Anyway, interest rate cuts, is it the right thing to do?
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What is the point in helping those who wish to grow their money by doing nothing?
-Suhredayan
suhredayan wrote:
What is the point in helping those who wish to grow their money by doing nothing?
That may well be the most ignorant question I've seen in weeks. Those are the people that provide the capital that funds work that creates the jobs that make the whole economy grow. It shows incredible ignorance of how things work to suggest that their money is "doing nothing". Without savers, there is no money to be borrowed. Borrowers who can't repay drain away savings that should go to activities that produce goods and infrastructure. Help borrowers who were foolish enough to borrow beyond their means at the expense of punishing savers, and you soon will have no money available for borrowing.
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What is the point in helping those who wish to grow their money by doing nothing?
-Suhredayan
suhredayan wrote:
What is the point in helping those who wish to grow their money by doing nothing?
For those who 1-voted this, recall that there was a time not too long ago when it was seen as immoral to make money off of interest. Reason being, every single penny of that money comes from interest charged to people who usually can't pay it but have no choice but to do so. Classic usury. The issue is ALOT more complex than "stupid people who took out bigger loans than they could pay." While I have no sympathy for that behavior, I think it's more complex than that.
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suhredayan wrote:
What is the point in helping those who wish to grow their money by doing nothing?
That may well be the most ignorant question I've seen in weeks. Those are the people that provide the capital that funds work that creates the jobs that make the whole economy grow. It shows incredible ignorance of how things work to suggest that their money is "doing nothing". Without savers, there is no money to be borrowed. Borrowers who can't repay drain away savings that should go to activities that produce goods and infrastructure. Help borrowers who were foolish enough to borrow beyond their means at the expense of punishing savers, and you soon will have no money available for borrowing.
Rob Graham wrote:
Those are the people that provide the capital that funds work that creates the jobs that make the whole economy grow.
I disagree, it is the people who borrow money, is creating the jobs and making the economy grow.
Rob Graham wrote:
It shows incredible ignorance of how things work to suggest that their money is "doing nothing". Without savers, there is no money to be borrowed.
The savers money is not needed actually, Fed can print the bills and give it to the borrowers provided the economy is robust.
-Suhredayan
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suhredayan wrote:
What is the point in helping those who wish to grow their money by doing nothing?
That may well be the most ignorant question I've seen in weeks. Those are the people that provide the capital that funds work that creates the jobs that make the whole economy grow. It shows incredible ignorance of how things work to suggest that their money is "doing nothing". Without savers, there is no money to be borrowed. Borrowers who can't repay drain away savings that should go to activities that produce goods and infrastructure. Help borrowers who were foolish enough to borrow beyond their means at the expense of punishing savers, and you soon will have no money available for borrowing.
Rob Graham wrote:
Without savers, there is no money to be borrowed.
Errr Rob, I was with you until this part. In a credit economy, it is borrowing that provides money for.. more borrowing. Banks use the money owed as collateral against future loans - they're lending money they don't actually have. Financial regulations allow them to do this and control the percentage of real value versus virtual value that can be loaned. It's also why when the economy tanks, bank failures accelerate so quickly. It's also an incredibly unstable way to do business. I keep thinking there's a better way, but I can't come up with one that still provides enough capital for invention and innovation on the scale that we're used to...
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Rob Graham wrote:
Those are the people that provide the capital that funds work that creates the jobs that make the whole economy grow.
I disagree, it is the people who borrow money, is creating the jobs and making the economy grow.
Rob Graham wrote:
It shows incredible ignorance of how things work to suggest that their money is "doing nothing". Without savers, there is no money to be borrowed.
The savers money is not needed actually, Fed can print the bills and give it to the borrowers provided the economy is robust.
-Suhredayan
suhredayan wrote:
Fed can print the bills and give it to the borrowers provided the economy is robust.
Printing money is poison to the economy in the long run (and sometimes in the short run - how do you think Zimbabwe got to where it is today). Even in a robust economy, printing money causes inflation, which in turn makes the money worth less and less. You seem to believe that one can really get something for nothing. It's pretty clear that you haven't a clue when it comes to economics. people who borrow money beyond their means to repay got us in the financial crisis we are in today. That is why the Mortgage market collapsed, starting this whole chain of events leading to bank failures and general economic malaise.
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suhredayan wrote:
Fed can print the bills and give it to the borrowers provided the economy is robust.
Printing money is poison to the economy in the long run (and sometimes in the short run - how do you think Zimbabwe got to where it is today). Even in a robust economy, printing money causes inflation, which in turn makes the money worth less and less. You seem to believe that one can really get something for nothing. It's pretty clear that you haven't a clue when it comes to economics. people who borrow money beyond their means to repay got us in the financial crisis we are in today. That is why the Mortgage market collapsed, starting this whole chain of events leading to bank failures and general economic malaise.
Rob Graham wrote:
It's pretty clear that you haven't a clue when it comes to economics.
Don't be so quick on your judgement.
Rob Graham wrote:
people who borrow money beyond their means to repay got us in the financial crisis we are in today
My replies were with respect to interest rates and not on the current financial crisis.
Rob Graham wrote:
people who borrow money beyond their means to repay got us in the financial crisis we are in today. That is why the Mortgage market collapsed, starting this whole chain of events leading to bank failures and general economic malaise.
This has no relation with the interest rates. Since most of the leveraged positions were taken when the interest rates were at their peak. And not now when the interest rates are coming down. FYI: Leveraged positions caused the current financial crisis. [edit]
Rob Graham wrote:
Printing money is poison to the economy in the long run (and sometimes in the short run - how do you think Zimbabwe got to where it is today)
Fed is printing money every night nowadays, may be they are also not aware of your age old theory. [/edit]
-Suhredayan
modified on Tuesday, December 9, 2008 4:49 PM
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Rob Graham wrote:
Without savers, there is no money to be borrowed.
Errr Rob, I was with you until this part. In a credit economy, it is borrowing that provides money for.. more borrowing. Banks use the money owed as collateral against future loans - they're lending money they don't actually have. Financial regulations allow them to do this and control the percentage of real value versus virtual value that can be loaned. It's also why when the economy tanks, bank failures accelerate so quickly. It's also an incredibly unstable way to do business. I keep thinking there's a better way, but I can't come up with one that still provides enough capital for invention and innovation on the scale that we're used to...
Patrick Etc. wrote:
It's also an incredibly unstable way to do business. I keep thinking there's a better way, but I can't come up with one that still provides enough capital for invention and innovation on the scale that we're used to...
Maybe there isn't one. But that means, to me, that there's no way that "provides enough capital for invention and innovation on the scale that we're used to" because it has become obvious that letting the idiots in charge of our banks loan out at 40:1 earns a fail, a big one.
Jon Smith & Wesson: The original point and click interface
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Rob Graham wrote:
Without savers, there is no money to be borrowed.
Errr Rob, I was with you until this part. In a credit economy, it is borrowing that provides money for.. more borrowing. Banks use the money owed as collateral against future loans - they're lending money they don't actually have. Financial regulations allow them to do this and control the percentage of real value versus virtual value that can be loaned. It's also why when the economy tanks, bank failures accelerate so quickly. It's also an incredibly unstable way to do business. I keep thinking there's a better way, but I can't come up with one that still provides enough capital for invention and innovation on the scale that we're used to...
Without some savers, you are printing money out of thin air, which is the road Zimbabwe has gone down (Ten million dollar bill, andyone?).
Patrick Etc. wrote:
Banks use the money owed as collateral against future loans - they're lending money they don't actually have
No, they use funds on deposit as collateral against future loans. They are required to maintain a percentage of deposits on hand to satisfy customer demands for cash. The bank failures come from inability to meet depositor cash out demand. Banks can't use even collateralized loans as collateral, that would be a ponzi scheme (borrowing more so they can borrow more - I don't think so). Granted, they get a huge multiplier against the deposits on hand (more than 20 to 1 I think), but not against loans outstanding. They do bundle up the loans and sell them to others, thus getting funds they can use to make more loans (in that case they have 'recaptured' the original deposits lent out and then some. Basically they sell the loan for less than the total payback (principle plus anticipated interest over the life of the loan), but still for more than the original loan value (settling for a lower total profit in order to realize it sooner). Not at all the same as "borrowing against loans outstanding".
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suhredayan wrote:
What is the point in helping those who wish to grow their money by doing nothing?
For those who 1-voted this, recall that there was a time not too long ago when it was seen as immoral to make money off of interest. Reason being, every single penny of that money comes from interest charged to people who usually can't pay it but have no choice but to do so. Classic usury. The issue is ALOT more complex than "stupid people who took out bigger loans than they could pay." While I have no sympathy for that behavior, I think it's more complex than that.
Patrick Etc. wrote:
For those who 1-voted this, recall that there was a time not too long ago when it was seen as immoral to make money off of interest.
The Quran or Sharia still holds that this is the case. It was never so in the United States, nor as far as I am aware in any European country.
Patrick Etc. wrote:
Reason being, every single penny of that money comes from interest charged to people who usually can't pay it but have no choice but to do so. Classic usury.
No, classic usury occurs when the rate of interest is sufficiently high to garauntee that the loan will not likely be repayable, and that is still illegal in most places (upper limits on interest rates).
Patrick Etc. wrote:
The issue is ALOT more complex than "stupid people who took out bigger loans than they could pay."
Yes, it is, but that is not what the poster said, nor what was replied to him. He made a general assertion that it is better to help those who borrow than those who save, and reinforced that statement in subsequent posts. That broad assertion shows remarkable lack of knowledge of economics, as well as little thought about the "educational" effects of bailouts.
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Rob Graham wrote:
It's pretty clear that you haven't a clue when it comes to economics.
Don't be so quick on your judgement.
Rob Graham wrote:
people who borrow money beyond their means to repay got us in the financial crisis we are in today
My replies were with respect to interest rates and not on the current financial crisis.
Rob Graham wrote:
people who borrow money beyond their means to repay got us in the financial crisis we are in today. That is why the Mortgage market collapsed, starting this whole chain of events leading to bank failures and general economic malaise.
This has no relation with the interest rates. Since most of the leveraged positions were taken when the interest rates were at their peak. And not now when the interest rates are coming down. FYI: Leveraged positions caused the current financial crisis. [edit]
Rob Graham wrote:
Printing money is poison to the economy in the long run (and sometimes in the short run - how do you think Zimbabwe got to where it is today)
Fed is printing money every night nowadays, may be they are also not aware of your age old theory. [/edit]
-Suhredayan
modified on Tuesday, December 9, 2008 4:49 PM
suhredayan wrote:
FYI: Leveraged positions caused the current financial crisis.
No, the crisis started in November 2007 with the collapse of Countrywide Financial corp. A collapse caused by having made too many "subprime" (i.e. high risk of non payment) loans. The rest of the house of cards came down over the ensuing year due to the heavy investment in credit default swaps (basically insurance against these mortgage defaults) which was unregulated and lacked sufficient transparency to allow proper valuation. When the mortgages insured by these started to default, investment banks failed because they couldn't liquidate the CDS paper, or even properly value it. High leverage played a role, but it was the bad loans and at the base of the whole pile along with bad insurance paper that caused this.
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Patrick Etc. wrote:
For those who 1-voted this, recall that there was a time not too long ago when it was seen as immoral to make money off of interest.
The Quran or Sharia still holds that this is the case. It was never so in the United States, nor as far as I am aware in any European country.
Patrick Etc. wrote:
Reason being, every single penny of that money comes from interest charged to people who usually can't pay it but have no choice but to do so. Classic usury.
No, classic usury occurs when the rate of interest is sufficiently high to garauntee that the loan will not likely be repayable, and that is still illegal in most places (upper limits on interest rates).
Patrick Etc. wrote:
The issue is ALOT more complex than "stupid people who took out bigger loans than they could pay."
Yes, it is, but that is not what the poster said, nor what was replied to him. He made a general assertion that it is better to help those who borrow than those who save, and reinforced that statement in subsequent posts. That broad assertion shows remarkable lack of knowledge of economics, as well as little thought about the "educational" effects of bailouts.
Rob Graham wrote:
The Quran or Sharia still holds that this is the case. It was never so in the United States, nor as far as I am aware in any European country.
It was very much the case in colonial America. Polite society, still having either traveled or being directly descended from English or other European polite society, held it to be "unseemly" either to 1) talk about how you earn money and 2) to earn money through interest. This is not something that is commonly known because capitalism required us to forget it [I'm not *necessarily* judging here, merely observing], but it's a commonly treated subject in history texts that go beyond dates and places. It is a subject that is treated in the Christian Bible. And Benjamin Franklin, for example, struggled most of his life to be precisely part of this "polite society", the great irony being that the American Revolution all but obliterated it.
Rob Graham wrote:
He made a general assertion that it is better to help those who borrow than those who save,
Hmmm ok I suppose. For what it's worth, I don't think particularly highly of the government helping either group, but if it's going to, it would seem to make sense to help borrowers only when not helping presents a clear danger to economic stability, but generally to always support savers.
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Patrick Etc. wrote:
It's also an incredibly unstable way to do business. I keep thinking there's a better way, but I can't come up with one that still provides enough capital for invention and innovation on the scale that we're used to...
Maybe there isn't one. But that means, to me, that there's no way that "provides enough capital for invention and innovation on the scale that we're used to" because it has become obvious that letting the idiots in charge of our banks loan out at 40:1 earns a fail, a big one.
Jon Smith & Wesson: The original point and click interface
Oakman wrote:
Maybe there isn't one.
Actually, that's the most obvious conclusion. The next most obvious is that the assumption that providing capital for the level of invention and innovation on the scale we're used to is a worthwhile goal - maybe it isn't. Maybe accepting a slower rate of development is a fair tradeoff for increased stability and an ability to have an economy not based entirely on credit. There mere suggestion, of course, gets one shouted down as a communist.
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Rob Graham wrote:
Those are the people that provide the capital that funds work that creates the jobs that make the whole economy grow.
I disagree, it is the people who borrow money, is creating the jobs and making the economy grow.
Rob Graham wrote:
It shows incredible ignorance of how things work to suggest that their money is "doing nothing". Without savers, there is no money to be borrowed.
The savers money is not needed actually, Fed can print the bills and give it to the borrowers provided the economy is robust.
-Suhredayan
suhredayan wrote:
disagree, it is the people who borrow money, is creating the jobs and making the economy grow.
Wow, you have no idea. Where does the money that is lent, come from ?
suhredayan wrote:
Fed can print the bills and give it to the borrowers provided the economy is robust.
The more money they print, the less the money is worth. That's called a banana republic.
Christian Graus Driven to the arms of OSX by Vista.
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suhredayan wrote:
disagree, it is the people who borrow money, is creating the jobs and making the economy grow.
Wow, you have no idea. Where does the money that is lent, come from ?
suhredayan wrote:
Fed can print the bills and give it to the borrowers provided the economy is robust.
The more money they print, the less the money is worth. That's called a banana republic.
Christian Graus Driven to the arms of OSX by Vista.
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Rob Graham wrote:
The Quran or Sharia still holds that this is the case. It was never so in the United States, nor as far as I am aware in any European country.
It was very much the case in colonial America. Polite society, still having either traveled or being directly descended from English or other European polite society, held it to be "unseemly" either to 1) talk about how you earn money and 2) to earn money through interest. This is not something that is commonly known because capitalism required us to forget it [I'm not *necessarily* judging here, merely observing], but it's a commonly treated subject in history texts that go beyond dates and places. It is a subject that is treated in the Christian Bible. And Benjamin Franklin, for example, struggled most of his life to be precisely part of this "polite society", the great irony being that the American Revolution all but obliterated it.
Rob Graham wrote:
He made a general assertion that it is better to help those who borrow than those who save,
Hmmm ok I suppose. For what it's worth, I don't think particularly highly of the government helping either group, but if it's going to, it would seem to make sense to help borrowers only when not helping presents a clear danger to economic stability, but generally to always support savers.
Patrick Etc. wrote:
I don't think particularly highly of the government helping either group, but if it's going to, it would seem to make sense to help borrowers only when not helping presents a clear danger to economic stability, but generally to always support savers. Quote Selected Text
I think we are in complete agreement.
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suhredayan wrote:
Printing money in Zimbabwe and in U.S.A are two different things.
Not at all. they may differ in degree of impact or the degree to which they are practiced, but that is all. A little poison may not kill, or may kill slowly, while a lot of poison kills quickly. In either case, the most prudent course of action is to avoid poison entirely.
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Perhaps you should acquaint yourself with hyperinflation[^] or even Hyperinflation History: When Hard Cash Goes Soft[^]
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Oakman wrote:
We'll just sell more bonds to China
They have enough problems with existing, do you really think they are stupid enough to permit this to continue. Better bet might be the Saudi's, they are cash rich and perhaps looking to invest their wealth, after all, the oil ain't going to last a great deal longer (few decades presumably) and they have expensive tastes and need to protect an uncertain oil-free future. Anyhow, balancing the books, an ironic joke. :laugh:
Richard A. Abbott wrote:
do you really think they are stupid enough to permit this to continue
Well, I'm the one who has been preaching never underestimate your enemy, but so far they have been. Maybe they consider the US too big to fail?
Jon Smith & Wesson: The original point and click interface
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Oakman wrote:
Maybe there isn't one.
Actually, that's the most obvious conclusion. The next most obvious is that the assumption that providing capital for the level of invention and innovation on the scale we're used to is a worthwhile goal - maybe it isn't. Maybe accepting a slower rate of development is a fair tradeoff for increased stability and an ability to have an economy not based entirely on credit. There mere suggestion, of course, gets one shouted down as a communist.
Patrick Etc. wrote:
Maybe accepting a slower rate of development is a fair tradeoff for increased stability and an ability to have an economy not based entirely on credit. There mere suggestion, of course, gets one shouted down as a communist.
Which doesn't make you one, no matter what Stan thinks. That conclusion was, indeed, where I was going. I suspect that we may never again see the excesses in using pretend capital that have been prevalent in the 90's and oughts. That may, or may not, mean that the US is not the economic powerhouse (or ersatz economic powerhouse) that it has been and that in turn may mean that the global economy may need to grow at a slower pace, but the Declaration of Independence mentions life, liberty and the pursuit of happiness, it never guarantees the right to turn large profits.
Jon Smith & Wesson: The original point and click interface
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Richard A. Abbott wrote:
do you really think they are stupid enough to permit this to continue
Well, I'm the one who has been preaching never underestimate your enemy, but so far they have been. Maybe they consider the US too big to fail?
Jon Smith & Wesson: The original point and click interface
Oakman wrote:
Maybe they consider the US too big to fail
You could be right, but then, China has a certain hunger that could potentially gobble up American in a more ruthless way than those tiger economies of recent history. Then China would assume the role that the United States has played for many a decade - namely the economic powerhouse of planet Earth. And when that happens, China, rather than the United States, could also become the World's Policeman. Are you prepared for that eventuality, if not, you had better evaluate and plan for such.