What Could Go Wrong?
(media.greatawakening.win)
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It certainly makes a kind of logical sense. The notion of a lender of last resort that always has money to lend is kind of absurd, and unjust. It means there is an entity with the power to redistribute all the money people have earned and saved. If they inflate to infinity all our savings become worthless.
On the other hand, this financial fiction has made possible an undeniable explosion of material wealth. We've got cities full of skyscrapers and huge power plants and factories because of easily available credit from fractional reserve lending. Without that credit much of modern society that we take for granted would not be possible.
You speak as if magic dollar bills can be planted in the ground to grow skyscrapers. No, franctional reserve lending does nothing to increase material wealth, but only to increase the percieved wealth of the lender.
So how do you build a billion dollar factory without credit? And where do you get the credit if there's no magic fiction money?
How do you pay for something with something that you do not have?
Do you not understand that fractional reserve lending is lending more than you have? As in, I have $10, I loan $100, charge say 8% interest, then you have to pay me $108. How does that increase material wealth? How does that increase the yield of crops? How does that increase the materials that can be mined?
You don't need to LIE about what you have to make that "billion dollar factory". If you think that lying about how much wealth actually existed by fabricating "magic fiction money" was the only way to make that "billion dollar" factory that got made then you are actually mistaken about it costing a "billion dollars". The materials existed, workers worked to provide them, the workers were fed, clothed, housed etc. and all of that wasn't caused by a printing press.
To help you understand further, remember that currency represents wealth. So for example if the population suddenly exploded and we had more people making more things of value, THAT is when more currency should be created. Currency facilitates trade of wealth.
If you're trying to trade wealth that doesn't exist then you're committing fraud. Inflation is creating currency that represents nothing. Fractional reserve lending creates that inflation by making you pay the lender money that the lender never earned.
Do you see why this is dangerous? Why it is only productive for the lender and detrimental to the borrower? If not then I apologize I couldn't make it more clear, I tried to type this a little at a time while at work.
I don't disagree with you about the fractional reserve lending being a kind of legalized fraud, but I don't think you really answered the question about how you build the billion dollar factory without it. The workers building that factory need to be paid now. They can't wait for the factory to be completed and generating profit to get paid. Yes, the workers were fed clothed and housed by a printing press, because that press gave them access to the future money that will be generated by the completed factory. The fractional reserve system gives people access to the wealth of the future now. When it's used effectively it enables rapid economic growth by facilitating the development of large capital intensive projects.
I will tell you one way that these large projects get built without credit. It's by saving for a really long time. That's how some medieval cathedrals got built. They didn't have the ability to borrow a billion ducats to hire workers, so they used what they had over a long period of time. Literally hundreds of years in some cases to complete these structures. We can't take hundreds of years to build a factory to build cars.
So unless you have an alternative to this system of legalized fraud, we're kind of stuck. Unless you're willing to return to a kind of medieval subsistence lifestyle. This system of credit enabled the modern world.