[FoRK] $30B a bargain for what it looks set to achieve?
<jbone at place.org> on
Wed Mar 19 11:11:10 PDT 2008
On Mar 19, 2008, at 1:06 AM, Adam L Beberg wrote:
> Jeff Bone wrote on 3/18/2008 7:46 PM:
>> Tangent: billion is the new million.
>> PS, Beberg --- doesn't look as though Road Warrior's actually going
>> to go down on this one. ;-)
> No worries, we have another 500+ Trillion to go :) Almost every
> other commercial bank in the country is technically bankrupt right
> now too.
One other bit...
Given the proximity of your number to your comment about banks, I
suspect you're confusing size of a particular market (derivatives,
that 500T number gets tossed around occasionally in that context) with
the total value of all deposits at banks, and their necessary
liquidity. If there was a run on all deposits in all banks, we'd be
in for a wild ride --- for sure. Depository requirements and the
mechanics of lending are such that banks in effect *create* money, and
their ability to do so and maintain the money supply depends on their
ability to hang onto deposits. If the public as a whole fails to have
confidence in the banks, then the whole thing falls apart --- until
and unless it saves itself, which it might well do through the banks'
ownership of the bulk of the assets out there. It's a scenario for
which no good model exists; even panics on the scale of 1930 don't
give us much to go on.
There's a really good series of cartoons on YouTube that explain the
mechanics of how banking works and how money is created. It's
definitely got a point of view --- the title is "Corrupt Banking
System." While I largely don't agree with the moral judgment made in
this, it does make a fairly accurate presentation of the recursive
mechanics involved. Here's the first installment in this series,
chase the links for the rest of it; particularly, you want to make
sure you see part 2, "How Money is Created."
This whole thing causes me a fair bit of consternation -wrt- my
libertarian leanings. On the one hand, we have in essence an
oligopoly on money at present, and that doesn't sound like a good
thing at all; why shouldn't anyone be able to mint their own coin, in
essence? On the other hand, even the oligopoly only works through
regulation in the form of semi-transparency requirements, depository
requirements, and so on. If the system went totally peer-to-peer, it
would probably require even more burdensome regulation in order to
maintain even the current risk profile, much less reduce it.
At the end of it all I believe that the global money supply is in
essence a measure of the net present value of the consensus view of
the total future global product, and each currency is in itself a
measure of the same thing for its respective sovereignty. The key
observation here is that there's ultimately no macro difference
between money, debt, and credit; they are each defined as functions
of the other, in a mutually and dynamically recursive fashion. The
biggest risk to the whole system would arise should a large --- or
strategically-placed --- segment of society in effect decide that the
rest of society was untrustworthy or that the future prospects for
growth were small enough that they in effect withdraw the credit they
are implicitly providing to everyone else.
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