What is money? Where does our money come from?

Splitlink said:
I think that you are right but it should not be like that, should it? I do not want to see the end of capitalism because I cannot envisage life without it. Perhaps this is a way to make sure that we keep it and regulate it, at the same time.

Loans should only be made with deposit money and the banks own capital and assets. It, certainly, seems logical when one comes to think of it but I have the inpression that, in recent years, the banks have avoided this

If this rule had been followed it would not have been possible to get mortgages of more than 30% (?) because there would not have been enough money to go round.

Policing this would be controlled by the centrral banks or some other authority.

I do not profess to be an authority on this but the idea is a start, surely, and can be imopproved upon?
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Remember the days when mortgages were 2 and a half times to 3 times salary?:)
House prices were linked to the local economy/wages?
Then the second home craze took off where higher earners in cities outbid country areas forcing local people out. Now you have large chunks of areas (Cornwall) dominated by second homes. Local greed and estate agents etc didn't help. But now it is difficult for any young person ( plumber, carpenter, electrician etc) to get on the housing ladder.
I hope house prices stagnate for a few years to allow youngsters to catch up earnings wise to return to 3 times salary for mortgage.....................some hope I know:confused:
 
Remember this?

One day a man walked into a country hotel and said he was thinking of taking the best suite for the following week-end and gave the hotel owner a £50 note to reserve it. The hotel owner was in debt to his drinks supplier the tune of £50, so he nipped around the corner and gave him the £50 note. The drinks supplier was in debt to his grocer to the tune of £50 so, in turn, nipped into his grocer and paid it off with the £50 note. The grocer was in debt to a lady of the night to the tune of £50, so sought her out and paid his debt off with the £50 note. The lady of the night was in debt to the tune of £50 to the hotel owner for renting a room for the afternoon, so went in and paid it off with the same £50 note.

The next day the man returned to the hotel and said that he'd changed his mind, so the hotel owner game him his £50 note back. So, back to square one but, miraculously, no-one was in debt anymore.

Maybe the man was Governor of the Bank of England and had just printed the note..........
 
barjon said:
Remember this?

One day a man walked into a country hotel and said he was thinking of taking the best suite for the following week-end and gave the hotel owner a £50 note to reserve it. The hotel owner was in debt to his drinks supplier the tune of £50, so he nipped around the corner and gave him the £50 note. The drinks supplier was in debt to his grocer to the tune of £50 so, in turn, nipped into his grocer and paid it off with the £50 note. The grocer was in debt to a lady of the night to the tune of £50, so sought her out and paid his debt off with the £50 note. The lady of the night was in debt to the tune of £50 to the hotel owner for renting a room for the afternoon, so went in and paid it off with the same £50 note.

The next day the man returned to the hotel and said that he'd changed his mind, so the hotel owner game him his £50 note back. So, back to square one but, miraculously, no-one was in debt anymore.

Maybe the man was Governor of the Bank of England and had just printed the note..........
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If I'd been the hotel owner, like it or not, if I had not had spare money I'd not have been able to return the deposit. The money was,always, in the system. The hotel owner had it, but preferred to wait for more to come in before paying off his debt.

This reminds me, a bit, of Germany's claim to have found an odd 55 billion last week.
In a pig's eye! They let their printing press do a little overtime to make their voters happy. No responsible govrnment, especially the German, finds an odd 55 billion knocking around. That money is in inflationary and in the system, devaluing everyone's savings.
 
I think that you are right but it should not be like that, should it? I do not want to see the end of capitalism because I cannot envisage life without it. Perhaps this is a way to make sure that we keep it and regulate it, at the same time.
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Im not to good on the ism's tbh but i dont think our current system has much to do with capitalism. The Banks have a monopoly control of our money supply, the public will always be on the short end of that stick imo.

Loans should only be made with deposit money and the banks own capital and assets. It, certainly, seems logical when one comes to think of it but I have the inpression that, in recent years, the banks have avoided this
If this rule had been followed it would not have been possible to get mortgages of more than 30% (?) because there would not have been enough money to go round.
Click to expand...
The way you describe it is how around 1/3rd of the public (according to NEF) currently thinks is how the system works. The problem (and imo deception) is that deposits and bank credit (loans) are'nt viewed as being different from eachother, that allows the expansion.
Re mortgages "of more than 30%" im sorry i dont understand? I would say that banks like to loan against property, the number that sticks in my mind is around 8% of lending goes to small business, the remaining 92% goes to mortgage lending / speculation etc. Not hard to see where the housing bubble came from in view of this.

Policing this would be controlled by the centrral banks or some other authority.
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Yep, this is i think is primary in all monetary reform proposals. The authority would have to be accountable / transparent / without incentive.

I do not profess to be an authority on this but the idea is a start, surely, and can be improved upon?
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Me nether mate, am just some guy who likes to know how things work. The more i learn about this subject the more important i think it is for general public to know. From there we can talk about alternatives. Problem ive seen is getting people to engage in the subject generally. I mean ive had some pretty intense conversations with friends even! The responses range from "thats just the way it is, what can we do about it!?" to "you been hanging around with too many hippies!".....I dont know any hippies!:|
I fear real change will only come out of necessity , when it all falls down. :eek:
 
We laughed at the Irani idea of lending to earn interest as being against Allah. I, for one, am not laughing so much now although, obviously, some middle ground has to be established as to what interest should be fair.

Nevertheless, there must be some way of writing the preservation of a country's currency into law.

A bank executive (not a director, I don't know any and the shaving mirror is as good as the golf course :)) told me that Visa charges 6% per month if the bill is not paid at the end of the month. That cannot be right, can it? It's not common sense and our society should have questioned that decades ago.
 
what happens if you go to the BoE with a note and ask them to keep their promise to pay you on your demand the sum of ten pounds?
 
I hope house prices stagnate for a few years to allow youngsters to catch up earnings wise to return to 3 times salary for mortgage.....................some hope I know
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I think in real terms house prices are going down but are being masked by inflation atm. Im with you on the wage front, int gonna change imo whilst the pr machine is pumping austerity!

Maybe the man was Governor of the Bank of England and had just printed the note..........
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Nah, if he was hed a found a way of working some interest into that deal! ;)

We laughed at the Irani idea of lending to earn interest as being against Allah. I, for one, am not laughing so much now although, obviously, some middle ground has to be established as to what interest should be fair.
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Im not totally against interest but imo it should be relative to risk taken. In reguard to money creation i think its totally wrong.

what happens if you go to the BoE with a note and ask them to keep their promise to pay you on your demand the sum of ten pounds?
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Lol, thats a good one! Ill try it and see next time im up town ;). As i currently understand it, a banknote can best be described as a physical claim on numbers inside a computer system.
Always gets a reaction when you point out that little line of text on a note. :)
 
Most money now a days comes from decimals and zeros put into accts from thin air (thanks to dysfunctional central banking) - this will not end well!

Gold and Silver still makes sense to the long side longer term.
 
LivestreamFX said:
Most money now a days comes from decimals and zeros put into accts from thin air (thanks to dysfunctional central banking) - this will not end well!

Gold and Silver still makes sense to the long side longer term.
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Maybe this would be closer to the mark.

"Almost all money now a days comes from numbers typed into accts (loaned at interest) from thin air (thanks to greedy bankers who count on the public being 99% ignorant of what it is they actually do) - this will not end well for the majority!

Gold and Silver still makes sense to the long side longer term, as well as pretty much anything else that isnt 'fiat money'."

Henry ford put it well i think
*It is well enough that people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning!*
 
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darktone said:
In this example id say that everyone is lending apart from the guy with the printing press who is creating credit/money.As I currently understand it thats not how our current monetary system works, the system we have is two stage. Central banks create the initial (base money), private commercial banks expand this money (create broad money).
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Yes, but the amount of broad money that can be created is already determined by the Central Bank. That's the whole point I am trying to convey.
Im always willing to be proved wrong. If we take the BoE sheet.
http://www.bankofengland.co.uk/publications/bankreturn/2011/111102cs.pdf
It shows a total balance of near 261billion. The government figure for our National debt is around 980billion atm (this doesnt include the bank bailouts which takes it well over 2 trillion)
Could you tell me where the other money came from to back this debt?
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What do you mean? There's a whole lot of people who have the ability to lend to the UK government, including people outside of the UK.
I have my own view for sure, id argue that ive added a little more to this thread than just 'bunch of funny videos' and opinions of others.
Videos are great for folks new to the subject imo and are far more engaging than reading page after page of text. I also dont see the the harm of backing my view with reference to other material.
But thats just me.
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I am not suggesting you didn't add anything to this thread. I am just saying that if we're to have a discussion where someone makes a specific point to which another can respond, it's impossible to do it with videos and references to what other people say.

Finally, I have read the proposal and I am afraid that it's fundamentally flawed. I could explain in detail, if you like.
 
Yes, but the amount of broad money that can be created is already determined by the Central Bank. That's the whole point I am trying to convey.
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In theory i agree with that view. The US system (in theory) puts a ceiling on bank credit creation at around 9x. The UK / Europe has no clearly defined ceiling (that i can see) but controlled by 'stress testing' (i dont really know enough to comment on that). The banking crisis has shown that banks dont stick to these rules! To my mind this severely limits the CBs power over bank created credit / money supply.
What do you mean? There's a whole lot of people who have the ability to lend to the UK government, including people outside of the UK.
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I understand that but only around 35% of UK debt is held overseas. So where does the money come from to buy the other 65%?.
You previously said.
Well, how about if you borrow the £20 from another friend and you now "have it" to lend. Does that qualify as credit creation or lending? 'Cause that's actually what happens in the modern economy. The money that the commerical banks "lend" doesn't actually get created out of thin air. It's, effectively, lent to them by the central bank and show up on the CB's balance sheet. This way the central bank controls (or tries to, at any rate) the total amount of "wide money" in the system.
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I dont know, i sort of sounds like youre presenting two views which i find a bit confusing. To my mind, regardless of control, base and broad money are both created out of thin air. Maybe our views are closer than i see and its just a wires crossed thing.
Finally, I have read the proposal and I am afraid that it's fundamentally flawed. I could explain in detail, if you like.
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Certainly mate, all i ask is you keep it as layman like as poss.
 
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