
Carl Marx on financial crisis - old-gregg
I thought this quote was amusing:<p><i>"... "Owners of capital will  stimulate working class to buy more and more of expensive goods, houses and  technology, pushing them to take more and more expensive credits, until their  debt becomes unbearable. The unpaid debt will lead to bankruptcy of banks, which  will have to be nationalized, and State will have to take the road which will  eventually lead to communism."</i><p>Karl Marx, 1867<p>Source:
http://news.scotsman.com/opinion/Folly-of-relying-on-corporate.4864430.jp
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cchooper
A comment on the first letter in that article:

Many people seem to think that we could create a better currency by banning
banks from 'creating money'. They don't want to ban banks, they just want to
ban the idea of money 'based on debt'. Instead they propose that the
government create all the money.

What they don't understand is that you can't ban 'debt money' without banning
banks, and you can't ban banks without banning short-term lending altogether.

Money is usually defined as that which a community uses as a means of payment.
It could equally be defined as any asset that is extremely liquid. If
something can be converted into money extremely quickly at little cost then it
can be used in place of money. If it is used in place of money, then it _is_
money, as it is being used as a means of payment.

Bank accounts are by their nature extremely liquid. The purpose of a bank is
to take on liquidity risk. That's to say, its job is to invest people's money
in long-term (and hence high interest) investments, while at the same time
allowing them access to it, should they need it. To put it another way: a bank
insures investors against a sudden need for liquidity.

Therefore, any institution that offers either demand deposits or extremely
short-term loans, and pays interest on them (which implies that they must be
investing the money in less liquid assets) is performing the same function as
a bank.

Because a bank deposit, like any very short term loan, can be quickly
converted into cash, it is a highly liquid asset. It therefore _is_ money. The
banks aren't performing any kind of sinister trick. By providing liquidity
insurance, they are by definition supplying the markets with highly liquid
assets, and the market will always choose to use such assets as currency.

So you can't ban banks without banning short term loans, because short term
borrowing with interest _is_ banking. And you can't ban debt-based money
without banning the creation of highly liquid assets, which is exactly what
short term loans are.

Oh, and I suspect the writer of the letter doesn't know what "capital
reserves" are either. He's probably just confusing capital with reserves.

