Making the financial system safe - a bad goal?

[Renegade Island]

Which is fine with coke cans because they are real things that have real value.

Fractional Reserve Money has no real value because there is nothing real with value attached to it. It's a faith based economic system (it only has value because people believe it has value,) and the people are losing the faith.

Quoting myself:

Too much money chasing after the same goods.

Works equally well with a bullion-based economy.
(The gold of the New World caused the Spanish economy to collapse!)

The absence of real value? We can leave it out of the equation. Why?

Because the same condition holds up just as well when you have non-fiat money that people continued to believe in - such as pure gold.

I really don't know enough about the Spanish economy that you are talking about to comment on that. What time period are you talking about?

My main point is that fiat money is different to bullion money because it represents a transfer of wealth from the users of the money (the public) to the owners of the money (banks). This is particularly obvious when you track the centralisation of banking since the formation of the Federal Reserve in the USA.

[Ostroeuropa]

Quoting myself:



The absence of real value? We can leave it out of the equation. Why?

Because the same condition holds up just as well when you have non-fiat money that people continued to believe in - such as pure gold.

I really don't know enough about the Spanish economy that you are talking about to comment on that. What time period are you talking about?

My main point is that fiat money is different to bullion money because it represents a transfer of wealth from the users of the money (the public) to the owners of the money (banks). This is particularly obvious when you track the centralisation of banking since the formation of the Federal Reserve in the USA.

The spanish economy that completely imploded when they suddenly discovered gold mines, and everyone realized gold was about to suffer huge amounts of inflation and so everyone went apeshit.
Or possibly the spanish economy that just recovered from that and was unable to dig up enough gold to counteract the industrial revolution and so gold DEFLATED rapidly and the rich sucked all the wealth from everyone else and the economy imploded, and people went apeshit.
Or the spanish economy that printed money to counteract these problems, and everything went pretty much ok on that front until the rich started complaining and telling libertarians that gold is better, and nobody went apeshit except the rich and the libertarians.

[Norsklow]

Quoting myself:



The absence of real value? We can leave it out of the equation. Why?

Because the same condition holds up just as well when you have non-fiat money that people continued to believe in - such as pure gold.

I really don't know enough about the Spanish economy that you are talking about to comment on that. What time period are you talking about?

My main point is that fiat money is different to bullion money because it represents a transfer of wealth from the users of the money (the public) to the owners of the money (banks). This is particularly obvious when you track the centralisation of banking since the formation of the Federal Reserve in the USA.

1559 and the subsequent State Bankruptcies in Spain.
Their root cause was the influx of bullion, the riches of the New World.
( nor was there any centralisation of banking worth mentioning btw )

EDIT: transferring banknotes rather than transferring bullion does not alter the basic dynamic.

[Rubiconic Crossings V2 rev 1f]

Great post Neu Leonstein...

I don't really mind banks investing in high risk ventures but they must be ethically sound. That means things like no artificially constructed bubbles and lying to bank customers.

There needs to be tight oversight and regulation as well as strong due diligence and compliance to regulations with those in leadership positions being held directly responsible.

Of course this also would have to extend into corporates as well, who use banks to great effect when leveraging deals...as well as the accountancy firms like PwC et al...who have a tendency not to smack their customers when they've done bad.

So I would like to seen banking reforms happen but they will be less effective unless the entire financial system is looked at. As for SOX...pfft...too weak, too laborious, rather silly.

I will hold my hand up and admit that I am in absolutely no way even close to comprehending the way that the banking system actually functions...much like 99.9999% of the rest of the population.

[Norsklow]

The spanish economy that completely imploded when they suddenly discovered gold mines, and everyone realized gold was about to suffer huge amounts of inflation and so everyone went apeshit.
Or possibly the spanish economy that just recovered from that and was unable to dig up enough gold to counteract the industrial revolution and so gold DEFLATED rapidly and the rich sucked all the wealth from everyone else and the economy imploded, and people went apeshit.
Or the spanish economy that printed money to counteract these problems, and everything went pretty much ok on that front until the rich started complaining and telling libertarians that gold is better, and nobody went apeshit except the rich and the libertarians.

Aunque mona de seda, mona se queda.
( A monkey in silk is still a monkey )

[Ostroeuropa]

If you want to argue for a standardized good, at least use the rice standard the japanese used.
it's arguably more stable than gold, prevents hoarding, and there is at least a FRACTION of reliability and control one can have over it.
And we know why THAT failed, it's largely the same reasons gold did.

[Norsklow]

Great post Neu Leonstein...

I don't really mind banks investing in high risk ventures but they must be ethically sound. That means things like no artificially constructed bubbles and lying to bank customers.

There needs to be tight oversight and regulation as well as strong due diligence and compliance to regulations with those in leadership positions being held directly responsible.

Of course this also would have to extend into corporates as well, who use banks to great effect when leveraging deals...as well as the accountancy firms like PwC et al...who have a tendency not to smack their customers when they've done bad.

So I would like to seen banking reforms happen but they will be less effective unless the entire financial system is looked at. As for SOX...pfft...too weak, too laborious, rather silly.

I will hold my hand up and admit that I am in absolutely no way even close to comprehending the way that the banking system actually functions...much like 99.9999% of the rest of the population.

Nonono - the thing to do is to separate Retail Banking from Merchant Banking. I don't want my money deposited in the Retail Branch risked by the Merchant Branch, unless there be a crapload of warrantees.

[Ostroeuropa]

Great post Neu Leonstein...

I don't really mind banks investing in high risk ventures but they must be ethically sound. That means things like no artificially constructed bubbles and lying to bank customers.

There needs to be tight oversight and regulation as well as strong due diligence and compliance to regulations with those in leadership positions being held directly responsible.

Of course this also would have to extend into corporates as well, who use banks to great effect when leveraging deals...as well as the accountancy firms like PwC et al...who have a tendency not to smack their customers when they've done bad.

So I would like to seen banking reforms happen but they will be less effective unless the entire financial system is looked at. As for SOX...pfft...too weak, too laborious, rather silly.

I will hold my hand up and admit that I am in absolutely no way even close to comprehending the way that the banking system actually functions...much like 99.9999% of the rest of the population.

Nonono - the thing to do is to separate Retail Banking from Merchant Banking. I don't want my money deposited in the Retail Branch risked by the Merchant Branch, unless there be a crapload of warrantees.

I'm fine with this, provided neither type of banking is prohibited.
Hell, even providing banks that ONLY do one or the other, and having some banks which do both, would be agreeable.

[Renegade Island]

I really don't know enough about the Spanish economy that you are talking about to comment on that. What time period are you talking about?

My main point is that fiat money is different to bullion money because it represents a transfer of wealth from the users of the money (the public) to the owners of the money (banks). This is particularly obvious when you track the centralisation of banking since the formation of the Federal Reserve in the USA.

1559 and the subsequent State Bankruptcies in Spain.
Their root cause was the influx of bullion, the riches of the New World.
( nor was there any centralisation of banking worth mentioning btw )

EDIT: transferring banknotes rather than transferring bullion does not alter the basic dynamic.

You're talking about the collapse of an economy due to a scarce resource becoming abundant. That's an entirely different scenario to the current economic collapse and current economic practices.

[Ostroeuropa]

1559 and the subsequent State Bankruptcies in Spain.
Their root cause was the influx of bullion, the riches of the New World.
( nor was there any centralisation of banking worth mentioning btw )

EDIT: transferring banknotes rather than transferring bullion does not alter the basic dynamic.

You're talking about the collapse of an economy due to a scarce resource becoming abundant. That's an entirely different scenario to the current economic collapse and current economic practices.

You're talking about the cabin catching fire because we put our campfire inside. That's an entirely different scenario to the cold we're in right now.

[Norsklow]

I'm fine with this, provided neither type of banking is prohibited.
Hell, even providing banks that ONLY do one or the other, and having some banks which do both, would be agreeable.

I'm not proposing prohibiting. I merely propose regulating, enforcing the Chinese Walls thingamajig.
It's a really sound old-fashioned Idea, you know?

[Norsklow]

1559 and the subsequent State Bankruptcies in Spain.
Their root cause was the influx of bullion, the riches of the New World.
( nor was there any centralisation of banking worth mentioning btw )

EDIT: transferring banknotes rather than transferring bullion does not alter the basic dynamic.

You're talking about the collapse of an economy due to a scarce resource becoming abundant. That's an entirely different scenario to the current economic collapse and current economic practices.

I beg to differ. The excessive granting of credit - especially by Governments and to Governments - is our basic problem, is our root cause.
The risks that the banks responded to did not just materialize out of thin air.

[Renegade Island]

You're talking about the collapse of an economy due to a scarce resource becoming abundant. That's an entirely different scenario to the current economic collapse and current economic practices.

You're talking about the cabin catching fire because we put our campfire inside. That's an entirely different scenario to the cold we're in right now.

Yes, it is, because the solution doesn't involve any actual fuel, just imagined fuel. Imagined fuel won't start a fire no matter how much you imagine that it will.

[Rubiconic Crossings V2 rev 1f]

Great post Neu Leonstein...

I don't really mind banks investing in high risk ventures but they must be ethically sound. That means things like no artificially constructed bubbles and lying to bank customers.

There needs to be tight oversight and regulation as well as strong due diligence and compliance to regulations with those in leadership positions being held directly responsible.

Of course this also would have to extend into corporates as well, who use banks to great effect when leveraging deals...as well as the accountancy firms like PwC et al...who have a tendency not to smack their customers when they've done bad.

So I would like to seen banking reforms happen but they will be less effective unless the entire financial system is looked at. As for SOX...pfft...too weak, too laborious, rather silly.

I will hold my hand up and admit that I am in absolutely no way even close to comprehending the way that the banking system actually functions...much like 99.9999% of the rest of the population.

Nonono - the thing to do is to separate Retail Banking from Merchant Banking. I don't want my money deposited in the Retail Branch risked by the Merchant Branch, unless there be a crapload of warrantees.

Totally...I thought I'd covered that by using the term "ethically sound"...but I don't think that is a good way of putting it because this split is absolutely fundamental...so yeah thanks for that very pertinent point Norsklow...

[Norsklow]

You're talking about the collapse of an economy due to a scarce resource becoming abundant. That's an entirely different scenario to the current economic collapse and current economic practices.

You're talking about the cabin catching fire because we put our campfire inside. That's an entirely different scenario to the cold we're in right now.

But there is a link. A Causality.

[Ostroeuropa]

You're talking about the cabin catching fire because we put our campfire inside. That's an entirely different scenario to the cold we're in right now.

Yes, it is, because the solution doesn't involve any actual fuel, just imagined fuel. Imagined fuel won't start a fire no matter how much you imagine that it will.

It isn't imaginary. Like I said, things have value because we decide they do.
If we decide that numbers on a screen no longer represent actual wealth, we'll make new numbers that do.

[Ostroeuropa]

You're talking about the cabin catching fire because we put our campfire inside. That's an entirely different scenario to the cold we're in right now.

But there is a link. A Causality.

Not denying that, just pointing out the utter uselessness of the statement he made. You may as well have said what I said

Pointing out a problem caused by a solution is different to the problem caused by NOT implementing that solution, etc.

[Renegade Island]

Yes, it is, because the solution doesn't involve any actual fuel, just imagined fuel. Imagined fuel won't start a fire no matter how much you imagine that it will.

It isn't imaginary. Like I said, things have value because we decide imagine they do.
If we decide realise that numbers on a screen no longer represent actual wealth, we'll make imagine new numbers that do.

[Norsklow]

Totally...I thought I'd covered that by using the term "ethically sound"...but I don't think that is a good way of putting it because this split is absolutely fundamental...so yeah thanks for that very pertinent point Norsklow...

Ethics can't cover everything, Rubi!
The thing to do when approaching Problems is to remove all ethics and only re-insert them when we are picking between Solutions. It saves so many problems!

[Ostroeuropa]

It isn't imaginary. Like I said, things have value because we decide imagine they do.
If we decide realise that numbers on a screen no longer represent actual wealth, we'll make imagine new numbers that do.

You don't imagine value. You decide it.
It has value because it is valued. So your edit just betrays your basic misunderstanding of economics.
We have decided that bits of paper with a signature are valuable as a medium of exchange.
We don't IMAGINE they are, because they ACTUALLY ARE since we decided it.

[Norsklow]

It isn't imaginary. Like I said, things have value because we decide imagine they do.
If we decide realise that numbers on a screen no longer represent actual wealth, we'll make imagine new numbers that do.

And inasmuch as all value is relative to the person, so what do your strikes have to do with anything real?

Decide what it means or imagine - what is your point?

[Ostroeuropa]

Totally...I thought I'd covered that by using the term "ethically sound"...but I don't think that is a good way of putting it because this split is absolutely fundamental...so yeah thanks for that very pertinent point Norsklow...

Ethics can't cover everything, Rubi!
The thing to do when approaching Problems is to remove all ethics and only re-insert them when we are picking between Solutions. It saves so many problems!

...
Norsklow's razor
now joins Hanlon and Occam

"Shave away the ethics."

[Renegade Island]

You don't imagine value. You decide it.
It has value because it is valued. So your edit just betrays your basic misunderstanding of economics.

It's the same thing. How are these things valued/decided?

I understand economics perfectly, it's a system designed to manage the resources of a community/country/planet.

[Ostroeuropa]

You don't imagine value. You decide it.
It has value because it is valued. So your edit just betrays your basic misunderstanding of economics.

It's the same thing. How are these things valued/decided?

I understand economics perfectly, it's a system designed to manage the resources of a community/country/planet.

We have decided that bits of paper with a signature are valuable as a medium of exchange.
We don't IMAGINE they are, because they ACTUALLY ARE since we decided it.
If we merely IMAGINED it it wouldn't be the case. You can imagine that a strand of hair is valueable. But it doesn't make it so.
However if we all decide that it is, then it is.

[Rubiconic Crossings V2 rev 1f]

Totally...I thought I'd covered that by using the term "ethically sound"...but I don't think that is a good way of putting it because this split is absolutely fundamental...so yeah thanks for that very pertinent point Norsklow...

Ethics can't cover everything, Rubi!
The thing to do when approaching Problems is to remove all ethics and only re-insert them when we are picking between Solutions. It saves so many problems!

In terms of mapping out solutions and looking to cover eventualities...I'd agree. One should look at all possibilities and then remove the chaff. However ethics must be a part of that selection process...a basic criteria if you will...

I have this unfortunate habit of leaping to conclusions without going through all the steps because there are givens and it takes time to go through that...getting to the root cause quickly is basically what I do and have done all my working life (albeit in a specific and narrow field). So I expect people to be following me down that same route which is obviously preposterous.

Of course to add a bit of hypocrisy I usually do mention in my RCA reports that measuring twice and cutting once would have prevented or lessened the impact of a incident or problem.