Free market vs State-led Economy

[Cado]

Additional value can be created, the problem with the banking system is that it creates it out of thin air. There is no value ergo the money is worthless and the only thing which sustains the illusion of worth is massive debt.

[SmartAlx]

You've got to be careful with your language there. You said that additional value can be created. This isn't really true now is it? You even alluded to it when you said "There is no value ergo the money is worthless."

[Cado]

Originally Posted by SmartAlx

You've got to be careful with your language there. You said that additional value can be created. This isn't really true now is it? You even alluded to it when you said "There is no value ergo the money is worthless."

I mean it can be created when there's something to back the value. IE, if your currency is backed by gold and you increase your supply of gold, you essentially create more value and it's reflected by the value of your currency.

[SmartAlx]

Ok. That's true. Just wanted to make sure you weren't saying that someone borrowing $10 to buy ALG's goods would add value.

[Acting Like Godot]

Think barter.

You have pork. I have apples. Potentially I can give you some apples in exchange for some pork. However, if you don't want apples, but oranges, then we have a problem.

Money solves the problem. I can just pay you for pork. With the money, you can go buy oranges elsewhere. I can sell my apples to someone else for money too.

Money therefore becomes a valuable thing in its own right. It facilitates exchange of goods and services - in fact, it facilitates the exchange of every kind of good or service that has a monetary price.

In that sense, money is like a ship. You live on Pig Island. I live on Apple Island. We can exchange pork for apples only if we have a ship whereby we can transport our respective goods to each other.

Does a ship have value? Sure. Similarly, so does money.

[SmartAlx]

Dude. You aren't paying attention. There aren't enough dollars in the example economy. Stick with the example. Either the $2 economy or the $1 million economy. The economy that began with $1 and one additional loan of $1 plus a specific interest entry in a ledger book.

Before you continue in this discussion you really should educate yourself as to what a dollar ACTUALLY represents. It's not a slip of paper representing trade. It's an IOU.

Please watch Money as Debt. It's easy to find. It's free. And it's fun to watch. More importantly, it's eye opening.

[Deep Eco]

if the money in our economy today was merely a means of exchange then Acting Like Godot, you would be correct.

But SmartAlx is right. Our money system today does not just facilitate the exchange of goods and services. It is much more insidious than that.

I do also recommend watching Money as Debt. It explains the state of our economy.

For an article that explains the situation here is a good one: "I Want The Earth Plus 5%."

[Acting Like Godot]

Oh sorry. I forgot that you're living in the US.

Those are your country's kind of problems. Not everyone else in the world prints money like that.

[SmartAlx]

Actually, most countries in the world use fiat money and fractional reserve banking. Where are you from ALG?

[Acting Like Godot]

From a country that's never had a budget deficit since at least the year I was born.

That is to say, the government here does not spend any money which it doesn't actually have.

[Brutha]

From a country that's never had a budget deficit since at least the year I was born.

That is to say, the government here does not spend any money which it doesn't actually have.

But your economy still suffers because the US economic policy.
Your currency is also pegged to foreign currencies.

[SmartAlx]

Originally Posted by Acting Like Godot

That is to say, the government here does not spend any money which it doesn't actually have.

If your country (the identity of which is suspiciously unclear) uses a fractional reserve banking system, then it most definitely does use money that it doesn't actually have.

Why don't you want to share which country you live in? I promise not to make a red herring argument - like say if your country is Communist.

[Acting Like Godot]

By the way, SmartAlx, Brutha knows very well which country I come from.

Originally Posted by Brutha

But your economy still suffers because the US economic policy.
Your currency is also pegged to foreign currencies.

Yup. However we are nowhere as badly hit as the US. In fact, there's a property boom in my country right now; stock markets are doing well; and in the 3rd quarter, our GDP expanded by 14.9%.

Unemployment, at its peak this year, was under 5% (whereas in the US, it was double that). The other thing to note is that household savings in my country are quite high; and debt is low; which means that a relatively high proportion of people can afford to go jobless for quite long.

(Having said that, a comparison between the US and my country is relatively meaningless, since the two countries are very different. Mine is much, much, much smaller, for one thing).


In fact, it's even possible that in the slightly longer run, our financial institutions are going to benefit from the financial crisis. Why? Because a lot of rich folks around the world who used to place their millions with Swiss banks such as UBS and Credit Suisse are now pulling out their money and assets and looking for another part of the world to park them. Guess where?

[Brutha]

Why don't you want to share which country you live in? I promise not to make a red herring argument - like say if your country is Communist.

It isn't communist. Feel welcome at a game of "guess the country". ALG gave a few pointers, I add some more

which means that a relatively high proportion of people can afford to go jobless for quite long.

But there are no welfare payment for those people without household savings.
But then I don't really understand how your system works in that regard.

If your country (the identity of which is suspiciously unclear) uses a fractional reserve banking system, then it most definitely does use money that it doesn't actually have.

They don't adjust the money supply through interest rates over there.

(Having said that, a comparison between the US and my country is relatively meaningless, since the two countries are very different. Mine is much, much, much smaller, for one thing).

That's part of the reason why the policy over at your country doesn't have that much impact in a globalised world.
It's also the reason why the US can't run the their dollar with the same policy that you use. They are just too big.

How should the US change their banking system in your opinion?

[ar81]

Originally Posted by SmartAlx

Why don't you want to share which country you live in? I promise not to make a red herring argument - like say if your country is Communist.

No country is communist these days. Are China and Russia or any other country communists? Nope.

[Acting Like Godot]

Originally Posted by Brutha

But then I don't really understand how your system works in that regard.

The 1st trick is to keep unemployment very low.

The 2nd trick is that if people lose their jobs due to structural employment, the government rapidly steps in. Not by handing out welfare payments, but by paying for those people to attend courses to equip themselves with new skills, so that they can find jobs in industries are still looking to hire.

The 3rd trick is that 85% of the population live in public housing. Even if they lose their jobs and fail to meet their mortgage payments, it will only be in very rare cases that they lose their homes and become homeless.

The 4th trick is that over the years, the government has had a scheme whereby first-time home buyers will be given a $40,000 grant, if they choose to live within a 2-km radius of their parents. Thus over time, relatives tend to stay in close proximity (and help each other through hard times).

The 5th trick (and this is perhaps the sneakiest trick of all ) is that the government DOES provide welfare. It's just that they refuse to publicise it and make it known - because they want everyone to think that there is NO welfare system (so that everyone will try to work hard to look after themselves).

But actually government workers will scour the low-income areas to discover the folks in trouble; schools have secret funds set aside to help kids who can't pay for textbooks; public hospitals will waive medical fees for the very poor etc etc - EVEN THOUGH there is no formal official policy on these matters, that the public can actually view.

[Brutha]

The 4th trick is that over the years, the government has had a scheme whereby first-time home buyers will be given a $40,000 grant, if they choose to live within a 2-km radius of their parents. Thus over time, relatives tend to stay in close proximity (and help each other through hard times).

That just the kind of political action that would never happen in the West, but it does them to be effective from a utilitarian point of view.

[Acting Like Godot]

Originally Posted by Brutha

That just the kind of political action that would never happen in the West, but it does them to be effective from a utilitarian point of view.

Yup ... My government is full of unusual solutions. The system is not perfect, but they definitely provide a lot of food for thought for other countries. Just because the solutions implemented here challenge some very basic assumptions in other countries (about economics, healthcare, politics, law, race, religion, pretty much everything).

To give you another example, senior citizens who are broke are entitled to sue their adult children, for a monthly sum, to meet their basic needs. They are never entitled to an exorbitant sum (no matter how wealthy their adult children may be) but they can get enough, to meet basic needs like food, water, electricity.

At the same time, there is an adjudicator who will hear out the stories and complaints of the adult children. So if the adult child says: "My father never took care of me when I was a kid, he was an adulterer and a gambler and he beat me a lot, he doesn't deserve a cent from me now", the judge is going to take all that into consideration.

[Michael Chui]

Originally Posted by Brutha

That just the kind of political action that would never happen in the West, but it does them to be effective from a utilitarian point of view.

Well, it kinda depends on the presumption of a Confucianist legacy in the culture, no? It wouldn't work here in the West not just because it would be unpopular, but also because our only solid notion of family is kinda pathetically nuclear... which is why it would be unpopular.

Also, when I look at the "85% of people live in public housing," I wonder whether or not that's really a good thing. Not that I'm personally opposed to the notion, but it has a distinctly anti-individual feel to me, and I like individualism. On the other hand, I tend to prefer giving the state control of anything considered a basic need when it can be trusted; it doesn't make sense to me otherwise.

Are we still playing guess the country? Because my google-fu tells me it's this one particular place, but I wouldn't want to deprive SmartAlx of his habitual silence in the face of questions he doesn't have an immediate answer to.

[ar81]

This book is a recommended reading.

Amazon.com: Agenda for a New Economy: From Phantom Wealth to Real Wealth (9781605092898): David C Korten: Books