$this->bbcode_second_pass_quote('pstarr', '')$this->bbcode_second_pass_quote('davep', '')$this->bbcode_second_pass_quote('pstarr', '
')There is no exchange, as you are unwilling/unable to debate simple economics.
PeakOil is You
The Powers that Be
Re: Peakers underestimate TPTB at maintaining the Status Quo
by davep » Thu 29 Sep 2016, 11:30:57
Dude! You admitted yourself that you weren't interested in economics and the reasoning behind why business cycles happen generally. I guess anyone with a strident view on WHAT IS TO BLAME for 2008 etc without wanting to further their understanding of the underlying economic system and its role in the process is just taking a position based on dogma.
Just my 2c.
I understand all I need to know about post-industrial economics in a consumer economy. Technological advances (in manufacturing, construction, resource extraction or media) create buying frenzies, booms and busts. The economists are paid to predict the timing and justify the results. It's all I need to know
If that's all you feel you know then I suggest there's little point in claiming to know the cause of the 2008 depression. If you'd read the IMF report it uses modern techniques to verify the four Chicago Plan claims about debt-based banking. These claims were $this->bbcode_second_pass_quote('', 'F')irst, preventing banks from creating their own funds during credit booms, and then destroying these funds during subsequent contractions, would allow for a much better control of credit cycles, which were perceived to be the major source of business cycle fluctuations.
Second, 100% reserve backing would completely eliminate bank runs.
Third, allowing the government to issue money directly at zero interest, rather than borrowing that same money from banks at interest, would lead to a reduction in the interest burden on government finances and to a dramatic reduction of (net) government debt, given that irredeemable government-issued money represents equity in the commonwealth rather than debt.
Fourth, given that money creation would no longer require the simultaneous creation of mostly private debts on bank balance sheets, the economy could see a dramatic reduction not only of government debt but also of private debt levels.
The first point is interesting. Here it is in a bit more detail $this->bbcode_second_pass_quote('', 'T')he first advantage of the Chicago Plan is that it permits much better control of what Fisher and many of his contemporaries perceived to be the major source of business cycle fluctuations, sudden increases and contractions of bank credit that are not necessarily driven by the fundamentals of the real economy, but that themselves change those fundamentals. In a financial system with little or no reserve backing for deposits, and with government-issued cash having a very small role relative to bank deposits, the creation of a nation’s broad monetary aggregates depends almost entirely on banks’ willingness to supply deposits. Because additional bank deposits can only be created through additional bank loans, sudden changes in the willingness of banks to extend credit must therefore not only lead to credit booms or busts, but also to an instant excess or shortage of money, and therefore of nominal aggregate demand. By contrast, under the Chicago Plan the quantity of money and the quantity of credit would become completely independent of each other. This would enable policy to control these two aggregates independently and therefore more effectively. Money growth could be controlled directly via a money growth rule. The control of credit growth would become much more straightforward because banks would no longer be able, as they are today, to generate their own funding, deposits, in the act of lending, an extraordinary privilege that is not enjoyed by any other type of business. Rather, banks would become what many erroneously believe them to be today, pure intermediaries that depend on obtaining outside funding before being able to lend. Having to obtain outside funding rather than being able to create it themselves would much reduce the ability of banks to cause business cycles due to potentially capricious changes in their attitude towards credit risk.
The researchers then go on to say $this->bbcode_second_pass_quote('', 'W')e study Fisher’s four claims by embedding a comprehensive and carefully calibrated model of the U.S. financial system in a state-of-the-art monetary DSGE model of the U.S. economy. We find strong support for all four of Fisher’s claims, with the potential for much smoother business cycles, no possibility of bank runs, a large reduction of debt levels across the economy, and a replacement of that debt by debt-free government-issued money.
So it's not "economics" but a critique of the current model and its effects, with a potential solution. But for our concerns, it's merely to show that the current model is indeed a debt-based model that causes "business cycles" due to bank lending practices.
Here's the IMF research report again https://www.imf.org/external/pubs/ft/wp/2012/wp12202.pdf. You can look up the Bank of England report supporting the fact that debt-based money creation is indeed inherent to modern economies (or go back to where I've posted it). The point is that the current economic system has a huge role to play in business cycles.
What we think, we become.
