A banking licence enables banks to cause inflation; it protects the institution from true insolvency. A bank run is prevented (they would go bust without the insurance) which means they they will continue to be able to issue credit at a high price.
Bank credit (deposits) are valuable only because of the deposit guarantee. Remove the guarantee and there would be a collapse of the banking sector. Banking relies on the deposit guarantee, without it there would be no inflation caused by lending from banks.
Perhaps we should just let the banks collapse? A Capitalist system would be allowed to collapse.
Banks cause inflation when they loan money, this is because the deposits remain in circulation, affecting prices. Normally, a loan would not influence prices. Aside from the inflation, the economic purchasing power of the lender (the depositor) is not altered. Loans outside the banking sector do not influence prices.
Tuesday 14 September 2010
The currency is not a store of value if banks are able to lend deposits
If banks have the legal entitlement to lend out deposits this means new deposits may be created, causing inflation. Many new deposits may be created even if the sum of base money remains the same.
This is not a benevolent process if deposits are guaranteed, deposits are diluted (we have no choice but to use this currency) which might result in monetisation by the central bank. As a result of banks being able to loan deposits, the currency no longer remains a store of value.
This is not a benevolent process if deposits are guaranteed, deposits are diluted (we have no choice but to use this currency) which might result in monetisation by the central bank. As a result of banks being able to loan deposits, the currency no longer remains a store of value.
Monday 13 September 2010
Deposit insurance enables banks to cause inflation
It is the Government, not the people that wants to protect the banks.
If taxpayers are forced to pay for deposit insurance the onus is on the Government to show why they cannot be allowed to fail; we assume companies are permitted to fail, otherwise we would have unlimited money to spend. If companies are not permitted to fail they will have endless access to economic wealth, they will be able to spend forever. If banks cannot go bust they will be able to issue credit forever; not being able to go bust means we have the ability to issue money.
If taxpayers are forced to pay for deposit insurance the onus is on the Government to show why they cannot be allowed to fail; we assume companies are permitted to fail, otherwise we would have unlimited money to spend. If companies are not permitted to fail they will have endless access to economic wealth, they will be able to spend forever. If banks cannot go bust they will be able to issue credit forever; not being able to go bust means we have the ability to issue money.
Sunday 12 September 2010
It is not out of ignorance that the banks don't collapse but instead the deposit guarantee
What is commonly known as a deposit at a bank is not actually a deposit. The word 'deposit' suggests that the money is available on demand and is being held for safekeeping. It is only because of promised Government intervention that the money is safe. It's not a deposit if the bank has the ability to lend the money out again, instead the customer has purchased the credit of the banking institution.
It is only because of the deposit guarantee that bank credit has value. Without deposit insurance the banks would collapse, it is not because of fraud that the banks are still solvent it is the threat of monetisation which keeps people's deposits in place.
It is only because of the deposit guarantee that bank credit has value. Without deposit insurance the banks would collapse, it is not because of fraud that the banks are still solvent it is the threat of monetisation which keeps people's deposits in place.
It is not much of a problem to be in debt if there is constant inflation
Deposit insurance enables banks to inflate the money supply.
If there is constant inflation there is not much disincentive against getting in to debt. A fixed money supply means it is bad to be in debt.
If there is constant inflation there is not much disincentive against getting in to debt. A fixed money supply means it is bad to be in debt.
Saturday 11 September 2010
The deposit guarantee is a subsidy of debts
The deposit guarantee is a subsidy of debt and means the banks will not be able to go out of business. They are already insolvent, but they can still continue to take profits.
Friday 10 September 2010
The deposit guarantee gives value to bank credit and makes it money
The market is reassured by the deposit guarantee which enables banks to increase the money supply. Banks can print money because the market trusts the deposit guarantee.
If deposits are guaranteed then banks can print money. Banks are able to print money because of the deposit (credit) guarantee. The deposit guarantee is what prevents the banks from collapsing. The banks have much less in reserve than they owe on deposit because the money has been loaned and redeposited, which causes inflation.
Deposit insurance is a promise to monetise the debt; there is no reason to think this won't happen.
If an organisation is protected from insolvency then its credit will remain valuable and it has the ability to cause inflation, assuming a fiat currency is in place. If bank deposits are guaranteed then this will result in inflation because there is no disincentive against insolvency.
Banks cause dilution of the money supply.
Money is not only cash notes and coins but also bank credit, on deposit; it must be guaranteed by the State, so it is State credit. Definition: Money is anything which is guaranteed by the State. Cash (notes and coins) is not the only form of money, there are other kinds of money, including bank credit. Bank credit is a type of money.
If deposits are guaranteed then banks can print money. Banks are able to print money because of the deposit (credit) guarantee. The deposit guarantee is what prevents the banks from collapsing. The banks have much less in reserve than they owe on deposit because the money has been loaned and redeposited, which causes inflation.
Deposit insurance is a promise to monetise the debt; there is no reason to think this won't happen.
If an organisation is protected from insolvency then its credit will remain valuable and it has the ability to cause inflation, assuming a fiat currency is in place. If bank deposits are guaranteed then this will result in inflation because there is no disincentive against insolvency.
Banks cause dilution of the money supply.
Money is not only cash notes and coins but also bank credit, on deposit; it must be guaranteed by the State, so it is State credit. Definition: Money is anything which is guaranteed by the State. Cash (notes and coins) is not the only form of money, there are other kinds of money, including bank credit. Bank credit is a type of money.
It's not so hard to pay your taxes when you have the ability to increase the money supply
The right to impose taxation, for this author at least, relies on the assumption that only the Government can print money.
It seems unfair that we must pay taxes denominated in a currency which gives permission to banks to increase the money supply. Normal people must earn money (to pay taxes) but the banks simply print it. It is easier for banks (and their customers) to pay theirs taxes given that they have the ability to increase the money supply.
It seems unfair that we must pay taxes denominated in a currency which gives permission to banks to increase the money supply. Normal people must earn money (to pay taxes) but the banks simply print it. It is easier for banks (and their customers) to pay theirs taxes given that they have the ability to increase the money supply.
Sunday 5 September 2010
There is no reason to vote for higher taxes
There is no reason (all else being equal) not to vote for the party that offers the lowest taxes.
The Government should not be allowed to collect taxes, and it can be prevented from doing so by voting against it.
The Government should not be allowed to collect taxes, and it can be prevented from doing so by voting against it.
Wednesday 1 September 2010
Proportional representation would remove power from the main parties
With a majoritarian voting scheme we have no choice but to pay attention to a candidate which we don't like and as a result this may mean that we must vote for their main rival. It is not enough to be voting for someone else as this vote may not count, we must balance this risk against the chance that our feared candidate will be successful. With a proportional voting scheme we have no (at least reduced) fear of a wasted vote and this enables votes to be cast on less popular parties, not worrying about having given space to a feared candidate to be selected.
Single winner seats give strength to the dominant parties
In majoritarian voting systems, it makes sense to cast your vote for one of the leading candidates; there is no point choosing a minority candidate because there is no chance this vote will count, it is better to influence the outcome between the favourites.
The leading candidates will generally be those endorsed by the main parties, and it is due to this dynamic that political parties emerge. This means that, in choosing their candidate, the main parties have an effective (if not in fact) monopoly on what might be termed the centre-right and centre-left. There would be less need for strong political parties if voters could be assured that a vote for a minority candidate would not be wasted. To enable this, it makes sense to allow more than one winner from each seat to be promoted to parliament. If there is more than one winner a vote cast for a minority candidate has a chance of success.
Proportional representation enables votes cast for minority candidates to be meaningful and as a result, this weakens the power of the main parties of both left and right. It is less vital for politicians to be part of the elite.
If candidates are being chosen for a representative position, such as parliament and not something presidential like being a mayor, then we can have constituencies with more than one representative, in a sense a parliament of parliaments.
One of the features of Democracy is that it tends to accentuate ignorances; if, among a large field, most of the candidates represent the truth and respect individual rights then there will be nothing to choose between them and it might be that none of them emerge as a potential winner and the vote will be split. If one of the candidates is ignorant in a manner held by a number of others who are voting, this politician will win, even with a small following.
If there are to be more than one winner chosen from the seat then this is helpful to the 'reasonable' candidates, they are not required to pander to the incumbent elite party who are seen as the natural opposition to ignorance.
The leading candidates will generally be those endorsed by the main parties, and it is due to this dynamic that political parties emerge. This means that, in choosing their candidate, the main parties have an effective (if not in fact) monopoly on what might be termed the centre-right and centre-left. There would be less need for strong political parties if voters could be assured that a vote for a minority candidate would not be wasted. To enable this, it makes sense to allow more than one winner from each seat to be promoted to parliament. If there is more than one winner a vote cast for a minority candidate has a chance of success.
Proportional representation enables votes cast for minority candidates to be meaningful and as a result, this weakens the power of the main parties of both left and right. It is less vital for politicians to be part of the elite.
If candidates are being chosen for a representative position, such as parliament and not something presidential like being a mayor, then we can have constituencies with more than one representative, in a sense a parliament of parliaments.
One of the features of Democracy is that it tends to accentuate ignorances; if, among a large field, most of the candidates represent the truth and respect individual rights then there will be nothing to choose between them and it might be that none of them emerge as a potential winner and the vote will be split. If one of the candidates is ignorant in a manner held by a number of others who are voting, this politician will win, even with a small following.
If there are to be more than one winner chosen from the seat then this is helpful to the 'reasonable' candidates, they are not required to pander to the incumbent elite party who are seen as the natural opposition to ignorance.
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