What is the best banking system?

[Supercilious]

Re: What is the best banking system?

The carry trade will be difficult -- because the interest free currency has an automatic demonetization built into it (it does respect the time value of money - it has to be spent fast - and exchanged for something of lasting value relatively soon -- or exchanged for new currency after paying signatory fees -- just no interest is paid!) -- so the risks for the carry trader are quite large -- and I am presuming that the interest free currency will be in a greater demand than the interest bearing one, and since there are automated supply constraints built into the system -- the scenario you outline is less likely to occur.

IMHO there is no realistic possibility to prevent carry trade between a neutral currency and a usury based currency. When franciscans had their war against usury, the jesuits invented the usance game, which was usury disguised as currency exchange.

Read again about how the Worgl system worked -- I am fairly sure that there was a de facto dynamic feedback loop system that worked quite well to regulate the money supply.

IMHO Worgl was a constraint case not a real dynamic feedback.

The dynamic feed back currency systems are based on usury and can thrive in competition with a non self regulating usury system. The closest to such implementation to such a model is Grameen Bank, but it's still not a real dynamic feeback system, being limited mostly to destitute people expelled from the official banking system. ( Some of the loan sharks in Banghladesh were actually primitive SIV's ).

How can you make a Grameen bank to work as a CB at national level in condition of free trade and free currency exchange?

[ocelotl]

Re: What is the best banking system?

There you go Klutzing it all up.

1. I think serious discussion of banking system is needed. We are going now towards a fractional or 0 reserve banking system based on fiat money as bank reserves.

No we are NOT. We are going to go to a multi-metallic / Fiat currency system.
The mint is going to release all of the US vault gold in 2009 as part of the
new 2009 Ultra High Relief Coin Program.

http://www.usmint.gov/mint_programs/ultrahigh/

That will provide the basis for the Multi-metallic/ fiat currency system.

2. This is what have now and it's not stable. Even bimetallism standards proved unstable.

NO, this is most certainly NOT what we have now. Currency appreciation in dollars is not taxed, currency appreciation in gold is taxed at 35%. I said dual parallel system. For that to happen the currency appreciation in gold would be taxed at 0%, to make things equal. AND currency appreciation in Platinum, Palladium and Silver WOULD ALSO HAVE TO BE TAXED AT 0%.

Bi-Metalism is stupid, you can't fix an (any) exchange rate (the gold/ silver ration in this case) and expect something good to happen. Haven't we PROVED THAT by now?

3. Gold standard and fractional reserve banking don't work well together resulting invariably in deflationary collapses.

3.1 Gold standard and full reserve banking is crippling for the economy and was abandoned in the middle ages.

Duh? And Duh? Did I say that we are going to either of THOSE systems? NO. I said we are going to a parallel Multi-metallic currency AND a FIAT currency. Read what I said, please.

4. There are too many unbound variables in the classic banking systems and stability cannot be achieved. They are torn apart by money demand pressure or out of control expansion of money supply. Unstable evolution can be corrected only through major ... corrections

Wrong, all you have to do is set up a boundary condition that permits flows from the unstable system into the stable system, then ultimately, you end up with one stable system at the end. Initially you will have instability in ONE SYSTEM, Not BOTH, because flows will only be one-way on a net basis. Guess which one will have the instability? This is why you have to have two systems, to provide for a evolution of the of the process from a chaotic system (fiat), transition (dual parallel), to stable (muliti-metallic only).

5. Is there any system out there that allows for a dynamic feed-back system without significant oscillations (boom-bust cycles)?

THIS IS NOT desireable until you get the economy to the end state. (transformed into an alt-e and infrastructure machine). You do NOT WANT STABILITY at this point. You WANT STABILITY after the transformation IS COMPLETE.

6. I ignored the rest, not material.

(P.S. I lied, 187, symbols will get the significance)

From this I see that somehow the ideas behind the silver monetizing proposal on Mexican Congress have permeated outside... Good for you.

As you say, jtabeb, it will be better and more stable if the value rate between gold and silver is determined by the market, as it has been since 1933. Point is that a multimetallic/fiat system benefits from Gresham law, instead of being damaged by it. The way it must be handled is by weight, not by fixing the value of coinage to a number, as was done last time the worls had multimetallic system.

For savings and large local transactions, PM's can stand as the base store of value, and for international trade, fiat can be used whenever it is accepted.

A multimetallic/fiat system has another benefit. It can rationalize trade, since no country will be able to run large deficits for an extended time without risking its fiat to devalue against the rest of fiats and PM's.

Eventually, due to lack of demand and generalization on the use of the multimetallic system, fiat will turn from computer numbers to mint/vault certificates, that must be controlled carefully. Actual technology allows us to track each certificate without problems.

[Rajiv]

Re: What is the best banking system?

IMHO Worgl was a constraint case not a real dynamic feedback.

How can you make a Grameen bank to work as a CB at national level in condition of free trade and free currency exchange?

Yes you could be right on that -- some serious modelling work would have to be done. A Grameen Bank model may well be the answer

Here are some links on that on appropriate-economics.org

[Judas]

Re: What is the best banking system?

The following gives an explanation of the "real bills", and the use of bills of exchange for clearing in a metallic standard environment.

http://www.financialsense.com/editor...2008/1107.html