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>They "loan" out money that THEY DO NOT OWN! When issuing a loan, they credit themselves with assets, create a liability at the central bank, then when they get paid back they pocket the interest.

I'm not super familiar with banking or accounting, but this doesn't sound remotely accurate. The whole point of a bank is that they're loaning customers with other customers' money. Fractional reserve banking just makes this easier, but the concept is still the same. If one bank's reserve is too low, they generally will just loan the money from another bank. The Fed will only loan out money to banks when all of them are running out of reserve.

> The whole point of a bank is that they're loaning customers with other customers' money.

Ahh, you would think so, wouldn't you? In fact I bet that's how most people still think about banks. Sadly that's not been the case for a while now.

Check this blogpost: the first few sections explain the basics and the immediate consequences of this arrangement: https://www.lowimpact.org/why-the-banks-have-so-much-power-a... Then he gets into his proposed solution and it's a matter of agree or disagree.

> this doesn't sound remotely accurate.

It is accurate.

> The whole point of a bank is that they're loaning customers with other customers' money.

This is mythology. When you "buy" a house your signature is worth the value of the house because you're obligated to pay much more than that AND/OR return the house. The bank "buys" the contract but since there is zero risk for them they don't have to bring anything to the table. They push a button and the seller gets 500 k.

But something else happens at the same time. There is now a new document in circulation that is worth 500 k AND that 500 k in the sellers account. Both didn't exist the day before.

It would be even better if the house was worth 600 k. The moment the hard working buyer can pay 600 we should raise the housing prices. Prices will chase your income because there is to much to gain.

The way I see it homeless people are the most valuable assets in the economy. They make truly convincing advertisement. If you can't pay the market rate, that guy over there, that could be you!

Imagine the disaster if we would not just build but create a housing surplus. The details are a bit to elaborate to get into but we have plenty of tools, materials and idle hands to make homes that are both crazy cheap and fantastic to live in. Even just relaxing the permission to build (or lack thereof) could potentially ruin the big money creation scheme.

I live in NL, we have houses 500 years old. A 300 euro per hour "professional" "expert" must value the home.... but they dont know anything. I know what the cracks in the wall mean. I know the meaning of the white and black mold spots. I know which structural parts have to be replaced. I know exactly how hard it is to modernize the building and hide all the tubing in the walls. I can tell what is quality plumbing or wiring and what is not. Non of these things play any role in valuing the home. Solar panels, nice new carpet or wooden floors, a fresh paint job, square meters. Those are important. You know, like selling a used car. It doesn't matter if the roof leaks as long as you cant see it.

If there was any interest in establishing the real value of the building they would be doing it. All they care about is how it looks. It has to be just good enough for the client to drive the old clunker out of sight. For me, there is no reason to think other parts of this industry are based on sound logic after they fool themselves like that.

Home mortgages are more complicated, but at the end of the day, all transactions are based on real money. The 500k that the seller receives comes from the bank. The 500k that the bank receives comes from Fannie Mae and Freddie Mac. When Freddie Mae and Freddie Mac start running out of money, then the Fed will loan them money of buy equity from them.

There is nothing at the end of the tunnel. All of the value comes out of the contract you sign. It obligates you to pay until everything is paid. This contract is worth the value of a house. The illusory money tunnel that pretends to provide the funds end with national debt that is irrelevant but if it was it is again your obligation to pay for.

You could examine it as a black box. Joe builds homes. He build homes for years in order to earn the right to get a mortgage. He then folds over a lot of the money he earns to pay for the home over the next 30 years. The number of houses he has to build in order to earn his own is completely ridiculous. He is old now! He most likely has to keep building homes to continue to earn the right to live in one.

Someone has to be running off with his earnings. People who are not involved in building houses physically only mentally. Whatever [deceptive] story they tell isn't worth listening to as the numbers say it all.

> Then why can't I, a person looking to buy a home, or to start a business, skip the middle-man then and create a liability myself with the central bank?

You and your descendants do have a liability with the central bank. The Fed holds $5 trillion dollars of US Government debt, which is about $15,000 USD for every US citizen.

Don't feel too bad though because in the UK it's about $17,600 USD per capita

That isn’t very much money per person and could be recouped in a few years with slightly elevated tax rates, primarily on extremely wealthy corporations and people.

"The average federal income tax payment in 2018 was $15,322, according to the most recent data available from the IRS. "

So it's doubling taxes for 1 year, or +5% for 20 years. Hardly "slightly elevated tax rates".

Only a fraction of total income is accounted for by all of the incomes equal to the average and below.

Absolutely not. This is not an individual liability. It is the country's liability. Just like employees in a company is not liable for the dept the company could have accrued etc.

Yeah but the country will need to collect from you and your descendants to keep paying that debt. If it wasn't for that debt the country could leave more money in your pocket. The debt is basically yours as the money to pay it comes from your pocket.

Employees can leave without any liability. You can't at least not without paying a huge cost both financial and personal.

It's not exactly the same as a personal budget though. The Fed can print money to pay back debt. Of course this just becomes an indirect tax as it leads to inflation since the amount of resources in the country/world doesn't change when printing.

True. There is a reason that ~400-500B$ is spent on interest each year by our wonderful government. That comes out of our taxes. Enough to pay for 40% of social security or medicare. 70% of the military budget. The expense we have from debt is no joke.

> capital paid an average of ~5% risk free, staying remarkably constant in the past 2 century

Where is 5% risk free in the past twenty years?

Famously explored by Piketty (agree or disagree with the book, it's a treasure trove in terms of empirical data, and all data is online).

http://piketty.pse.ens.fr/files/capital21c/en/pdf/F6.3.pdf

http://piketty.pse.ens.fr/files/capital21c/en/pdf/F10.9.pdf

http://piketty.pse.ens.fr/files/capital21c/en/pdf/F10.10.pdf

That’s not a risk free rate. It’s an average return on a basket of assets.

"Bankers and financeers deserve their pay because they take all the risk"

*in theory* they do. after all, a lot of these financial-like practices (stock ownership, and such) are the legacy of oceanic trading trips, which are very risky. Over the time the 'markets' evolved and become more sophisticated (I think the rise of the spreadsheet allowed it all to become even more complicated) until today when some players get rid of any and all risk so that in the end "the market" (i.e. the government and "the taxpayer") suck it up.

I think there's some confussion about the fact that trading in a financial market is not a productive (value creation) activity, the only value they add is stability (becuase this is useful) but this is not strictly creative value (unlike, for example, manufacture). Similarly to rent, its value (usefulness) is about maintanance and stability.

hes talking about absolute risk rather than relative risk. also there's a reason why we route everything through middlemen like banks instead of p2p. and it has everything due to risk and organization.

> hes talking about absolute risk rather than relative risk

could you explain the difference?

Can you give me a source on ~200 people controlling 40t USD?

I think this includes "Larry Fink controls 8 trillion because that's what's at blackrock". It's dancing around controlling vs owning.

17 firms manage over 40t dollars in assets. Tracing the people on the board of those firms, who actually make the decisions, we arrive at about ~200 people. By making their decisions exclusively based on profitability, they perpetuate things like environmental damaging industries (and of course their lobby to delay any action on climate change, extremely profitable decision), or cigarrete companies (the biggest killer of the 20th century, let that sink in). It's profoundly undemocratic, the disproportionate power those people wield to shape the course of the world.

It's detailed e.g. in this book https://www.goodreads.com/book/show/40923001-giants , which also includes influent orgs like the group of thirty in its count, and of course heads of state of powerful countries.

Also the well known fact that the eight richest people are worth more than the bottom 3,800,000,000, but that's a separate metric.

Thank you for this, I feel so lonely with my similar opinion in my circle.

Your comment made me less feel less crazy.

I've been slowly radicalising my circle of friends too ;)

First, I'd like to thank you for posting such a long comment. I will try to engage in constructive dialogue.

My first qualm with your post is that it appeals to the emotions of the masses instead of addressing core issues. It also fails to place blame on anything actionable. For instance, you refer to both "bankers and financiers" but also "do they deserve to get paid 300x, 400x, 1000x more than the people actually making the things?" While finance does have elevated pay, the people with those type of multiples can also be found in regular companies, for instance, Elon Musk. This is just the nature of the American system and the root of income inequality. If your issue is with CEOs getting paid millions, this just simply isn't part of the discussion about the role of finance in society.

I also counter that 2008 did not affect the finance industry. It almost bankrupted Citadel who did not make performance fees again until the start of 2012. The operations was paid for by Ken Griffith out of pocket. Many people would have lost their jobs like those who worked at Bear Sterns. You shouldn't feel sympathetic as most of these people would have had nest eggs larger than most Americans, but I am sure many had to downsize houses and forego any yacht purchases. Comparing this situation to those who make a low-paid job is again a complaint about wealth inequality and not the financial system.

I don't know where you got 5% risk free in the past 2 centuries. The Great Depression happened in the US less than a century ago and WWII happened in Europe. I think one could argue that Germany has good wealth equality because their currency was hyper inflated to pay their debts. So any rich Germans were wiped out in the process which kind of served as a reset button.

Now, getting to your points that actually address the financial system, I disagree with most of your stance. Again, statements like:

> They "loan" out money that THEY DO NOT OWN!

Make it seem they are doing something bad if you don't think about it. It's entirely akin to saying "Governments are so bad, they created this thing called "currency", that has no value, and THEY PAY US WITH IT!". The reason why banks are able to issue loans and create credit in this manner is precisely to counteract the access to wealth problem you then go on to complain about. If only the central bank could do that, then they would only bother with rich people with large sums of money because the central bank is not interested in being a commercial bank. Thus, commercial banks are given the responsibility to give everyone access to wealth by being given the power to create loans. The idea being that the banks will compete with each other and provide loans in a much more efficient process than the central bank. Your core complaint here seems to be that you don't like that lower income individuals have a harder time of being approved for a loan. You also point out the cause in an earlier statement.

> any person with no savings that takes a low-paid unprotected job is risking infinitely more

If you genuinely agree with that statement, why would a bank ever take a risk on the small guy? Of course, the government does step in for specific situations like buying your first house and guaranteeing the loan. But that was also a non-negligible cause of the 2008 crisis.

I also don't like that you say that ~200 control over 40t in assets. Again, it is the type of statement that riles up the masses without understanding what it means. It means millions of Americans have their 401k at one of 5 companies. Those 5 companies each have ~40 people represent their bundle of money. That is not neofeudalism. That's responsible investing on a large part of society. As a capitalist, I take issue with this current phenomena because if all companies are owned by the same set of individuals (or at least represented by a few people) then there are antitrust concerns. In particular, why would you tell United Airlines to try to capture American Airlines' business if you own both?

In summary, I think your main issue is that of wealth inequality. Not the financial system. However, you've picked the financial system as the target of your frustration as they are an easy target due to their wealth level. You then construct your own narratives pushing your view but fail to see the logical contradictions in your own statements.

No, the main issue is that people are working their ass off to make the world economy work and get increasingly smaller crumbs of their pie while others create enormous amounts of money out of thin air. It is not inequality, it is the delta of it!

Ill do you one better than inequality! If we continue the line and see where this is heading you end up with a fully automated economy serving those who hold the money. These will increasingly be non human entities. They might employ some people but those won't be making decisions that matter.

Try look at it like this: Do you think anyone working at Apple in the US (earning 100 k on average) actually approves of those Indiers getting 6 dollars per month? You'd be lucky to find just one employee who has to ponder the question. Something like, "hummmm.... wait didn't we have 200 billion in savings? Yeah... uhh I think there is room for 7 dollars in the budget?"

Thus, even if no one in the company could approve it it still happens. If 6 can happen 5 can happen too! As soon as we sign our world over to the automatons you don't have to expect some hindsight way of clawing our way back into decision making.

Those 200 people have very little room to do anything sensible. Their job is to expand profits at the expense of whatever.

Seeing as you are someone who is interested in constructive dialogue, I encourage you to read Capital, so you can form an even stronger dialogue about the pros and cons of modern capitalism.

> I don't know where you got 5% risk free in the past 2 centuries.

So everyone can at least argue about the same data....(I'm not the PP)

Check out this infographic [0], or a great paper that analyzes it here (page 8 has a good scatter plot and trend line [1].

[0] - https://www.visualcapitalist.com/the-history-of-interest-rat...

[1] - https://economics.rutgers.edu/downloads-hidden-menu/news-and...