What is money? Where does our money come from?

This is a discussion on What is money? Where does our money come from? within the Home Trader forums, part of the Trading Career category; Originally Posted by darktone Id agree with the first part completely . Id say that central banks dont have much ...

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Old Oct 31, 2011, 2:03pm   #9
 
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re: What is money? Where does our money come from?

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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!

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.
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.
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Old Oct 31, 2011, 2:09pm   #10
 
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re: What is money? Where does our money come from?

darktone started this thread 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!
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Last edited by darktone; Oct 31, 2011 at 2:13pm. Reason: typo
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Old Oct 31, 2011, 2:19pm   #11
 
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re: What is money? Where does our money come from?

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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!
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.
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Old Oct 31, 2011, 2:24pm   #12
 
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re: What is money? Where does our money come from?

darktone started this thread
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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.
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.
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Old Oct 31, 2011, 2:35pm   #13
 
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re: What is money? Where does our money come from?

darktone started this thread
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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.
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
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Old Oct 31, 2011, 2:40pm   #14
 
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re: What is money? Where does our money come from?

darktone started this thread
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Old Oct 31, 2011, 2:43pm   #15
 
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re: What is money? Where does our money come from?

darktone started this thread
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Old Oct 31, 2011, 2:49pm   #16
 
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re: What is money? Where does our money come from?

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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.
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.
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