Banks and fiat currency is the root of all economic problems? What are the alternatives-Bitcoin or ?

[Nikhil_cric]

I'll be the first to admit . My economics and financial knowledge is pretty haphazard. But if what I've learned of late is true, then the truth is pretty shocking.


I think most people know that fiat currency is not backed by anything ever since Nixon unilaterally took the world off the gold standard and most economists understand that as well.

But from the empirical works of Richard Werner and from statements from the Bank of England etc, it seems to me that the fundamental role of ANY bank is actually CREDIT creation. Basically creating credit out of nothing.

Most people assume that banks only give out loans when they have deposits to give out . But if the evidence is to be believed, even private commercial banks can create credit without any central bank currency or deposits backing it up and don't function just as financial intermediaries as most people believe.

If true, how has this accounting sleight of hand gotten away from auditing/legal scrutiny for nearly a 100 years .

Also will we have to go back to the gold standard or will it be something like Bitcoin.

Sone insightful answers needed, please

 

[MenInG]

Could Islamic finance where the currency is backed just by precious metals and NOT connected with interest rate based changes be the answer?

 

[Nikhil_cric]

Could Islamic finance where the currency is backed just by precious metals and NOT connected with interest rate based changes be the answer?

Will be difficult without interest rates imo. But yes, I believe it needs to be backed by a metal or something.

 

[WhenSultansBowled]

The problem is (and always has been) usury.

Here is a copy/paste from Wikipedia:

In many historical societies including ancient Christian, Jewish, and Islamic societies, usury meant the charging of interest of any kind, and was considered wrong, or was made illegal.[3] During the Sutra period in India (7th to 2nd centuries BC) there were laws prohibiting the highest castes from practicing usury.[4] Similar condemnations are found in religious texts from Buddhism, Judaism (ribbit in Hebrew), Christianity, and Islam (riba in Arabic).[5] At times, many states from ancient Greece to ancient Rome have outlawed loans with any interest. Though the Roman Empire eventually allowed loans with carefully restricted interest rates, the Catholic Church in medieval Europe, as well as the Reformed Churches, regarded the charging of interest at any rate as sinful (as well as charging a fee for the use of money, such as at a bureau de change).[6] Religious prohibitions on usury are predicated upon the belief that charging interest on a loan is a sin.

https://en.wikipedia.org/wiki/Usury

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The irony of it all is that humanity has always known the root problem. Not much but a bit of objective critical thinking is required to see this evil millennia old ancient evil practice.

 

[sweep_shot]

Usury/Interest is the root of all issues.

Get rid of it. Go back to gold standard. Money should be backed by precious metals.

 

[happydavy]

Usury/Interest is the root of all issues.

Get rid of it. Go back to gold standard. Money should be backed by precious metals.

Enlighten us how would it be done. I am sure you have seen the data on inflation and economic growth during the gold standard era? You would know that for 50 odd years when usa had gold standard there were 5 full fledged banking crisis along with recession every 3.5 years? Also pls tell us that (1) how it makes any sense to spend billions on mining a metal not to be used for some industrial purpose but for storing it in central banks vaults? (2) Since prices are linked to the amount of money in the economy, which will be then linked to the supply of gold, inflation will depend on the rate that gold is mined. Is that a smart thing to do? (3) Also how do you plan to expand the economy of developing countries if they have to buy gold to print money?

Gold standard ensures only 1 thing and that is ditching floating exchange rates and return to a system of fixed exchange rates. And if that's the end objective then you should propose a fixed exchange rate world rather than espousing good standard.

 

[Technics 1210]

Enlighten us how would it be done. I am sure you have seen the data on inflation and economic growth during the gold standard era? You would know that for 50 odd years when usa had gold standard there were 5 full fledged banking crisis along with recession every 3.5 years? Also pls tell us that (1) how it makes any sense to spend billions on mining a metal not to be used for some industrial purpose but for storing it in central banks vaults? (2) Since prices are linked to the amount of money in the economy, which will be then linked to the supply of gold, inflation will depend on the rate that gold is mined. Is that a smart thing to do? (3) Also how do you plan to expand the economy of developing countries if they have to buy gold to print money?

Gold standard ensures only 1 thing and that is ditching floating exchange rates and return to a system of fixed exchange rates. And if that's the end objective then you should propose a fixed exchange rate world rather than espousing good standard.

Which 5 full fledge banking crisis, and which recessions? Enlighten us.

 

[MenInG]

Could Islamic finance where the currency is backed just by precious metals and NOT connected with interest rate based changes be the answer?

BTW I am not referring to current "Islamic Finance" thing that is prevalent which I feel is not very Islamic despite the nice Islamic names associated with it's products etc