[FoRK] $30B a bargain for what it looks set to achieve?

[Jeff Bone]

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."

   http://www.youtube.com/watch?v=cy-fD78zyvI&feature=related

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.

$0.02, IANAE.

jb