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RE: Banks Are Crooks, Inventing Money as Loans to Profit on Interest Payments
In Steem, there is a 9.5% annual inflation. That newly minted STEEM and SBD is given out as rewards for content creators. What do you think about that?
I think that in the case of Steem and SBD we can not talk about inflation, since there are no goods and services assessed in Steem and in SBD. In the case of these cryptocurrencies we can speak of appreciation and depreciation of their value, and this depends on the supply and demand of Steem and SBD that exists in the Exchange.
Inflation simply refers to the growth of the money supply. You could argue that STEEM is not sound money because new STEEM coins are minted out of nowhere as rewards for content creators and curators. Exactly the same way, in fractional reserve banking new money is created every time a loan is issued to be used in creating something of real-world value someone is willing to pay money for to go towards paying the loan back. Inflation of the money supply is not the problem of the fractional reserve banking.
The problem is that the banks have too much power over everyone else. and they have been shown to abuse it many cases. But with stable money supply and price deflation, it is not easy to create an expanding economy. Price stability is impossible if the supply of new money is not made to match the supply of new value.
The amount of money can remain exactly the same, but if the demand for money decreases, an inflation scenario can arise, that is, a general increase in prices in relation to a given currency. What does this mean? Although the main cause of inflation is the issue of money, this is not an absolute condition in itself, because it needs to be compared with the demand for money.
Actually, it does not matter only the new units of SBD that are issued, what matters is the amount of Steem and SBD that is bought and sold in the Exchange, of course, the higher the amount of Steem and SDB issued, the more it is likely to increase. volume in the Exchange and consequently the price is affected.
But the price of the Steem and the SBD does not necessarily have to be lowered by the fact that it is issuing new units, in fact, it has not done so, but it has increased its value despite having a growing mass.
When the SBD reached $ 14, it was the result of a boom in cryptocurrencies, which caused the demand of the altcoins to increase, among them the SBD, which caused the price to rise a lot. The decrease in the price that the SBD had later, was not due to the issuance of new units of SBD, but was due to the excess supply and the decrease in SBD demand in the Exchange.
I already noted the difference between supply and price inflation.
The argument still stands that supply inflation may be called theft for the same reasons as price inflation - even moreso because it is 100% under the control of the issuer.
Now, the headline on this thread is not effective criticism of the banking system because money supply inflation is desirable. Allowing banks to keep interest as income is also fine in principle because banks are businesses that have operating costs: staff, IT infrastucture and office space etc. It is also normal and acceptable that they keep some of that as profit for shareholders.
The most potent argument against the banking system is, in my opinion that they've become too large to fail. This creates a moral hazard. Because they know that the government is forced to bail them out, they will take larger risks they would otherwise take.
Well, yes, that way you're right.
The problem with the bank is not that they charge interest, the problem is that the money they lend has not been saved. In a healthy economy, a free market economy, people must save money, part of that money people are willing to invest, so they deposit it in an interest-bearing account, in this way, the bank can lend that money to a greater interest, and that's how they earn their share. Now, none of that happens, what they do is totally immoral and is a theft to all of us.
But the important thing is to understand that they do not do it to obtain money, they do it because it is their way of governing us. The socialist economies run the State and the Market with legislations and controls that are easy to see for people who are attentive, but this system, this credit system, is really very intelligent, since it allows them to direct the economy just as they do these other interventionist governments, but in a silent way, no one notices, not even the employees who work in their financial institutions do, the points are very difficult to connect because they are not on the table but below it, so they do not occur account that those who issue the credit are part of the same group that receives them.
In the free market, consumers are the ones who decide how the economy is conducted, but they have created this illusion, the illusion that we live in capitalism, but no, they take the power of consumers and give it to themselves.
Under that system, no new money gets created. If there is economic growth, there can't be price stability, or vice versa.
I think I did not understand?
You wrote:
If all money that a bank lends to customers must come from savings accounts deposited there by other people, then new money is not created by banks or any other lending institutions. How is new money supposed to be created? Or is it supposed to be created at all? If not, the quantity of money will remain constant which will lead to prices falling when new value is created. That rewards those who merely hoard money while not contributing to real-world economic growth in any way, all at the expense of the creators. How is that not theft? What constructive purpose is there to a medium of exchange being scarce?
There is nothing immoral about creating new money to match the new value created by an economic enterprise like is done when a bank creates money to issue a loan used to fund a project like building a new factory or a new apartment building.
What is immoral is individual banks having grown so large as to be able to force governments to bail them out if their risky investments blow up in their face. That is a clear example of a moral hazard.