Can't trust anyone- another thread about what capitalism does to us.

I never said that. But this is not what determines the worth of money.

In a resource based economy you would assess what resources, or wealth, you have, and determine how much money should be made to represent it. But if you had a barn full of grain, you couldn't sell that 9 times. But with fractional reserve banking, if you deposit 10 million into a bank, that bank is allowed to make 10 new loans to other people to the sum of 10 million each for the 10 you deposited. They only need to keep 10% as a reserve. So, by sitting on that 10 million they can make 90 more millions out of nothing.

Since you cannot make anything else out of nothing, this practice doesn't correspond to the increase or decrease of resources.

That's not right - they can't lend the same money multiple times. They can lend the money deposited, minus the reserve, once. Any repayments received can also be reloaned.

You are right that the money supply is artificially inflated because the depositor still considers they have their 10 million in assets and the lender has their loan. But there can't be multiple lenders of the same money.

To illustrate why your multi loan thesis is flawed consider this thought experiment:

Your deposit of a million dollars is the only deposit the bank has. In your premise the bank approves 9 loans of $900,000 to separate individuals who each buy a $900,000 Ferrari from the same dealership on the same day. The dealership won't release the cars until the money changes hands - and there is no way the bank can provide the dealership with 8.1 million dollars (9 x 900,000).

http://en.wikipedia.org/wiki/Fractional-reserve_banking

I am not saying the practice isn't flawed. But it is still being done. Your example merely illustrates how fractional reserve banking is a fraudulent process which is disguised by the fact that there are too many banks in the system, and too much money and debt in ciculation for anyone to have complete control of it.



Yes, and this happens from time to time. If people start to lose faith in the bank's ability to make good on it's promises.
When you illustrate it simply, like this, it becomes even more apparent how this whole thing is a fraud. It is as you say, flawed. But that doesn't alter the fact that it is going on.

Well it's not flawed, it's technically impossible as far as I can see. Unless all but one borrows the money for the purpose of not using it, and the bank is sure that purpose won't change. Why would anyone borrow money for sole purpose of paying interest? You've lost me Cyracuz. I'm not supporting banks but the logic of what you're saying escapes me.

Another words have seen too much of adults to buy the adult fantasy land message to "be nice to each other". It is difficult to live in a corrupt exploitive society and not figure out by the time you are ten years old what the score is. When adults come preaching nonsense they should expect to have no impact, because they deserve none.

it would be helpful to expand your view some. Something that has been talked about a lot, because it had a great deal to do with creating the great recession, is that all across the board the incentives that this economic system has in place do not serve the greater good. In fact sometimes they serve no one. Our system does not work, it is broken, fundamentally.

This does not get fixed until we replace the economic system. Because of political corruption this in impossible to do by incremental reforms, and those who have a desire to keep the bad system that we have can block any efforts to reform it. We are looking at a French Revolution traumatic shift correction, I believe.

You ask questions of others in your initial post. Questions that are phrased in such a way that it would be easy for the unwary to answer in such a way as to agree with you.

I don't agree with you. You saying above that I don't know the facts doesn't make that statement true.
You speaking as if you do know the facts does not make that true either.

People state opinions as fact all the time, which is what you have done.

In capitalism, if someone has success it means someone else has to fail. If you have enough to pay your debts, it means someone else doesn't. This is a fact.

Scarcity of anything creates a lower supply than demand, so prices soar. In other words, scarcity is a benefitial condition for industry within the current system, as it will give more income per produced unit. This is also a fact.

In such a system, where no one can stand aside, it is not reasonable to expect honesty from anyone. It is not reasonable to expect them to look out for anyone but themselves.
This attitude, selfishness, is generally thought of as a less attractive human attribute. But the way the capitalistic system works now, we are forced to act selfishly wether we want to or not. Unless you don't need to eat, or you don't mind living off social welfare checks.

And yet it is happening. What do you think all the troubles come of?

Clearly not from the same money being loaned ten times.

Focus your attention on unregulated financial institutions, securities and derivatives. On incautious consumers drawing on their perceived future equity in their homes. On lenders removing all safeguards on that practice and removing 'ability to pay' from credit conditions. On the US economy moving from adding real value (primary and secondary industry, Research & Development) to 'meta value' in quaternary industries, particularly finance - because of attraction of quick profit regardless of the sustainability.

Perhaps too you'll find some ideas here: http://en.wikipedia.org/wiki/Financial_crisis_of_2007%E2%80%932010

Which includes this thesis:

This is the point you repeatedly do not get.

From the start.
The government decides some new money is needed, and they contact the central bank. They request a sum which will be created by the central bank and given in exchange of government bonds, which are essentially promises to repay the money.

The government then deposits their new money into a bank account, and new money is added to the economy.

Then the bank has that money, but the bank doesn't lock the total sum away and sit on it until those who deposited it comes to get it.
It's a fractional reserve practice, which means the bank only has to keep a percentage of the deposited sum as a reserve. For simplicity, lets say 10%.
The other 90% is not loaned out. If it was there would be trouble when the first depositer came back for his money. Instead that 90% is created as new money on top of the existing deposit. Someone borrows it, deposits it in his own bank account, and that bank will create new money to the value of 90% of that deposit through new loans.

Basically, if you deposit one thousand dollars, the bank can create around 900 dollars in new money based on your deposit. This is the whole purpose of a fractional reserve banking system.

And then there's intrest. It has to be paid for every dollar that is borrowed. And as money is created by making loans, money is then created at a debt. It's kind of paradoxical.
It also means that the total amount of money owed to the banks will always be greater than the total amount of existing money. That is why new money constantly has to be added, which decreases the purchasing power of already existing money.
It is also why foreclosures are inevitable. Since there is always more money owed than money owed in the total pool of money, someone will inevitably fall short of the required amount to satisfy their debts.

The inevitable result of such a practice is the transferrence of true wealth to the central banks. They initially created the money you used to buy your house, and through intrest at every exchange before it got to you, and by you paying intrest, you have to pay to use this money, and if you can't pay your debt they take your property. It happens all the time, but there is one case that stands out.

First National Bank of Montgomery v. Jerome Daly, Dec. 9, 1968

http://en.wikipedia.org/wiki/First_National_Bank_of_Montgomery_vs_Jerome_Daly

Hi...new poster here. I just had to jump in on this one.

First, I understand perfectly how Fractional Banking works. I admit it's more than a little scary. All that so called money which represents....well, basically nothing.

Regardless of what you think of capitalism, nearly all of the world's developed nations are the products of capitalism. And what has happened in those nations? Even the poorest of people have a standard of living that would be the envy of most people in third world nations. (There are exceptions, of course--mostly homeless people who are so completely disabled that they cannot function in society at all. But really, proportionately speaking, that is incredibly uncommon. I myself have been homeless...I know.)

Living in a well-developed, capitalist nation myself, I can say with certainty that nearly all of the poor people I know who complain about their lot in life are poor for four main reasons:

1) A Misplaced sense of entitlement

In other words, they think they should actually get something for nothing, even though this goes completely against the very laws of nature itself. They hinder their own progress. Sure, Jesus told us God provides for the birds, so he'll also provide for us. (Luke 6:26) But when's the last time you ever saw a bird sit around and complain that the world owes it a living? Birds work their little feathery butts off to stay alive. Entitlement is foreign to them.

2) Stupidity

Why do people think they REALLY need all the crap they buy? The expensive cell-phones, the MP3 players, the video game systems, the shoes, etc. Or maybe it's other stuff, like cigarettes or beer or illegal drugs. They piss their money away on things they don't need, then complain at the end of the day that they don't have all the money they want. They don't even take time to learn basic financial skills, like saving money or carefully using credit cards.

3) They're just plain lazy.

Some people are just lazy...they don't want to improve themselves, they don't want to work. They just don't do what it takes to succeed in life--for whatever reason. This is actually different than #1. A sense of entitlement can easily justify laziness, but it isn't laziness itself. But lazy people with a sense of entitlement are, in a word, just pathetic.

4) They're so convinced they can only be victims, they've defeated themselves before they even start.

I swear this one runs in families and is also a trait acquired from the social circles that the poorest of people like to frequent. It's the attitude of "Why try? I'll just be screwed over by 'the Man.' " Therefore, "I am guaranteed to fail -- but I won't admit it because they're all amoral bastards and I am morally upright, and I should be rich instead of them, but being rich is wrong, so I'm poor." In other words, it's a damningly self-reinforcing circular reasoning that traps people in a cycle of poverty.

Now, I'm not saying that I'm a rich man. I'm poorer than most. Like I said above, I used to be homeless, and it takes a while to climb out of that hole. But I would like to be rich someday, and I'm willing to bet that I'll be able to do it without screwing that many people over. Why? Because I realize that you can make mutually beneficial financial deals, where everyone involved profits in their own way and their standard of living is increased. In other words, I plan to make an honest living. And yeah, I may do that as an entrepreneur, and if I'm lucky someday I will be filthy rich.

Being rich would be great.... I've never been a fan of too many material things, mostly because I've too often seen materialism as a by-product of stupidity. (See #2 above). Remember what I was saying about mutual benefits? I think of all the things I could do to help people by carefully donating or (gasp!) investing money. Where would it help the most? Who's going to use it to actually improve the world, and not buy an uneeded stereo-system in for their car, or get a hair weave? Where could I place my money to increase the standard of living for the world? And really.... I could help MANY more people with a LOT of money, than I could with just a little... even after I provide a comfortable living situation for myself.

Wealth is NOT, and has NEVER BEEN, a zero sum game. Talking about it as if it is, is a mistake. If it were, we would all be stuck in the stone ages. People forget about innovation, the constantly new ways that more things can be used to improve the standard of living for all, by using fewer overall resources to get more done with less and less effort.

And yes, people are very rarely motivated to do anything at all unless they profit from it in some way. Well-regulated capitalism, by its very nature, improves the quality of life for all people OVER TIME. Continuous, honest dealings benefit everyone involved. One could say that capitalism breeds greed and corruption, but if you can name even ONE other economic system that doesn't offer numerous opportunities for greed and corruption, I would REALLY like to know. The difference between capitalism and other systems is that it uses the inherent, deeply imbedded drive for people to "get more stuff" to the advantage of all. Supress that desire with the rule of the land, and I'll show you a place where black markets flourish regardless. (Think of any socialist, communist or theocratic country and I'm positive you'll find a black market economy in any of them.)

In a system where currency is involved, Fractional Banking opens the doors for a LARGE increase in the standard of living for all. The problem in recent times is that banks got cocky, they threw too much caution to the wind and now they are paying the price. And anyone who thinks the general public wasn't also blithely complicit in the downfall of the banks fails to understand that the public has more control over their own collective financial situation than most people ever stop to think about.

Okay...I'll end my defense of capitalism for now. I expect some hostile responses, but no philosophy forum is worth its salt without some vehement disagreements.

Welcome to a2k.
You are absolutely right about the salt.

But when you point to the prosperity of developed nations as a beneficial result of capitalism, that is not entirely accurate.
Technology is the real cause of all that. Our high standards of living is not due to the money shufflers. It's due to technicians and engineers working to make life easier and better for us all. That it has to be motivated by capitalistic motives is simply a lie.

But then it is reasonable to ask; if technology is the cause of our prosperity, why are not all equally prosperous? And that is entirely due to the money shufflers. They have led us to believe that it is possible to give away money, and still have the money after you gave it, and they have proceeded to tell us that knowledge, which is essentially the foundation of all technology, has to be guarded as a commercial trade value, and not freely shared.

The reality is completely reverse. Knowledge, not at all like money, is the only thing you can give away without losing.

Well, there's disease too... but who wants to give anyone that?

Good points

That's not logical. I understand how you derived that concept but, in reality, it doesn't work.

So u think we coud trust anyone IF we had nazism or communism? I don 't.





David

It is not the form, but the relationship.... No form, of government, of economy, of religion, or any form you might imagine if it does not feed the relationship is just another damned form and no improvement on any other damned form.... Trust is essential to relationships. All the virtues as moral forms are essential to relationships; but if your form has been perverted to take from one and give to another, and no essential good comes out of it, and it is a dead form... That is life, all forms of relationship either rob life from the relationship or feed the relationship, and capitalism is a dead form that will kill us if we cannot kill it... It does not mean some other dead form is better.