Mechanics of Aggregate Bank Asset and Liabilities Expansion
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Joe Leote
May 6, 2012, 12:37:31 PM5/6/12
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In an essay on Full Reserve Banking, William says a bank under
fractional or full reserve scheme must secure free reserves prior to
expanding bank assets while creating new transaction accounts TA as
credit money.
To expand assets a bank must first gain some free reserves usually in
the form of reserve balances RB. I apply this identity in the aggregate
bank balance:
TA = [RB + RC - BFF] + [NonRA - ONonTAL - NW] + [LTB - BFB]
Transaction accounts TA, reserve balances RB, vault cash RC, bank
borrowing from Fed BFF, Non-reserve bank assets NonRA, other non
transaction account bank liabilities ONonTAL, bank net worth NW, loans
to banks LTB and borrowing from banks BFB (in Fed funds).
In the Fed funds reserve market loans to banks LTB are equal and
opposite to borrowing from banks BFB, so there is no impact on reserves
R or transaction accounts TA when banks expand lending and borrowing of
reserves in the final term.
Mode 1 (Fed funds market):
A reserve lending bank debits LTB [+] and credits reserve balances RB
[-], a reserve borrowing bank debits RB [+] and credits BFB [+]. The
reserve borrowing bank next debits NonRA [+] and credits TA [+] thereby
expanding aggregate bank assets and liabilities.
Mode 2 (Liabilities management):
If a bank borrows transaction accounts, at the bank of any transaction
account lender the bank debits TA [-] and credits reserve balances RB
[-], the borrowing bank debits reserve balances RB [+] and credits other
nonTA liabilities ONonTAL [+].
The TA borrowing bank next debits NonRA [+] and credits TA [+] thereby
expanding aggregate bank assets and liabilities.
Mode 3 (Equity influx):
If a bank issues new shares, at the banks of share purchasers debit TA
[-] and credit reserve balances RB [-], at the equity influx bank debit
reserve balances RB [+] and credit net worth NW [+]. The equity influx
bank next debits NonRA [+] and credits TA [+] expanding aggregate bank
assets and liabilities.
Note: during systemic recapitalization Banks would cancel TA to raise
equity, then purchase securities and reduce future loan volumes to
stabilize bank balance sheets. Fed acting as a source of TA and RB under
Quantitative Easing apparently assists in Bank recapitalization
mechanics by injecting TA and RB at the Fed source as the first term in
my identity. Otherwise banks would have to cancel TA to increase net
worth NW, buy securities and replensish some TA, and reduce loans in the
future to improve the ratio of securities to loans (a better capital
position), in aggregate there might be a net drain on TA as loans are
reduced while banks recapitalize unless Fed assists banks with
recapitalization by expanding its own balance sheet.
Mode 4 (Borrowing from Fed):
To lend reserves Fed debits [+] loans due from banks and credits reserve
balances [+], bank borrowing from Fed debits reserve balances RB [+] and
credits borrowing from Fed BFF [+]. The bank borrowing from Fed next
debits NonRA [+] and credits TA [+] expanding aggregate bank assets and
liabilities.
There is more to say about the interaction between Banks and Nonbanks in
modes 2 and 3, and there should be an arbitrage interaction between repo
and eurodollar money markets banks use in mode 3 which have spreads
relative to Fed funds in mode 2.
The image I have of aggregate Banks is the ancient mystical sign of a
snake eating its own tail, since Banks create the transaction accounts
by expanding assets and borrow back transaction accounts in modes 2 and
3 for liability and capital adequacy, however, reserve management under
network banking is a practical limit to the process of Bank balance
sheet expansion, and Fed adjustment of interest rates is another limit
to the process.
Joe
fractional or full reserve scheme must secure free reserves prior to
expanding bank assets while creating new transaction accounts TA as
credit money.
To expand assets a bank must first gain some free reserves usually in
the form of reserve balances RB. I apply this identity in the aggregate
bank balance:
TA = [RB + RC - BFF] + [NonRA - ONonTAL - NW] + [LTB - BFB]
Transaction accounts TA, reserve balances RB, vault cash RC, bank
borrowing from Fed BFF, Non-reserve bank assets NonRA, other non
transaction account bank liabilities ONonTAL, bank net worth NW, loans
to banks LTB and borrowing from banks BFB (in Fed funds).
In the Fed funds reserve market loans to banks LTB are equal and
opposite to borrowing from banks BFB, so there is no impact on reserves
R or transaction accounts TA when banks expand lending and borrowing of
reserves in the final term.
Mode 1 (Fed funds market):
A reserve lending bank debits LTB [+] and credits reserve balances RB
[-], a reserve borrowing bank debits RB [+] and credits BFB [+]. The
reserve borrowing bank next debits NonRA [+] and credits TA [+] thereby
expanding aggregate bank assets and liabilities.
Mode 2 (Liabilities management):
If a bank borrows transaction accounts, at the bank of any transaction
account lender the bank debits TA [-] and credits reserve balances RB
[-], the borrowing bank debits reserve balances RB [+] and credits other
nonTA liabilities ONonTAL [+].
The TA borrowing bank next debits NonRA [+] and credits TA [+] thereby
expanding aggregate bank assets and liabilities.
Mode 3 (Equity influx):
If a bank issues new shares, at the banks of share purchasers debit TA
[-] and credit reserve balances RB [-], at the equity influx bank debit
reserve balances RB [+] and credit net worth NW [+]. The equity influx
bank next debits NonRA [+] and credits TA [+] expanding aggregate bank
assets and liabilities.
Note: during systemic recapitalization Banks would cancel TA to raise
equity, then purchase securities and reduce future loan volumes to
stabilize bank balance sheets. Fed acting as a source of TA and RB under
Quantitative Easing apparently assists in Bank recapitalization
mechanics by injecting TA and RB at the Fed source as the first term in
my identity. Otherwise banks would have to cancel TA to increase net
worth NW, buy securities and replensish some TA, and reduce loans in the
future to improve the ratio of securities to loans (a better capital
position), in aggregate there might be a net drain on TA as loans are
reduced while banks recapitalize unless Fed assists banks with
recapitalization by expanding its own balance sheet.
Mode 4 (Borrowing from Fed):
To lend reserves Fed debits [+] loans due from banks and credits reserve
balances [+], bank borrowing from Fed debits reserve balances RB [+] and
credits borrowing from Fed BFF [+]. The bank borrowing from Fed next
debits NonRA [+] and credits TA [+] expanding aggregate bank assets and
liabilities.
There is more to say about the interaction between Banks and Nonbanks in
modes 2 and 3, and there should be an arbitrage interaction between repo
and eurodollar money markets banks use in mode 3 which have spreads
relative to Fed funds in mode 2.
The image I have of aggregate Banks is the ancient mystical sign of a
snake eating its own tail, since Banks create the transaction accounts
by expanding assets and borrow back transaction accounts in modes 2 and
3 for liability and capital adequacy, however, reserve management under
network banking is a practical limit to the process of Bank balance
sheet expansion, and Fed adjustment of interest rates is another limit
to the process.
Joe
Joe Leote
May 6, 2012, 12:49:20 PM5/6/12
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Note in modes 2 and 3 in the first step of asset and liability
expansion, which is to gain some free reserves, there is a transfer from
preexisting TA [-] to ONonTAL [+] liabilities, with no net change in
aggregate Bank reserves or in total Bank liabilities.
Therefore in the second step the increase of Bank assets and liabilities
NonRA [+] = TA [+] restores the level of transaction accounts prior to
step 1 in the process, and represents an incremental expansion of bank
assets and liabilities, so the logic applied appears to be correct on
first analysis.
Joe
expansion, which is to gain some free reserves, there is a transfer from
preexisting TA [-] to ONonTAL [+] liabilities, with no net change in
aggregate Bank reserves or in total Bank liabilities.
Therefore in the second step the increase of Bank assets and liabilities
NonRA [+] = TA [+] restores the level of transaction accounts prior to
step 1 in the process, and represents an incremental expansion of bank
assets and liabilities, so the logic applied appears to be correct on
first analysis.
Joe
Jean Erick
May 7, 2012, 1:15:06 PM5/7/12
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After watching the author,
on Fahreed, of the book acclaiming
the %1, I have decided that the idea that
innovation is our way out
of the economy is a planned, identified as such,
strategic shiboleth,
by the far right. It is a red herring, displacing discussion of economic reality.
It enbles them (as the
author did) to give a few sound bytes about
"mistakes" of progressive economics, without any
follow through, but to
get on with their own propaganda which, of course,
uses terms that
really have nothing to do with the reality of
economics. They appeal
to the libertarian, the idea of our independent
individuality
He said we need a million Steve
Jobs. Well, Steve Jobs simply
put together what, now centuries of patient
research, has produced,
at his particular time. Not that that action
wasn't admireable.
It is technology that produces
growth. Technology "mandated"
the freedom necessary to motivate the, now wage,
slave to accomplish
the complex tasks provided by that new
technology.
He talked about
risk. Steve Jobs did risk. He was not the
%1. The %1 do not take risks. They get
others to take the risk for them
and then appropriate the
results. Microsoft was actually born that
way,
Although, and at the time, seemingly honestly and
forth rightly by Gates.
Nobody was willing to
invest in nuclear power unless the true risk
was legislated out of it. Nor lay realroad
tracks accross the US. It has
always been cost plus with limited legal exposure
to tort remedies.
James
Jim Blair
May 9, 2012, 9:11:21 PM5/9/12
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Hi,
I saw the same interview and had exactly the opposite reaction.
Of course the US (and the world) would be better off with more, not fewer people like Steve Jobs, the Google guys,
and those many hundreds of other computer and internet billionaires and innovators going all the way back to Andy Groves and even to Henry Ford.
Sure they only put together the existing technologies in ways that are "obvious" to everyone--obvious AFTER someone does it first.
A recent issue of THE ECONOMIST asks why there has not been an English Henry Gates or Steve Jobs. Why is there no Silicon Valley
in the UK? Why is the new innovation coming almost exclusively from America?
And the Republicans say it wrong. It is not that "rich people create jobs". It is that people become rich by doing things that create jobs.
And we would all be better off if there were more of them.
Jim
I saw the same interview and had exactly the opposite reaction.
Of course the US (and the world) would be better off with more, not fewer people like Steve Jobs, the Google guys,
and those many hundreds of other computer and internet billionaires and innovators going all the way back to Andy Groves and even to Henry Ford.
Sure they only put together the existing technologies in ways that are "obvious" to everyone--obvious AFTER someone does it first.
A recent issue of THE ECONOMIST asks why there has not been an English Henry Gates or Steve Jobs. Why is there no Silicon Valley
in the UK? Why is the new innovation coming almost exclusively from America?
And the Republicans say it wrong. It is not that "rich people create jobs". It is that people become rich by doing things that create jobs.
And we would all be better off if there were more of them.
Jim
Mark Bachmann
May 10, 2012, 11:07:17 AM5/10/12
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In trying to understand the relationship between innovation and economic vitality, the main consideration is how do new technologies get plugged into viable production and marketing systems. All the people that Jim mentions, like almost all who become famous as business innovators, worked with technologies pioneered by others or that others were developing simultaneously. These individuals are thus often accused of stealing the ideas, but in fact what they did was create the business processes and organizational infrastructures without which the technologies would have been economically useless. It's the combination of technical innovation and business discipline that gives rise to economic growth, makes products affordable and creates jobs for people.
Mark Bachmann
Joe Leote
May 10, 2012, 11:57:57 AM5/10/12
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All the innovators and so-called job creators in the history of
capitalism have been unable to create a full employment capitalist
economy that is financially stable. No economist has been able to
solve the riddle of creating enough jobs for everyone in a private
property production scheme with financing.
Einstein said capitalism solves the problems of wealth production but not the problem of wealth distribution, those who produce more acquire financial assets which are liabilities of the mass of consumers, how can the mass of consumers eventually acquire the finanical assets to repay the producers? Germany is the producer in Europe and it is facing default on the financial assets it acquires by selling to consumer regions ... the financed production system is inherently unstable.
Joe
Einstein said capitalism solves the problems of wealth production but not the problem of wealth distribution, those who produce more acquire financial assets which are liabilities of the mass of consumers, how can the mass of consumers eventually acquire the finanical assets to repay the producers? Germany is the producer in Europe and it is facing default on the financial assets it acquires by selling to consumer regions ... the financed production system is inherently unstable.
Joe
Mark Bachmann
May 10, 2012, 1:04:39 PM5/10/12
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Joe,
Three points in response to this:
1) No economist has solved the riddle of creating full employment in ANY real-world system, outside of militarized or slave labor economies. This is, in my opinion, because economic systems are by their nature complex and chaotic and will forever elude economic models. Economies may at times seem to approach stable full-employment, but it will always be for reasons that economists lack the tools even to understand much less control.
2) When analysts use the term "capitalist economy", it's never clear either what they really mean by that, or what they imagine the alternative to be. No free market purist would recognize any of our modern developed economies as truly capitalist - government being by far the largest players in all of them - any more than social purists would recognize the old Soviet Union as truly socialist. Developed economies are and will always be hybrid in nature.
3) I think Einstein would have been the first to acknowlege that his genius never penetrated economics!
Mark Bachmann
Joe Leote
May 10, 2012, 1:40:38 PM5/10/12
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Mark,
If a statement expresses genius, then it is self-evident. Einstein said capitalism has solved the problems of mass production of wealth but has not solved the problems of the distribution of wealth. I think that is a reasonable diagnosis and one need not be a genius to make that observation or agree with the diagnosis.
I specifically said a private property scheme with finance (a capitalist system) does not create full employment despite the efforts of innovators and job creators, and the reason is not a mystery, the accumulation of financial assets by the producers is matched by liabilities of the consumers who never in time can acquire sufficient financial assets (money) to repay the debts that accumulate over time. Most economists do not look at these problems in particular and become political hacks to perpetuate the system. Otherwise they should study the real features of an economy including accounting, law, engineering, financial structure of micro and macro systems and consider the proper role of bankruptcy laws instead of playing with their toy mathematical models that fail to incorporate real features of the system.
In any event the innovators who are in it to get rich cannot innovate society toward a full employment stable financial system because their motive is not to improve the system but to game the system for personal financial gain, this is one of the features that makes the system itself unstable since the rich must hold financial assets that are liabilities of the non-rich and which cannot lead to anything other than periodic systemic default on debt.
Joe
If a statement expresses genius, then it is self-evident. Einstein said capitalism has solved the problems of mass production of wealth but has not solved the problems of the distribution of wealth. I think that is a reasonable diagnosis and one need not be a genius to make that observation or agree with the diagnosis.
I specifically said a private property scheme with finance (a capitalist system) does not create full employment despite the efforts of innovators and job creators, and the reason is not a mystery, the accumulation of financial assets by the producers is matched by liabilities of the consumers who never in time can acquire sufficient financial assets (money) to repay the debts that accumulate over time. Most economists do not look at these problems in particular and become political hacks to perpetuate the system. Otherwise they should study the real features of an economy including accounting, law, engineering, financial structure of micro and macro systems and consider the proper role of bankruptcy laws instead of playing with their toy mathematical models that fail to incorporate real features of the system.
In any event the innovators who are in it to get rich cannot innovate society toward a full employment stable financial system because their motive is not to improve the system but to game the system for personal financial gain, this is one of the features that makes the system itself unstable since the rich must hold financial assets that are liabilities of the non-rich and which cannot lead to anything other than periodic systemic default on debt.
Joe
Mark Bachmann
May 10, 2012, 8:41:11 PM5/10/12
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Joe,
It's an intelligent diagnosis but not necessarily an accurate one, and Einstein's opinion on the subject is no more authoritative than would be Keynes' opinion on Relativity.
I generally concur with the disdain you express for economists' preoccupation with 'toy' models to the exclusion of real-world analysis. Locked into abstractions, it's easy for economists of all persuasions to become shills for somebody out there.
I part company with you in your apparent belief that the motives of business people are somehow the main source of inequality and financial instability. The motivation to produce and expand is the main driver of any dynamic economic system, and ennui is going to overwhelm any system that destroys it in the name of fairness. Paradoxically, fairness itself would be among the first casualties, since scarcity and economic decline breed contempt for it.
It should be taken for granted that self-interested business people will tend to overstep themselves when they can - game the system if you will - and it's the job of politicians to create a legal framework for containing such behavior. This includes the appointment of regulators competent enough and willing to transmute such law into rules that are pragmatic and enforceable.
When some combination of corruption, foolishness and sloth becomes pervasive among business people, politicians and regulators alike, then there's no clear way out. You're beyond the point where tweaking policy has much impact. That's certainly the situation Greece finds itself in today, and I'm not convinced the rest of us aren't beginning to slide slowly in the same direction.
helge nome
May 11, 2012, 12:03:45 AM5/11/12
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Joe stated:
"I specifically said a private property scheme with finance (a capitalist system) does not create full employment despite the efforts of innovators and job creators, and the reason is not a mystery, the accumulation of financial assets by the producers is matched by liabilities of the consumers who never in time can acquire sufficient financial assets (money) to repay the debts that accumulate over time. Most economists do not look at these problems in particular and become political hacks to perpetuate the system."
The part of this statement that I highlighted contains the crux of the problem of our economic system: Credit and debt part ways with some people and organizations accumulating vast amounts of financial assets which are really just claims on debtors that are swimming in red ink. When this discrepancy becomes great enough, the system grinds to a halt and can, potentially, fall apart. The process of very rapid growth in both green and red ink levels is an aspect of financial asset bubbles, as seen in the real estate markets across the world prior to 2008.
So, while underlying greed is released by slack financial controls, the system itself, where all new money is created as debt to somebody, is at fault.
And the willingness by too many people to go deeply into debt is a major accelerator of financial crashes.
Helge
Date: Thu, 10 May 2012 20:41:11 -0400
Subject: Re: Innovation is a crock
From: mbach...@gmail.com
To: understan...@googlegroups.com
Jim Blair
May 11, 2012, 3:08:28 PM5/11/12
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Hi,
While I understand a meaning for "the problem of the mass production of wealth", I don't know what the term "problems of the distribution of wealth" means. The distribution of wealth (or is that income? or maybe consumption?) is not a "problem" but a fact. It can be measured (or is that estimated?). But whatever it is at any given time, who is to say that is a "problem"?
And is the DISTRIBUTION of wealth (or income or consumption) at any given time more important (more of a "problem"?) than the MOBILITY of wealth (or income or consumption) with time? For example if there is a wide distribution of wealth (or income or consumption) but individuals increase their wealth (or incomes or consumption) with time, typically moving up the ladder, is that a "problem"?
Is it a "problem" that 20 year olds in the US today become billionaires?
In the US, individuals typically do increase their incomes and wealth as they get older, at least until they retire. See the Hubbard Study or any data on wealth as a function of age. How rapidly they increase their wealth with age depends mostly on the difference between their income and their consumption.
And yes, inventing or founding a new project today does typically utilizing an existing technology. Da Vinci could not build a heavier than air plane, but the Wright Brothers could and did. Because they had access to gasoline, and small but powerful internal combustion motors. Does that diminish their accomplishment?
While I understand a meaning for "the problem of the mass production of wealth", I don't know what the term "problems of the distribution of wealth" means. The distribution of wealth (or is that income? or maybe consumption?) is not a "problem" but a fact. It can be measured (or is that estimated?). But whatever it is at any given time, who is to say that is a "problem"?
And is the DISTRIBUTION of wealth (or income or consumption) at any given time more important (more of a "problem"?) than the MOBILITY of wealth (or income or consumption) with time? For example if there is a wide distribution of wealth (or income or consumption) but individuals increase their wealth (or incomes or consumption) with time, typically moving up the ladder, is that a "problem"?
Is it a "problem" that 20 year olds in the US today become billionaires?
In the US, individuals typically do increase their incomes and wealth as they get older, at least until they retire. See the Hubbard Study or any data on wealth as a function of age. How rapidly they increase their wealth with age depends mostly on the difference between their income and their consumption.
And yes, inventing or founding a new project today does typically utilizing an existing technology. Da Vinci could not build a heavier than air plane, but the Wright Brothers could and did. Because they had access to gasoline, and small but powerful internal combustion motors. Does that diminish their accomplishment?
Joe Leote
May 11, 2012, 4:16:14 PM5/11/12
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Is it a problem that children in the United States go hungry while
other 20 year olds are becoming billionaires rather than seeing to
it that children are fed first?
The distribution of wealth is a problem only if one applies an ethos or system of moral values which recognizes it as a problem, if one has an ethos or system of moral values that says, "Distribution of wealth, No problem!" Then there is no problem.
Human beings cooperate to create wealth and compete to use and enjoy it, so there is a moral process at work at all times, and there are moral judgments made by those who are content with the social conditions and those who are not content.
Joe
The distribution of wealth is a problem only if one applies an ethos or system of moral values which recognizes it as a problem, if one has an ethos or system of moral values that says, "Distribution of wealth, No problem!" Then there is no problem.
Human beings cooperate to create wealth and compete to use and enjoy it, so there is a moral process at work at all times, and there are moral judgments made by those who are content with the social conditions and those who are not content.
Joe
Jim Blair
May 12, 2012, 2:07:23 PM5/12/12
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Hi,
I think someone can do more for the problem of hunger in the US AFTER they become a billionaire than before.
And people used to talk about the poor starving, but in the US today the eating problem of the poor is obesity. If you want to see starvation, go to Ethiopia.
And by what logic was Steve Jobs NOT one of the top 1%???
I think someone can do more for the problem of hunger in the US AFTER they become a billionaire than before.
And people used to talk about the poor starving, but in the US today the eating problem of the poor is obesity. If you want to see starvation, go to Ethiopia.
And by what logic was Steve Jobs NOT one of the top 1%???
Joe Leote
May 12, 2012, 5:35:19 PM5/12/12
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This AARP page says a significant percentage of elderly persons
report not having enough money (financial assets) to buy food:
http://www.drivetoendhunger.org/hunger-in-the-united-states/
and this is a persistent problem of the present distribution of purchasing power which never does not go away in the future becoming the present no matter how many millionaires or billionaires live and die in the private property system with finance.
The system of private property with finance (capitalism) has an inherent distribution of wealth "problem" although I would say the same thing for other social systems that are less effective at solving the production "problem."
Joe
http://www.drivetoendhunger.org/hunger-in-the-united-states/
and this is a persistent problem of the present distribution of purchasing power which never does not go away in the future becoming the present no matter how many millionaires or billionaires live and die in the private property system with finance.
The system of private property with finance (capitalism) has an inherent distribution of wealth "problem" although I would say the same thing for other social systems that are less effective at solving the production "problem."
Joe
Jean Erick
May 13, 2012, 3:04:48 PM5/13/12
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Well, you are in
Wisconson, aren't you? Soon to be renamed Kochland.
James
----- Original Message -----From: Jim BlairSent: Wednesday, May 09, 2012 6:11 PMSubject: Re: Innovation is a crock
Jean Erick
May 13, 2012, 3:05:23 PM5/13/12
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Yes, exactly. And I
think Gates is the perfect example because he has bridged the good and evil of
it. The stuff he turned out was mediocre but was enough to
get the job done and THAT is of absolute primary
importance. He has to be the strking example of the constructive
entrepenuer(SP?) because he devloped something that already existed into a
PRODUCT. His later heavy handedness provides the full panalopy, for
study, of pluses and minuses on constructive and destructive actions in the
developement of the industry.
As a side note, both
Robert Moses (the --"Power Broker" by Robert Karo-- of New York), and Bill Gates
were --voluminous-- readers as children.
James
----- Original Message -----From: Mark BachmannSent: Thursday, May 10, 2012 8:07 AMSubject: Re: Innovation is a crock
Jean Erick
May 13, 2012, 3:06:06 PM5/13/12
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Yes Joe.
Exactly. That's why I was making the point. Part, if not all of the
reason for the dysfunction is the propaganda. I was attempting to discuss
that part of it.
How do you organize people? I call the
thoughts that people use, of all the thoughts running around thair brains, to
act on, "effective" thoughts (cognitions).
Red light, green light works phenominally the world
over. So does "forward, march".
Here, we discuss thoughts
relative to the intangible concept of "money" and how that may effect what we
call an "economy". As this is a process of thinking, it behooves
us
to think about thinking. The propaganda is
usually characterized by dichotomous thinking and uses much pathos, as opposed
to logos, to persuade.
Dichotomous, black or
white thinking, is a way of thinking that rejects complexity. Therefore,
education is the best anecdote. Clarity. Simplicity.
Accuracy.
James
----- Original Message -----From: Joe LeoteSent: Thursday, May 10, 2012 8:57 AMSubject: Re: Innovation is a crock
Jean Erick
May 13, 2012, 3:06:45 PM5/13/12
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Well, I am so glad
that you are seeing debt as a problem in this area of our historical
heroics.
All I can do is beat my old drum. The way to
handle debt is to add to an exponent, applied to accounts, at each
loaning. This exponent would be
risk analized, relative to lower numbers having
repayment priority. The free market would work.
This recognizes that
debt functions in a vacuously regulated "serial intermediary"
fashion. With more and more debt added to the, essentailly, same
quantiy
of money being passed around and around. It
adds a risk measure to each transaction. The fact that account law has
formalized the communicative elements of
payment and securties transfer provides a precedent
field to act in.
The problem has been the
secrecy of money. You cannot personally identify money to some persons
interest but you can --identify the money accounts as to the
characteristics of the amounts--. If you have an account
with a 7.99836 tier level and you need to borrow money so you can make a profit
by relending it, you have to figure
what the greater tier level will be when you lend
it out again. The higher the tier level is, the lower on the repay to you
scale you are. You will be looking for lower tier money and your interest
rate will be tied to that tier. It builds in risk analysis to
debt.
James
----- Original Message -----From: Joe LeoteSent: Thursday, May 10, 2012 10:40 AMSubject: Re: Innovation is a crock
Jean Erick
May 13, 2012, 3:06:52 PM5/13/12
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Maybee it's a work in
progress???
James
----- Original Message -----From: Mark BachmannSent: Thursday, May 10, 2012 5:41 PMSubject: Re: Innovation is a crock
Jean Erick
May 13, 2012, 3:07:22 PM5/13/12
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Whose "at fault"? We
are. IMHO, America developed an isolationistic quality due to the fact
that they had this fantastic country to play with that others
didn't and then WWII displayed all the worse things in the
world that were to big to solve at the time, relative to what we
had.
What the US doesn't seem to know
is that ---things have changed---. The world has come a long way and
we CAN solve the problems that are left, or rather
provide leadership in these goals. And for ---exceedingly little cost---. But to many people still have that old "them is to different and
despicable for us to
waste time fooling with" attitude. See Jeffrey Sachs
on world poverty.
James
----- Original Message -----From: helge nome
Terry Hammonds
May 13, 2012, 4:42:16 PM5/13/12
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As we saw last week when J.P. Morgan lost over $2 billion perusing its own selfish, hubristic goals, our largest "financial institutions" are not in business to finance or facilitate broad based economic growth, expansion of prosperity among the general population, infrastructure, real estate stability, student loans that enrich society, not just corporate bottom lines or much of anything beyond their corporate structure. At some point on the "bank" growth line, they should be quarantined from the rest of our financial system. They can gamble with investor money, scam each other and go broke when when they make mistakes but not sink national and world economies. We need more Infrastructure banks, community banks and other such society enriching institutions and fewer too big to fail, self centered, capital eating financial giants. Every day we hear about the miraculous wonders of free markets. They do not exist. Our tax codes, "incentives" (bribes) and other forms of corporate welfare to our richest companies eliminate the risk of true free markets, Any comply with shareholders should not receive government handouts. It is the job of investors to monitor their company's decisions, carry the risk or withdraw financial support.
Sent from my iPad
Vern Ela
May 14, 2012, 6:52:25 AM5/14/12
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While, admittedly, there are a variety of causes for inefficient distribution of wealth in the U.S., one of the primary causes for the increasing disparity in the distribution of resources – including wealth – is being perpetuated by way of drastic cuts in governmental aid and support of education. In my view, education is as vital an element of national infrastructure, as roads, communications networks, and mass transportation; and as deserving of public support. With increasing frequency, those who can afford it, are sending their children to private schools, because public schools, denied adequate money and resources, are less able to provide the quality education needed to succeed in an increasingly complex and technologically sophisticated society. Attending a private school, already gives students a sense of superiority, and, in my opinion, instills in them a proclivity to class distinction, which is then perpetuated when they send their own children to private schools and universities. Graduates of private secondary schools, attend the top-tier universities in far greater numbers than the general population. These universities, heavily endowed, and receiving generous donations from their (mostly) wealthy alumnae, are able to afford the most prestigious faculty, the best equipment, and the most up-to-date technology. Public universities, languishing from a lack of state and/or governmental support, are unable to attract top faculty, and must necessarily lower academic standards in order to maintain enrollment at a level that will sustain them. This helps to create a ‘niche market’ for private “universities” which charge exorbitant ‘tuition’ for mediocre (at best) instruction, but which provide an accredited diploma that qualifies students for Federal loans, and enables them to qualify for increased salaries, having attained ‘advanced’ degrees.
The wealthier classes have no interest, or motivation, to divert more resources (via increased taxes) to public universities, as they, for the most part, do not utilize them. An educated middle class is, in many ways, a liability, for a more educated workforce will increasingly demand more participation in the rewards of their own labor. In addition, as jobs are moved overseas, the educational level of American workers becomes less and less a factor to be considered.
I see this problem as only getting worse, given the current status of our elected officials, and a poorly-informed public that only seems to react to ‘knee jerk’ issues.
Vern Ela
From: understan...@googlegroups.com [mailto:understan...@googlegroups.com] On Behalf Of Joe Leote
Sent: Saturday, May 12, 2012 5:35 PM
To: understan...@googlegroups.com
Subject: Re: Innovation is a crock
This AARP page says a significant percentage of elderly persons report not having enough money (financial assets) to buy food:
Jean Erick
May 13, 2012, 3:35:38 PM5/13/12
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----- Original Message -----From: Jim Blair
Sent: Friday, May 11, 2012 12:08 PMSubject: Re: Innovation is a crock
Hi,
While I understand a meaning for "the problem of the mass production of wealth", I don't know what the term "problems of the distribution of wealth" means. The distribution of wealth (or is that income? or maybe consumption?) is not a "problem" but a fact. It can be measured (or is that estimated?). But whatever it is at any given time, who is to say that is a "problem"?
The primary, on going issue of history has been the slave-freedom aspect of association.
And is the DISTRIBUTION of wealth (or income or consumption) at any given time more important (more of a "problem"?) than the MOBILITY of wealth (or income or consumption) with time? For example if there is a wide distribution of wealth (or income or consumption) but individuals increase their wealth (or incomes or consumption) with time, typically moving up the ladder, is that a "problem"?
IMHO, it is not a problem UNTIL (like NOW), the greater wealth enables the wealthy to impinge on the Constitutional spiirt and law.
Is it a "problem" that 20 year olds in the US today become billionaires?
In the US, individuals typically do increase their incomes and wealth as they get older, at least until they retire. See the Hubbard Study or any data on wealth as a function of age. How rapidly they increase their wealth with age depends mostly on the difference between their income and their consumption.
And yes, inventing or founding a new project today does typically utilizing an existing technology. Da Vinci could not build a heavier than air plane, but the Wright Brothers could and did. Because they had access to gasoline, and small but powerful internal combustion motors. Does that diminish their accomplishment?
No. It actually exemplifies how bright and disciplined they were.
James
Jean Erick
May 13, 2012, 3:40:49 PM5/13/12
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As I posted to Jim, the
main issue of mankind dealing in groups has been the slave-freedom
issue. Most of mankind has, historically, lived in slavery.
Freedom
is the exception. These are life and death
issues. It's rediculous to suggest they can be put aside.
They are ONLY and have EVER been put aside by a person or group of persons
who have the power and use it to oppress the
others. It is only "put aside" at the point of a sword.
James
----- Original Message -----From: Joe LeoteSent: Friday, May 11, 2012 1:16 PMSubject: Re: Innovation is a crock
Jean Erick
May 13, 2012, 3:42:10 PM5/13/12
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He didn't start out that
way.
James
----- Original Message -----From: Jim Blair
Sent: Saturday, May 12, 2012 11:07 AMSubject: Re: Innovation is a crock
Jim Blair
May 14, 2012, 6:06:35 PM5/14/12
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Hi,
The guy from J.P. Morgan was on a TV talk show Sunday, and while he apologized for losing that $2 B, he never explained (and was not even asked) exactly what the "mistake" was. It seemed to have something to do with "hedging" on something in England, i.e. insuring against a loss that didn't happen. Is that like wasting money buying flood insurance and then there is no flood?
At any rate he made it clear that in spite of that loss, the company still made over $8 billion on its other activities. Win some, lose some seems to be the policy, and they win more than they lose.
J.P. Morgan is an investment firm (i.e for gambling, only where the odds favor the player). If you want to store your money, and safety trumps gain, there are FDIC insured bank accounts, S&L's, and credit unions.
The guy from J.P. Morgan was on a TV talk show Sunday, and while he apologized for losing that $2 B, he never explained (and was not even asked) exactly what the "mistake" was. It seemed to have something to do with "hedging" on something in England, i.e. insuring against a loss that didn't happen. Is that like wasting money buying flood insurance and then there is no flood?
At any rate he made it clear that in spite of that loss, the company still made over $8 billion on its other activities. Win some, lose some seems to be the policy, and they win more than they lose.
J.P. Morgan is an investment firm (i.e for gambling, only where the odds favor the player). If you want to store your money, and safety trumps gain, there are FDIC insured bank accounts, S&L's, and credit unions.
"Every day we hear about the miraculous wonders of free markets. They do not exist."
No? Just look at living conditions in the US and Europe as compared
with "non-market" economies.
"...shareholders should not receive government handouts. It is the job of investors to monitor their company's decisions, carry the risk or withdraw financial support"
I agree. Those who get the gains should also suffer the loses.
"...shareholders should not receive government handouts. It is the job of investors to monitor their company's decisions, carry the risk or withdraw financial support"
I agree. Those who get the gains should also suffer the loses.
Terry Hammonds
May 14, 2012, 6:41:58 PM5/14/12
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I still contend that the old fashioned "free market" system everyone admires no longer exists. We have this vision as we imagine markets to be. We have moved to a state subsidized economy (not state run like China) . Too many "incentives," tax subsidies, tax breaks, lobbyists and other factors get involved. Some large, profitable companies are allowed to collect state income taxes and then keep the money for themselves. Employees still get to claim the deductions as if the state actually got the money. Meanwhile, state budgets are slashed because there is a revenue crisis. In my opinion, corporate control of our government revenues and corporate welfare have gotten totally out of control.
From: Jim Blair <jeb...@wisc.edu>
To: understan...@googlegroups.com
Sent: Monday, May 14, 2012 6:06 PM
George Chandler
May 15, 2012, 2:33:18 PM5/15/12
to understan...@googlegroups.com
Jim wrote: " Is that like wasting money buying flood insurance and then there is no flood?" >>>>Not exactly. As I understand it, some hedging
is like buying insurance against a loss. If there is no loss - you still had the comfort/security.. it is not wasted. It is like paying premiums for insurance, just pay the premium and be happy. Interesting aside, in the case of the 2008 crisis and AIG...banks paid the insurance premium but when it came time to file a claim...there was no money available to pay the claim. You still like capitalism/ Unfettererd capitalism?
Jim Blair
May 18, 2012, 1:07:51 PM5/18/12
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"....banks paid the insurance premium but when it came time to file
a claim...there was no money available to pay the claim."
Hi,
It is fraud to sell an insurance policy if you don't have the money to pay a claim "covered" by it. A capitalist economy requires a government and laws to prevent fraud, or punish it when it happens.
That government bailout of the big banks was not an example of unfettered capitalism.
Hi,
It is fraud to sell an insurance policy if you don't have the money to pay a claim "covered" by it. A capitalist economy requires a government and laws to prevent fraud, or punish it when it happens.
That government bailout of the big banks was not an example of unfettered capitalism.
George Chandler
May 18, 2012, 1:14:38 PM5/18/12
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Jim wrote: " A capitalist economy requires a government and laws to prevent fraud, or punish it when it happens." Exactly. AIG committed fraud, big time, big bucks. But they have not been charged with fraud, or anything. Go figure :)
Terry Hammonds
May 18, 2012, 2:38:31 PM5/18/12
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There are always those seen as too valuable to face consequences for bad, horrific or illegal acts. . Nazi war criminals, aka rocket scientists. who sent the V rockets to blast London were brought to America like heroes to build rockets for us. Powerful people resign in disgrace, pay paltry fines. Like other countries, we are overrun with scammers, con artists, crooked politicians and Ponzi schemes at all levels of institutions. It is human nature. In "finance" we have to separate commercial dealers from investment dealers, that way they can gamble and scam each other with their own money with each player knowing the risks.
From: George Chandler <lante...@gmail.com>
To: understan...@googlegroups.com
Sent: Friday, May 18, 2012 1:14 PM
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