Cor i havent been here in a good while, hope your all well . Would be interested in hearing your opinions / views / facts on:-
1) What is money?
2) Where does our money come from?
(Am talking about the UK)
Yes, that's correct, but the wide money is effectively allowed to exist by the central bank, so, in a way, it all comes down to them.Martinghoul: I agree that some of our money is created by central banks (base money) But the bulk of our money (90% +) is created by private commercial banks. This is the bit that interests me the most.
Yes, that's correct, but the wide money is effectively allowed to exist by the central bank, so, in a way, it all comes down to them.
Id agree with the first part completely . Id say that central banks dont have much control over the amount of bank issued credit though.
This is all as i currently understand it so i reserve the right to make a complete **** of myself! :clap:
In the US they have a system that puts a ceiling on how much they can create, around 9x deposits. In the UK its less regulated (stress testing), before the 2008 fun and games they were lending 30x plus.
Both are fractional reserve systems.
Why is that such a shocking thing? We like the free mkts, right? So what entity is better suited to make the decisions where to allocate capital than the banking system, which is, supposedly, the epitome of the free, unfettered mkt? Sounds good to me, at least on paper and in theory.I dunno how much of a shock this next statement is gonna be, certainly shocked me!
When banks make loans, they create money!
This still blows my mind! Banks have monopoly control of the amount of money in supply, they also control where this money goes, ie who gets to borrow it!
Yes, correct... The idea is that CBs can control the leverage of the "official" banking system by tweaking the reserve requirements. The problem, of course, is that the funding for the global banking system was bypassing the "official" channels, which means that the CBs/regulators completely ignored all signs of excess. We all witnessed the unfortunate result.
Why is that such a shocking thing? We like the free mkts, right? So what entity is better suited to make the decisions where to allocate capital than the banking system, which is, supposedly, the epitome of the free, unfettered mkt? Sounds good to me, at least on paper and in theory.
Well, we don't really have to borrow our money into existence. You choose to borrow. And debt growth isn't really assured at all, as there have been and always will be periods of significant deleveraging. These sorts of cycles are inevitable and, you could argue, are part of capitalism (this is actually the Austrian view most eloquently described by Schumpeter). The question is all about making these cycles less volatile and socially destructive, i.e. it's not about economics, but rather about politics/sociology.Yep, have to agree.
The question for me is why do we have to borrow our money into existance at all?
Under our current system debt growth is assured.
How do you envision money creation by the people?When you look though history there has been a constant tug of war battle between banks and the people. I think we might be living through another transition of money creation power back to the people. I hope so!
Well, we don't really have to borrow our money into existence. You choose to borrow. And debt growth isn't really assured at all, as there have been and always will be periods of significant deleveraging. These sorts of cycles are inevitable and, you could argue, are part of capitalism (this is actually the Austrian view most eloquently described by Schumpeter). The question is all about making these cycles less volatile and socially destructive, i.e. it's not about economics, but rather about politics/sociology.
How do you envision money creation by the people?