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  1. #1
    resonance entropie's Avatar
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    Default Idea for the euro crisis

    I am no financial expert, but to those of you who are: what if one would found a central european bank which is political neutral. this bank does give credit to everyone who asks for them of course the investment needs to be analyzed beforehand. the interest rates are then collected and every period given out equally to every state. that makes the bank non-profit.

    this could solve injustice the occupy protester for example are against. its idealistic of course and its suceptible to crime.

    and it wouldnt solve the problem with poorer countries joining the same currency like richer countries. this wont ever be a relationship of mutual benefit financially as long as the poorer ones cant be strenghtened

    whats your take ?
    [URL]https://www.youtube.com/watch?v=tEBvftJUwDw&t=0s[/URL]

  2. #2
    The Unwieldy Clawed One Falcarius's Avatar
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    The main problem is too many countries in the eurozone, like Greece took advantage of the artificially low interest rates. This meant it was far too easy for countries to borrow on the never never, consequently far too many borrowed more than they should have been allowed.

    Sooner or later the EU needs to start rigidly enforcing the agreed growth and stability pact: annual government deficit to GDP and gross government debt to GDP levels. In exchange for doing so, the richer nations have to either back poor countries or quite literally throw them out of the euro-zone.

    Being in limbo because of the lack of common policy has hit market confidence, especially as the eurozone took away two key tools for adjustment: interest rate and the exchange rate.
    Quote Originally Posted by Thalassa View Post
    Oh our 3rd person reference to ourselves denotes nothing more than we realize we are epic characters on the forum.

    Narcissism, plain and simple.

  3. #3
    Senior Member reason's Avatar
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    Are you suggesting that Europe "nationalise" its banking system? What you're saying is that Europe should have one megabank, and all bank deposits, investment funds, etc. should be held with this one bank; all lending decisions would be made by this central authority and any "profit" goes straight into the European Union coffers. Is that right?

    It's a terrible idea. I'd sooner nuke Paris.
    A criticism that can be brought against everything ought not to be brought against anything.

  4. #4
    resonance entropie's Avatar
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    Quote Originally Posted by reason View Post
    Are you suggesting that Europe "nationalise" its banking system? What you're saying is that Europe should have one megabank, and all bank deposits, investment funds, etc. should be held with this one bank; all lending decisions would be made by this central authority and any "profit" goes straight into the European Union coffers. Is that right?

    It's a terrible idea. I'd sooner nuke Paris.
    "The rules of the money system have shifted. The majority of money that
    now changes hands does so electronically. As a result, far more than ever
    before, new money is not issued by the state but by banks. Ninety seven
    pounds in every one hundred circulating in the economy will now have
    been issued by banks (in the form of sight deposits, printed into
    customers’ accounts as interest-bearing debts). Only three pounds are
    cash, issued by the state (in the form of banknotes and coins, issued at no
    interest). The cost to the state of issuing new money is only the cost of
    producing banknotes and coins. The cost to the banks of issuing new
    money is virtually zero. The state receives public revenues from issuing
    cash, but banks make private profits. The benefits of the money system
    are therefore being captured by the financial services industry rather than
    shared democratically.

    The loss of this privilege is equivalent to an extraordinary twelve pence
    on income tax in the UK. In effect it has become a subsidy to the private
    banking sector – a nice little earner, but one that should always have
    been for public benefit rather than private gain. This is likely to grow as
    as we move further still towards a cash-free economy, perhaps to a point
    where coins and notes represent less than 1% of money in circulation.
    Unless we find creative alternatives, the benefit of issuing new
    money will have transferred entirely from public benefit into private
    corporate gain.

    This argument has been made by monetary reformers, who have become
    increasingly vocal. The contemporary Jubilee 2000 campaign, for
    example, focuses on the unpayable debts of the poorest countries. It has
    begun to argue that debt is as systemic a by-product as pollution or global
    warming of a global political economy locked into the search for rates of
    return on capital of fifteen per cent annually or more.
    This report represents a fundamental breakthrough on this agenda.
    While the principles of monetary reform have been asserted often
    enough before, the steps from where we are to where we need to be, in
    terms of a democratic and efficient money system, have been obscure
    or unconvincing.

    [...]

    Today’s monetary and banking system is, in essence, still based on the
    500 year old fractional reserve system suited to metal money. It still has
    to catch up with the new payment practices and the accelerating
    circulation of non-cash money based on modern information and
    telecommunication technology.

    It is now opaque, inherently unsafe and unstable, almost impossible to
    control, and too expensive. It is increasingly perceived as part of an
    unaccountable system of money and finance that needs reform at every
    level – local, national and international. New initiatives and proposals are
    in the air. The New Economics Foundation has been prominent in
    developing and promoting LETS (local exchange trading systems), time
    money and other alternative or parallel currencies, microcredit,
    community banking, credit unions, and other new approaches to local
    community finance (Mayo et al 1998).

    The reform we discuss in this report is different from those. It is not
    directly linked to them, but is a wider issue. It is a reform of the
    mainstream monetary and banking system. It reflects the values of a
    democratic civil society and the need for economic and financial stability.
    It is in tune with the Information Age.
    It is basically simple. It is in two parts.

    1. Central banks should create the amount of new non-cash money (as
    well as cash) they decide is needed to increase the money supply, by
    crediting it to their governments as public revenue. Governments
    should then put it into circulation by spending it.

    2. It should become infeasible and be made illegal for anyone else to
    create new money denominated in an official currency. Commercial
    banks will thus be excluded from creating new credit as they do now,
    and be limited to credit-broking as financial intermediaries.

    We refer to this as “seigniorage reform”. While adapting to the new
    conditions of the Information Age, it will also restore the prerogative of
    the state to issue legal tender, and to capture as public revenue the
    seigniorage income that arises from issuing it. Originally, seigniorage
    arose from the minting and issuing of coins by monarchs and local
    rulers. Extending it to the creation of all official money will correct the
    anomaly that has grown up over the years, resulting today in 95% of
    new money being issued, not by governments as cash (coins and
    banknotes), but by commercial banks printing credit entries into the
    bank accounts of their customers in the form of interest-bearing loans.
    This costs the public large sums of money in seigniorage revenue
    foregone, in the UK, for example, of the order of £47bn a year
    (Appendix, Table 4G). It gives the commercial banks a hidden subsidy
    in the shape of special, supernormal profits of the order of £21bn a year
    in the UK (Appendix, Table 4B). We estimate that, in total, the resulting
    cost burden for the UK economy is about £66bn a year"

    from "A monetary reformation for the information age" Huber/Robertson
    [URL]https://www.youtube.com/watch?v=tEBvftJUwDw&t=0s[/URL]

  5. #5
    Senior Member reason's Avatar
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    entropie,

    Whoever wrote that has only a tenuous grasp of what they're talking about. I suggest that you ignore them.
    A criticism that can be brought against everything ought not to be brought against anything.

  6. #6
    Senior Member reason's Avatar
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    Okay, I'll be more specific.

    "The rules of the money system have shifted. The majority of money that now changes hands does so electronically. As a result, far more than ever before, new money is not issued by the state but by banks."

    This isn't a new development and electronic transfer has nothing to do with it. The majority of money has been a product of banks for hundreds of years. In Scotland during the 18th Century, the government had no part in issuing money at all; almost 100 percent of the money supply was created by private banks. Scotland also had one of the most stable and productive banking systems in the world. Oh, and by the way, they didn't have electronic money transfer back then, so Huber & Robertson made an oopsie with that one.

    They are either ignorant or willfully misleading about a bunch of things. Commercial banks can only create money in proportion to what are called 'reserves', and bank reserves take the form of something called 'base money'. While commercial banks can create money, they cannot create base money. The issuance of base money is the sole prerogative to central banks, like the Bank of England in the United Kingdom, Federal Reserve in the United States, or European Central Bank in the Eurozone.

    These central banks indirectly control the total money supply by creating or destroying the base money that commercial banks depends on for reserves. If the central bank thinks that commercial banks are creating too much money, then the central bank just tightens its monetary policy (i.e. reduces the supply of base money) until the commercial banks are forced to reduce their own issues of money. The upshot is that while governments do not issue everything we call 'money', like bank deposits, they control the base money on which it all depends.

    An understandable confusion, in which Huber & Robertson appear to be mired, is the status of paper or metal money (i.e. currency). Currency is an already tiny and shrinking part of the money supply, and the proliferation of means of electronic transfer has something to do with that. However, Huber & Robertson imply that this reduces the government's part in money creation, but it doesn't at all. Currency is part of the supply of base money, but only a tiny part and it's insignificant to the government's control of the money supply. To suggest otherwise betrays a gross misunderstanding of the subject matter; this is introductory level stuff.

    The state receives public revenues from issuing cash, but banks make private profits. The benefits of the money system are therefore being captured by the financial services industry rather than shared democratically.
    The seignoirage earned from issuing cash is minuscule and has been for at least 100 years. The government shouldn't even bother. Private banks are perfectly capable of issuing bits of paper and metal, like they continue to do in Scotland to this day. Seignoirage from the issuance of base money, of which currency is just a tiny part, is most important to the government. You see, central banks alter the supply of money from buying and selling government bonds; they gradually accumulate government debt on their balance sheet. When the debt eventially gets paid, most of the money goes straight back to the government: it's basically a free loan.

    The profit earned by commerical banks from issuing money is simply the profit earned from financial intermediation, not seignoirage. Huber & Robertson seem to not recognise this distinction, but it's very important. Seignoirage is a stealth tax imposed by inflation, while financial intermediation is neither a tax nor inflationary. It's not like commercial banks are taking away the government's seignoirage; they just can't do that. Commercial banks are completely beholden to the whims of government central banks and regulators, and they can create money only at the central banks' pleasure.

    Alright, that's all for now. The rest of it is a garbled mess too, but only so many hours in one day.
    A criticism that can be brought against everything ought not to be brought against anything.

  7. #7
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    Why is it a crisis?

    Perhaps the world economy is just naturally shifting to be more "fair" for everyone.
    As the west's economy declines, more investment opportunities are opening up else where. Wealth isn't being lost..it's just moving.

    Just a thought.

  8. #8

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    I absolutely support the new Franco-Germania Empire and will support them in the now inevitable war against the Saxon world.

  9. #9
    Uniqueorn William K's Avatar
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    Quote Originally Posted by xisnotx View Post
    Why is it a crisis?

    Perhaps the world economy is just naturally shifting to be more "fair" for everyone.
    As the west's economy declines, more investment opportunities are opening up else where. Wealth isn't being lost..it's just moving.

    Just a thought.
    Coming from one of the countries that is looking at a positive growth next year, I sort of agree that the balancing is inevitable. The question is the speed of the thing as well as where that wealth goes. Already, over here the housing prices are starting to go up. And inflation is far out-running wage increase. My main fear is that all this new wealth is gonna do is make us repeat the same mistakes that have been made in the West.
    Also, a lot of the export economies are driven by demand from the West so any slow-down will have an effect too. I don't think just selling to BRIC's will be enough.

    Edit : Oh yeah, and the reaction of the populace so far is to throw out all the incumbents in the elections. While that is probably human nature, it could lead to very dangerous people/parties being in charge of countries with lots of weapons, nuclear and conventional.
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  10. #10
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    Quote Originally Posted by Lark View Post
    I absolutely support the new Franco-Germania Empire and will support them in the now inevitable war against the Saxon world.
    And this time it WILL last a thousand years!

    To answer the OP, I think breaking up the eurozone into more manageable regional currencies would help considerably. You can't expect a single currency to work for an entire continent with differing levels of economic stability, not to mention political cultures to boot.

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