of course there is no need for a 'banking' system of the sort being discussed here.

I don't know if they existin america, but worldwide there are credit unions - where instead of lodging your money every person who keeps their money in a credit union is effectively an investor (it is a co-operative) and they can thus lend locally (from local investors) to promote economic growth, or lend to families to buy homes... - thus allowing this targetted investment in small/medium businesses which the government has been trying to encourage (and you don't need to bail-out the banks, just let them fail and let the local people save something and invest in their local credit union and thus directly into their local economy)

You can also support 'building societies' which specifically target the building market (and a not allowed deal in other markets, insurance and securities) but do allow international investments rather than merely being a local co-operative.

You could equally setup a local co-op insurance fund (for you medical care) which you pay into not as an investment (because insurance is not a profit-making system) but which can offer a return each year if they spend less than the total donated to the fund.

As a community co-operative it is entirely possible to decide not to care for the older members of your local area, or those with pre-existing conditions.. but we already get these issues...

also, offering solutions which don't reference 'the fed' or 'the government' may help reduce 'national' debt, start distributing services into the power/control of local communities, and you can avoid 'too big to fail' situations while making sure your local financial services and insurance are small enough to actually care about local issues which will affect them greatly.

You can make them work for you!

There is no need for such a banking system I suggest? So the banking system we have is superior? This banking system we have is also total effective ond stable? Sure it is.

Dude small services are ineffective! This is why we have huge companies. They work more efficient.

Now I got your statement. You mean the usa should move away from too big-to-fail-banks to small "banks" on local level?

"How a Nuclear Plant works is highly complex. But still you can break it down to 2-3 Sentences which are truly correct and explain most of its functions. "

elMuro is exactly correct here.

And here is the banking (FED) version...

When you issue money at interest, like the FED does, it creates more debt than there is money in supply to pay that interest back.

It's that simple. The American people will NEVER resolve their debt to the FED with this system. And that is by design.

http://www.youtube.com/watch?v=GnFtllei0Rs&feature=related

"you control the debt...you control everything"

Do the pro-gold standard people realize price controls and limits on spending overseas were implemented in order to maintain it? It's hard to reconcile the gold standard with the anti-fed types love for libertarianism and small government.

Very nice simplification.

And this why orathaics model wont work for long. It will endure the life time of our current system but still there will be a crash. And economies are Man made systems like nuclear plants are.

Putin - you can base a monetary system on just about anything, so long as there's consensus among all parties. Gold is not the be-all, end-all standard like everyone likes to claim it is.

I'm sorry I must be confused, I thought people were bashing the fed here. Usually fed bashers want to return to the gold standard.

"Dude small services are ineffective! This is why we have huge companies. They work more efficient."
actually, i believe you will find HUGE inefficiencies in companies where a million dollars going to waste can just sit in the balance books and be chalked up as a 'normal' expense.

mainly because nobody in the compnay is paid to care.

"You mean the usa should move away from too big-to-fail-banks to small "banks" on local level?"

yes, but only for *certain* tyupes of transactions.

"you control the debt...you control everything"

- no, you can exchange money for goods and services.

so an individual CAN eat food (generate some debt) and then sell some labour (let's say teaching) for more money than it cost that individuals to survive for the day.

At the end of the day they will have created more wealth (and thus paid off their debt with interest) and the system will not have allowed the FED to own everything.

It is not a closed system because money can turn into things which are more valuable.

"And economies are Man made systems like nuclear plants are."

No. There is a fundamental difference.

Nuclear properties are constants, like mass-energy, or momentum.

The simple parts (atoms, or subatomic particles) are the same, they have a given state, or range of states, and the interact in the same way every time you play with them.

Economic systems built by man have properties like trust, and enthusiasm, or disgust and fear these are not constants.

The simple parts are people, and the information they contain in their brain (operating system) is massively varied. It can barely be observed without changing their behaviour. You can't repeat the same experiment. You get complex inter-relations which include positive and negative feedback loops (which eventually give boom/bust cycles) but most importantly which are UNPREDICTABLE (like weather forecasting)

orathaic - I'm talking about *issuing* money at interest. This isn't about the personal debt that you or I accumulate.

And the fact is that if you issue money at interest, there exists more debt than there is money. It is really that simple. No need to read into it...not need to extrapolate anything. If I (the FED) charge you 10% on the $100 I created for you (the American people) to get your economy going, you will owe me $110. But you only have $100 to pay me back.

Get it?

yes, but who takes this issued money?

what if the FED can't issue any more because nobody wants it? does that not complicate matters?

Darwyn, if I (the US people) take that $100, and use it to buy oil from the Arabs, now there is $110 of debt, and $100 of oil

but the oil could change hands multiple times, and inflation drive it's price up to $120.

now how about i sell the $120 of oil to jim, the baker, and pay off my debt.

The FED now has all it's money, plus $10 (though it doens't want this because no debt means no making new money, so it's going ot issue some more) and I have made a healthy $10 profit.

I being the US economy.

"yes, but who takes this issued money?"

I don't know the specifics exactly but I believe it involves Congress selling treasury bonds in the open market or some such. But this is immaterial.

"what if the FED can't issue any more because nobody wants it? does that not complicate matters?"

How will nobody want it if the only way to pay your debt is with the money the Fed issued? Do you think a bank is going to accept apples to pay your mortgage?

However, that question leads us to only one place...the only way nobody will want it is if the Fed is dismantled and Congress issues its own money. But nothing short of a revolution will make that happen.

"Darwyn, if I (the US people) take that $100, and use it to buy oil from the Arabs, now there is $110 of debt, and $100 of oil

but the oil could change hands multiple times"

It can't change hands. You spent your load on oil. No more money exists. You need me to print you more at 10%.

That 10% will forever hang over your head no matter what the scenario.

it can change hands without money exchanging, a system known as barter.

and also several other nations have US dollars astheir reserve currency, thus a lot of other money exists.

How would a federal reserve-less system avoid the bank panics that plagued America prior to the Fed coming to exist in 1913?

"That 10% will forever hang over your head no matter what the scenario."

fair enough, however i can trade for the potential of more money in the furute, and thus by using trust, i defer the repaying of my debt.

At this point the 10% hanging over will force me to work hard to prove my trust was worthwhile... it's a great motivator of economic success.

And nobody needs to buy bonds: "How will nobody want it if the only way to pay your debt is with the money the Fed issued? Do you think a bank is going to accept apples to pay your mortgage?"

you can default. You can work in a hotel where they pay you by feeding and accomadating you. You can survive without debt.

@Darywn, your static situation is correct.

however the fed can in future create an extra $100, (plus debt) so i can then sell pay off my debt, and someone else will owe the FED 20%.

but they can use the oil to make something worth $200 (farm fertilizer perhaps) which it then sells to (a FED funded) farming corp. (again generating more debt.)

The whole point ofthis process is that it's a) NOT static and B) it generates economic activity at all points, hwich means jobs, incomes, food, et al.

Bascialy how a country operates, pushed forward by looming debt, what's wrong with that?

perhaps a debt crisis.

"it can change hands without money exchanging, a system known as barter."

True and after posting, I should have said "It can't change hands within the system." Bartering is great, but it exists outside the present system.

"and also several other nations have US dollars astheir reserve currency, thus a lot of other money exists. "

It exists only because the Fed issued it. That money still resides within the interest-issued system.

"you can default. You can work in a hotel where they pay you by feeding and accomadating you. You can survive without debt. "

Agreed. The American people need to start thinking this way and rid themselves of the Fed.

@Putin - "How would a federal reserve-less system avoid the bank panics that plagued America prior to the Fed coming to exist in 1913? "

I don't know exactly Putin, but it sounds like you already know the answer so why don't you tell me? For that matter, why don't you tell me how any nation avoids bank panics without a central bank?

@darwyn, sorry, im' not sure if all of my points are valid, i'd like to withdraw some of them... i think we may have been talking about different things, at least some of the time (or i was mistaken) please see my last post about dynamics vs statics.

The debt is not serviced in a static way.
The inflation of money means that while debt can increase it's $ value, society as a whole will have produced more wealth and thus be better off with more debt.

and yes, barter and e-currency, and defaulting on debts are all perfectly viable alternatives in my mind. (though they all requrie trust by the users of the system)

No, I don't know the answer. My guess is it's very difficult. Either banks restricted credit so nobody could lend money, which led to economic problems, or lenders made run on banks, drying up the gold and silver and leading banks to close. A central bank of some sort is needed to avoid these problems, I would think.

"however the fed can in future create an extra $100, (plus debt) so i can then sell pay off my debt, and someone else will owe the FED 20%."

Well, the point is that the American people as a whole is still on the hook for that 10%. While you may have paid off *your* personal debt, the American people still owe 10%.

"but they can use the oil to make something worth $200"

Then the Fed just prints up more money to cover that worth and everyone is still on the hook for that 10%.

There is no scenario that will magically make the 10% disappear, orathaic.

It starts at the very top of the monetary chain. If you issue money at interest, more debt exists than there is money to pay it back. <- nothing will change this until that system is replaced by a system that issues money interest free.

"A central bank of some sort is needed to avoid these problems, I would think. "

As long as that central bank issues money interest free, I think the problems would resolve themselves.