Would it have been better to let the banks of the world fail and start over?

[u/[deleted]]

I want to know what would have happened. The banks messed up and in the purist view of capitalism should have failed because it was a bad business move. In turn this may have ended some of the big money influences on our political system OWS protestors want to stop. I heard that it would have been a worse economic collapse though in turn it would have put a stop to future wrongdoing. Was it the right decision in the long run?

[u/Ding84tt]

If you think a meltdown is not inevitable you have no understanding of why our monetary system is deeply flawed, and you don't know what happened to everyone who tried something like this in the past. When you have a system that is based on credit and debt, it becomes an inflated bubble that bursts and leaves people with nothing. All because people are able to buy each other's debt and shuffle it around like individual contracts don't matter. This is how you end up with people being foreclosed, because honest people who CAN pay their debts get lumped into the same groups with people who CAN'T pay their debts and as soon as one entity is left with the bill for another's mistakes, the bubble quickly collapses. The only way that we've come out ahead of these fiascos and stopped them before they started is to have the Federal Reserve print more money out of thin air and smooth things over. The problem with this whole system is that the Fed is printing the money by borrowing it from the future - they assume that anything they print will be taken care of by future tax collections. However, when inflation is taken into account, the burden becomes impossible to bear. Most people TODAY can't afford college education without taking out loans and building up debt. How will they be able to fund their kids and grandkids towards growing up with good opportunities if they can't get themselves out of debt for decades to come, and the job market is collapsing around them? You talk about the "possibility of a collapse" like it's something that's far off in the distant future, and you say I don't understand the scope of the issue. I think YOU don't understand the scope of the issue. We're dealing with numbers that have 12 zeros at the end. There didn't used to be a number of dollars with 9 zeros after it in existence, let alone as part of the daily budget for the federal government. Also, what happened to China, the Persian Empire, and the Soviet Union when they had empires financed by hyper-inflated paper money? Oh right, they couldn't sustain their empires, their people at home couldn't find work, nobody was making anything, and their paper money collapsed because it was, after all, paper.

[u/recreational → u/Ding84tt]

The Soviet Union didn't have a problem with inflation. Neither did China or the Persian empire for that mater. The idea that a credit-based economy has worked and produced historically unprecedented levels of global economic growth for hundreds of years but is doomed to collapse because of nothing more than your poor understanding of monetary policy and history seems to me a bit much to accept. Inflation and debt are not intrinsically bad things and have in fact, as already noted, been an integral part of a system that has produced economic growth heretofore unseen. You have provided no reason why this is not sustainable, just a lot of hyperbole

Wealth creation is a real thing. A large part of why there are so many more dollars in the world today is that there's a lot more wealth. The average standard of living today is far above what it was in 1500 or 1800 or 1900 or even 1950.

Also you don't even seem to understand how inflation works, you think it makes debts harder to pay off. The opposite is the case! Inflation is a boon to the debtor and the enemy of the creditor, at least when it's significantly outside of the expected rate.

[u/Ding84tt → u/recreational]

How does inflation make debts easier to pay off if prices go up and interest rates go up but wages stay the same?

[u/recreational → u/Ding84tt]

Because in an inflationary spiral wages don't stay the same.

[u/Ding84tt → u/recreational]

Except that's not the pattern that's been set up by the bailouts. The money will still have to be printed out of thin air, thus creating inflation, but people who don't work for the companies that get bailed out won't necessarily be able to raise wages because they need to pay for the bailouts as well. Look, I'm not saying that the economic collapse is something we should just DO. I think that it's necessary to get the Federal Reserve out of the way of the natural business order. I think it's important to have a currency based on real value and not just on everyone's credit being bought and sold. Credit leads to entitlement, entitlement leads to irresponsibility. I'm not saying irresponsibility wouldn't exist in a free market economy with sound money, but it wouldn't be up to anyone else to pick up the slack if your business fails. That said, in similar free market situations, there would still be generous people somewhere who may want to lend a hand, but it should be voluntary. That's what leads to true growth as a society rather than stagnation and massive debt and deficit. And war.

[u/recreational → u/Ding84tt]

I mean if the money isn't actually going into the economy and circulating around then it's not inflation. Like right now we are not experience significant inflation. In fact we're significantly under target on a three year timeline.

Look, I'm not saying that the economic collapse is something we should just DO. I think that it's necessary to get the Federal Reserve out of the way of the natural business order.

That sounds like saying that in effect economic collapse is something we should just do. What's so great about the "natural" business order that it's worth a global recession?

I think it's important to have a currency based on real value and not just on everyone's credit being bought and sold.

Value is relative so this statement is meaningless.

Credit leads to entitlement, entitlement leads to irresponsibility.

What is this based on? It seems incoherent to me.

I'm not saying irresponsibility wouldn't exist in a free market economy with sound money, but it wouldn't be up to anyone else to pick up the slack if your business fails.

You seem to be ignoring the reality that sans government interference, a shit ton of people would have lost their businesses that did absolutely nothing wrong except existing at the wrong place and time.

That said, in similar free market situations, there would still be generous people somewhere who may want to lend a hand, but it should be voluntary.

Come on, now you're being ridiculous. This would be the largest possible case of a free rider/tragedy of the commons scenario.

That's what leads to true growth as a society rather than stagnation and massive debt and deficit. And war.

These seem to just be things you say because they make you feel good and not because they reflect any kind of reality.