I am really impressed with your insights. You are exactly the kind of person I had hoped to attract to this blog of mine.
After much thought, and hearing more and more about this problem that we've encountered, I see indeed that the fractional reserve banking system is precisely what has caused this problem. As you pointed out, the banks are experiencing a pinch and they can't pay their obligations, because the money is all lent out. And it is true - it is better for the bank that if the debtor cannot pay back the loan, halfway through the term, because then the bank not only has gotten the debt service moneys, but also the hard asset - the house and the real estate.
I definitely agree with points three and four as well.
Musing about this whole problem this morning, my proposal to fix the problem would be this:
As you have suggested... it would be appropriate to forbid banks from lending out money which their customers have given them. Banks should raise their fees to customers significantly, and get all their income from charging a series of fees for the storage and transfer of funds. This would prevent any future meltdown like we see today where the banks simply don't have the money on hand to pay back to their customers.
If people have a good chunk of money, and they don't want to pay the bank fees, but instead, want to give out loans to debtors, then let them do that through mortgage market funds, and through places like Prosper.com, and most of all through venture capitalism.
The usa has fallen behind the curve quite a ways over the past decade and two when it comes to producing goods and services that people in other nations want to buy. Ironically, at the same time, there seem to be a lot more people out there wanting to find those to do them debt-service, than there are people who actually want to be debtors. Those aristocrats have done all they can to pump up housing prices, because they want to create more debtors when there aren't enough willing debtors to be found.
The high tech industries in silicon valley seem to have been the sensible folks. There, they have built a system around Moore's law where they can keep on selling products which are twice as good every three years or so to consumers who are happy to fork over money for them. They have formed a real economy, while their colleagues over in the mortgage markets were going hog wild with trying to sell and resell securities of dubious value.
Paul Graham is a person I very much admire. He finds college students who wish to form companies. He has a summer program for them in Cambridge, Massachusetts... where he mentors them, and funds their projects. If there's that much demand by people with money to find places to invest it, then there needs to be a lot more of this. Well moneyed people should be combing the internet, and looking for people with exciting ideas, and then offering to fund their projects. That would be a much more labor-intensive way to invest, but it would also yield much higher and much more reliable returns.
I would really like to learn how we could level the "wealth bell-curve" which you talked about, and yes, I definitely agree that there needs to be more transparency in regards to all of these financial markets. In fact, I think that congress ought to institute a law requiring end-to-end transparency between those lending money and those borrowing money. People need to be educated about all these things.
Is p0ss your username over at reddit? If so, I'll send you a note over there. Thanks for your gracious and very insightful words here on my blog.
Wow...
I am really impressed with your insights. You are exactly the kind of person I had hoped to attract to this blog of mine.
After much thought, and hearing more and more about this problem that we've encountered, I see indeed that the fractional reserve banking system is precisely what has caused this problem. As you pointed out, the banks are experiencing a pinch and they can't pay their obligations, because the money is all lent out. And it is true - it is better for the bank that if the debtor cannot pay back the loan, halfway through the term, because then the bank not only has gotten the debt service moneys, but also the hard asset - the house and the real estate.
I definitely agree with points three and four as well.
Musing about this whole problem this morning, my proposal to fix the problem would be this:
As you have suggested... it would be appropriate to forbid banks from lending out money which their customers have given them. Banks should raise their fees to customers significantly, and get all their income from charging a series of fees for the storage and transfer of funds. This would prevent any future meltdown like we see today where the banks simply don't have the money on hand to pay back to their customers.
If people have a good chunk of money, and they don't want to pay the bank fees, but instead, want to give out loans to debtors, then let them do that through mortgage market funds, and through places like Prosper.com, and most of all through venture capitalism.
The usa has fallen behind the curve quite a ways over the past decade and two when it comes to producing goods and services that people in other nations want to buy. Ironically, at the same time, there seem to be a lot more people out there wanting to find those to do them debt-service, than there are people who actually want to be debtors. Those aristocrats have done all they can to pump up housing prices, because they want to create more debtors when there aren't enough willing debtors to be found.
The high tech industries in silicon valley seem to have been the sensible folks. There, they have built a system around Moore's law where they can keep on selling products which are twice as good every three years or so to consumers who are happy to fork over money for them. They have formed a real economy, while their colleagues over in the mortgage markets were going hog wild with trying to sell and resell securities of dubious value.
Paul Graham is a person I very much admire. He finds college students who wish to form companies. He has a summer program for them in Cambridge, Massachusetts... where he mentors them, and funds their projects. If there's that much demand by people with money to find places to invest it, then there needs to be a lot more of this. Well moneyed people should be combing the internet, and looking for people with exciting ideas, and then offering to fund their projects. That would be a much more labor-intensive way to invest, but it would also yield much higher and much more reliable returns.
I would really like to learn how we could level the "wealth bell-curve" which you talked about, and yes, I definitely agree that there needs to be more transparency in regards to all of these financial markets. In fact, I think that congress ought to institute a law requiring end-to-end transparency between those lending money and those borrowing money. People need to be educated about all these things.
Is p0ss your username over at reddit? If so, I'll send you a note over there. Thanks for your gracious and very insightful words here on my blog.
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