Why has Capitalism failed to produce optimal value everywhere?

[Fake Boris]

Well, knowing there will be an economic downturn at some point in the future is pretty easy, it's essentially a given due to human nature... timing is what makes it profitable. For all the glaring problems with Fake Boris' logic, he doesnt seem to be claiming the ability to predict the timing of the bursting of the bubble.

While it would be impossible to completely eliminate cycles, they are not 100% natural and thus outside our grasp to control.

The financial system is man-made, and man-made intervention can improve it.

The fundamental aspect is debt-currency. All currency is issued as debt, however the interest on the debt is not issued with the debt itself. This is a significant and purely artificial factor in economic cycles. There are others, but eliminating this imperfection would do a great deal to improve everyone's lot in life.

[Fake Boris]

Debts are only impossible to repay if the lender had unrealistic expectations.

Read #391

[giblets]

Your post doesn't make sense because the money supply is a stock while interest payments are a flow.

[Fake Boris]

Your post doesn't make sense because the money supply is a stock while interest payments are a flow.

This would be an acceptable argument if banks were publicly owned.

However in the current system here's what happens:

1) deposits are liabilities (from the bank's perspective)
2) interest payments thus (a) reduce a bank's liabilities (b) decrease the money supply
3) to prevent deflation, either (a) new loans have to be issued (b) the bank's profits have to be socially distributed. B is not the case, therefore A is the case until a credit bubble busts.

[giblets]

This would be an acceptable argument if banks were publicly owned.

However in the current system here's what happens:

1) deposits are liabilities (from the bank's perspective)
2) interest payments thus (a) reduce a bank's liabilities (b) decrease the money supply

How do interest payments reduce deposits?

3) to prevent deflation, either (a) new loans have to be issued (b) the bank's profits have to be socially distributed. B is not the case, therefore A is the case until a credit bubble busts.

Where would the bank's profits go? The shareholders aren't burying the money in their backyard.

[Fake Boris]

How do interest payments reduce deposits?

What happens to your checking account when interest is deducted?

Where would the bank's profits go? The shareholders aren't burying the money in their backyard.

Most likely the shareholders are buying assets and/or investing the money. Of course if they're investing, then it's not possible for workers to buy all production unless more debt is created to sustain the new production level.

[giblets]

What happens to your checking account when interest is deducted?

When I pay interest? Someone else receives the money and can either spend it or deposit it.

Most likely the shareholders are buying assets and/or investing the money. Of course if they're investing, then it's not possible for workers to buy all production unless more debt is created to sustain the new production level.

When they buy assets, the person who sold them the assets now has the money and can either save it or spend it.

Note that the money supply in the US didn't decrease during the 2008 financial crisis and recession.

[Fake Boris]

When I pay interest? Someone else receives the money and can either spend it or deposit it.

False.

[giblets]

A collapse in the money supply associated with fractional reserve banking was a major problem in the early 1930s but that problem was solved a long time ago.

[giblets]

False.

Do they burn the interest payment in a bonfire?

[Fake Boris]

Do they burn the interest payment in a bonfire?

They reduce the reserve to deposit ratio, which is the same.

[giblets]

Why would lower reserve to deposit ratios cause a contraction in the money supply?

[Elok]

While I have not read this thread, I'd just like to express my unreserved confidence that every poster in it has been working from the same clearly-stated and agreed-upon definition for "capitalism," knows what exactly "optimal value" would be, and has reasons for believing it has or has not been reached.

[giblets]

Elok is a nerd.

[Fake Boris]

Why would lower reserve to deposit ratios cause a contraction in the money supply?

There are less deposits!

You stated it yourself.