Banking vs Capitalism ?

TonyBird

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So I appreciate why 'free markets' make sense . I dont agree with it but I think I understand the logic . I have been watching 'Friedman' on youtube . My question is , how does modern banking square with 'true capitalism' ?

Have 'capitalists' made a major miscalculation ?
Are they now 're engineering' their 'system' instead of allowing it to 'flow' ?

People who have consistently failed/cheated are asking us to trust them .
Imo , the game is up . Its a total spoof .
 
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crocked

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So I appreciate why 'free markets' make sense . I dont agree with it but I think I understand the logic . I have been watching 'Friedman' on youtube . My question is , how does modern banking square with 'true capitalism' ?

Have 'capitalists' made a major miscalculation ?
Are they now 're engineering' their 'system' instead of allowing it to 'flow' ?
It's funny how it's "capitalism" when a business goes bust, but "banks" are to big to fail.

I would think that they will try everything to "re-engineer" the system.
 

TonyBird

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As far as i know , 'banks' dont seem to figure in any of these phoney 'philosophies'. These muppets will tell us all how we should be working 'better' , yet the banks can live in wonderland !
Caviar anyone ?
Total joke !
 

MauriceColgan

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The only time I have been a little concerned about our modest savings is when our pension was paid directly into a bank .

We use a Credit Union and credit cards so do have a cushion if things went crazy.

We are witnessing the Age of True Enlightenment.
 

Cael

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So I appreciate why 'free markets' make sense . I dont agree with it but I think I understand the logic . I have been watching 'Friedman' on youtube . My question is , how does modern banking square with 'true capitalism' ?

Have 'capitalists' made a major miscalculation ?
Are they now 're engineering' their 'system' instead of allowing it to 'flow' ?

People who have consistently failed/cheated are asking us to trust them .
Imo , the game is up . Its a total spoof .
The thing is that "capitalism" as such has never existed except on the pages of Adam Smith, and never can exist. This is where Von Mises and his followers fall down. They are locked into an idealised utopia that has simply never existed in the world. The reality is always monopoly, corporatism \ state capture.
 

davehiggz

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The thing is that "capitalism" as such has never existed except on the pages of Adam Smith, and never can exist. This is where Von Mises and his followers fall down. They are locked into an idealised utopia that has simply never existed in the world. The reality is always monopoly, corporatism \ state capture.
Idealised Utopia = workers paradise :)
 

NotoriousFin

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No, TonyBird, the problem is the money supply.

The low interest rates of the Euro caused this mess. Saying that the banks caused this, is like saying that the wood started the fire.
 

Cael

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Idealised Utopia = workers paradise :)

At least the USSR existed for a time, the kind of capitalism that Von Mises dreams of has never ever existed.
 

Cael

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Banking is not a capitalist enterprise as the Central banks set the interest rates. If banking was capitalist interest rates would be set by the markets.

Pretty much all capitalists have said the banks should be allowed fail.
What you are missing is that no form of capitalism can exist without a banking system, and, once you have a banking system, the type of capitalism that Adam Smith imagined cannot exist. The minute you have a banking system, you have monopoly capitalism.
 

Tea Party Patriot

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No, TonyBird, the problem is the money supply.

The low interest rates of the Euro caused this mess. Saying that the banks caused this, is like saying that the wood started the fire.
Agreed its the fractional reserve system that has brought down a lot of banks.

However the politically influenced sub-prime market is also one of the major factors, basically this was lending money to people with a poor credit history at higher rates of interest to cover the risk, the higher interest rates of course further compounded their long term inability to repay.

As for re-engineering the system, well currently in order to create money you must have debt. If money is created without debt it leads to inflation as currency no longer has a backing mechanism such as gold or silver. Therefore when debt contracts money simply disapperars.
 

onetimeonly

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No, TonyBird, the problem is the money supply.

The low interest rates of the Euro caused this mess. Saying that the banks caused this, is like saying that the wood started the fire.
Surely the analogy should be that the low interest rates provided the wood. All the banks in the various countries started the fires. No?
 

Cael

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No, TonyBird, the problem is the money supply.

The low interest rates of the Euro caused this mess. Saying that the banks caused this, is like saying that the wood started the fire.
Thats not really true. Fractional reserve banking means that, at all times, there is more debt in the world than there is money to pay it - which means that constant economic expansion is required just to keep up the interest repayments, never mind the capital sums. Western capitalism can no longer generate that economic expansion, thus the system is imploding under the weight of debt that the banks have created. This implosion really happened in 1929. Only WW2 generated the expansion that gave the impression of recovery. However, since the collapse of Bretton Woods, and the linking of the dollar to a gold standard in the early 1970s, it has been admitted that capitalism cannot generate growth by "normal" economic means. Thus, we have seen stagflation all throught the 1970s, expansion by increasing third world debt in the 1980s, and expansion by the creation of bubbles in the 90s and 00s. What's left? Where can the economic expansion needed to inflate out of this crisis come from? WW3?
 
D

Dylan2010

Banking and central banking is currently anti free market. Free market banking would leave all interest rates to the market. A managed rate causes mis allocation of capital. Then there is the issue of moral hazard, for example an "Anglo" would be less likely in a free market, savers would have to be careful where they put their savings in the absense of state guarantees etc. If I walked into a bank today and wanted to open a savings account where the money is physically held in the bank, I'd be laughed out the door, once your savings are deposited they are as likey to end up in speculative activities. In general free market banks would be less leveraged and would have hgher reserves.
 

Cael

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Banking and central banking is currently anti free market. Free market banking would leave all interest rates to the market.
For perfect competition to exist, you need a great number of competitors. Do you suppose that we could have a great number of banks?
 

Tea Party Patriot

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For perfect competition to exist, you need a great number of competitors. Do you suppose that we could have a great number of banks?
There are a great number of banks, but Irish people are very parocial and don't use banks outside the Irish state.
 

Cael

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There are a great number of banks, but Irish people are very parocial and don't use banks outside the Irish state.
This is really not practical. Unless you are dealing with very large sums, you are limited to banks within the state. Can you imagine giving an employer an account for a bank in the Caymen Islands? And, imagine applying to a bank in the Caymen Islands for a mortgage for a two bed in Lucan?
 
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Dylan2010

For perfect competition to exist, you need a great number of competitors. Do you suppose that we could have a great number of banks?
It depends, you dont need a hundred airlines to get a decent travel market. Its more important that people are not fooled into making poor decisions. You have 2 ways to achieve this regulation which is flawed and always will be or market dicipline so that a bank is not in a position to offer someone a 100% loan.
 

Cael

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It depends, you dont need a hundred airlines to get a decent travel market. Its more important that people are not fooled into making poor decisions. You have 2 ways to achieve this regulation which is flawed and always will be or market dicipline so that a bank is not in a position to offer someone a 100% loan.
But you seem to think that central banking is something imposed on bankers. The opposite is true. Central banking is imposed on us by the bankers. The US Fed is the most obvious and blatant case, where it reamins a private institution, in the ownership of the bankers.
 
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Dylan2010

But you seem to think that central banking is something imposed on bankers. The opposite is true. Central banking is imposed on us by the bankers. The US Fed is the most obvious and blatant case, where it reamins a private institution, in the ownership of the bankers.
The Fed is a hybrid institution. From a free market point of view cartels can only develop if you have a government that is heavily involved in the market, the banks didnt come up with the idea of a Fed in a vacuum. Take another industry farming, intoduce an umbrella of government regulation and subsidies and you end up with the basterdised industry we see today.
 


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