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House Price Crash Forum


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  1. 1. In FRB, the broad money supply has expanded, vastly, the erosion of fractional reserve requirements and the unceasing profitability of banking and legislation which favours them making even more risky money is the reason they need reforming. 2. Mutuals are perfectly fine, but I'm just saying that why would the average middle class investor go for a mutual which is just as susceptible to a run in a time of a bad investment, when they could go for an investment account where the bank will pay for every last penny they can be milked for if the SHTF. Even if that means providing an emergency loan and imposing a fine which goes to those stung by the bank. 3. Banking has been inflating the money supply, house prices are going through the roof, banking is becoming more and more profitable and has been ever since it began, the average person simply can't afford tax increases, and won't stand for service cuts. The government subsidy to the banking sector has continued and grown larger and larger, this is why the government runs a deficit, because they don't want to cut services. They are forced into this position by not changing banking, it's not largely due to poor book keeping, it's because they are letting banking continue in it's current form. We don't want to add in a land value tax, wide reaching reforms tend to be ignored because of the upheaval costs. Our reform will assist with providing opportunity to the poor, other reforms are not our remit. It's not a false dichotomy, it's a useful example, you have three options. a) Make massive cuts, and still be unable to pay off your debts, you're going to have to start paying benefits for all those people you lay off, unless you plan to let them starve, an out of work economy doesn't really save you any money. Carry on deficit spending while you prop up banking. c) Enact a reform like ours. What are the problems you foresee with monetising demand deposits with a bridging loan from the bank of England to the banking sector? Imagine the tax cuts we can achieve while the banking industry pays this back, and we all get back to work in a productive economy. Who loses out? Roughly 2-3% of the population, those with enough money to start investing in whatever they want anyway, or just to stop working, those who became rich at the expense of everyone else by working in the problematic part of the financial world (not their fault, they were playing by the rules) Our new banks will not fail often at all, the likelihood of runs is very small, and the difference in the investment climate, and the responsibility of banks to pay for their mistakes will increase the appeal of safe investments such as mortgages, and decrease those of derivatives and futures that rely on a volatile stock market caused by debt fuelled booms and crashes. They might lose money every so often, but they aren't going to become "too big to fail" as they won't be able to make astronomical profits any more, a financial intermediary cannot make anywhere near the same amount of money they can do now. Anyway, at least I'm glad you think our reform is at least better than the status quo, remember call4reform is primarily about increasing awareness of the problems, we have pretty much finished the "technical version" of credit expansion, I'll post it up here when it's done, and our social media campaigning platform "the hub" is about to launch, hopefully we can see you on there! The proposed bank of england act is the best solution our team has arrived at so far, but we need those of you interested in making change happen to continue to criticise in a constructive manner
  2. Why won't people lend their payments back into the banking system?
  3. We have two MSc Financial Mathematics students modelling this, so I'll have to get back to you on this, please remember we are still promoting "the problem" and acknowledge that our solution needs more modelling, but we are on the case. If debts are repayable now they'll be repayable afterwards, if they're not, then someone is screwed anyway. There's a tangled mess of derivatives and debt contracts, and it's going to be tricky to unwind them without something screwing up, with or without the reform. We are modelling all of this though so that potential provisions could be made for the aftermath. We can't let it continue and get worse though, we know this much.
  4. 1. Because there is no sensible limit to how much banks can lend 2. Of course they'll fail, just far less often and not due to systemic instability, it will be the bad choices of bankers that make them fail. Transaction accounts will always be kept safe, so there'll be no risk of anybody losing them if a banks fail, unlike a mutual fund. Banks will never fail due to panic withdrawals, as you only get your money back after your maturity. The money will be distributed in a fair way after the bank starts to wind up and the loans come back in. 3. The government ended up in this situation not from their own greed, but they were effectively forced into this situation by the monetary system. Government couldn't just tax everything it needed, or just get rid of things like the NHS, if productivity is increasing, why do we need to close hospitals, people would say. The real reason government needed to borrow is because the population were getting poorer in real terms due to the inflation caused by the monetary system. It was the government's fault for not doing the 1844 act properly, so we can fix it now with our reform. 4. Poor policy is allowing banks to "create money" (please don't start with the terminology debate again). We are achieving all three of your targets, you have to remember that the public are poorer because of the monetary system and the rich poor divide has increased massively. The government would be unable to avoid cutting it's services massively, services that the poor wouldn't stand for losing while keeping the same monetary system.
  5. Hi Alan, Could you please clarify what problems you see occuring, or some scenario of events that are problematic happening in a certain sequence?
  6. We are trying to achieve a realistic solution to a number of problems, not utopia in one easy reform, if on a hot day somebody offered you a free vanilla ice cream, but you really wanted a chocolate one as vanilla isn't quite your favourite, would you get angry with them and turn them down? One thing at a time, there's no reason further reforms can't be enacted at a later date, contrary to what some of you here believe, this isn't the Enabling Act of 1933.
  7. We are trying to achieve a realistic solution to a number of problems, not utopia. One thing at a time, there's no reason further reforms can't be enacted at a later date, contrary to what some of you here believe, this isn't the Enabling Act of 1933.
  8. 1) Ok, but it would still shrink to catastrophic levels. 2) Depends on how much people know about what and what isn't money, you can't assume 100% knowledge of the difference between money and credit. Back when there was no support from government, fractional reserve banks failed all the time, what would be different nowadays? 3) Doesn't change the current situation, the government has had to borrow to meet it's policy targets, because the money has not been there from taxation as we are all now so poor in real terms (a house would have cost you equivalent of £88,000 in 1950) - and the government can't tax the super rich as they will move their assets and taxable wealth elsewhere. We are in this situation, why does not matter, we need to get out of it and we have to pay one way or another, whose fault it is does not matter, getting out of it does. 4) A pointless debate, it's happened now, we know why, we can change the situation we are currently in by enacting our reform. We aren't blaming anybody here really, who is responsible is not our concern, of course we know bankers only play within the system, but we also know that the system has been exploited and milked for all it can be, so we need to change it. Setting in place clear, simple reform, like ours, will prevent both government and banking from abusing it at the expense of the taxpayer. I've replied to a number of your concerns on the other topic Traktion, maybe you could respond to those in this thread?
  9. A Free market in money has been tried before, it doesn't work and would lead to massive inefficiency in the economy. In our reform we allow alternative currencies, but unless the government expressly permits otherwise, your taxes will still need to be paid in sterling. I'm not interested in any debates about whether taxation or fiat money is right or wrong. If you don't like it, don't vote for our reform - or avoid living in a society where taxation is necessary.
  10. We don't guarantee our investments with the Proposed Bank of England Act. The investment account guarantees are from the banks, not the government. Emergency bailout loans are temporarily created money to protect you from mistakes made by your bank, if the government deems it to be necessary and appropriate.
  11. I'm not keen on answering any questions from you because you are rude and deliberately try to cause offence, and I neither like the style of leading question after leading question or arrogant socratic irony that Injin likes to use, although you didn't use this you seem to be keen on sharing his delight when comparing me with mass murderers. If you can refrain from acting like a child I'll answer your questions. Injin will stay blocked. You'd pay the mortgage back to whoever you paid it back to before the reform, as I explained earlier. Nothing changes with existing loan contracts, can you explain why you asked this question, what is your specific concern with this arrangement? An answer to Traktion's queries - LPB lets you cash in/out of the fund at a time of your own choosing (even closed end shares can be traded). This means the mutual fund is never forced to liquidate*, forcing haircuts. Bad PBoEA investment accounts would need to be liquidated and losses distributed. LPB could therefore weather periods of crisis more smoothly, as there is no terminus for repayment (although, the administrators could manage a gradual PBoEA wind down, but it may be more expensive, so give lower overall returns). With a LPB fund, the people who cash out last will receive least - you have the same incentive to be first in the queue (in a run on the fund) that you have under FRB (assuming there's no government guarantees on deposits). I'm not sure that's it's accurate to say that LPB would be able to weather periods of crisis more smoothly. It is very similar to effectively investing all savings in the stock market - look what happens to the stock market as soon as people think there's an issue. If you had rumours of a sub-prime crisis, you might see every single mortgage-based fund collapse in a mad panic. I'm not convinced that LBP is particularly safe. It's not so much that they would sell you something bad, but that they wouldn't suffer the consequences if they made bad judgements. LPB basically uses the fund management model for ALL savings, so the same issues that apply in the asset management industry would apply to all investments. I'm sure there have been more than enough cases where fund managers have lost a lot of money for customers and not felt a great deal of pain themselves. Note that with our reform, there would be nothing limiting people investing in mutual funds. Why wouldn't there be the need to panic sell your mutual funds? If you sell out of a mutual fund at the top, you'll get the largest value per share. But if there's a run on the fund, the act of the fund selling off assets in order to pay off the customers can push down the value of the assets themselves, which would mean that if you're last in the queue, you could get next to nothing, so I think you would still have the same risk of runs on the fund. We do let people decide. They could opt for a 14-day notice period; they could opt for a 6-month notice period. They could invest in a mutual fund where they can cash out immediately. But if someone voluntarily chooses to enter a contract and take a 6-month notice period, then they should honour that contract and not try to cash out as soon as the investments start to look bad. They have completely freedom to choose. There is nothing in our proposal that prohibits mutual funds. There is more freedom of choice in our proposal than under LPB - with the LPB banking, you want to force everyone into the same 'contract' that a mutual fund implies. As far as I can see, there is no option, under LPB, to have our type of Investment Account. There is an option under our proposal to have mutual funds (they would simply continue to exist). So our proposal offers the greater freedom of choice overall. Currently, this broad money of £300 DOES function as money (it can be used to make payments). Post-reform, the £300 isn't money, can't be used to make payments, and can't circulate through the payment system. It just represents a legal contract, a promise that the bank will repay you in future. It's not money of any form. Because it can't be used to make payments, it is categorically difference from the broad money which would have been created using the same system pre-reform. I think this answers most of your questions, all of you, that is. Could anybody please reiterate any questions that are left over? I apologise for not being quick enough to respond to all of you as the questions come in, I'm very busy and it's difficult to keep up! RJG18 I think you may still have issues we need to address? Maybe this addresses them?`
  12. another limiting factor here is that you'd only have £100 of money to pay off all the 99999 with. The whole money supply (£100) would have to be changing hands at light speed for this to work.
  13. With the reform, we tell it like it is, it's credit, money out on loan, not "broad money" - the money supply is unitary. The transition process is not finished yet, we are still working on it while trying to raise awareness of the general issues with fractional reserve banking and test the rest of the proposals. This is pasted from a very useful conversation we've been having with a member of this forum who has been discussing how to get from a to b with us. As far as the transition process is concerned there are two main obstacles to overcome. The first is to do with monetising the deposits and the second concerns the assets of the banks and attempting to prevent a windfall gain for them. The reality behind monetisation of the deposits is that in fact, the deposits are already monetised because of the deposit guarantee, all any reform can aim to do is make this more apparent and official. For this, I would suggest that, rather than agree to printing up the entirety of deposits in cash notes and coins (which is a scary prospect for some people) a better alternative would be to create deposits not at the commercial bank level, but instead at the central bank. The central bank could create an equal number of deposits as there are in the system in an attempt to match the value of deposits. At this stage the central bank would sell these new deposits to the commercial banks in exchange for their loan assets. OR The alternative suggestion would be that the Bank of England 'lends' the banks 'real money' up to the value of their demand deposits, and the banks would then repay it over time. This way, the banks keep the their loans and don't get to offload a load of risk. In this case, the bank would swap a liability to the private sector for a liability to the Bank of England. The customer deposits at the commercial banks would now be backed, not with a promise, but instead actual accounts at the Bank of England. This process would prevent any windfall gains for the banks; the loans held by the commercial banks which are the result of inflationary lending then pass into the hands of the State, in exchange for the new deposits. Any new lending by the commercial bank would now put the customer deposits at risk (which is what we want) since they would be increasing the money supply above the 'central bank' deposits. If a little bit of inflation is required to ease the burden of debt, the Government can now print money in the normal way. This achieves the removal of the deposit guarantee, and prevents windfall gains. Please note the transition process is a work in progress, I invite you to criticise/analyse this method of getting there, if you can be courteous. I'm going away til Monday/Tuesday, have a good weekend y'all.
  14. If my legacy is refusing to be called a Nazi when it's the most ridiculous comparison imaginable given everything we would achieve with this, then I'm pretty happy with that, the only person who's come up with any legitimate criticism is yourself, and it's all been answered and put into perspective so far, so I'm not bothered. Anybody who's really paying attention to what's going on would stop thinking it was cowardly of me to respond to criticism right about the time the Nazi comments started flying my direction after being asked to stop twice. This line of criticism is ridiculous, but despite repeated explanations as to why, ie. I'm not forcing government to create money, you would by voting for them and demanding that they do it or not, it still carries on being levelled at me without anybody stopping to pause for even just a second and read it. FRB doesn't occur, there is nothing left in reserve, and investments and demand deposits are completely seperate, this is the key difference. Money is transferred, all of it, that's held in reserve, when a loan is made. It serves no purpose to compare it, although I think what you were trying to say is that credit still happens with our reform, which is pretty obvious given that an absence of it would set us back to the stone age. I've demonstrated why there could pretty easily be no inflation. If you've got 10 people in the economy with one pound, and then one more enters, unless you give him a pound too, there's 11 people competing for 10 pounds, so if they are to share it out evenly then they'll have £9.09 to buy the same amount of stuff, so deflation has occurred. If that 11th person enters the economy, and starts cutting down trees and making the same chairs the other 10 were making, there are more chairs, prices decrease. Deflation has occured. If you give the new guy a pound, prices stay the same, 11 people competing for 11 pounds, an extra pound to spend on all the extra chairs, unless he builds them at double speed. You can stop saying I'm telling lies about it now if you like. Please tell me where I said that it isn't a way for government to raise revenue, what I said was... it doesn't necessarily cause inflation, it might just prevent deflation. Ultimately which policy the government follows is up to you. If our reform was about crippling the government's ability to raise revenue we'd be laughed at, the fact that some of you here are laughing at me for not doing this is a testament to how far removed from the real world some of you are. The government has to be able to create money under our reform, whether it does or not is up to you (for the millionth time) - we need to be appealing to people on all sides of the fence, here. Please pay incredibly close detail to what I'm about to say here.... We are not forcing the government to create money, it is down to what people vote for, we are giving the options for them to tax those who spend a lot by creating money and causing inflation, or to not to, at no point did I say under our reform governments had to create money. I've said god knows how many times that creating money is a way of raising revenue for the government that they don't need to do, I'm really, seriously, losing patience now.
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