Society/Culture Currency Circulation

[Run n Spread]

Here is what I don't get. I have money in my pocket. Cash. I also have money on my ATM card (which is essentially backed by cash).

Said money only exists because the government approved its creation. As such the government is a currency issuer not a user. The government does not need our tax dollars at all for wages, infrastructure projects, welfare payments etc as they should be issuing not using the currency in the same way a private business or individual uses money.

Granted rapid printing of money leads to inflation (which can then be controlled by manipulation the tax rate:i.e. taking money out of circulation or by gov purchases of foreign equipment/capital which has the same effect). Oppositely a government needs to bunk up the economy just issue more currency and inject it where needed (gov jobs, public works etc)

While a simplistic OP can someone explain why this doesn't occur and we are being conned? Interest rates (should be left to a privatised + 1 public banking sector) do not control inflation effectively. Government debt when they are the issuer is an oxymoron. Like saying the ocean is out of water.

The government at its core has the levers to fix change the economic mix. The fact they are in debt to some shadowy foreign entities/government/banks is criminal.

 

[kickazz]

Part of being a social democracy requires some level of wealth redistribution. Printing money doesn't really do this, taxation does.



I'm sure there is more to it than that but I think that is a pretty good start.

 

[tandino]

Granted rapid printing of money leads to inflation (which can then be controlled by manipulation the tax rate:i.e. taking money out of circulation or by gov purchases of foreign equipment/capital which has the same effect). Oppositely a government needs to bunk up the economy just issue more currency and inject it where needed (gov jobs, public works etc)

While a simplistic OP can someone explain why this doesn't occur and we are being conned? Interest rates (should be left to a privatised + 1 public banking sector) do not control inflation effectively. Government debt when they are the issuer is an oxymoron. Like saying the ocean is out of water.

Probably because you end up with this.

 

[Gough]

Probably because you end up with this.

I've still got a couple of Z$5 notes from my travels that literally wouldn't be worth the paper it's written on.

 

[Seeds]

Here is what I don't get. I have money in my pocket. Cash. I also have money on my ATM card (which is essentially backed by cash).

Said money only exists because the government approved its creation. As such the government is a currency issuer not a user. The government does not need our tax dollars at all for wages, infrastructure projects, welfare payments etc as they should be issuing not using the currency in the same way a private business or individual uses money.

Granted rapid printing of money leads to inflation (which can then be controlled by manipulation the tax rate:i.e. taking money out of circulation or by gov purchases of foreign equipment/capital which has the same effect). Oppositely a government needs to bunk up the economy just issue more currency and inject it where needed (gov jobs, public works etc)

While a simplistic OP can someone explain why this doesn't occur and we are being conned? Interest rates (should be left to a privatised + 1 public banking sector) do not control inflation effectively. Government debt when they are the issuer is an oxymoron. Like saying the ocean is out of water.

The government at its core has the levers to fix change the economic mix. The fact they are in debt to some shadowy foreign entities/government/banks is criminal.

see chicago plan. Economists have proposed changing the system to allow the central bank rather then private banks to create all money and give it to the government. But too many vested interests and conservatives scared of dramatic reform will prevent it from happening. we would need a great depression first.

in saying that i dont advocate it as there is value in the private sector creating money to lend to entrepreneurs to invest in new ideas. I advocate something in between the chicago plan and our current system. One that still enables the banks to create money but forces the banks and depositers in banks to pay for all their risk taking.

 

[ShanDog]

Every now and again I think about where all these make believe dollars and cents come from and go to, and how the 1s and 0s on computers can accurately reflect any real sense of a currency when they are just numbers, and then my head hurts so I stop thinking about it.

 

[RupieDupie]

An issue here is that value for the money decreases when invested in rich people, for example, say if a person who actually does work, takes a crap at work, it might only cost their boss a few cents, but the boss loses a valuable ~12 seconds of actual work (https://www.thecut.com/2017/04/heres-how-long-it-should-really-take-you-to-poop.html). This is why places like the ATO are timing how long their underlings are at lunch etc (http://www.abc.net.au/news/2018-02-19/ato-urging-staff-to-dob-in-timewasters/9462604) because their underlings do all the work. Also, if a person in this category is asked to complete a menial task they do not cost the company 100,000s of dollars.

Then there is a person who does zero work, and takes a crap, and it will cost the workplace $1368.00, but the workplace loses zero productivity. This is the reason these people are allowed to spend entire years playing golf with no counting of time nor clocking in or out, because they do not contribute to the workforce in any meaningful manner (and arguably only detract from it when present by being hedonistic bullying jackasses). If a person in this category is asked to perform a menial task they will cost the company 100,000s of dollars, that is, if they print and then staple a few sheets of paper together $100,000s of dollars are lost.

The lesson from this is the AUD, regardless of its value relative to the USD, has more value when spent on the working population and not the rich.

 

[Procrastinator35]

Welcome to arbitrary fiat banking.....Brought to you by the World Bank & the IMF.....It's a racquet & we're all it's indentured slaves.

Keep making money for us you plebs, that debt aint getting any smaller now......Something, something, mice running on a wheel.

 

[RupieDupie]

Welcome to arbitrary fiat banking.....Brought to you by the World Bank & the IMF.....It's a racquet & we're all it's indentured slaves.

Keep making money for us you plebs, that debt aint getting any smaller now......Something, something, mice running on a wheel.

Ladies, gentlemen, and members of the associated press ^^^ this here is the Meaning of Life. No further questions please.

 

[Long Live HFC]

Here is what I don't get. I have money in my pocket. Cash. I also have money on my ATM card (which is essentially backed by cash).

Said money only exists because the government approved its creation. As such the government is a currency issuer not a user. The government does not need our tax dollars at all for wages, infrastructure projects, welfare payments etc as they should be issuing not using the currency in the same way a private business or individual uses money.

Granted rapid printing of money leads to inflation (which can then be controlled by manipulation the tax rate:i.e. taking money out of circulation or by gov purchases of foreign equipment/capital which has the same effect). Oppositely a government needs to bunk up the economy just issue more currency and inject it where needed (gov jobs, public works etc)

While a simplistic OP can someone explain why this doesn't occur and we are being conned? Interest rates (should be left to a privatised + 1 public banking sector) do not control inflation effectively. Government debt when they are the issuer is an oxymoron. Like saying the ocean is out of water.

The government at its core has the levers to fix change the economic mix. The fact they are in debt to some shadowy foreign entities/government/banks is criminal.

it should be fairly obvious to normal people that issuing bonds involves a transfer of money rather than the creation of money. so the amount of currency in the economy (all things being equal) doesn't change. just as obviously and as you note- if instead of transferring money you keep creating it that will (all things being equal) tend to increase prices.

theoretically i guess you could print the number of dollars that do count as new money in the economy (such as foreign investment in sovereign debt) but i'm not sure how significant that would be. there are a few sites around that discuss your idea, it's called "positive money".

i also dispute that taxation takes money out of the economy. it doesn't. it simply transfers it as above; however i guess in your model they could simply destroy all the tax dollars they collect. but if the government doesn't need our tax dollars because they can simply create money...yet they need to tax us anyway to prevent all that money-printing destroying the economy, what's the difference in real, practical terms?

Welcome to arbitrary fiat banking.....Brought to you by the World Bank & the IMF.....It's a racquet & we're all it's indentured slaves.

Keep making money for us you plebs, that debt aint getting any smaller now......Something, something, mice running on a wheel.

a pretty funny response even by your terrible economics/finance standards. the best parts here are:

a) what the OP is proposing is more and more fiat banking; and
b) governments selling bonds / borrowing money is a completely separate and distinct concept from fiat. you can, quite obviously, have a commodity standard while also borrowing to fund deficit spending.

 

[Procrastinator35]

a pretty funny response even by your terrible economics/finance standards. the best parts here are:

a) what the OP is proposing is more and more fiat banking; and
b) governments selling bonds / borrowing money is a completely separate and distinct concept from fiat. you can, quite obviously, have a commodity standard while also borrowing to fund deficit spending.

Sorry.....Are we suppose to still take you seriously as a poster, when you still insist that the U.S federal Reserve bank is owned & run by it's govt.

Back to lapsing off poor dole-plebs from their meagre rations.

 

[Long Live HFC]

Sorry.....Are we suppose to still take you seriously as a poster, when you still insist that the U.S federal Reserve bank is owned & run by it's govt.

only conspiracy nutters and wanton finance ignoramuses think the US central bank is a private corporation in the way you repeatedly and stupidly imply.

remember that time you posted that youtube video? the one about all the (trillions?) of dollars missing based on testimony from elizabeth coleman, the inspector general? and then i got to explain to you what an inspector general was and what they did?

Such offices are attached to many federal executive departments, independent federal agencies, as well as state and local governments.

the board of governers is an independent statutory authority and is the pointy end of the federal reserve system. its chairman is appointed by the president and requires congress approval. the federal reserve is audited by the GAO, congress' audit arm. the fed returns ~98% of its revenue to the treasury. it was created by federal law and is still subject to the federal reserve act, a piece of legislation i know you've never read.

yes, the fed also has private aspects to it too (like its 12 banks), and commercial deposit-taking institutions that meet certain criteria are required by law to buy "shares" in the federal reserve system. but you have no idea about the nuances of the fed, how its private aspects might impact its role as a financial and economy regulator, what benefits or negatives this might entail, how it is/isn't different to other central banks etc, because your understanding of its structure goes no deeper than "it's a private corporation hur dur" like the pathetic conspiracy regurgitator that you are.

 

[nut]

97% of money is created by private banks via fractional reserve banking.

Australia is about to hit a massive recession due to the Royal commission into banking.

Ever wondered why our average wage/ average house ratio is one of the highest in the world??? Because of our banks.

http://www.news.com.au/finance/real...t/news-story/5651d277d701405abb175292c870c4fa

 

[Long Live HFC]

97% of money is created by private banks via fractional reserve banking.

~97% of "money" is actually credit which is created during the lending process; we (pretty much everyone) then treat those credit IOUs as good as the real thing. deposits created via lending form part of the money supply in a broader m0/m1/m2/m3 etc sense, but the process is still different to the one performed by a central bank. for example, the creation of deposits during the lending process could also be described as an increase in the velocity of money. fractional lending in essence provides more and more people access to the same bank reserves; all customers essentially sharing the same pile of dollars.

Ever wondered why our average wage/ average house ratio is one of the highest in the world??? Because of our banks.

and the people who buy the houses?

Australia is about to hit a massive recession due to the Royal commission into banking.

http://www.news.com.au/finance/real...t/news-story/5651d277d701405abb175292c870c4fa

APRA have been tightening the screws for the last 2 or 3 years already so it will be interesting to see what further impact the royal commission might have in this regard. before too many people celebrate however, tighter regulations almost always punish those at the bottom of the rungs moreso than others.

 

[RupieDupie]

If anyone has had the pleasure of watching The Preacher (the comic is way cooler), they <spoiler alert> depict hell as a prison, and in each cell every inhabitant is constantly reliving the worst moments of their life. This repetition of suffering is reminiscent of the many hells dreamt up throughout Mythology as the worse kind of punishment, now actualised through the Reserve Bank.

 

[Run n Spread]

Probably because you end up with this.

What stuffed Zimbabwe was economic sanctions coupled with the Land Grabs caused the country to literally run out of food and goods on the shelf. Not being able to import more meant prices skyrocketed and notes just got printed so people could afford what little was left.

Zim should have just run up a debt US, China style.

Say the world goes to s**t and there is massive government debt. To who is it owned and how would it ever be enforced?

 

[Run n Spread]

Every now and again I think about where all these make believe dollars and cents come from and go to, and how the 1s and 0s on computers can accurately reflect any real sense of a currency when they are just numbers, and then my head hurts so I stop thinking about it.

Exactly money hits your account enabling you to spend.

That money came from someone elses account who came from somewhere which originated on a screen then made $$$ out of nothing.

a pretty funny response even by your terrible economics/finance standards. the best parts here are:

a) what the OP is proposing is more and more fiat banking; and
b) governments selling bonds / borrowing money is a completely separate and distinct concept from fiat. you can, quite obviously, have a commodity standard while also borrowing to fund deficit spending.

Fiat banking has resulted in for every $100 there is $110 debt. Even more considering banks are only required to have 10% backing for any loans they give out. At least with government taking over the process they have mechanisms to keep track of money.

 

[Mofra]

Granted rapid printing of money leads to inflation (which can then be controlled by manipulation the tax rate:i.e. taking money out of circulation or by gov purchases of foreign equipment/capital which has the same effect). Oppositely a government needs to bunk up the economy just issue more currency and inject it where needed (gov jobs, public works etc)

While a simplistic OP can someone explain why this doesn't occur and we are being conned? Interest rates (should be left to a privatised + 1 public banking sector) do not control inflation effectively. Government debt when they are the issuer is an oxymoron. Like saying the ocean is out of water.

In simple terms, 'printing money' in itself does not lead to rabid inflation.
It's the creation of currency above the productive capacity of the national economy that leads to inflation.

There are radical alternatives available e.g. the Yuan is pegged to foreign currency as China are net holders of US T Bond and do not float their currency, and some countries (desperately) will adopt the US currency as their official currency.

 

[Mofra]

Say the world goes to s**t and there is massive government debt. To who is it owned and how would it ever be enforced?

Government default means that any further raising of capital (such as bond issuances) either become far more expensive, or impossible.
Additionally, rolling over bonds would become far more expensive as the risk component has increased substantially (due to possibility of default).

It's 'owned' by the bond holders who, like any financial instrument holder, are paid an arbitrary rate of interest priced on the perception of risk for buying the instrument in the first place.

 

[Mofra]

Fiat banking has resulted in for every $100 there is $110 debt. Even more considering banks are only required to have 10% backing for any loans they give out. At least with government taking over the process they have mechanisms to keep track of money.

M1, M2 and M3 capital requirements are a little more complex than that and in Australia since the GFC there has been an ongoing increase in capital requirements for issued credit from lenders hence your average loan interest rate vs treasury interest rate is higher than pre-GFC levels.
Some would say 'good' as it will help soften the blow of the next (inevitable) financial crisis.

 

[RupieDupie]

In simple terms, 'printing money' in itself does not lead to rabid inflation.
It's the creation of currency above the productive capacity of the national economy that leads to inflation.

This is why Australia should reap the reward of the harvest. For example, how could Australia not be growing (rhetorical question)? Even in a moron’s hands this country would be booming and then some.

But the RBA at 1.5% (yet again) is demonstrating Australia has very little economic growth happening... apparently this is called a “robust” economy...

 

[00Stinger]

Because wealth isn't created by printing money, it is only represented by it.

In simple terms a currency (type of money) value is determined by the demand of it. Like simple economics, the higher the demand, the higher the value.

So therefore printing money for the sake of it would increase the supply but not the demand. Therefore devaluing what the currency is worth. This is a big reason why when inflation increases the reserve bank increases interest rates in order to keep the supply of cash down so that it can hold it's value

Now there are three ways to value a currency (dollar in this case).

1. Comparing it to other currencies. Traders on the foreign exchange market determine exchange rates by taking into account supply and demand and then factor in their expectations for the future.

2. By valuing treasurey notes which in essence are fixed income investments which are basically guaranteed. When demand for these are high, the dollar rises.

3. By foreign exchange. Which is how much money foreign countries hold. The more they hold, the lower the supply. That makes the money more valuable

 

[Long Live HFC]

Fiat banking has resulted in for every $100 there is $110 debt. Even more considering banks are only required to have 10% backing for any loans they give out. At least with government taking over the process they have mechanisms to keep track of money.

lol, this isn't my first rodeo

firstly, fiat "banking" has nothing to do with your supposed $100 of money = $110 of debt. you are conflating fiat with fractional lending; you could quite easily have a fiat currency in a full-reserve lending model or a commodity standard in a fractional lending model. what you proposed in the OP is more fiat currency than you can poke a stick at.

secondly, banks aren't required to have "10% backing" (*see below) of the funds they give out- you have lifted that from some silly site that only talks about the US system. reserve requirements differ from country to country. in australia (up until the last 2-3 years perhaps) it was about 3%, but even then i'm not sure how accurate that is because in australia IIRC its backed more by non-cash assets not by reserves. i am unsure how the bassel III (?) and APRA changes might have changed this though.

thirdly, you haven't actually explained what's wrong with people voluntarily pooling their funds so that it may be lent to others. lending is based on the fact that most money sits around doing nothing most of the time. fractional lending essentially allows your money to be lent to me, while still providing access to your money, to you. the questions you raise in your OP, while related, are still distinct from this argument against fractional lending you have now switched to.

finally, why is it necessary to "track money" in the way you describe? lending (theoretically) involves an efficient allocation of resources between contracting parties; it increases the money supply commensurate with the economic activity it allows (buying a house, going on a holiday etc). the government regulates the long-term trend re the costs associated with the price of money. if i want to buy now and pay later, of what benefit is there to me to have to satisfy the government i should be given a loan? have you seen the mess the government makes sometimes?



*additonally, it should be pointed out to you that they don't have to have 10%, they actually can only lend 90% when creating the loan; so if they have $1000 in reserves, they may lend $900. it is only after the money is moved by the borrower that they end up with 10% reserves:

$1000 of reserves = $1000 deposit liabilities
loan is created
$1000 of reserves, $1900 deposit liabilities and a $900 loan asset.
the customer withdraws their loan dollars
$100 reserves, $1000 deposit liabilities and a $900 loan asset.

and on and on it goes.

(this is all theoretical of course because i dont think anyone really pays much attention to strict reserve requirements in such a micro fashion these days.)

-edited for clarity.

 

[nut]

Hopefully it happens

https://thenewdaily.com.au/money/finance-news/2018/06/10/swiss-vote-banks-create-money/

 

[kickazz]

Hopefully it happens

https://thenewdaily.com.au/money/finance-news/2018/06/10/swiss-vote-banks-create-money/

It sure needs to be reined in, but don't you think there is benefit to some level of fractional reserve banking?

It has its part to play in wealth creation.