"This banking trick allowed them to call into existence the vast pools of money that financed the Industrial Revolution."
This requires clarification. It wasn't "vast pools of money" that fractional reserves created, but rather credit relationships. There wasn't enough gold available to finance all investments. The crucial point was the realization that credit relationships processed through banks largely cancel each other out by offsetting the outstanding claims. The fact that offsetting makes the actual availability of gold unnecessary is the real reason for the development of fractional reserve banking. It was a stopgap solution that turned out to be a fundamental innovation for banking.
"Entrepreneurs borrow money from banks in this system, and then repay their loans by bringing labor-saving technologies to market."
While this is often claimed, it ignores the question of how higher productivity is supposed to generate more money. Of course, gold can also be extracted in greater quantities through advanced extraction methods, but this doesn't apply to the Spinning Jenny. It brings more goods to market, but not more money to buy them. Marx formulated this in the second volume of Capital: "How can entrepreneurs extract 600 pounds from circulation when they have only put 500 pounds in?" Mainstream economics avoids precisely this question by stylizing marginal productivities as the remuneration of the factors of production. The question "How is profit generated?" (and consequently, interest) is addressed by very few economists. Keynes's answer of promoting capacity utilization through government debt is possible in the short term, but creates its own problems because government debt is systematically not repaid.
Regarding the "Delusion of Individuality," I have previously referred to Dugin's fourth political theory, which focuses on Heidegger's "society-focused Dasein."
Another incredible comment; thank you so very much for it, Renée!
As long people are willing to accept payment on Tuesday for a hamburger today, then isn't credit effectively the same as money? You're always careful to distinguish between transaction and settlement, and this case illustrates why: not everyone who agrees to pay on Tuesday will be able to settle their debt when Tuesday arrives.
On a macro level, it's easy to see that there's NEVER enough money to settle everybody's accounts, if for no other reason than interest payments on debt. Doesn't this lead to the distinctive boom-bust cycles extant since the alchemical advent of the fractional reserve banking system?
It seems to me that vast quantities of credit being called into existence is the functional equivalent of money being called into existence. Right up until a financial crisis forces us to differentiate between debts that will be paid and debts that won't.
"This banking trick allowed them to call into existence the vast pools of money that financed the Industrial Revolution."
This requires clarification. It wasn't "vast pools of money" that fractional reserves created, but rather credit relationships. There wasn't enough gold available to finance all investments. The crucial point was the realization that credit relationships processed through banks largely cancel each other out by offsetting the outstanding claims. The fact that offsetting makes the actual availability of gold unnecessary is the real reason for the development of fractional reserve banking. It was a stopgap solution that turned out to be a fundamental innovation for banking.
"Entrepreneurs borrow money from banks in this system, and then repay their loans by bringing labor-saving technologies to market."
While this is often claimed, it ignores the question of how higher productivity is supposed to generate more money. Of course, gold can also be extracted in greater quantities through advanced extraction methods, but this doesn't apply to the Spinning Jenny. It brings more goods to market, but not more money to buy them. Marx formulated this in the second volume of Capital: "How can entrepreneurs extract 600 pounds from circulation when they have only put 500 pounds in?" Mainstream economics avoids precisely this question by stylizing marginal productivities as the remuneration of the factors of production. The question "How is profit generated?" (and consequently, interest) is addressed by very few economists. Keynes's answer of promoting capacity utilization through government debt is possible in the short term, but creates its own problems because government debt is systematically not repaid.
Regarding the "Delusion of Individuality," I have previously referred to Dugin's fourth political theory, which focuses on Heidegger's "society-focused Dasein."
Another incredible comment; thank you so very much for it, Renée!
As long people are willing to accept payment on Tuesday for a hamburger today, then isn't credit effectively the same as money? You're always careful to distinguish between transaction and settlement, and this case illustrates why: not everyone who agrees to pay on Tuesday will be able to settle their debt when Tuesday arrives.
On a macro level, it's easy to see that there's NEVER enough money to settle everybody's accounts, if for no other reason than interest payments on debt. Doesn't this lead to the distinctive boom-bust cycles extant since the alchemical advent of the fractional reserve banking system?
It seems to me that vast quantities of credit being called into existence is the functional equivalent of money being called into existence. Right up until a financial crisis forces us to differentiate between debts that will be paid and debts that won't.