Damp squib budget

meanreversion said:
I think it's pretty simple. New money has to be created in order to pay the interest on existing loans. It can't work any other way.

Forget "economic activity". If you have a fixed amount of money and new goods are produced (someone creates something) the value of money will go up relative to "things produced" (=deflation), as long as the fiat money is legally enforced by the democratic government (which it always will be).

I really don't see fractional reserve banking as a con, but I know there are others with an opposing point of view.
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That's not necessarily correct, meanie... Suppose I borrow £100 from you at 10% pa. I spend the money to buy a widget-making machine and you accept my widgets in lieu of interest payments. Where is the creation of new money?
 
Hmm, but you're implying that widgets are interchangeable with money. If they are, then the production of widgets adds to the money supply. No?
 
meanreversion said:
Hmm, but you're implying that widgets are interchangeable with money. If they are, then the production of widgets adds to the money supply. No?
Click to expand...
Sorta... What I am implying is that economic activity, aka creation of value added, is the flip side of the money supply issue. So you have to look at the two of them together rather than just the money side.
 
meanreversion,...It's only a "con" as you so nicely put it,....If the "flow"of currency is halted (lending is postponed/canceled),resulting in business failures, and repossessions (a mathematical "post" certainty) ,..and of course all the activity related.
What was it, some guy said about controlling money?,....
 
Rite, so it's not a con (isn't that what I said?). It's maybe a con inasmuch as no-one really understands money, as it's not taught at school.
 
Martinghoul said:
Sorta... What I am implying is that economic activity, aka creation of value added, is the flip side of the money supply issue. So you have to look at the two of them together rather than just the money side.
Click to expand...

But value-added doesn't really mean a thing. If no money was ever created and we still existed on a barter system, it would be almost impossible to measure "value added".

If I spend £10mio exploring for oil, and another £10mio brining it up, and then sell the oil for £100mio, that's £80mio of "value added". BUT if the money supply remained perfectly static, everything else has to go down by a total of £80mio for me to sell my oil.

There's a disctinction between value added/efficiency and the value of money. In fact there isn't much connection between the two I don't think.

I used to wonder why people generally seemed to have more money. E.g. a millionaire these days is not a big deal, but in 1900 it was. I always assumed it was because as a planet we were developing value-added things all the time. But in fact the reason is fractional reserve banking, and the continued creation of new money.
 
meanreversion,....Hence my favorite saying:
If things seem more complicated than they need be,..be sure there is a con' going on! : /
 
I just don't see it as a con, as long as everyone understands it. But they don't.

Actually I'm getting quite giddy about England v Krautland on Sunday. Forget all this economic stuff, leave that to Dunecat!
 
meanreversion said:
But value-added doesn't really mean a thing. If no money was ever created and we still existed on a barter system, it would be almost impossible to measure "value added".
Click to expand...
That's the bit I don't understand at all... Suppose we were using gold or seashells or another fiat commodity as our medium of exchange. Why would it be more difficult to measure value added? I agree that it will be problematic in a fully barter-based economy, but that's a rather different scenario. Is your beef then with the use of currency in an economy in general, as opposed to barter?
 
I have no beef with anything, I'm relaxed about the whole set up. I read "Lords of Finance" a couple of months ago, it's an excellent book about the period of deflation and inflation during the wars.

I think the current system (i.e. fiat) is far preferable, as long as governments are kept in check.
 
meanreversion said:
I have no beef with anything, I'm relaxed about the whole set up. I read "Lords of Finance" a couple of months ago, it's an excellent book about the period of deflation and inflation during the wars.

I think the current system (i.e. fiat) is far preferable, as long as governments are kept in check.
Click to expand...
Ah, then we're in agreement, which is sehr gut...
 
meaneversion,....England v Germany ?,........what's going on,..world cup friendly or somethun'
When is the world cup BTW ? : )
 
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