What is money? Where does our money come from?

darktone

darktone

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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)
 
darktone said:
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)
Click to expand...

It is a ponzi scheme which has to kept going at all costs, otherwise it collapses.

Interest has to paid so the system has to keep creating more and more money over time to cover the ever increasing interest payments.

Money is as debt according to the you tube video below. I dont know how a complete an explanation this is but it seems to describe part of the system quite well.

Money As Debt-Full Length Documentary - YouTube
 
There are excellent articles on this site and a free e-book which explains money.

Atlas Sound Money Project

I think what donaldduke should be saying is that fiat money is debt because it has no intrinsic value, it is nothing but a promissory note from a government.
 
1) Money isn't debt. It's a medium of exchange.
2) Money is created by the central clearing exchange facility for money, aka the Central Bank.
 
Great to get some replies :).
Its one of those subjects thats a bit fuzzy imo, lots of confusion and half truths floating around.
Funny enough the doc that Dduke posted was the first material i saw, guessing it must have been 3-4 years ago now but its only recently after revisting the subject around 6 months ago that ive become very interested.

My view of question 1 is:-
money is debt (It is created as an interest bearing debt) / money is a means of exchange.

NT: Thanks for the link, would just add that fiat money doesnt have to be backed by debt.

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.
 
darktone said:
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.
Click to expand...
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 said:
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.
Click to expand...

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.
 
darktone said:
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.
Click to expand...

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.
 
I dunno how much of a shock this next statement is gonna be, certainly shocked me! :eek:

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! :eek:
 
Last edited:
darktone said:
I dunno how much of a shock this next statement is gonna be, certainly shocked me! :eek:

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! :eek:
Click to expand...
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.
 
Martinghoul said:
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.
Click to expand...

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. :confused:
 
Martinghoul said:
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.
Click to expand...

To me it doesnt sound good. Sounds like a huge conflict of interests. A very good deal for the banks, not for us.

I find a couple of vids
 
darktone said:
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. :confused:
Click to expand...
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.
 
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!:)
 
darktone said:
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!:)
Click to expand...
How do you envision money creation by the people?
 
Martinghoul said:
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.
Click to expand...

I dont agree. For the public to have money it has to first be borrowed by somone before it can circulate around the economy (I want to point out im not talking about private debt).
We are all in debt which we service through our taxes.

I would also say that debt growth is assured (as i currently understand it). As money is loaned into existance + interest. Further loans will be always be needed to service the interest.

I also see in a way that economics and monetary theory / policy are two seperate subjects. Monetary theory provides the foundation for economics imo. But im no economist ;).

Its good to talk about this stuff, i see it as the subject of our time.
 
Martinghoul said:
How do you envision money creation by the people?
Click to expand...

Through the Bank of England under control of the monetary policy commitee. It has to be so that there is no conflict of interest, it would have to transparent and accountable to the public.
I think most people currently think that BOE issues 'our' money anyway lol :D. I mean, it cant do any worse than the current arrangement.
 
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