Skeptic Project

>> Do banks own much/most of the US real-estate (via mortgages)?

About 47%

>> Did people much more often own their own houses more often (and in single income homes) in the past?

No, most people didn't own their homes until after WWII and mortgages were big then as they are now. However, when people did own homes, they typically saved up for it before buying, as most people didn't take things on credit prior to the 1920s.

>> How much of this might be due to our banking system (fiat currency, fractional reserve lending, the Fed, etc)?

Absolutely none of it. No matter what banking system we have, your average person can never save up and buy a house outright without taking years to do so, so they get a loan from the bank to do it.

>> It seems to me that the banking industry as a whole, due to fractional reserve banking, gets to lend out far more money (about 8 times more) than it has in its deposits, at interest.

It's about 9 times, but the central bank controls this by contracting or expanding the money supply.

>> While fractional reserve system isn't necessarily bad, per se, and might even be good, the bankers seem to benefit enormously.

How so? The only people who can expand the money supply are the board of the central bank, and even then it's not as simple as saying "do it, and it will be done." Even if it were that simple, it wouldn't benefit them because then it'd cause inflation.

>> If I was the banking industry, which, while not 1 person or entity, seems fairly consolidated, I would want the Fed to keep increasing the money supply as it does to fund wars and social programs,

Well, you have to show how someone at the Federal Reserve would benefit from expanding the money supply. The supply expands because real-world assets (purchased through loans) expand, which is why metal-backed money doesn't work as well. There was a huge amount of corruption during the Second Bank era, and that was backed by mixed metals.

Furthermore banks exploited people even more easily when it they weren't centralized, as they weren't answerable to anyone other than account holders, which is why there were so many panics and runs on banks in the free banking era.

>> so that more money will come in as deposits to my banks, which I could then load out 8-fold at interest.

That's not how it works, though, the interest rate is far lower than 8 fold, typically around 2 - 3% not 800%. Even if it was, the money is assets, it's not like in a giant vault where the bank owner can walk in and take whatever they want.

>> ...Alan Greenspan

This guy recently admitted that he was wrong about his belief in complete deregulation, though I'm sure he's still an objectivist.

>> They seem to sense — perhaps more clearly and subtly than many consistent defenders of laissez-faire — that gold and economic freedom are inseparable, that the gold standard is an instrument of laissez-faire and that each implies and requires the other.

That's because laissez-faire is dominated by Austrian Economists and Objectivists, but there are other flavors of it.

Gold-backed banking -- free banking -- in the United States was one of the most turbulent banking periods ever, with panics, gold prices collapsing, running out of gold and silver, run on banks, etc. happening every couple of years. Yet, amazingly, any country following proper Keynesian economics has yet to lead to any of the predictions made by gold supporters; no hyperinflation, no depressions, etc.

>> If I were selfish and could create money, I don't think I'd care that much about causing inflation. If there is say $1 trillion in my country's money supply, and I currently have $1 million, it would benefit me to make another $1 billion or even $1 trillion if I could earn some interest on it. The effect on inflation would be minimal in comparison to my gains.

I'm having trouble imaging how that'd be possible though. If you work for the Federal Reserve, you never see the money, if you own a regular bank, it's 90% assets, which someone had to take the loan out for in the first place.

>> Under fractional reserve lending, with a $100 dollar initial deposit, the banking industry can end up lending out up to about $900 and be making interest on the $900, not just the $100.

Yes, that's true, but someone has to actually take out the loan with some kind of asset, and the bank has to be able to get returns on that loan.

>> Wouldn't the value of the metal-backed money simply go up in proportion with increased assets represented by the unchanged money supply?

No, the metal has to be roughly equal to the value in circulation -- be it physical or in assets. There are more things of value in the US than all the gold and silver on Earth.

>> I'm not sure what we should draw from that.

Well, my point was that gold-backed money isn't inherently incorruptible as some people seem to believe.

>> Perhaps a centralized bank that simply maintains notes that represents a specific, unchanging weight of say gold would be best, then.

That was done right up until the great depression, and was partly done until Nixon removed it completely. As I said, properly following Keynesian economics -- which wasn't done with FRS when it was backed by mixed metals up to and during the great depression -- leads to modestly stable economies, but of course you do have the business cycle.

>> Didn't we have pretty bad inflation in the 1970s? Aren't we in something like a depression right now? Not severe enough?

Inflation usually happens after the end of a war, due to shifts in industry, services, etc. and that was due to the end of the war in Vietnam. We aren't in a depression, we're coming out of a recession. A depression is far worse than a recession, though we got close to it in 2008, luckily the illuminati at the federal reserve helped by pumping money back into the economy.

>> Seems there is at least a conflict of interest as the Fed members have close with the rest of the banks, no?

Well, to an extent yes, but that's not uncommon in the US anyway, what with lobbyists and all. My main concern is with the idea that the Federal Reserve is inherently evil or wrong because of whatever reasons that conspiracy theorists come up with. I see bankers in general as the scum of the Earth to be honest, and that likely can be contributed to growing up with anarchist parents, so I have a heavy bias against banking in general, so it's definitely weird for me to almost be defending it sometimes on this site.

>> I'm not sure I understand what you mean by this. Do you mean if I take a loan of $100 it has to be backed by $90 of assets? Can you elaborate on this please?

What I mean is, most loans are for things like businesses, buying houses, etc. The money goes towards these things and so the majority of the loan is no longer in cash, but rather the asset itself -- hence home foreclosures on those who cannot pay, it's an attempt to turn those assets back into cash, even at a loss.

>> On assets: sometimes loans are made just on credit, though, with very small or no assets, are they not?

Yes, credit though tends to have a higher interest rate and a much, much shorter time to be outstanding -- I don't know if my credit card company would like me to spend the next 30 years paying off things I've bought on it, but I know the bank is fine with that, because they have the ability to take my house away and resell it. The best credit card companies can do is either sell it to a debt collector at a loss or sue you.

>> On returns: But, still, to the extent that there is an ability to pay back loans, bankers are positioned to collect all the interest on loans made with money that wasn't theirs (deposits from other customers). This seems maybe too great for the bankers. It also seems like they'd want to bring about more money creation eg to spur more depositing. Inflation would hurt their deposits a bit, but not compared to the additional interest being made on the 9-fold lending. Or how is this wrong?

I'm not really good at explaining banking, even though I can sort of imagine it in my head -- the same way I can imagine a great drawing in my head, but only stick figures come out. Bankers can indeed exploit it, but there's also regulations, inspections, book keeping, etc; if there was a grand conspiracy amongst the bankers, their accountants, and accountants above them at the central bank branches, I'm sure that some larger exploitation could be had.

>> And a general question: How did these banks come to own 47% of the US real-estate? Where did all their wealth come from? That is an enormous percentage.

The main reason is baby boomers, we have a population today that's 3 times as large as it was prior to World War II. Business exploded after the end of the war, as well as building homes, and a general shift in the ideas that people had on what it meant to be successful, one of which is being a home owner, and that's only increased as time has gone on, and it's very common today. You also had programs by different presidents, like Bill Clinton and George W. Bush which promoted low interest mortgage loans and things like that. There's this belief that the greatness of the country, and the successfulness of its people is reflected in how many people own their own property (this very idea in general stretches back to the beginning of America).

The wealth itself came from the huge rise in population and the assets created by their labor -- a house is worth more put together than its individual pieces, for example.

>> My main concern is with the idea that the Federal Reserve is inherently evil or wrong because of whatever reasons that conspiracy theorists come up with.

I sometimes dislike the kookiness of CTs, but that doesn't mean everything they say in necessarily completely false. It is true that bankers worked with the state to create the Fed right? Well, they got to advice the state on how banking should be done. And even now, when there are issues with the banking system, the bankers et al are the ones advising the state. While you might point to legitimate reasons for this, it does seem like the wolves tending the sheep, a bit, no?

The term grand conspiracy throws me off to, but, I mean, there need not be such a concentrated effort to conspire to have people with similar interests working together in ways that screws other people. When business interests all back a certain bill, they don't need to conspire to do this, they just go after their individual interests which might be very bad for consumers.

>> >> And a general question: How did these banks come to own 47% of the US real-estate? Where did all their wealth come from? That is an enormous percentage.

>> The main reason is baby boomers

I meant something more along the lines of: it is a little off-setting to realize so much of that baby-boomer wealth ended up with the bankers. I didn't realize they own (the land of) half of the country, in a sense. Of course, who else would own the mortgages but bankers, would be asked? That doesn't in itself prove any conspiracy, but gets me thinking about the industry as a whole a little more. What are the aims of the big players, what end-results of government actions seem to help them, etc.. Still doesn't prove any conspiracy, but, as I mentioned above, it doesn't take a conspiracy to help a collection of like-minded entities against everyone else.

So how much are the assets of the banking industry worth, anyhow? Just estimating real quick: Say there are 100 million homes (10^8) in the US, each worth average of 100k (10^5) , that is 10^13, $1 trillion. Say the mortgages are 1/2 paid, so that is a value of $500 billion. Oh, that doesn't seem THAT high :) I'll point it out to my CT friend that brought it up. But it is just 1 element of their wealth, and is still very sizable.

Anyhow, none of that provides criticism of the Fed directly, and does not put forth an alternative. I suppose a mixed-metals plus other valuables based dollar could be one alternative, if there isn't enough gold. Not sure how much of the perceived 'problem' that CTs see that would solve.

@domokato Thanks, I'll try to check that out soon.

>> I sometimes dislike the kookiness of CTs, but that doesn't mean everything they say in necessarily completely false.

While that's true, I've found that givening them the benefit of the doubt tends to lead to bad places and ends up being a waste of time. You can find plenty of non-CTs that have the same concerns and talking with them is a lot less insane.

>> It is true that bankers worked with the state to create the Fed right?

Yes, but as I pointed out in Part III of my review of Zeitgeist, it's smart to have them work on it; if you want to build a house, do you design it yourself despite not knowing the first thing about architecture, or do you get someone who knows what they're doing?

>> Well, they got to advice the state on how banking should be done. And even now, when there are issues with the banking system, the bankers et al are the ones advising the state. While you might point to legitimate reasons for this, it does seem like the wolves tending the sheep, a bit, no?

Maybe, but that's unavoidable, with or without central banks, and like I said before as well, lobbyists basically have turned the entire State into a plutocracy. At least there is some oversight for the Federal Reserve, but there's almost no oversight or control of private enterprises. I mean, would you rather have the federal reserve in control of monetary policy, where at least the president and senate have some control over who controls it, and of course that means indirectly the people do as well, or a 100% complete private enterprise like Bank of America? When it comes to banking, unfortunately it seems to be one of those "the less of two evils" situations.

>> The term grand conspiracy throws me off to, but, I mean, there need not be such a concentrated effort to conspire to have people with similar interests working together in ways that screws other people. When business interests all back a certain bill, they don't need to conspire to do this, they just go after their individual interests which might be very bad for consumers.

I know, exactly, I don't know how many times I've mentioned this. It's refreshing to see someone else saying it.

>> Of course, who else would own the mortgages but bankers, would be asked? That doesn't in itself prove any conspiracy, but gets me thinking about the industry as a whole a little more. What are the aims of the big players, what end-results of government actions seem to help them, etc..

To make money, as you said.

>> Oh, that doesn't seem THAT high

Yeah, home loans alone aren't that much compared to the entire GDP, I think it's near a trillion however. Given that, it's basically peanuts compared to the vast wealth of the US, both in assets and resources. We're the third largest country in the world by population (a lot of people don't realize this, even in the US) and we've got the largest economy on Earth, so a trillion dollars, while it may seem like a lot at face value, in the whole scheme of things, it really isn't, and it's spanned across thousands of banks.

>> Anyhow, none of that provides criticism of the Fed directly, and does not put forth an alternative

That's right, and that's how most conspiracy theorist arguments work, they use anecdotal evidence of one thing to prove yet another thing. "All banking and money problems are caused by the Fed and this proves the NWO is trying to destroy America."

These guys gave some good answers to my questions about alts to the Fed, too:

http://forums.randi.org/showthread.php?p=5964883&posted=1#post5964883

>> Where did you get the $1 trillion number?

Not sure, I may have been thinking of something else.

>> What do you think the government tried to get out of the the Gold Confiscation Of April 5, 1933?

They did it to prevent gold hoarding and to keep the money from contracting massively. Since the currency was backed by gold at that time, hoarding would have created even bigger problems, since the Federal Reserve couldn't expand the money supply at will as it can today.

>> Here is an excerpt. I think he goes a little far, here, but I'm not Alan Greenspan:

He's an objectivist, so of course he's alarmist and sees gold as the only way to store value. Even if he's right, there's simply not enough gold, so it won't work.

>> "we did extremely well" without a central bank and with a gold standard.[35] ...
>> In a congressional hearing on October 23, 2008 Greenspan admitted that his free-market ideology shunning certain regulations was flawed.

Those are connected.

Regarding the first statement, however:

Free banking:

http://en.wikipedia.org/wiki/Panic_of_1819<br /> http://en.wikipedia.org/wiki/Panic_of_1825<br /> http://en.wikipedia.org/wiki/Panic_of_1837<br /> http://en.wikipedia.org/wiki/Panic_of_1847<br /> http://en.wikipedia.org/wiki/Panic_of_1857<br /> http://en.wikipedia.org/wiki/Panic_of_1866<br /> http://en.wikipedia.org/wiki/Panic_of_1873<br /> http://en.wikipedia.org/wiki/Panic_of_1884<br /> http://en.wikipedia.org/wiki/Panic_of_1890<br /> http://en.wikipedia.org/wiki/Panic_of_1893<br /> http://en.wikipedia.org/wiki/Panic_of_1896<br /> http://en.wikipedia.org/wiki/Panic_of_1907<br /> http://en.wikipedia.org/wiki/Panic_of_1910%E2%80%931911

Central banking:

http://en.wikipedia.org/wiki/Wall_Street_Crash_of_1929 (still backed by mixed metals)
http://en.wikipedia.org/wiki/Financial_crisis_of_2007%E2%80%932010

So only one panic without a gold standard, two with central banks, that's pretty good. Consider also those are both over the span of ~100 years a piece.

The Gold Standard has some very serious shortcomings on the international level. Consider first that a nation would only ever be able to have purchasing power, or currency of value, if they had some access to gold (or other metal) reserves. Now, there are nations with no substantial gold supply or reserve, thus there is the issue of starting this kind of system with countries that would be far behind.

http://www.research.gold.org/reserve_asset/</p>

Now, lets say we argue that we should only worry about ourselves being on the gold standard. Well, there we have the difficulty of conducting trade and international investments. Converting between gold-backed-currencies and fiat-currencies presents a remarkable challenge. And its one that introduces not just problems of economics, but of international cooperation. And as any good political scientist can tell you, international cooperation is tricky business.

My final point on the gold-standard is my own issue with the way in which value is assigned. People often point to gold as a place where value is inherent. However, gold operates in the same way that money does. It has value because people agree it does. Gold has remarkably limited application or use value (not that it is without great uses, but just not as great as other metals). The hard part is getting people to agree that gold is worth squat. In the 19th century there was a heavy debate over the creation of a silver standard, and indeed many European nations had pushed for a silver standard during the French dominance over the continent. Gold, like fiat money, is ripe with its own problems.

I suppose I'd need to know what you mean by commodities because we need to remember that the production or extraction of materials requires capital in order to take place. I can only speak to your point once I know what you define as a commodity.

>> I know you addressed mixed-metals, but it was in the context of free banking.

Well, we know what happens in the context of mixed metals and fractional reserve banking, it works "OK" but if economic problems occur it could cause serious issues (great depression).

>> What if the process of maintaining these commodities and handling money creation could be done by proportional parts of parties in congress -- ie, completely govt controlled?

Well, commodities are almost as bad as mixed metals, as they also don't expand as quickly as fiat does. As for government control of money, well, we have Weimar Republic, Hungary, and Zimbabwe as examples of what happens when the government has direct control over currency.

How would you respond to this:

"the first user of newly minted money can gain disproportionate profit by knowing how to guide and direct it before price arbitrage by millions of transactions ultimatly make the general participant feel the loss of value."

Basically:

1) Prime lenders get to spend their money before inflation has set in for the newly created money they receive and the rest of the newly created money made within some period after this.

2) Prime lenders get to direct this money. These are only a handful of private institutions.

http://www.newyorkfed.org/markets/pridealers_current.html</p>

Need there be so few Prime Lenders? Pros and cons for expanding first use of money to more entities, especially for reason 1)?

1) Also, since if they are lending the money, then they'll get it back in lower real value terms, so they do pay for the inflation. So the assumption is probably wrong, anyhow.