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 Nationalise the Banks !?! Is Friedman dead ?

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PostSubject: Nationalise the Banks !?! Is Friedman dead ?   Tue Jul 15, 2008 6:03 pm

Well yes, I believe he (Friedman) is (dead).

'Nationalise the Banks' used to be a slogan of the left. Now we are watching the most right wing free market regime doing just that.

With vast sums of public money being used to back Indymac and Fannie and Freddie, Friedman's legacy is in tatters.

We can't build a few houses in a village without planning it first. When are we going to admit that free market capitalism is in failure and start intervening to properly plan the economy ?
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PostSubject: Re: Nationalise the Banks !?! Is Friedman dead ?   Tue Jul 15, 2008 6:07 pm

Fannie was set up in the 30s or something and was/is supported by American government bonds and Freddie was set up in the 70s similarly so aren't they based on the Nations earning power and in effect nationalised? America is coming out with news everyday which is making it seem as liberal in business as China. They have strong shareholder laws or something which might not be so Chinese but really, what a bunch of communist wannabees.


Last edited by Auditor #9 on Tue Jul 15, 2008 6:08 pm; edited 1 time in total
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PostSubject: Re: Nationalise the Banks !?! Is Friedman dead ?   Tue Jul 15, 2008 6:07 pm

cactus flower wrote:


We can't build a few houses in a village without planning it first. When are we going to admit that free market capitalism is in failure and start intervening to properly plan the economy ?

Free market capitalism is not failing, it is not being allowed to do its work. What is happening in the US is not free market capitalism, it is governmental interference. I wish they'd just leave these people out to dry.
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PostSubject: Re: Nationalise the Banks !?! Is Friedman dead ?   Tue Jul 15, 2008 7:15 pm

The problem with a planned economy is you cannot plan in detail for something so complex. Within the system however there is room for state owned enterprises and COOPs. There is no reason why these cannot work within a market system. It makes better sense for some services to be organised by the state but planning the number of Christmas trees needed 3 years from now please NO.

With regards free market economy, you need one currency and no government should have the right to manufacture money or play around with interest rates. These are major distortions.
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PostSubject: Re: Nationalise the Banks !?! Is Friedman dead ?   Tue Jul 15, 2008 7:32 pm

You cannot plan an economy - it's a mathematical impossibility, and every attempt to do it has produced progressively worse conditions before finally collapsing.
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PostSubject: Re: Nationalise the Banks !?! Is Friedman dead ?   Tue Jul 15, 2008 10:44 pm

ibis wrote:
You cannot plan an economy - it's a mathematical impossibility, and every attempt to do it has produced progressively worse conditions before finally collapsing.

Well said ibis. Cuba, Vietnam, North Korea, the Eastern European states, China, Russia, Albania and so on all tried and failed to plan their economies. Only by liberating your economies to the free play of market forces can you hope to succeed. The government should facilitate this in their economic policies. The market system isn't perfect, but it's a quantum improvement on planned command economies.
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PostSubject: Re: Nationalise the Banks !?! Is Friedman dead ?   Tue Jul 15, 2008 11:22 pm

Ibis and Ard are correct. The notion of the US being free market capitalism is the biggest baloney of all time. It is a corporate fascist regime with the survellience and police state being now introduced with the FISA Act a few days back. The German model is what we have here. We were taught that they were right wing but yet they were called Nation Socialist Party.
What we have is called corporate welfare to the tunes of trillions.
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PostSubject: Re: Nationalise the Banks !?! Is Friedman dead ?   Wed Jul 16, 2008 2:01 am

youngdan wrote:
Ibis and Ard are correct. The notion of the US being free market capitalism is the biggest baloney of all time. It is a corporate fascist regime with the survellience and police state being now introduced with the FISA Act a few days back. The German model is what we have here. We were taught that they were right wing but yet they were called Nation Socialist Party.
What we have is called corporate welfare to the tunes of trillions.

I hear that there is a fair amount of intervention in agriculture as well as in the banking system. Do you think the IMF should be sent in to sort out the US economy ?
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PostSubject: Re: Nationalise the Banks !?! Is Friedman dead ?   Wed Jul 16, 2008 4:47 am

No point in curing intervention by more intervention. Get rid of the IMF, The World Bank and the the Federal Reserve. Banking has facilitated some amount of misery.
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PostSubject: Re: Nationalise the Banks !?! Is Friedman dead ?   Wed Jul 16, 2008 10:55 am

The IMF and World Bank are certainly two organisations whose track record requires some consideration.
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PostSubject: Re: Nationalise the Banks !?! Is Friedman dead ?   Wed Jul 16, 2008 11:39 am

youngdan wrote:
No point in curing intervention by more intervention. Get rid of the IMF, The World Bank and the the Federal Reserve. Banking has facilitated some amount of misery.

Would you opt for the Islamic model of banning interest on loans?
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PostSubject: Re: Nationalise the Banks !?! Is Friedman dead ?   Wed Jul 16, 2008 2:38 pm

cactus flower wrote:
youngdan wrote:
No point in curing intervention by more intervention. Get rid of the IMF, The World Bank and the the Federal Reserve. Banking has facilitated some amount of misery.

Would you opt for the Islamic model of banning interest on loans?

I would, positive interest rates are inflationary. It is the concept that you can make profit virtually risk fee and that is so very wrong.
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PostSubject: Re: Nationalise the Banks !?! Is Friedman dead ?   Wed Jul 16, 2008 2:59 pm

The muslims don't like interest? I like it. How are the bank staff salaries covered? Machines or very little interest? The money system needs to work in some way and I wonder are the days of specialised banks like the Ag Banks, Building societies and credit unions going the way of all flesh and online banking and other forms on the rise (regards Northern Rock - you can't say you've tried if you haven't failed)

Why is interest allowed at all on money movements? What is the justification for profiting on the process of allocating credit? Is it purely to do with risk? Isn't there a form of insurance that could be used? Ideally in a successful market shouldn't interest rates be close to zero as they are inflationary?

Is inflation always bad, incidentally?
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PostSubject: Re: Nationalise the Banks !?! Is Friedman dead ?   Wed Jul 16, 2008 3:34 pm

Auditor #9 wrote:
Ideally in a successful market shouldn't interest rates be close to zero as they are inflationary?

Is inflation always bad, incidentally?

In my opinion real interest rates should be close to zero, anything more is inflationary. Banks could earn income on fees, as they do. You should never have negative real interest either. I am one of those people who believe that playing around with interest and money supply are eventually counter productive. If I have low interest rates now I stoke up inflation and have to raise at some future date.

Inflation can help flush out a problem, if a house is 600,000 and inflation is 100% in a year the real value of the house has halved. (if no one is willing to pay more). In the housing market in Ireland the vast majority of the adjustment will be due to inflation over 3-4 years despite what many on politics.ie hope. House prices have been falling for over a year but you need to add inflation to that price drop. After a few years it really starts to ratchet up when inflation heads up. We will probably see at least a 25% adjustment due to inflation on top of any price drops.

In business inflation can be a nightmare, especially if you are on fixed price contracts. It also erodes real wealth. So if you are worth 1million today this time next year you need to be worth 1.05 million just to stay still.
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PostSubject: Re: Nationalise the Banks !?! Is Friedman dead ?   Wed Jul 16, 2008 4:01 pm

cactus flower wrote:
youngdan wrote:
Ibis and Ard are correct. The notion of the US being free market capitalism is the biggest baloney of all time. It is a corporate fascist regime with the survellience and police state being now introduced with the FISA Act a few days back. The German model is what we have here. We were taught that they were right wing but yet they were called Nation Socialist Party.
What we have is called corporate welfare to the tunes of trillions.

I hear that there is a fair amount of intervention in agriculture as well as in the banking system. Do you think the IMF should be sent in to sort out the US economy ?

No. It doesn't need someone to "sort it out", just leave the banks who pursued short-term policies and idiocy over the past few years to be taken out of business. I wish market forces were just let get on with it and re-structure our economy. Governmental interference is just impeding this and reducing the likelihood we'll get over this.
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PostSubject: Re: Nationalise the Banks !?! Is Friedman dead ?   Wed Jul 16, 2008 4:14 pm

Auditor #9 wrote:
The muslims don't like interest? I like it. How are the bank staff salaries covered? Machines or very little interest?

I think Muslim banks enter into a form of joint venture with you when you take out their equivalent of a mortgage. I think the bank takes a share-holding in your house and, in order to own it, you have to buy out the bank's stake. They make money from this, you get a house and at no stage are you paying infidel usury.

Quote :
Why is interest allowed at all on money movements? What is the justification for profiting on the process of allocating credit? Is it purely to do with risk?

It's a price paid on the riskiness of a loan. The bank is afraid the loan might go bad so they attach a rate of interest equal to how afraid they are about that reality. Banks are trying to protect their capital positions by charging interest. It also reminds debtors of the need to pay loans off promptly. If there was no interest on a loan, many debtors would hold back on payments and wait for inflation to erode the real value of the debt.


Quote :
Isn't there a form of insurance that could be used? Ideally in a successful market shouldn't interest rates be close to zero as they are inflationary?

Interest rates aren't inflationary, they're deflationary. They take money out of the economy and temper demand-pull inflation by reducing disposable income. That is why interest rates are increased by central banks to reduce inflation.

Quote :
Is inflation always bad, incidentally?

Yes. It is the economic equivalent of cancer. It's that bad.
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PostSubject: Re: Nationalise the Banks !?! Is Friedman dead ?   Wed Jul 16, 2008 5:32 pm

Ard-Taoiseach wrote:


Interest rates aren't inflationary, they're deflationary. They take money out of the economy and temper demand-pull inflation by reducing disposable income. That is why interest rates are increased by central banks to reduce inflation.

That is conventional wisdom but it is an interesting one. If the interest rate was say 10% and I borrow and it increases further to 20% I have to do one of 3 things.

1 Reduce consumption or costs to pay the interest.
2 Produce more and make more profit.
3 Charge more and pass the cost on.

Not only that but if the interest goes up then those with savings gain an unearned windfall as their saving interest also goes up. So they are more able to spend.

However as the business who has borrowed I am stuck in a bind. I either have to create growth, reduce costs or pass the costs on. Positive interest causes one section of the community to produce more and more and enables another section to consume more and more. It is eventually unsustainable.
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PostSubject: Re: Nationalise the Banks !?! Is Friedman dead ?   Wed Jul 16, 2008 6:38 pm

I'm not at all clear about what the ECB hopes to achieve by raising interest rates. A considerable part of the reason for inflation at present is the rise in oil prices. The increase in oil prices is because there is a shortage/insecurity of supply. Raising interest rates can't and won't deflate the price of oil, will it?
The high price of oil is in itself deflationary as no one has money to spend on anything else (and the winter hasn't even come yet). Retail in Ireland now is the same as 21 years ago. Clothing, computer and car prices have fallen, as have house prices.
Surely higher interest rates will increase inflation in countries with a high level of personal and business debts???
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PostSubject: Re: Nationalise the Banks !?! Is Friedman dead ?   Wed Jul 16, 2008 6:52 pm

Cactus flower, high positive interest rates are a means of transferring wealth from those who produce wealth to those who have wealth. The rest is voodoo.
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PostSubject: Re: Nationalise the Banks !?! Is Friedman dead ?   Wed Jul 16, 2008 7:37 pm

Ard-Taoiseach wrote:
Auditor #9 wrote:
The muslims don't like interest? I like it. How are the bank staff salaries covered? Machines or very little interest?

I think Muslim banks enter into a form of joint venture with you when you take out their equivalent of a mortgage. I think the bank takes a share-holding in your house and, in order to own it, you have to buy out the bank's stake. They make money from this, you get a house and at no stage are you paying infidel usury.

There are also fees for arranging the loan of the money, 'risk premiums' for lending you the money, and recompense to the lender for not having the money while they loan it to you. Every single one of these mechanisms was in use in Christian Europe before the Church eventually relaxed its prohibitions on usury in the Middle Ages (by pretending that usury was really the charging of 'excessive interest' only, when in fact usury is simply the charging of interest). All of them involve calculating a sum which is essentially identical to interest.

Ard-Taoiseach wrote:
Quote :
Why is interest allowed at all on money movements? What is the justification for profiting on the process of allocating credit? Is it purely to do with risk?

It's a price paid on the riskiness of a loan. The bank is afraid the loan might go bad so they attach a rate of interest equal to how afraid they are about that reality. Banks are trying to protect their capital positions by charging interest. It also reminds debtors of the need to pay loans off promptly. If there was no interest on a loan, many debtors would hold back on payments and wait for inflation to erode the real value of the debt.

Or, looked at from a historical perspective, once money rather than land became the prime 'wealth' of royalty and aristocracy, they needed a way to charge rent on it as they had done on land.
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PostSubject: Re: Nationalise the Banks !?! Is Friedman dead ?   Wed Jul 16, 2008 11:41 pm

Don't confuse what a central bank is and what a regular bank is. Had anyone watched The Money Masters when it was posted 4 months ago they would followed the Bear Stearns sale and subsequent events now unfolding with a good understanding of what can at times be made to appear complicated.
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PostSubject: Re: Nationalise the Banks !?! Is Friedman dead ?   Wed Jul 16, 2008 11:50 pm

youngdan wrote:
Don't confuse what a central bank is and what a regular bank is. Had anyone watched The Money Masters when it was posted 4 months ago they would followed the Bear Stearns sale and subsequent events now unfolding with a good understanding of what can at times be made to appear complicated.

Wrists slapped all right youngdan. Embarassed Unfortunately I can't listen as often as I can post, in order to preserve the peacefulness of the home. I'll google it when I get a chance.
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PostSubject: Re: Nationalise the Banks !?! Is Friedman dead ?   Thu Jul 17, 2008 4:06 am

Cactus. I don't need to tell you that I have good time for your opinions. Everyone has their interests and have good knowledge of those subjects. I have disagreed with most here on something or other but the other posters have good arguments and sometimes I need to play for a draw. The Congo debate being a good example of the other side having a good rationale. Fortunately for me the conflict itself seems to be multisided so who can say whon was right.

I am lucky to have had an interest in the markets always. Few do but now with the economy about to really impact people's lives many are scrambling to get an understanding that would normally take years. If you understand the credit markets and how the Federal Reserve creates money then fraction reserve banking and all the rest is easy. Watching that video is the best I have seen as in 3.3 hours you will learn what took me a lot of reading and years of time
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PostSubject: Re: Nationalise the Banks !?! Is Friedman dead ?   Thu Jul 17, 2008 11:35 am

youngdan wrote:
Don't confuse what a central bank is and what a regular bank is. Had anyone watched The Money Masters when it was posted 4 months ago they would followed the Bear Stearns sale and subsequent events now unfolding with a good understanding of what can at times be made to appear complicated.

YD, I watched the first hour of it only last night. Will watch the rest over next few days. I'm a bit confused by some of it. Why was everything so stable during the Colonial Script ? This was also a FIAT currency, no?
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PostSubject: Re: Nationalise the Banks !?! Is Friedman dead ?   Thu Jul 17, 2008 12:39 pm

Some reading, quite similar to the Momeymasters script.

History of Money Part 1

History of Money Part 2

History of Money Part 3
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