Is It Time To Start Phasing Out The Banking System?

[Greg]

Speculation is causing at least some of the inflation in addition to Covid and Ukraine. For example, despite high oil prices, the United States is still producing more oil than it consumes and is a net exporter of oil. Back in 2008, a lot of those high prices were speculation. When then housing bubble burst, not only did housing prices plummet, but, so did oil prices. They fell from $147 dollars a barrel (one barrel of oil is refined into 42 gallons of gasoline) all the way down to $32 a barrel. Lumber prices also show evidence of speculation. After already going up and down, lumber prices nearly tripled from November 2021 to March 2022; and, lumber prices then fell by more than half from March 2021 to May 2022. It is hard to imagine anything related to lumber supply that would go up and down that much that quickly.

[Big Magilla]

Covid is the main cause of current world-wide inflation, not just Covid in China but everywhere. That and the lack of vaccinations, some caused by inaccessibility in some countries but also by assholes who refuse to be vaccinated in countries like the U.S. where vaccines are widely available, causing the pandemic to linger. Granted, not as many are ending up in hospitals and/or dying as in the early days of this thing, but it would be well on its it way to eradication if everyone were vaccinated.

Food and gas prices are the toughest on the economy, not housing prices. If you can't afford a new house, stay in the one you're in until things ease, and you can afford to move. Rent from unscrupulous landlords is another matter. Being caught between the inability to pay an increase in rent and affording to buy your own home is much more problematic than staying put in a home you can afford but want to leave for other reasons.

[mlrg]

It appears the big current issue is inflation. Much of the inflation is caused by obscene financial deregulation and Wall Street speculation. Home prices, in relation to household income, are now higher than they were in 2008, even though sub-prime mortgages no longer exist. What is driving home prices is hedge funds and other investment companies buying homes for speculation. These companies are also buying up apartment complexes, and rents are rising because many households who before would have bought homes are no longer able to buy and have to continue renting. Speculation is also driving up commodity prices, such as oil, like it did last time. Also, a lot of money is being pumped into the economy, not with people's salaries, but with investors buying and reselling houses, stocks, cryptos, etc.

I tend to disagree with your approach to the causes leading to inflation, which might be the biggest problem worldwide and not only in the US. Inflation is caused mainly by two occurrences: covid in China and war in Ukraine.

Covid in China is causing a lack of many electronic components and several commodities. For instance, if I buy a new car today, the estimated delivery time can go up to 12-15 months as there are no chips available in Europe. Another example: a pharmaceutical company needs small glass containers for medical pills. Usually this container were availabe 90 days after purchase order. Currently, the estimated delivery time is 420 days. The higher the demand, the higher the price. At the same time, with the disruptions in supply chain, the cost of transportation is, at best, 7 to 10 times higher than it was 3 years ago due to lesser shipping boats available.

The war in Ukraine and the sanctions on Russia are causing huge increases in energy prices. One example: one of the largest paper mills in Europe, that also produce paper tissue, is expecting a 300% increase in energy cost by the end of this year on a YtoY basis. Many commodities are produced in Russia (steel, for example).

All of these examples are real cases I'm dealing with under my professional life.

I agree with you that the ongoing speculation on the real estate market is driving inflation to some extent but is far from being the main cause.

[Greg]

It appears the big current issue is inflation. Much of the inflation is caused by obscene financial deregulation and Wall Street speculation. Home prices, in relation to household income, are now higher than they were in 2008, even though sub-prime mortgages no longer exist. What is driving home prices is hedge funds and other investment companies buying homes for speculation. These companies are also buying up apartment complexes, and rents are rising because many households who before would have bought homes are no longer able to buy and have to continue renting. Speculation is also driving up commodity prices, such as oil, like it did last time. Also, a lot of money is being pumped into the economy, not with people's salaries, but with investors buying and reselling houses, stocks, cryptos, etc.

When things are bought only to be resold for more money, a crash will always happen, just like with the Great Recession. As soon as people start to question if prices will keep rising, they will stop buying and drive down prices, making price drops a self-fulfilling prophecy. This will end the inflation but bring about another recession.

One way to end this cycle would be to stop using bank loans as a source of money. Instead, money creation would come from larger deficits from the federal government. As fewer bank loans are issued and the money entering the economy from bank loans falls below the money leaving the economy from bank loans being paid back, that money could be replaced from larger federal budget deficits. The deficit money could then go to fund real investment rather than blowing bubble after bubble after bubble. There could be a massive increase in funds for more medical research, particularly to develop second-generation covid vaccines, infrastructure, and the creation of non-carbon forms of energy.

We would not be able to end the banking system immediately as, for example, companies would not have the cash to build the non-speculative rental housing for people to live in until they could save enough money to buy homes with cash. I would start by eliminating gambling business loans. I would ban the lending of money to hedge funds, private-equity firms, venture-capital firms, companies that buy their own stocks, companies that engage in mergers and acquisitions, companies that buy cryptos, and companies that buy NFTs (non-fungible tokens).