (the richer get richer). The decrease in inequality comes from access to the financial instruments ("equal opportunity"). Wealth inequality in US has decreased during '47-'70 and increased afterwards, so we cannot blame the banking system [gini index - pdf file].
Several reasons their system will not work:
1. It is not practical as US would loose much of its financial power [you will have to find a mechanism that does not hurt too much]
2. Increasing the reserve requirements of the banks will disrupt the economy as several financial circuits will be broken.
3. If such system were to be in place, any excess federal spending would result in inflation.
4. A 100% reserves banking system will increase inequality as people will not have access to capital.
Who collects the interest on our multi-trillino dollar debt?
posted by MzB at 8:42 AM on January 25, 2004
Several reasons their system will not work:
1. It is not practical as US would loose much of its financial power [you will have to find a mechanism that does not hurt too much]
2. Increasing the reserve requirements of the banks will disrupt the economy as several financial circuits will be broken.
3. If such system were to be in place, any excess federal spending would result in inflation.
4. A 100% reserves banking system will increase inequality as people will not have access to capital.
Who collects the interest on our multi-trillino dollar debt?
posted by MzB at 8:42 AM on January 25, 2004
Thanks MzB. Although I'm still not convinced either way, this did prompt me to learn a bit about how it all works.
Wealth inequality in US has decreased during '47-'70 and increased afterwards, so we cannot blame the banking system
I notice a couple of interesting things about that gini index plot. National debt made a sudden big increase just before that '47 period (the war), and levelled off during that period. Then after '75, when the gini index starts its rapid climb, national debt coincidentally hits the seriously exponential-looking part of its growth curve. Similar things seem to have happened in other Western countries at around the same time.
So although that's not really hard evidence of any causal relationship, it does seem like something went wrong. I don't think that data rules out an instability in the design of the system that eventually tips it into irreversably increasing debt (of one kind or another) and concurrent increase in wealth inequality.
If such system were to be in place, any excess federal spending would result in inflation.
Well, the theory is that excess federal spending would be prohibited by their system, although this is to to some extent independent of the 100%-reserve idea. Excessive federal spending always results in bad things happening, one way or another.
A 100% reserves banking system will increase inequality as people will not have access to capital.
That seems debatable. They do mention the mechanism from Milton Friedman as a way to go to 100% reserves without too much disruption, and it seems plausible enough to me. As this description of a 100%-reserve system puts it, "no modern nation has actually operated such a system, so we cannot know with certainty how well it might work."
posted by sfenders at 11:02 AM on January 25, 2004
Wealth inequality in US has decreased during '47-'70 and increased afterwards, so we cannot blame the banking system
I notice a couple of interesting things about that gini index plot. National debt made a sudden big increase just before that '47 period (the war), and levelled off during that period. Then after '75, when the gini index starts its rapid climb, national debt coincidentally hits the seriously exponential-looking part of its growth curve. Similar things seem to have happened in other Western countries at around the same time.
So although that's not really hard evidence of any causal relationship, it does seem like something went wrong. I don't think that data rules out an instability in the design of the system that eventually tips it into irreversably increasing debt (of one kind or another) and concurrent increase in wealth inequality.
If such system were to be in place, any excess federal spending would result in inflation.
Well, the theory is that excess federal spending would be prohibited by their system, although this is to to some extent independent of the 100%-reserve idea. Excessive federal spending always results in bad things happening, one way or another.
A 100% reserves banking system will increase inequality as people will not have access to capital.
That seems debatable. They do mention the mechanism from Milton Friedman as a way to go to 100% reserves without too much disruption, and it seems plausible enough to me. As this description of a 100%-reserve system puts it, "no modern nation has actually operated such a system, so we cannot know with certainty how well it might work."
posted by sfenders at 11:02 AM on January 25, 2004
I mean, you're saying that we can't trust our money supply to the government; therefore, we should have no problem trusting it to a privately-run bank?
Except that we don't:
The Federal Reserve System is not "owned" by anyone and is not a private, profit-making institution. Instead, it is an independent entity within the government, having both public purposes and private aspects."
If the Fed was really a privately owned corporation as the video claimed, then why does the President need to re-appoint its chairman every term?
posted by VeGiTo at 8:43 PM on January 25, 2004
Except that we don't:
The Federal Reserve System is not "owned" by anyone and is not a private, profit-making institution. Instead, it is an independent entity within the government, having both public purposes and private aspects."
If the Fed was really a privately owned corporation as the video claimed, then why does the President need to re-appoint its chairman every term?
posted by VeGiTo at 8:43 PM on January 25, 2004
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