It's time to crackdown on bent bankers, felonious financiers and shady stockbrokers

== Pro Inherency == 1) Capitalization down Unless I'm misunderstanding it, capitalization is merely the monetary size of a firm (1). So if its shrinking, that's probably a good thing since evil bankers are going out of business. 2) Lending to Business down Lending is a core part of modern economies. But healthy lending involves one party agreeing to defer consumption. So if I lend you $500, I'm not spending it till later. I use fewer resources, so that you can use more. This coordination is essential to market stability. Contrast this to fractional reserve banking, of which virtually all the world engages. A bank loans on top of a fractional reserve base, allowing loans to exceed deposits (savings). This creates new money, which bids up prices in the market. It has three effects: A) The new loans bid up prices asymmetrically because they are spent in specific markets. This price distortion makes it impossible to track whether an increase in price is due to real market forces (supply/demand) or simply the result of new money entering the system. It sends a false signal of higher profits in some markets, causing investors to rush in. The housing market is a good example of this. The result is a boom of investments that can never be seen to completion because the demand was never there. It doesn't matter if firms were engaged in speculative mortgage leveraging. Unprofitable projects are revealed in a "bust" when the source of credit is cut off or cannot keep up with inflation. B) The rise in prices necessitates more borrowing to keep up with inflation. This is why our firms (2) and consumers (3) are sickly dependent on credit they can't hope to pay back. With a central bank around, borrowing is the only way to maintain purchasing power. C) Inflation is a wealth transfer between holders of old money and receivers of new money. People who are on fixed salaries or living paycheck to paycheck cannot insulate themselves from inflation. In short, the lower and middle class shoulder the burden. 3) Regulations Brian wants new regulations on the banking sector, particularly suspending the payment of bonuses if banks don't meet certain targets. A) His article mentions that many UK banks are paying lavish bonuses. A particularly exorbitant company, Barclays, paid a ï¿½14.8mn bonus to its director (4). While that would certainly make my day, the general effects are pretty insignificant. Distributed among the UK population, it would amount to only a quarter of a pound. So the people who caused the crisis are rolling in dough. It's morally outrageous but doesn't matter much in the grand scheme of things. Regardless, both the UK and US governments have actually passed very high taxes on bonuses already (5)(6). Clearly this has been unproductive, and more drastic measures are in order! B) But what about other regulations? Shouldn't some financial schemes be outlawed? If you pass a law against a particular activity, you don't resolve the underlying issues. You only ensure that we'll never have a bust from that *particular* problem again. Bubbles will simply appear elsewhere by a different route because the fundamentals are the same: Lending in excess of deposits. Regulations probably just exacerbate everything because banks and financial groups will use increasingly awkward strategies to get to market. == Con Counterplan == I want two laws repealed. First, the capital gains tax, which is paid upon trading commodities including gold. Second, the legal tender laws granting monetary monopoly privileges to central banks. This is a de-regulation, and therefore fulfills my burden of clash. Commodity Currency: Gold, silver, sea-shells... Whatever people choose. Money originated as the "most saleable" or "most liquid" good. Something you could always know other people would accept. It also typically has other qualities, such as a good stock of value and divisibility. Commodity currency tends to have a relatively stable supply, although many currencies expand at stable rates (6). Central banks can run the printing press all day because citizens have no alternative to paper money. With the elimination of the two laws above, the threat of competition is introduced, and the behavior of banks becomes very restricted. If consumers decide that gold checks are better to use as money, the value of central bank notes will plummet, pushing irresponsible parties into bankruptcy. This deregulation creates an incentive for central banks and the financial industry to stop manipulating fiat money. If the central banks fail new free banks take their place. A good example is Bit-Coin (7), who could easily expand capacity to millions of consumers. The inflation tax on the poor and inflationary boom/bust cycles would disappear. Whether the central banks survive, we are left with stable currency and a responsible financial system. Right now we live in a two-tiered system. The wealthy keep all their assets in commodities, stock, and real estate. The poor require short term liquidity and are forced to use constantly depreciating money. Its time to break the monopoly privileges of central banks and impose the only real check on their behavior: competition. (1) http://en.wikipedia.org... (2) http://www.clevelandfed.org... (3) http://www.federalreserve.gov... (4) http://www.guardian.co.uk... (6) http://www.guardian.co.uk... (7) http://en.wikipedia.org... (8) http://p2pfoundation.net...