to not understand capitalism

[IceBeing]

Some people work hard (say 60 hours a week all year) and get paid about £20000 a year...and some people work hard and get paid 10 or even 100 times as much a year.

How can 60 hours a week of work from 1 person be worth 100 times as much as 60 hours a week of work from another person?

crescent - re "i try to keep up with financial stories in the news"

I have been saying this before, and really, I'm not being patronising when I say this again, but it is not possible to understand financial stories in the news without formal education in this subject. Yes, you can read the interpretation of the person who has written the article, but (1) you won't really know its significance, or what the alternative would be and (2) you won't be able to judge if he is making stuff up or talking sense.

(For reference, check out how much of this you know)

"things are even more opaque because of 'technological advances and financial innovation' that 'have not only made financial flows and instruments so complex that they are hard to depict"

All that is thanks to computers. We can now calculate automatically stuff that would be nearly impossible to figure out several decades ago.

"but also financial intermediaries themselves are so complex that they are ill-placed to make sense of shifting information flows.'"

Not really. Who are you talking about re 'financial intermediaries' and again, are you talking about the US?

"very little transparency that even the CEO didnt know how to explain it in front of the US gvt's equivalent of the relevant select committee"

That is not because of any lack of transparency! Top management (CEO, Directors etc) of banks tended to be from an era where clever people with little or no financial education could rise to the top. New generation of clever bunnies who have had extensive education could devise financial products that the previous generation have no hope of even understanding.

I have some personal experience with this, actually, and could tell you some shocking stories of ignorance by bank CEOs who couldn't understand even the simplest derivatives. This was before 2008 and in the US, and I can't be sure that any of them have survived the culling that followed the bank sector implosion. Hopefully not.

kim - re "Not sales people - the people who actually are in charge of the products"

Those are the sales people. People who sell those products to the public. You call them "in charge of the products". They are not the ones who devise those products and they can't be expected to understand how exactly their calculations are made.

"How much "money" is physical cash?. How much money is merely on a computer - but doesn't exist physically?"

Are you talking philosophically? If not, you clearly have internet access and can look it up. Unless you don't even know what you are to look up, unfortunately. And that is what I mean by lacking the bare minimum of knowledge to talk on these subjects.

I reckon people can't be bothered to debate with her because it's difficult (though not impossible, clearly!) to argue with logic.

Wasn't that what did for Enron and Barings? Nobody wanted to say that the transactions didn't make sense because they were frightened of looking stupid and they liked the money.

I think the point about the value of currency being 'magicked up' is relevant if you are measuring it on the internet/on notes/in silver bullion or in tulips. It has to be underpinned by an economy that can produce the things that people need to live. Clearly at various points in history people have turned around and realised that the thing they thought was vary valuable in theory had no actual value at all.

That is why we have governments and regulations and don't trust the market to look after everything for us. If you want more government and more regulations, we live in a democracy, vote for it.

crescent - re "bank of england's own article on how money is created to show that its not only the central bank that creates money"

I thought you were talking about printing money. That article (which actually talks about another article) is written in a simplified manner and in laymen's terms. At one point or another, the person receiving the loan or whoever he is paying ends of withdrawing the cash from a machine. "Money" doesn't remain a number in a computer forever.

"on economic stimulus, why wouldnt the vision stretch beyond increasing rates of borrowers so that people would keep buying?thats the main way to keep the economy going."

I don't understand what you mean by this. I thought I explained clearly why economic activity declines (on a corporate level as well as consumer level) when interest rates increase.

"banks prefer to keep their profits separate rather than invest or spend it back in the economy. "

"Keeps profits separate"... where? Banks don't keeps hoards under a hypothetical pillow.

"as for mortgages, and car finance etc do you really own the house or car even when you buy it if you have to pay the debt?"

You don't own it until you pay back the debt in fulness. No need to even ask that - it is elementary, I would think.

"what is more equitable would be something like shared ownership of a buy to let property. with rent paid on the property to both owners according to proportion of ownership between the bank and oneself, and with options to increase your share from the bank regularly. without involving usury and the skews in behaviour that causes. in an ideal world."

I don't see what's so ideal about it. Banks are not in the business of managing real estate. If they were, they wouldn't need you. They would just buy whatever house they like and rent it out.

If you like to think of it that way, just convince yourself that the bank part-owns your house and the mortgage payments you owe it every month are its share of the rent.

kim - I take it that means you don't know what to search for re "how much money in circulation is cash and how much isn't", like I predicted?

Has OP come back to say what it was that I previously posted that caused her such grief and marked me as an evil banker in her mind? That would have been interesting to see.

crescent - re "all the sophistry in the world cant conceal what is just a giant ponzu scheme"

In what way do you think capitalist economy is a Ponzi scheme?

"an illiterate peasant farmer could cut straight to the chase with these questions 'where did the money come from?' and 'who has the money now'?"

It came from the cash machine and you hold it in your hand now. That is what that proverbial peasant farmer would calculate, I imagine.

"i know you wish to say people who find themselves overwhelmed by debt only have themselves to blame"

In hindsight, banks shouldn't have lent money to people already burdened by excessive debt either, but you know what they say about hindsight being 20/20. The truth is that risk calculations were slightly different before. I doubt if anyone can rack up that much debt these days.

"how capitalists such as George Soros (the man who made broke the Bank of England and made £1 billion from black Wednesday here in the UK in 1992) used repeated speculative attacks on the south east asian economies and currencies that they experienced financial collapse"

He didn't cause their financial collapse. He did make a lot of money speculating at that point, though. Do you think speculators caused the collapse of Greek economy?

"if Turkey is an example, they might also get out under the thumb of the IMF in 5 decades time"

Each case is individual and operates in the economic climate of the time. They might do much better because global interest rates are so low at the moment and it looks like they will stay that way for quite some time.

The reason you can't pay off some loans early is that the bank is lending you money based on making a certain amount of profit. If you want to pay off the loan early, the bank can still organise a loan, but they will probably want different terms e.g. a higher or flexible interest rate or more security on their loan so that you pay back more money or take on more risk.

Alternatively, just don't take out a loan.

kim - If you can't be bothered to look up the answer, why do you ask the question?

Or did you think the question of "how much cash in circulation and how much of it non-cash" to be a very profound one? That information is easily available.

Your business to run - Would that be the math tutoring to children you say you do? When you need help with stuff more complicated than arithmetics, you know I'm always here to help. See you around

TBH Cote I can't actually be bothered. I've got my own business to run.

It would take you as long to Google that as it would to type on here. But you'd rather take the time to type nonsense than to educate yourself.

"The reason you can't pay off some loans early is that the bank is lending you money based on making a certain amount of profit"

Yes. There are also other reasons:

(1) Bank accepts to make little money from the loan in times of low interest rates and higher when rates go up. If all creditors pay loans back then rates go up, they will have to change the way they give out loans.

(2) Banks aim to synchronise their cash inflow & outflow, and have models to predict the total of mortgage payments they will receive each month, among with other stuff. It upsets their future cash flow balance when people pay off their mortgages before they are due.

Overvaluation of tulips: bad.

Hand to mouth subsistence based on what you can personally farm or hunt: a bit of a bother when you want to raise funds to find a cure for the plague.

Feudalism: not much fun if you are a peasant.

Communism: sounds friendly but apparently quite difficult in practice - general loss of personal freedom.

Assuming that you are either at the mercy of a global plot or that someday some all powerful employer is going to come along and think of a way to give everybody jobs: not very proactive

Well regulated banking system with financially literate populace and government who will step in and ensure that we pay for the things we need to pay for e.g. education: good.

But you don't. You don't know how and you're just blah-blahing to conceal that fact.

Now you will probably spend the next couple of hours learning macroeconomy until you learn some concepts and learn some financial terms which you can then look up to find the answer to your question. And that will be a good result for everyone here, you most of all

You're allowed to all the opinions you'd like kim, but when you say that you can't be bothered to educate yourself, but still continue to write absolute nonsense, you can't expect people to take you or your opinions seriously.

I hate this response, "Why don't you amaze us with your knowledge then?" You see it on threads all the time, when the poster clearly can't be arsed to look something up themselves. Use fucking Google. And you're clearly on the internet already, because you're posting on here. It's not difficult to look something up yourself.