US GOV'T BAILOUT of Banks

[Drake]

And it is my understanding that the Bretton Woods agreement was done in 1971 because Asian and other lenders were asking for debt to be repaid in gold in 71. We couldnt do it and keep the Vietnam War going.

We unhooked the dollar completely from gold and it allowed us to finance more war with no actual cost.

What is your understanding of why Bretton Woods happened in 71 yast?

 

[guerilla]

The end of Bretton Woods was basically a dollar default. Nixon closed the gold window, because they had printed more dollars (which functioned as gold reserve receipts) than there was gold in order to finance Johnson's Guns and Butter policies of the 60s (Vietnam War, War on Poverty).

The previous dollar default iirc was in 1933, when FDR confiscated all of the gold bullion held by private citizens. Gold was available in exchange at the bank for $20 an ounce. When FDR allowed gold back into the banks later, it was set at $35 an ounce. So the dollar was devalued by 43% just by the government resetting the rate.

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erect or anyone else interested, if you are still reading this, the Mises Institute has put out a Bailout Reader with links to lots of articles and information.

The Bailout Reader - Mises.org - Mises Institute

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From the Volokh blog,

Finally, the best line of the night last night (that I saw) went to Congressman Ron Kind who said that phone calls to his office were "running 50-50,

50% 'No' and 50% 'Hell No.'"
​

And

And Larry White adds : "Capitalism in which AIG never closes down is like American Idol in which Sanjaya never goes home."​

 

[erect]

The previous dollar default iirc was in 1933, when FDR confiscated all of the gold bullion held by private citizens.

2 questions

1> What's wrong with a silver or other "hard asset" dollar base system

2> What's the likelihood that the gold is still in Fort Knox after what FDR did?

erect or anyone else interested, if you are still reading this, the Mises Institute has put out a Bailout Reader with links to lots of articles and information.

The Bailout Reader - Mises.org - Mises Institute

Yea, I'm still here. Will be checking that link out over the weekend.

 

[-Bill-]

Washington Mutual bit it
I wonder who is next?

These banks keep folding out... I wonder how long the FDIC is going to wait to update their online watchlist...
It has got to be growing by the day right now.

Washington mutual bailout

 

[guerilla]

2 questions

1> What's wrong with a silver or other "hard asset" dollar base system

Nothing from the perspective of the citizen. From the perspective of politicians and special interests, it makes it very hard to transfer wealth from main street to wall street, or for government to conduct wars, build welfare states or deficit spend in general. In an MP3 I linked to (Peter Schiff) he explains that hard money is like a government chaperone. They have to tax to spend. They can't just inflate the money supply if it is tied to a commodity, because hanky panky risks a default. When FDR defaulted, the Depression carried on another 4 or 5 years. When Nixon defaulted, you had the stagflation of the 70s and early 80s. Eventually these dollar bubbles have to burst and when they do, you get bad economic times.

It also means the banks can't cheat either. They can't leverage on leverage on leverage. They have to be accountable to their depositors or they will go bust.

2> What's the likelihood that the gold is still in Fort Knox after what FDR did?

Not good. I believe most of it is classified as "deep reserve" but is assumed to be loaned out to foreign governments (off the books).

I know that any attempt to audit the physical gold is blocked. Ron Paul has been trying since the 80s to get one done.

 

[erect]

It also means the banks can't cheat either. They can't leverage on leverage on leverage.

Which basically gets rid of fractional lending which, from my understanding, is a big part of what got us into all this shit in the first place ... hmmmm

 

[guerilla]

Which basically gets rid of fractional lending which, from my understanding, is a big part of what got us into all this shit in the first place ... hmmmm

Fractional Reserve banking is institutionalized counterfeit.

If I go to the bank of erect, deposit $20. Then Drake comes along and borrows $20, and I show up the next day to get my $20, you give it back.

So when I deposited my $20, it allowed the bank to make $20 new dollars to loan to the Drake. The allowed ratio is much higher than 1:1.

So then the Drake deposits his loan from Bank of erect into Bank of Nacho. And the Bank of Nacho creates a new $20 to loan to xmcp123.

And pretty soon, that original $20, can create 10s of thousands of dollars.

That is fractional reserve banking, and that is a scam. If a private citizen lent out money he didn't have, that would be called fraud.

What's the alternative? Full Reserve banking with time deposits. If you put your capital into the bank, you can't get it back for 90 days or 18 months or whatever. This allows the bank to loan out your capital without duplication. You would earn interest on this. You're allowing the bank to manage your capital and make loan investments from it, in return for the bank getting a cut.

This of course would spawn the "warehouse bank" which is a bank which you actually pay to store and transfer your money (for electronic purchases). In return for the service of storing, securing and transferring, you might pay 0.25% per annum or something plus a per transaction fee. They would perform services like check cashing, issuing check books, debit cards, wire transfer etc etc.

 

[Unarmed Gunman]

Having our money backed by a hard asset such as gold or silver does not by definition disallow fractional reserve banking. The only way that would be true is if we actually used the hard asset as our day-to-day currency. If we still used a paper money backed by gold, nothing would prevent the banks from loaning out more than they have on deposit.

Fractional reserve banking counts on two things:

1 - People with excess wealth will need somewhere to store it long term, and will not remove their deposits en masse.

2 - People that borrow money will pay it back in a timely fashion.

The formulas used as the backbone of fractional banking factor these things in to determine how much can be lent out without causing a run on the bank, and at what interest rates for the bank to remain profitable.

 

[guerilla]

Having our money backed by a hard asset such as gold or silver does not by definition disallow fractional reserve banking. The only way that would be true is if we actually used the hard asset as our day-to-day currency.

Which is why FDR confiscated bullion from private citizens.

Obviously a hard money system (commodity money) is only part of the solution. Which is why gold bugs and the Money Masters folks don't see the whole picture.

FRB is legal counterfeit. Until this is stopped, the problems will reappear.

Ideally, there is free market money. There is no fixed commodity backing currency. If someone tries to manipulate or confiscate a supply, people can just start using a different good. In other words, repeal legal tender laws.

 

[-Bill-]

I seen this on my lens' adsense block earlier...

No Wall Street Bailout |

 

[Unarmed Gunman]

...In other words, repeal legal tender laws.

Whoa - you're opening up a big can of worms with that.

 

[snavr]

The issue here is math ... global crashes (should) happen about every 60 years, and have since the rise and fall of the Roman Empire.

And it boils down to usury (interest paid on borrowed assets). Over time usury builds up speculative capital which starts to far outweigh the value of real capital. But it can never be tied to any real goods or work performed. It's just a cost paid for borrowing an asset. Usury creates nothing ... but hey, nobody is going to lend shit out for nothing ... so usury is never going away.

That's why it's a millenia old problem. It's a mathematical certainty.

All the speculative capital (wealth on paper) that builds up over time isn't real. It has to crash eventually. The system has to reset. And then of course it'll start all over again.

And it doesn't matter if you have a gold standard, tight regulation, no regulation ... none of that shit matters. People will never lend money for free ... seriously, why the fuck would you? ... so you have interest. And interest creates wealth out of nothing.

It creates a bubble full of nothing. The bubble pops. End of equation. It's just math.

These idiots running around trying to save the financial system for the last 20 years are on the wrong side of fundamental math. They're just creating a fundamental need for artificial growth (bigger bubbles) each time.

 

[Enigmabomb]

Interesting stuff on FRB. I had no idea that's how it worked.

That's collosally fucked up if they don't follow the strictest of guidelines, which as it seems they dont.

enigmabomb

 

[Dan Grossman]

Washington Mutual bit it
I wonder who is next?

Wachovia, which is unfortunately one of my banks... they're doing merger talks over the weekend to see if someone will save them by market open.

 

[guerilla]

Whoa - you're opening up a big can of worms with that.

I don't think so.

That's collosally fucked up if they don't follow the strictest of guidelines, which as it seems they dont.

It's a system that is setup to fail, reset, fail, reset. Each time, the most wealthy get to snatch up property at a discount, and confiscate wealth through government.

People will never lend money for free ... seriously, why the fuck would you? ... so you have interest. And interest creates wealth out of nothing.

There is another option. Instead of a fixed rate of return, you make an investment and profit from it. You buy into a company, and you receive dividends on your capital investment. If the company does well, you do well. If the company does poorly, you don't get a return.

That is how it was done in the day.

The only reason we don't do it that way anymore and conform to the interest model instead, is that the banks issue all of the credit in the economy. They are allowed to "print" money out of thin air, and no private capital holder can compete with the superpower of legal counterfeit.

 

[Unarmed Gunman]

Guerilla, you've spoken eloquently on several economic issues - but you haven't thought out the repeal of legal tender. Unless you think we should run off of a barter economy alone? You can't have millions of people deciding what they think is legal tender. You bring the economy to a halt. You're driving out west, what do you pay for gas with? Merchant doesn't accept that - now what? You need to stay at a hotel, what do you pay with?

Store owners don't like the way you look, so they won't accept your money, etc. Think it through. Everybody has to agree on what has value in order for an economic system to work. Show me a sufficiently large scale economic system in existence today that proves otherwise....

 

[guerilla]

Guerilla, you've spoken eloquently on several economic issues - but you haven't thought out the repeal of legal tender.

Unless you think we should run off of a barter economy alone?

That's not the only alternative.

You can't have millions of people deciding what they think is the correct word processor. You bring the economy to a halt.

You can't have millions of people deciding what they think is the best job. You bring the economy to a halt.

You can't have millions of people deciding what they think is tasty. You bring the economy to a halt.

You can't have millions of people deciding who they think they love. You bring the society to a halt.

You can't have millions of people deciding what they think God is. You bring the society to a halt.

You can't have millions of people deciding which channel to watch. You would bring the entertainment industry to a halt.

You can't have billions of people deciding which currency to trade in. You would bring the global economy to a halt.

Actually, competition is good. It's always good. You get the most transparency, the most freedom, the most options, the most security and the most efficiency.

There are competing currencies in the world. There are competing credit cards and other forms of payment.

You can't have millions of people deciding what they think is legal tender. You bring the economy to a halt.

I don't think you can have a handful of economic and political elites deciding what is legal tender. They will use it to cornhole the masses.

But that aside, if you believe in competition (which I do) why would you want a monopoly in money? Or in government? Or in religion? Or in politics? Or in anything?

You're driving out west, what do you pay for gas with? Merchant doesn't accept that - now what? You need to stay at a hotel, what do you pay with?

Presumably a hotel owner services people from out of town, not the locals, I am quite sure he would be willing to recognize different forms of payment. Again, it doesn't have to not be money. It could be Citibank bucks. Unarmed Gunman Rubles. Wickedfire Dollars. Or maybe he could accept your credit/debit card, and the transaction would be automatically converted by Visa/Amex/MC into the currency of his choice.

Store owners don't like the way you look, so they won't accept your money, etc.

I worked in stores. We took money from anyone with money. Hoes, crack heads, cops, blacks, whites, hispanics, male, female, old, young etc. We weren't the MFing Salvation Army. We were there to make a profit.

Think it through.

I and a great many others have.

Everybody has to agree on what has value in order for an economic system to work.

You're overcomplicating it. Do it like foreign exchange. We have the technology.

Show me a sufficiently large scale economic system in existence today that proves otherwise....

 

[-Bill-]

Wachovia, which is unfortunately one of my banks... they're doing merger talks over the weekend to see if someone will save them by market open.

Wachovia Bailout

Wachovia may be the next big bank in need of a bailout. Wachovia's stock fell to $8.90 a little after 6pm today. Talks are inline between Wachovia and New York based CitiGroup. Early speculation also shows that Wachovia could possibly turn to talk with San Francisco based Wells Fargo

 

[Dan Grossman]

Wachovia Bailout

Is this your page? You've been writing dates as 10/xx/2008... that's October, not September. Wachovia has something like $100 billion in mortgage assets and $400 billion in deposits... if the bailout bill is ready today, which it looks like it is, then they may not need help tomorrow after all.

 

[-Bill-]

Ahahaha Noted and fixed

Thanks much Dan

We'll see about the bailout plan.
I seriously believe this is a "super shot term" fix to the long term problem. Lending will be right back where it is now, and we will be in the shit again within 3 years max.