Rethinking central banking

Jolly, Many industries fail or even fail to start due to a lack of infrastructure to support them. Perhaps some strategic thinking in this regard would be a good investment no matter who pays for it. For example, your comment about a hydrogen fuel distribution system in partnership with the suppliers who could get gov grants for paying for such a setup provided they hire new workers to complete the project. These are the kind of make work projects that make sense because they have momentum long after the gov funds stop flowing into the project. That's just one example. I am sure there are many other ways also.

Jolly -- where do you stand on fractional reserve banking, loans between private parties and charging of interest on said loans?

If yes to any of the three questions, would you have some sort of centralized policy to create price stability and uniformity of interest?

BTW -- one good thing this article recommended is that BIS is no longer allowed to meet and act in secrecy.

Jolly -- just trying to place your opinions.

The video you recommend, Money Masters is against fractional reserve banking. I rejected that part. It is also against the gold standard. I accepted that part. All said and done, it was time well spent. Thanks again.

Like you, interest makes sense to me (though a previous series you recommended --money and debt was against it), and I believe that with or without a central bank we should regulate the banking industry and pretty much smash any organization that becomes too powerful. And the central bank does a pretty lousy job of regulating banks.

I would like the idea of QE if it was used to pay for Obama's job program. I also like the idea of inflation instead of taxes.

BTW -- Chinese banking reserve ratio is less than 5:1. But this does not take into account the "black market" for loans or the possibility that somebody, somewhere (or everybody, everywhere) is cooking the books.

Happy to look at any further recommendations you have.

By QE for jobs I mean some of program where the government provides stimulus with additional liquidity flowing to the people through infrastructure programs, instead of additional zeros to the bank accounts of the wealthy.

The Chinese dodged 2008 with a massive stimulus program. This resulted in their current problem of inflation and a lot of dodgy loans. But even if they don't avoid 2012, at least they will have a lot of new infrastructure and have reduced their economic jail sentence by 4 years. The US has been in economic prison for the last 3 years and nothing to show for it but smiles on the face of bankers. Next year China may join the US in economic jail, but still, they enjoyed the last 3 years.

I am a bigger fan of building something like roads, schools or wind farms. Although the money is not as evenly distributed, it makes its way back into the economy. And you also get to enjoy what was built instead of ipods from China.

The Hoover dam has been generating (a lot of) electricity for almost a hundred years, and the Empire State Building has served as a symbol of the US for just as long.

Hard to say what things would have been like without them... We only have what happened. From the accounts of my parents, these make work projects kept the hard edge of starvation from the American people, and to make sure that the armies of unemployed did not become real armies.

But still...

All I can really say is that building infrastructure is what the Chinese did in 2008 and they enjoyed 8% growth while the US economy contracted and now the Chinese have a lot of new roads and airports. All of which are being used.

Of course, the Chinese are now stuck with trying to put the genii of inflation back into the bottle without collapsing their economy.

By all accounts 2008 should have been a bust year for China. They were producing junk for the world, and the world no longer needed as much junk. Everybody said that China was going down, down, down.

However, within 10 days of Lehman's collapse they announced a trillion dollar plus infrastructure stimulus program. Things slowed down for a few months and then they picked up with all the new funny money in the system. Maybe without that trillion dollars 2008 and 2009 would still have been good years for China. But probably not. And either way, the Chinese can drive on better roads.

The US can use new some infrastructure. So why not do it now? If we wait 10 years for the economy to recover, then the workers will be more expensive and interest rates on government bonds will be far higher. So the cost to the public will be much higher. And the added employment will not hurt the economy. Certainly it will not be any worse than keeping people at home collecting unemployment benefits.

Jolly -- An infrastructure project undertaken now with QE -- probably won't be worse for the economy than buying bonds. But I am not sure that it has been done before, so we will never know.

A typical infrastructure project, financed with bonds, is paid for over a period of 10-20 years. So people get paid now, the people start to enjoy it 2-3 years from now and the people pay for it over the next decade or so.

Hopefully the project will be a good one. By that I mean an investment, something that generates value for the people in excess of its cost. A road (that people use) is a good example, a dam that generates power is another.

Large infrastructure projects need to be undertaken by a country if it is going to remain competitive. So it is a matter of timing.

Large infrastructure projects during bad times makes good economic sense because it is cheaper. Bad times means that wages are cheaper because the government does not have to compete with private enterprise, and money is cheaper because government does not have to compete against private enterprise. It also reduces the demand on the social support system by employing people and so produces another savings. And the government get a rebate on everything spent when they collect taxes from everybody directly and indirectly employed.

Yeah, we are not going to prove anything one way or the other.

When I look at china and think about a possible economic collapse I think "well hey, they will still have the schools and the indoor plumbing".

We don't have a lot to show for our 14 Trillion dollar deficit. If even 2 trillion of that had been spent rebuilding America, we would live in a very different country. Well... technically I don't live in America, but you know what I mean.

Rearranging central banks into action groups, or line them up in this or that manner, is meaningless, as long as the basic fundamentals in their SOP is a debt system.

Central banking can operate on a non debt system, but in a privately controlled an operated central banking system, that concept is fought with claws, nails, spit and drul.

A non debt system, in where the central bank will not induce a debt on the state, can only be achieved if the state themselves are printing and minting the currency.

As it is right now, the central bank is a private bank, and the state have to give a bond, to be paid later, to the bank, in order to print money.

That will always leave the state in a debt, while if the state would subordinate and own the central bank, that would be a Treasury Dep bank, that would come under the US Mint, and print money, no debt bond have to be brought forward, and the money printed will be debt free.

As long as the central banking system is insisting on the debt system ( and as long as they are private, they will stongly insist on the splendor of it) , the end result will always be the same, no matter if you teach the banks to roll over, or line up and march or sing in unison.

The central banking system is already working as one group, in , where all the banks have an interbank system, that is as fast as the speed of light, and will support each other, no matter what the policy in the different countries are.

Some, but very few basic differences exists between them...if push comes to show, they will run and save each other.

The Global central bank cartell, will do what is good for the banks, and funds are tossed back and forth, to support the banks...not regimes.

In this way, Nazi Germany had a lot of funds available, from all the western banks, and in particular the US Fed reserve...they got it, because of standard operating procedures between the banks....not because of any policy made by the US government.

The central banking is already detatched, from policy making, and their world as they see it, is where other central banks exists. The fact that one country happens to be Nazi, Fascist, Democratic, Communist or Socialst, Dictatorial, or whatever...is outside of the existing central bankings awareness universe.

That's just what the ants are doing on that piece of land, outside the windows of the bank....

The banking lobby is the bigest lobby in the world, and any representative from any government that is suppose to be elected into any overseeing post...will have to be knowledgeable in banking...so their own people will always be voted in, to make sure that the banking industry will be able to continue, with business as usual.

The central banking system as is used now, was put there on the promise to even out highs and lows, and to have a stable currency...but ....from day one, when the system was applied...it proved that they delivered exactly the opposite.

Long stretches of recession and depression, and short burst of good times, that always ends up in bubbles, a fast deterioration of currency value, and a long stretched decline in economy....that is the way this debt system works.

To take all these central banks, and make some kind of group out of it, that is suppose to do some kind of stabilisation of some sort, is pretty much a dream.

The Fed Reserve have been granted such a power that in all essence, they are above the law, and those representatives we have in them, are not loyal to the people, but are bank people that will do what is good for the bank, not what is good for the nation.

So there are no mechanisms to control a big conclomerate of central banks....they live their own life above the clouds, and above our laws.

G7, G20 and any of those meetings, that sounds so official, is no more than bank meetings of privately owned central banks, and the battle plans they set forth. Finance ministers are voted in on their partys agenda, and the banks have already paid for their election campaign, so they are all abord.

Finance ministers are not bankers, but have usually some academia, behind him, where he have written a paper while he was in school, and favour some "model" of some sort. They usually know enough to fool the public when they open their mouth, but in all essence, does'nt have a clue.

If a central banker tells a finance minister something, it will be the banks way.

None of these bankers are interested in concepts like, human rights, educational quesitions, famine, work opportunities, strong or weak army, who controls what land, what nationality you are, what language you have, what flag you represents.

But it is up to us....we have given the private bank the bank charter they are operating upon, a right to print our money...a right we have the full power to withdraw at any time.

AW, Fractional reserve banking, is just fractional banking no matter if it is happening in a reserve bank or not (actually there are no reserves in a central bank)..

The whole idea with fractional banking is that the bank will create credits...basically out of nothing, on the basis that the bank have some cash at hand. The more cash at hand, the better funded the banks are, the lesser cash in the bottom, the lesser liquidity they have ( latest reports claims that Chinese banks have very little in the bottom)

If you have a 100 bucks in the bank, but you make out loans for a 1000 bucks, you have a ratio of 1.10.

When this goes astray, you start to see very extreme numbers...20:1 30 :1 ...probably not per the bank charter, but any financial institution is very adapt to have "creative financing" .....I heard the Chinese are damn good in that.

If I would have a bank...personally...I would probably not go over 3:1 - 5:1 or thereabout. But that statement may be very much challenged by very up and coming profitable bank that have a much higher ratio....but that banks vunerability will be much higher also...and in that lies the trap.

Press that point a little bit more up...then a bit more...and..so on.

The good point is that it will give liquidity into society,investments, and money will go to wages, payments , gas stations, and candybars....all along the line there is people living on it.

The bad point is that the higher cash/loan ratio, the more it is fragile....spread a bad rumor, and make a run on the bank, and the bank will have all it's fundaments ripped off from underneath it.

If you were into the trucking industry in the US, you would have to live with rules and regulations that would be overwhelming, you would have to drive onto scales, and measure the weight, you will have officials measuring how far, the trailer goes, how much the goods is sticking out, and do safety tests, you will have to show logs on the hour, you can expect that DOT can raid your office, and do audits whenever they like, that your permits are ok, and paid, that...well endlessly....

A bank in the US does not have this army of Government Ninjas doing frequent check up raids, but are pretty much regulating themselves...mainly because of government incompetency, and heavy legislative lobbying from the bank lobby.

So banks and finance institutions will far too often get into a self feeding frenzy, where a trend is follwed until it bursts.

Like the latest house bubble, where loans was sold, and resold, and resold and so on, until they all ended up in big funds, where they were stamped AAA.

The whole bank industry did ok, on each section of it's activity did nothing wrong per see, but the whole animal went berserk, because of no bank regulations.

Banks was de-regulated, because as per the bank lobby, government should'nt interfere with business....and that sounds agreeable.....

But what was left was a freeway, wiithout traffic rules, without traffic lights, no right or left traffic, no speed limits, no paint markers on the road, no traffic signs, no nothing....just a freeway with a bunch of careerpeople hauling ass down the road, until they all piled up in a fog bank one dark night, doing 200 mph with a high number of casualties.

I just want to see this industry get some traffic rules to abide by, something that is always fiercefully fougth against, by a very big and strong banklobby.

About interest on loans...don't get your question, what about it?.

You borrow me some cash, I pay it back, and put a little sugary sauce on top to say thanks. ...what are you getting at?

About secrecy in meetings...try to take that away...good luck, there is Illumni, Skull and Bone and all these secret societies, that at the top of the banking industry is a must to join...I don't know all their agendas, but if bank people meet there, who can stop them, to have a secret society is not forbidden, and who can police what they say when they meet in their secret societies.

AW,

An "optimal solution" so to say, is always evolving, and would anyone bring satisfying arguments that in simple logical terms can explain why one action or function is better than another...I don't mind.

As gold standard, or charge interest, ...I see that as being so periferial in the whole sceme of things, even if they all by themselves is a function of magnitude.

Muslim countries can not charge interest, and they seem to survive, and we have not had gold standard since the very early -70's, and there is no big hole, where the US used to be, we are all still here.

I have a leaning towards gold standard, think interest can be charged, and think that a well regulated fractional banking system will work, and are opposed to the debt system in central banking, and are in favour of a government, non debt central banking...

The QE as I see it was a waste of moneny, as it put all the funds into parked accounts, all it did was to inflate the Dollar.( even if the Feds denies that feveresly).

The idea with giving you these videos to look at was to get you a general idea on things, and of course, amongst the producers, they all have ideas...like you and I what would be the very best for all, and some ideas are pretty far out I must say.

Inflation instead of taxes...I must say I have not really melted that one yet......perhaps with a bit more to drink I could digest it....like Tzing Tao beer.

AW, Like Bush or not, but he had it targeted, he arranged for cash straight on taxreturn to every taxpaying citizen a couple of hundred bucks....I think it was too little to make a big difference, but at least he had the right target.

Would all these Obama waisted bailout money to companies, and the Fed Reseve printing that went straight to bond purchases, instead had been straight and pure cash....maybe four payments of three thousand dollar each, one check coming every month... we would have had this recession licked.

Of course, but if we want to kickstart something, an injection straight into the bottom of the chain, will make it going.

Projects like Hooverdam and Tennesee valley was tried during the Great Depression, and that didn't do anything good.

Yes AaronWard,

... all this big projects gave work when they happened, and they gave something that was of benefit for a long time, and they also became valuable real estate.

Hoover dam, Golden Gate bridge, Empire State building...all land marks now.... loved ones as well.

But these projects did not take the US out of the depression.

These was not a free market enterprises, ...hard and cynical as it may sound, it was still a government handout, the government can not give anything to anyone, unless it have taken it from someone else first.

This times in the USA, was probably one of the most US government intervened times, and with every action they did, and they did a lot, the depression deepened. Would they have left the market alone, it probably would have turned much quicker.

The depression was over pretty much around -34-35 in Germany, Italy , and Great Britan, but here in the US, the government just could'nt keep their hands out of it, and arranged for wages stops, price stops, burning of weat, and...well you name it....and at every turn, it just got worse.

FDR was probably one of the worst economical doctor the US could have had, but he was a greeeeaaaat bullshitter, and people was glued to their radios, and wanted to hear his fireside chats.....a one sided proclamatin of how he wanted things to be done, and he...of course got the whole population with him, and I am pretty sure your parents have accounts of how his projects staved off starvation, and are ever so thankful that FDR was at hand during those years.

China built a lot of infrastructure, but they did it in boom times, in there lies the difference.

Sure why not, the freeways are terrible, we could use bullet trains everywhere, and a remake of some old downtowns would make the towns more appealing.

A remake of may towns with a lot of bicycle lanes, separate bicycle "freeways" would get things going in that direction.

A complete set up of a Hydrogen fuel distribution system would probably start a lot of other projects going in that direction too.

Some of them would be a bit of a leap of faith....and rely on the saying...if you build it they will come....but hey why not.

PT, Of course...if everything goes to hell, I rather be in the US than in Zimbabwe, becuase in Zimbabwe there is no infrastucture to talk about.

Infrastructure is a value all by itself, railroads, harbors, freeways and airports, are all there....an electric grid will not evaporise in case of an economic melt down, and generators will continue to spin, at water reservoirs, no matter if Apple tanked on the market or not.

All these things have value, and will come in handy, good or bad times.

The issue here though, was the discussion whether construction of these things will pull a market out of a recession or not, and even if they have good future use, good stay value, the construction of those things, have shown to not be a factor in kick starting a depression or recession.

The construction of those things have been, however in bad times, government favorite pets, as it will usually put a lot of people to work, but they will all...tap government on funds for material, and workers cost.

So before all of this can be put in place in the first hand...the government have to take it from somewhere, and that act alone..is the counter weight to the stimulus into the economy the work will give.

If we want to build stuff like this...I would say yes, infrastructure will be a stabilising factor in a society, but that is another discussion all by itself, and deserves it's own debate.

The point I am getting to, is that projects like these always have a tendency to be important, during recessions or depressions.

When the government can least afford to build them, they always seem to have higher priority. These should be projects built in good times.

There is another aspect of it as well...the bragging right...the worlds ..biggest...longest...heaviest...widest...highest...whatever....it is a bit ...well pasee' to get something for the bragging right of it.

Developing countries however are in full swing with their bragging right projects now.

Our big projects have moved over more into "soft" targets, something that does not leave an Eiffel tower behind it.

We could easily build another structure, where the Twin Towers of the World Trade Center once stood, that is higher, bigger and all that....but...it's just not in the times now.

Those things starts to be...impresive as they are...a bit like the -50's cars with chrome all over them.

But who knows...things might change, and we will once again be proud over big bridges, high buildings, and big dams, and will build even bigger stuff in the future....I am sure something astonishing lies ahead in the future.

Yes AW, but the project is there because it is bad times, and the project itself will not bring an end to the recession or depression...I think we start to go around a little bit on this.

They all have good value and a future use, but they have good value and future use in both good or bad times.

They are finaced by various means, but usually in a loan in one form or the other. If a loan is over thirty years, does'nt matter, the loan will cost either in partly repayment, or in bond interest, even if it is paid as a baloon afterwards, and will at the time of it's introduction put another tax burden on the government.

You don't have to sell me at all on the idea that infrastructure is valuable, and the more and better it is, the more valuable it is for the society, it will enhance the society to be more resilient, and the more of the infrastructure it has, the more shock it can take.

When the Soviet Union fell..I was reading about the first two years afterwards...it was a tale about a neighbourhood in Leningrad, later, St Petersburg, No one had work, but no one was collecting rent, older ladies tried to sell anything they could, small gardens sprung up, by some reason or the other, electricity keept on going, and the busses kept on going....and they managed to get out of it.

They had infrastructure those first important two years after, houses, roads, and all that....even two hard winters didn't do much to them, they had something to fall back upon..

Put the same people out on a naked prarie, desert or tundra...and they would have been done.

If food and shelter is provided in one way or the other, during a collapse, it will eventually turn around. That is the value of an infrastructure. If there is even more infrastructure that will aid, an industrial comeback, the better.

It's of course also depending on how deep the collapse is, and the attiute of the people. Iraq, from what I saw when I was there, was looted on everything , and it had to start from scratch with bare walls....if that.

Jolly -- magic of QE...they take it from nowhere...

....but it will still be government handouts........and they have to take it from someone, somewhere first...

AW....you're not fooling me Aprillo...are you?