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Traktion

Steve Baker Mp's Presentation On Banking Reform

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http://www.cobdencentre.org/2010/11/steve-baker-mp-honest-money-and-the-future-of-banking/

This is a rather good speech. It's refreshing to hear a Conservative MP come out and say he is a libertarian too.

He sets out the stall for banking reform and suggest what approaches are practical and politically acceptable. On reflecting what Mervyn King spoke about the other day, he stresses the need for changing the system to one of two solutions:

1. 100% reserve banking with deposit guarantees, central bank assistance etc.

2. Free banking without deposit guarantees, central bank assistance etc.

He seems to like the idea of starting with 1 and then moving to 2 when the guarantees and central bank assistance become obsolete. Douglas Carswell's act starts the process of 1, by asking banks to clarify the contract between the depositor and the bank, which is a good start, IMO. However, it looks unlikely the act will get far, but they're hoping it will get a good reading.

Other interesting bits:

- Northern Ireland has as much centralised state spending (70%+) as the satellite states had in the USSR.

- He urged people to understand that this is a problem of central planning by the state, in the form of centrally backed and manipulated currency, legal privilege etc. It is easy for laymen to blame the free market, when the market for credit is far from free.

On a side note, having pondered the relationship between excess credit or planning/taxation being the problem, I think it is ultimately a combination of the two. Ever more credit won't solve a problem of housing being unaffordable (in all but the short term). Equally, restricting credit won't make them more affordable and may restrict other areas of the economy. In this respect, we need a solid monetary system and good planning/taxation on land. If nothing else, a solid monetary foundation means credit can't mask underlying problems, which encourages them to be addressed.

It seems that many imbalances have been masked with (EDIT: state backed) credit expansion, both at the national and international levels. Hiding the problem doesn't make it go away and may just cause it to rot and fester, causing a bigger problem later on.

Edited by Traktion

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I have held to the theory for at least the last 4 years that we are seeing the unwinding of a 300 year old bubble begun with the South Sea speculative bubble. Fractional reserve banking was "invented" ibn that era and it has become ever more stretched for 3 centuries to the point where it just broke. Its a MASSIVE bubble that we are seeing and it is about to really burst. QE2 may well trigger a chain reaction that will finally bring it all down in a massive deflationary spiral that not even the Fed can withstand with the odd trillion here or there. The structural collapse that began a couple of years ago is only a small part finished.

IMO it is a good idea to try to stand clear of anything that is bubbleishious including gilts/bonds. Stocks may see a nasty sell off this side of Crimbo and I would probably be taking my profits on gold.

Edited by Realistbear

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  • 140 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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