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Post by Data Cable on Sept 3, 2005 1:11:15 GMT -4
No, it's the punishing of people who need money that I abhor. When you pay more for a roll of toilet paper than it cost the manufacturer to produce it, are you being punished because you need TP?
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Post by turbonium on Sept 3, 2005 4:17:05 GMT -4
When you pay more for a roll of toilet paper than it cost the manufacturer to produce it, are you being punished because you need TP? That is missing my point by a country mile. I am referring to punitive interest rates on loans based on increasingly fewer choices, and having our gross incomes stripped to pay down needless interest payments towards the national debt. What your example refers to is a normal and reasonable transaction of commerce in a free market economy.
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Post by Data Cable on Sept 3, 2005 4:33:57 GMT -4
...as the investor I wilfullly risked my money knowing I may lose it in the end. And, as opposed to the business owner possibly having his house taken by the bank (as he had to put it up as collateral for his loan)... But when the business owner put his house up as collateral, he also willfully risked it, knowing that he may lose it in the end.
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Post by turbonium on Sept 3, 2005 4:57:22 GMT -4
But when the business owner put his house up as collateral, he also willfully risked it, knowing that he may lose it in the end. He had to risk it, to try and establish a business - that is my point . I was fortunate in that my business got its start with help from a venture capitalist. I didn't need to go begging to the banks with hat in hand. Not all those who wish or attempt to start a business are fortunate enough to begin that way.
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Post by Data Cable on Sept 3, 2005 5:53:49 GMT -4
He had to risk it, to try and establish a business Obviously he didn't have to, since... ...he had the option, under the existing system, of going to a no-risk venture capitalist for free money which he would be under no obligation to re-pay.
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Post by Joe Durnavich on Sept 3, 2005 19:28:23 GMT -4
No - it could be done through regional representation, much like Congress, but independent and given the sole mandate of monitoring economic policies and acting on public referenda of the region.
You have outlined a fully politically-controlled banking system where the majority rules. The problem is, the majority of the public doesn't know how to run a national banking system. With zero interest rates, there will be great demand to borrow money, but you said you would limit money to avoid excessive inflation. What do you think the first thing the majority of the public will call for? More money to borrow. Controlling inflation under your system will be difficult.
In a private bank, the stockholders hire the best banking managers available with the mandate to maximize profits. The public still wants to get as much value as they can from the bank in terms of borrowing money at the lowest possible rates, etc. but the requirement for profits balances the public's demands.
No - but eliminating the payment of needless interest towards the national debt will eliminate the greatest portion of the tax burden.
No, it won't. Because the Fed turns those interest payments right over to the US Treasury to spend on pork-barrel projects and whatnot, the interest fees are nothing more than another form of tax revenue. If you eliminate them, the government will just have to increase taxes elsewhere to get the money.
Your problem on this point is that you won't consider that government spending is what creates the debt and the tax burden.
I don't advocate a free-for-all money grab by every John Q. Public that comes in for a loan. There still have to be restrictions on loans and requirements for repayments on primary loans before allowing secondary loans.
If you disallow secondary loans, a black market will develop where people who have no primary loans will borrow money from your banks at no interest and loan it for interest to those who are unable to borrow again.
Also, your system, presumably, has no requirements for collateral, making it more likely for loans to be defaulted on.
Banks today loan with the intent of maximizing profit. Since there is no such incentive under your system, and since your bank, being a legal monopoly, will continue operating regardless, what criteria will decide who gets to borrow money? Don't you see a danger of corruption among the loan officers who have the power to loan money to those can personally benefit them most?
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Post by turbonium on Sept 4, 2005 3:21:08 GMT -4
...he had the option, under the existing system, of going to a no-risk venture capitalist for free money which he would be under no obligation to re-pay. I pointed out that this financing option is not available and/or successfully acquired for the majority of those starting a new business. Most businesses do indeed need to rely on bank loans to get up and running.
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Post by turbonium on Sept 4, 2005 3:37:29 GMT -4
If you disallow secondary loans, a black market will develop where people who have no primary loans will borrow money from your banks at no interest and loan it for interest to those who are unable to borrow again.That already exists today , and some of them aren't even black market financiers - although they could certainly be called loan sharks. Those with existing loans already have difficulty obtaining a secondary loan from the banks. So they turn to the ugly last resort alternatives. These financiers prey on those with no credit or bad credit by accepting their homes as collateral for loans at interest rates that Lucky Luciano might have found exorbitant.
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Post by turbonium on Sept 4, 2005 4:20:50 GMT -4
Because the Fed turns those interest payments right over to the US Treasury to spend on pork-barrel projects and whatnot, the interest fees are nothing more than another form of tax revenue. If you eliminate them, the government will just have to increase taxes elsewhere to get the money.There is a shell game going on here. The money loaned to the Gov't by the Fed places interest charges on the principle. The Gov't spends the money on its pork barrel projects, then needs to collect taxes from the public to pay back both the principle and the interest. But the taxes the Gov't takes in don't even cover the interest charges on the Fed loans, so of course the debt continues to spiral past the $7 trillion mark.. This link www.publicdebt.treas.gov/opd/opdint.htm shows the interest expense on the national debt annually. In fiscal year 2004 the payment was over $321 billion, and this year to date has paid almost $315 billion. The Gov't is collecting taxes to pay the needless and ridiculous Fed interest, as I said before.
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Post by turbonium on Sept 4, 2005 4:25:59 GMT -4
Your problem on this point is that you won't consider that government spending is what creates the debt and the tax burden. No, I do consider the Gov't spending is a huge problem - there are countless examples of Gov't waste throughout the years. Even if there were no interest on the money it spends, the Gov't would still spend like there's no tomorrow, and we would still be in debt. When it's not your money, it's easy to piss it away without a care, because you won't end up in the poor house for it. Don't misunderstand me - it's more than one problem we have here. Gov't waste is well worthy of its own thread of discussion.
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Post by Joe Durnavich on Sept 4, 2005 11:37:04 GMT -4
Nothing wrong with that, as the investor I wilfullly risked my money knowing I may lose it in the end. And, as opposed to the business owner possibly having his house taken by the bank (as he had to put it up as collateral for his loan) if he defaulted,
You say that you want a system the better serves the public's needs, but you are overlooking the nature of the public's demand regarding investments. I have some of my money in cash, some in a checking account, some in a savings account, some in CDs, and the rest in "high-growth" mutual funds. I probably will invest some in lower-growth mutual funds that may earn more than CDs but are safer than than the higher-growth funds.
The diversity here reflects my requirement for quick access to cash and my willingness to risk my money for a particular rate of return. In general, I want higher rates of return for riskier investments as well as investments that tie up my money longer. This "demand schedule" is typical of much the general public. In market economies, institutions arise to meet the public's broad spectrum of demand.
The venture capitalist is willing to risk losing all his money for a chance at part ownership in a company that becomes successful. The venture capitalist, as well as most other people, is not willing to risk losing all his money for a chance at only 2 to 3 percent interest. To attract savers, banks have to eliminate as much risk as possible. One way to do that is to require collateral on loans.
I pointed out that this financing option is not available and/or successfully acquired for the majority of those starting a new business. Most businesses do indeed need to rely on bank loans to get up and running.
That's right. By meeting the public's demand for safe investments, banks make capital available to businesses that don't appear to offer high enough rates of return to attract venture capitalists.
But banks take advantage of the public - they all profit enormously from the public need. The bank is the public. Members of the public save money, buy stock in the bank, or work at the bank with the expectation of earning money. Other members of the public borrow money from the bank with the expectation of earning money or otherwise gaining value from the loan in the long term. Let that sink in for a moment: Everyone who interacts with the bank does it to be better off in the long run.
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Post by Joe Durnavich on Sept 4, 2005 11:57:58 GMT -4
If there were a true free enterprise banking system, you would see interest rates on loans much lower than exist today.
That is true. Interest rates are high to account for inflation The government would not be as able to inflate the money supply by over-spending in a true free market system.
And there would be some that are successful, some that are not and go under. That only happens to the small banks which are bought out by the large monopolist banks as they grow in power and control of the market, further eliminating choice for the public. That is the stark reality of today, with larger and larger bank mergers, and less choice for all of us.
And look at what you want to do. You want to forcibly merge all the banks into one legal monopoly! Think of cable companies before there was competition from satellite providers like DirecTV and Dish.
Merging companies in a free market doesn't necessarily lead to less choice. The shelves at Wal-Mart are not exactly bare of choices. With banking, you want to allow the market to merge banks as needed. There are some advantages in the form of pooling reserves across regions, etc. (Think of the effects of the hurricane disaster on New Orleans banks, etc.) In a market economy, banks are not able to form a pure monopoly because there are so many other sources of investment money in the market.
The only way to get a true monopoly of banks is to form a legal monopoly, which is exactly what you want to do.
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Post by Joe Durnavich on Sept 5, 2005 12:31:03 GMT -4
But the taxes the Gov't takes in don't even cover the interest charges on the Fed loans, so of course the debt continues to spiral past the $7 trillion mark.. This link www.publicdebt.treas.gov/opd/opdint.htm shows the interest expense on the national debt annually. In fiscal year 2004 the payment was over $321 billion, and this year to date has paid almost $315 billion.
The Gov't is collecting taxes to pay the needless and ridiculous Fed interest, as I said before. In 2004, the Fed received about $22 billion in interest revenues. The Fed held then $717 billion in Treasury securities, or roughly a tenth of the public debt.
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Post by turbonium on Sept 6, 2005 23:49:40 GMT -4
The bank is the public. Members of the public save money, buy stock in the bank, or work at the bank with the expectation of earning money. Other members of the public borrow money from the bank with the expectation of earning money or otherwise gaining value from the loan in the long term.
Let that sink in for a moment: Everyone who interacts with the bank does it to be better off in the long run.
Of course, everyone does it to be better off, that's a given. The problem is that often they end up worse off. The bank uses the public to its advantage, in most calculated and unfair ways. True, some can use the banking system to their advantage, but the odds are against it. Much like a casino operator knows, any customer who gambles for long enough will lose, because the odds are against them over time. Bank loans are set up so that you are paying mostly interest on the loan for many months, or years (in most mortgages).
If, at very least, just the principle alone was being reduced when first repaying loans, the borrower would not end up paying from half again to over three times the value of the actual loan itself by the time the loan is paid off (if it is paid off). To actually impose penalties on paying off a loan early , tells you all you need to know about the fact that banks make sure they gouge all their borrowing customers one way or another.
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Post by turbonium on Sept 7, 2005 0:12:08 GMT -4
And look at what you want to do. You want to forcibly merge all the banks into one legal monopoly They already are acting as a monopoly, in many ways. For example, I do a lot of foreign currency transfers. Anyone who has travelled knows what really happens when you exchange your money. The exchange rates posted daily are not the rates I (or anyone) actually gets, of course. Every bank charges two points on every dollar I exchange, for every currency, from home to foreign currency, and foreign to home currency. That is, every bank charges that same 2% fee on currency exchanges. Where are the banks competing for my money in this case? They don't exist. I should be able to find a bank, wanting my $10,000, that will offer me a 0.5%, 1%, or even a 1.5% exchange rate.
That would be the case, again, in a true free enterprise banking system. Obviously, we really don't have one.
The fact is, the banks are operating as a monoplistic system right now, and we have no recourse or alternatives within our current system. I don't like any monopolies, but I prefer one that is recognized as such by the public, and under much needed scrutiny, accountability, and ability to change and revamp through independent auditing.
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