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Thread: Fundamental Reform of the Financial System

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    Fundamental Reform of the Financial System



    What do you think should be changed about the financial system to prevent boom and bust economics?

    Money as Debt - Documentary

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    "The financial industry invented many other clever instruments with funny names and acronyms. A prominent one was the credit-default swap (CDS). Basically, someone figured out you could insure an investment against potential loss and thereby eliminate any risk: you would be guaranteed a profit. This was hailed as a great advance for civilisation. The only catch was you had to find an insurance company (or someone) that would insure your investment. While this practice was new and uncommon, some convinced themselves the risk was reasonable. Unfortunately the practice spread rapidly (why wouldn't it, it was virtually free money) until it distorted the market and the risks were much bigger than predicted by the clever formulas underlying the CDSs.

    If the practice sounds dubious, it is. It was realised by a few that risk was not being reduced, it was merely being spread around and diluted. It could thus grow much bigger than it would have if a few smaller companies had failed and revealed the falsity of the arguments. Rather the risk grew until it was big enough to bring down the biggest operators, and the whole financial system. That is why a trillion dollars or so of taxpayers money was handed to Wall Street bankers, who recovered and have gone on to make even bigger profits." source

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    Is there a fundamental flaw in modern banking?

    "Here are the main points:


    1. The very structure of separating loan origination from ownership awakens deep rooted concerns about the exploitation of asymmetric information, namely Adverse Selection and Moral Hazard


    2. The expectation of market operations to effectively regulate credit risk is shown to be unfounded, instead resulting in ill-conceived and excessive lending practices


    3. The recent growth in debt levels therefore may be masking a more fundamental issue of declining debt quality, such as debt for consumption and Ponzi financing


    4. Risk transfer practices mean that poor credit risk judgements are increasingly likely to be borne by unsuspecting counter-parties such as underwriters of Credit Default Swaps and central banks enjoying Government support


    5. Finally, the climate for fraudulent activity is amplified as Government support for institutions with the potential for suffering losses (on securitised assets) increases.


    Source

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    Fractional-reserve banking

    Fractional-reserve banking is a type of banking whereby the bank does not retain all of a customer’s deposits within the bank. Funds received by the bank are generally on-loaned to other customers. This means that available funds (called bank reserves) are only a fraction (called the reserve ratio) of the quantity of deposits at the bank. As most bank deposits are treated as money in their own right, fractional reserve banking increases the money supply, and banks are said to create money.


    Bank runs (or when problems are widespread, a systemic crisis) can occur in fractional-reserve banking systems. To mitigate this risk, the governments of most countries (usually acting through the central bank) regulate and oversee commercial banks, provide deposit insurance and act as lender of last resort to commercial banks.


    Fractional-reserve banking is the most common form of banking and is practiced in almost all countries. Although Islamic banking prohibits the making of profit from interest on debt, a form of fractional-reserve banking is still evident in most Islamic countries.


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    Money creation through the fractional reserve system

    Through fractional-reserve banking, the modern banking system expands the money supply of a country beyond the amount initially created by the central bank. There are two types of money in a fractional-reserve banking system, currency originally issued by the central bank, and bank deposits at commercial banks:

    1. Central bank money (all money created by the central bank regardless of its form (banknotes, coins, electronic money through loans to private banks)
    2. Commercial bank money (money created in the banking system through borrowing and lending) - sometimes referred to as checkbook money

    When a commercial bank loan is extended, new commercial bank money is created. As a loan is paid back, the commercial bank money disappears from existence. Since loans are continually being issued in a normally functioning economy, the amount of broad money in the economy remain relatively stable. Because of this money creation process by the commercial banks, the money supply of a country is usually a multiple larger than the money issued by the central bank; that multiple is primarily determined by the reserve ratio set by the relevant banking regulators in the jurisdiction.


    source

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    Quote Originally Posted by edao View Post

    1. Central bank money (all money created by the central bank regardless of its form (banknotes, coins, electronic money through loans to private banks)
    2. Commercial bank money (money created in the banking system through borrowing and lending) - sometimes referred to as checkbook money


    When a commercial bank loan is extended, new commercial bank money is created. As a loan is paid back, the commercial bank money disappears from existence. Since loans are continually being issued in a normally functioning economy, the amount of broad money in the economy remain relatively stable. Because of this money creation process by the commercial banks, the money supply of a country is usually a multiple larger than the money issued by the central bank; that multiple is primarily determined by the reserve ratio set by the relevant banking regulators in the jurisdiction.

    well, I am not that good economist, but I know 1 thing,
    I TRy to say it simple
    1800, Money were metals, Gold, Silver, Bronze Iron etc
    Metals, sprecially Gold is almost eternal cause no very low oxide so it can stay for centurires and more,

    people trusted metals for that, for example you exchange and store in metal so to use it in another time, but No one other can haddle them,
    that means metal is Ploutos, PlUTO was the God of the underworld. all plutonic rocks belong to him,
    so I use and store in metal, then is like return the plutonic to pluto,
    why i say that,
    lets see, paper are easy to corrupt, that means they are not like metal,
    paper money are 'imaginary metals', AND THAT IS THE POINT,
    example,
    in 1850 about have silver or gold Dolllars in USA, that means each dollar was for example 1 gr of gold,
    then paper money, each paper supposed to have its miror in gold, that means 1 paper money unit could cost 1 gr of gold, so 1 kg should be 1 kg of gold means 1000 paper money units. with time we see that 1kg of gold cost 10 000 paper unit money, that means each paper money unit now is 0,001 gr of gold,
    and that is the role of the bank, and interest,
    interest is killing your money, although you believe it make you rich, in fact it is killing you with 2 ways,
    1rst way, you had 1000 money units 1 kr of gold, and bank has 100 kgr of gold, that means 100 000 money units in market,
    the time that bank cuts 1 more paper money unit you are cheated, and you are robed, since 100 001 money units is another ballance among paper and metal money,
    2nd way, you have a small field, a small hotel, a small corporation, you put the money in a bank, Bank in order to give you the interest, is giving Loan to another, the one who took the loan buy the area next to you Builds a bigger and modern corporation and slowly puts you out of market, well the system had worked, you took your interest, but your corporation is destroyed,

    there is also the market way,
    what is that, the cheap industry products that are you buy expensive due to advertise and destroy your economy,
    for example cotton or wool are considered Healthy and eco products, the world used them for thousands of years,
    then cheap plastic clothes enter the market, ( i am not talking about parts, like rain coats or boots), new chemicals etc, that means that the new products will replace the old, bring allergies pollution environment etc,
    yes Bank tells you that the new industry has brought 1000 places of work, but it does not tell you that destroy 2000 places of work,
    1000 of wool farmers, and 1000 due to machines work.
    so if you watch tv, at least in Greece every 2 minute Banks are advertised, and in the middle time Banks products, buy that its good, belongs to XYZ Bank, buy that is strong, member of XYZ Bank and finnaly XYZ bank the best bank.

    that means that that the 'treasure keepers' keep the metals in the treasury, and destroy our working hours or our paper money, and we don;t realize it,
    in fact huge empire corporations are build from that, and destroyed in one night by their builders,
    just think, your money is a share in gold system stock exchange, you buy for example shares of a corporation which you trust,
    the owners take your money, slowly destroy the corporation, and then with your money build another stronger.
    in fact that is what is happening,

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    Nigel Farage buried Euro in Brussels




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    http://www.bbc.co.uk/news/world-midd...medium=twitter

    IMF GO AWAY

    TROIKA GO HOME

    well since that site started

    The Greek politians who majority finished Harvant
    ok they are dumb

    Lets see the IMF and TROICA Europeans,

    In pappers in order to avoid the non tax pay as they claimed they all take a measure
    the hunt of receipts
    by asking from each one a number of receipts according his income + the public corporations should reach a big %

    What had happened
    the taxes collected by income and hunt receipts were smaller cause the more the receipt means lower taxes cause you don't save money
    the taxes from market were raised but the balance is the famous -5
    why
    IMF scientists, Troika European politicians, and Greek Harvard or midleton graduates
    expended +5% from the receipt hunt
    +5 from the market that more receipts should be cut
    but the result was -5%
    why All greeks gave receipts more than the number wanted
    that means lower taxes collected by income
    about 10%
    the extra taxes from market due to more receipts ask was only 4,89%
    so +5% +5% = -5%

    SIMPLY IMF PUSHED DEEPER THE GREEK ECONOMY

    Egypt also wants the IMF to go away




    as you see Greeks already familiar with the idea of no Euro
    in photo is a local exchange suggestion the lireta exarcheia

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    If majority Greeks think like you, I would grant you your wish in no time. Go drahmas.
    Especially if what you wrote sounds Greek to me.
    Maybe because you didn't finish the Harvant?
    . . . .
    .
    .
    .
    .
    .
    .
    Just having fun, but not about drahmas.

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    Quote Originally Posted by LeBrok View Post
    If majority Greeks think like you, I would grant you your wish in no time. Go drahmas.
    Especially if what you wrote sounds Greek to me.
    Maybe because you didn't finish the Harvant?
    . . . .
    .
    .
    .
    .
    .
    .
    Just having fun, but not about drahmas.

    hahaha

    the point is that until yesterday we were lazy, some said
    until yesterday greeks were this or that,
    today with supervisors and other counters
    And thing went worse,
    so even the wise guys from europe did FAIL !!!!!!!!!!!!!!!!!!!!
    some said about a good road that greece entered ,
    and when results came that was a disaster, another IMF disaster who instead of help the situation, pushed the drawing deeper,

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