The Difference between Capital and Money

[skarke]

I believe that we are not in a recession;, rather, I believe that we are witnessing a fundamental shift in World economic power away from the West.  Perot said it best when he described the "Giant Sucking Sound" of "jobs" leaving the US and relocating in other Countries.

Wealth is NOT money.  It is visible, tangible assets, such as the means of production.  The value of money, in the absence of a standard backed by hard assets, is established by a complicated process of banking, the discussion of which I'll "Reserve" for another day.

The public policies, moral behavior, and beliefs of huge numbers of Americans force wealth to leave America.  We reached the tipping point when the average American began to believe that we, the people are entitled to anything other than a few rights provided to us by natural law.  

Specifically, when we began to believe that we should use tax revenue to provide entitlements, we greased the skids of our demise.

The American dream goes like this:

Anybody can come to this country with nothing and become a millionaire.  Our dream is not that anybody can come to this country and be loaned the money to buy a house (home ownership) and provided free healthcare.

Until we become American again, we'll continue to get slaughtered in the World marketplace.  The government invents nothing, innovates nothing, and inspires nobody.  Success does.

[skarke]

Tm, I believe that it is precisely American to revel in the success of the 40 millionaire, provided she acquired that income legally, and to a lesser extent, ethically.  There are 250 million people with the skill to work their tails off for 10 bucks per hour.  The person capable of generating 40 million, well, she's a rare bird indeed.

That said, I fully support government's role in leveling the playing field of opportunity, NOT outcome. Robinson Patman comes to mind.

I also believe that the Federal government has a role in banking regulation.

BUT, we are dead wrong to teach our kids that an individual must be guilty of some untoward behavior because he is wealthy.

The pursuit of property is what the Founders intended to encourage.

[SHOOTALL]

OSHA and the EPA both have caused cost of production to go so high jobs left here . Then the lost n taxes was covered with loans . Now inflation is here soon to be followed by hyper inflation. We saved a couple out of control auto copanies and killed alot of small business .Pizzed away billions on GREEN .
Yea i have to agree .

[Heather]

I also believe that the Federal government has a role in banking regulation.

May I ask which role that is?  If they have the power to regulate...what is and isn't their job?

Heather

[SHOOTALL]

They gave the power to the fed reserve bank , they can at any time take it back .

[skarke]

Thanks Heather,

In my opinion, the scope of banking activity should be pretty limited.  Risk management, or more accurately, complex monetary asset bundling and trading based in nothing more than speculation, shouldn't be permitted.  I believe that the majority role of banks is to facilitate economic exchange between those having and those needing money, and doing so using the most conservative risk and accounting practices.

Banks should be prohibited from what amounts to nothing more than gambling such as exchange rate "investments", hedge fund trading, non-collateralized stock or securities trading, acting as investment brokers, international banking, etc.  These activities are the roles of investment brokers.

A bank should operate with sufficient reserves to survive even the worst economic downturn without necessity of the FDIC.  The FDIC and similar agencies should be the rarest used protections, almost never, because banks should operate using secure and conservative banking practice.

Banks should be prohibited by generally accepted accounting practice to loan to individuals or institutions who pose substantial risk to the bank's assets by defaulting.

In my dad's day, one couldn't purchase a car without 33% down, or a house without 20% down.  These are good principles.

[SHOOTALL]

Banks should not be allowed to create money on paper .

[Heather]

Sharke,

   I guess my mind just thinks too simply.  I don't see how the Federal government has the right to regulate banking at all.  According to the tenth amendment The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people.  I may have missed something in the Constitution about banking regulation, but without specific power laid out then it should be up to the states right?  

If there were no federal regulation or assistance for banks wouldn't some of the issues be non existent?  If we allowed bad business practices to result in loss of business wouldn't businesses stop the bad business practices?  With a truly free market economy wouldn't bad businesses just go out of business?  I know there are crooks and 'big banks' who would try to have shady business practices to harm individuals, but shouldn't that be up to the states?

I know I don't have a good understanding of how banking works and won't pretend to.  I am simply trying to understand why it is exactly that the Federal government should have the power to dictate any aspect of banking.  

Oh and I agree totally with you on the difference between capital and money and the role of banks.  My only issue is who should be the ones making those decisions, the fed or the states.

Heather

[SHOOTALL]

We allow it ( right or wrong ) to have insurance on our deposits . The banks agree so they can create money on paper and profit from it while the fed carries the risk.
In business the old saying is there is no free lunch. Every time we accept security we lose freedom .

[skarke]

Nothing simple about your argument Heather, many of our Founding Fathers held similar beliefs.  There is a pretty good, though incomplete, review of Central Banking and the role Government has played, right or wrong, from our inception to date here:

http://en.wikipedia.org/wiki/History_of_central_banking_in_the_United_States

The bottom line is that, while I agree in principle to shootall, or at least what I infer from his position, banks use paper (or electricity) to represent something else.  If there isn't intrinsic value backing the "money", then its value is arbitrary and subject to worthlessness.  So, if what shootall is saying is that monetarism is wrong, then i absolutely agree.  I knew shootall wasn't one of those commie Keynsianists

Heather, my position is that the Federal government has a role and responsibility in Banking under the Interstate Commerce clause.  Banks facilitate business.  The problem isn't with the failure of the Bank per se,; rather, when they fail, they take with them the value deposit assets that they guaranteed to the depositor, ruining an otherwise perfectly sound business.

I'd have no problem with the collapse of a bank if it were just the bank.  

[Heather]

Heather, my position is that the Federal government has a role and responsibility in Banking under the Interstate Commerce clause.  Banks facilitate business.  The problem isn't with the failure of the Bank per se,; rather, when they fail, they take with them the value deposit assets that they guaranteed to the depositor, ruining an otherwise perfectly sound business.

I'd have no problem with the collapse of a bank if it were just the bank. 

I can see that.  Thanks for the information.

Heather

[SHOOTALL]

Banks deposit in the FR . They have to have 10% In deposits to make a loan . In simple they have $10000.00 and can loan $100000.00 . Where did the $90000.00 come from ? Its little more than numbers on paper but it was used to pay for  say a house . Then the Bank sells the paper to a bank off shore . Confused yet ? Then they print mo money the folding kind and create inflation . Its good to be old some times and realize you ain't going to be the one to pay it back .

[mcwoodduck]

Sharke,

   I guess my mind just thinks too simply.  I don't see how the Federal government has the right to regulate banking at all.  According to the tenth amendment The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people.  I may have missed something in the Constitution about banking regulation, but without specific power laid out then it should be up to the states right?  

If there were no federal regulation or assistance for banks wouldn't some of the issues be non existent?  If we allowed bad business practices to result in loss of business wouldn't businesses stop the bad business practices?  With a truly free market economy wouldn't bad businesses just go out of business?  I know there are crooks and 'big banks' who would try to have shady business practices to harm individuals, but shouldn't that be up to the states?

I know I don't have a good understanding of how banking works and won't pretend to.  I am simply trying to understand why it is exactly that the Federal government should have the power to dictate any aspect of banking.  

Oh and I agree totally with you on the difference between capital and money and the role of banks.  My only issue is who should be the ones making those decisions, the fed or the states.

Heather

The Federal Government when insuring the banks deposits against loss then came in and said here is what you need to do.
The government should have regulations against having a run on the bank.  Keeping X% of the total branch deposits on hand and not loaning all of the deposits out so you can go to the bank and take out some of your $ and buy items you want or need.
The Fed needs to act as a safety net so stupid people do not get ripped off for being stupid and greedy.
Other than that the whole sub prime loans, the Fanny may and freddy Mac should be dissolved with the loans sold off- good and bad.

The difference between Money and Capital is easy money is what you use to purchase items you need, Capital is money you use to buy things that will make you more money.
For example-  You use Capital to buy a building, equipment and tools to build a factory.  You use Money to buy labor, repay the cost of that capital (%of Profit or interest on a loan) and raw materials to build products in your factory.  That Capital to build the factory could be a load or come from selling shares.

[jimster]

It would really help if we could trust our Federal Government to only do those regulations that would make sense, but the truth is, the Feds can't be trusted either, they seem to get their fingers in where they don't belong too, due to their own corruption. It seems like there is every little out there to protect American wealth, and depending on our Congress to even pass any decent legislation at all on anything seems to be a shot in the dark.  Many of us don't want the feds anywhere near money at all...not because we don't want some protections, but because we don't trust them, due to what they already have done.  That leaves us with almost no options and with the attitude we want the feds to stay away from everything, regardless of how you interpret the constiution.   

[mcwoodduck]

It would really help if we could trust our Federal Government to only do those regulations that would make sense, but the truth is, the Feds can't be trusted either, they seem to get their fingers in where they don't belong too, due to their own corruption. It seems like there is every little out there to protect American wealth, and depending on our Congress to even pass any decent legislation at all on anything seems to be a shot in the dark.  Many of us don't want the feds anywhere near money at all...not because we don't want some protections, but because we don't trust them, due to what they already have done.  That leaves us with almost no options and with the attitude we want the feds to stay away from everything, regardless of how you interpret the constiution.   

The problem is there are people in the government that have a job to create new regulations.  They see this as they NEED to create new regulations to keep thier job, not to be there to make sure the rules in place do not need to be changed to make it easier and cheaper to do buisness.
once they create new regulation then they get larger budgets to manage larger staffs to keep track of the regulations and in turn as you get a larger staff you get moved up the pecking order.  Once all the regulations are not met there are fines involved and then the department becomes a "profit center".  It is not the legislation that is killing the country it is the beaurcracy and the regulation and the growing of departments to over see not the legislation but the regulation that is adding Billions in unseen costs to doing buisness.  The Air Quality Managment boards are a prime example of this.

[skarke]

I am certainly a minimalist regarding the size and scope of the federal government.  Heather is spot on regarding the 10th Amendment, and i'd guess that Washington spends at least 5 times the amount of money that our Constitution would allow if it were interpreted and operated based upon original intent.

I hate it that banks need regulating, but I'd say that bank regulation would fall under what Thomas Paine refers to as a "necessary evil".  I also understand the concept of elasticity in the money supply offering protection against bank runs and economic downturns, but even the most ardent Keynsianist should agree that the Fed should always be the lender of last resort, NOT "Joes Taco Shop and Savings and Loan".

Regarding "Natural Order", TM, I'm not saying anything like what you are describing, sorry for the ambiguity.  I'm not talking about a natural order; rather, Natural Law.  What I am referring to is a concept where humans individually have a certain state of existent, and in that state are endowed with "Rights of Man", citing Paine again.

We must never lose sight of the importance of life, freedom and liberty.  If I have to, I'll fight for these.  Our forefathers sure did, this is a good read:

 http://www.connecticutsar.org/articles/price_paid.htm