What is money? Where does our money come from?

darktone

Well-known member
Nov 2, 2003
3,917
999
123
#1
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)
 

donaldduke

Well-known member
Jan 1, 2004
1,664
251
93
#2
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)
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
 

new_trader

Well-known member
Jan 1, 2006
6,166
1,253
223
#3
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.
 

Martinghoul

Well-known member
Feb 3, 2009
2,690
276
93
#5
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.
 

darktone

Well-known member
Nov 2, 2003
3,917
999
123
#6
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.
 

Martinghoul

Well-known member
Feb 3, 2009
2,690
276
93
#7
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.
 

darktone

Well-known member
Nov 2, 2003
3,917
999
123
#8
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.
 

Martinghoul

Well-known member
Feb 3, 2009
2,690
276
93
#9
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.
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.
 

darktone

Well-known member
Nov 2, 2003
3,917
999
123
#10
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:

Martinghoul

Well-known member
Feb 3, 2009
2,690
276
93
#11
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:
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.
 

darktone

Well-known member
Nov 2, 2003
3,917
999
123
#12
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. :confused:
 

darktone

Well-known member
Nov 2, 2003
3,917
999
123
#13
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