What is money? Where does our money come from?

[darktone]

Yes, sorry... I have been procrastinating. It's just a bit more serious than the usual forum stuff, so takes a bit more resolve for me to gird my loins and get down to business.

An outline of the main points will do mate. simple is best, cos i is simple! So mi mama told me!

 

[Martinghoul]

An outline of the main points will do mate. simple is best, cos i is simple! So mi mama told me!

The main point, as I understand it, is that the authors suggest that you create a sort of a full-reserve system for individual deposits within the standard fractional-reserve banking framework that's in place for institutions. Apart from the usual issues that full-reserve banking exhibits, the main problem is that the setup they propose is profoundly unfair. Why should I, as a retail depositor, be entitled to a lower yield than an institution? As always happens when artificial abritrary constraints are imposed, the mkt will quickly find a way to circumvent these rules and we will be back to square one. I will be able to elaborate once I re-read the piece again.

 

[new_trader]

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.

Great post nice articles!!!!!!!!!!!
Thanks

You're welcome. If you like that site you will like this video,

Ron Paul's Domestic Monetary Policy and Technology Subcommittee Hearing entitled "Road Map to Sound Money: A Legislative Hearing on H.R. 1098 and Restoring the Dollar"
Ron Paul Hearing on Restoring Sound Money - YouTube



Spread the word!

 

[darktone]

The main point, as I understand it, is that the authors suggest that you create a sort of a full-reserve system for individual deposits within the standard fractional-reserve banking framework that's in place for institutions. Apart from the usual issues that full-reserve banking exhibits, the main problem is that the setup they propose is profoundly unfair. Why should I, as a retail depositor, be entitled to a lower yield than an institution? As always happens when artificial abritrary constraints are imposed, the mkt will quickly find a way to circumvent these rules and we will be back to square one. I will be able to elaborate once I re-read the piece again.

within the standard fractional-reserve banking framework

As i understand it they want to do away with FR entirely. Maybe your referring to the transition period? Would be much fairer than the system we have today imo.

I know your not into the videos but i still say its an easier format to digest for most (me included) than text. The discussion below is worth a read too.
Our Proposals | Positive Money

 

[darktone]

Originally Posted by new_trader View Post
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.

NT, have you seen any of Bill Still's work on monetary reform?

 

[new_trader]

NT, have you seen any of Bill Still's work on monetary reform?

Yes

 

[darktone]

Yes

How do you reconcile the (Ron Paul) gold standard vs debt free fiat (Bill Still) thing?
Your pro gold standard arnt you?

 

[new_trader]

How do you reconcile the (Ron Paul) gold standard vs debt free fiat (Bill Still) thing?
Your pro gold standard arnt you?

I watched and read some of Bill Still's ideas and agree in principle with some of his views but I am pro sound money.

 

[Martinghoul]

As i understand it they want to do away with FR entirely. Maybe your referring to the transition period? Would be much fairer than the system we have today imo.

I know your not into the videos but i still say its an easier format to digest for most (me included) than text. The discussion below is worth a read too.
Our Proposals | Positive Money

My comment was related to the actual document that you have posted earlier. I have read it and I am pretty sure that they specifically propose permanent full-reserve banking for deposits only. If they proposed a total elimination of fractional-reserve banking, it's even more nutty. There's all sorts of evidence (including empirical) that full-reserve banking just doesn't function in modern society.

 

[darktone]

I have read it and I am pretty sure that they specifically propose permanent full-reserve banking for deposits only.

To what else does FR apply to?

There's all sorts of evidence (including empirical) that full-reserve banking just doesn't function in modern society.

Can you give me some examples?

it's even more nutty

And what we have now isnt!?

 

[darktone]

I watched and read some of Bill Still's ideas and agree in principle with some of his views but I am pro sound money.

Fair do's man. Thing that concerns me with gold backed money (ie fixed in quantity to some extent) is that it can manipulated / hoarded, to the majorities cost.
Outside that i like Ron Paul a lot.

 

[new_trader]

Fair do's man. Thing that concerns me with gold backed money (ie fixed in quantity to some extent) is that it can manipulated / hoarded, to the majorities cost.

That would be unlikely if the initial link is determined by the free market over a period of time rather than it being made by Government edict. It would also be important for interest rates to be determined by the free market after that.

 

[Martinghoul]

To what else does FR apply to?

Institutional pools of capital that, incidentally, form what people refer to as the "shadow banking system".

Can you give me some examples?

Well, the most interesting examples come from attempts to create a functioning banking system/infrastructure under strict Sharia law. Because Islam prohibits "usury", there have been attempts to do full-reserve banking, while keeping the commercial banks in private ownership. It turned out that that just can't be done. I think it's been tried in smaller countries like Bangladesh, but, to some extent, even in larger ones like Indonesia.

And what we have now isnt!?

What we have now is flawed in a variety of ways. However, replacing something that kinda sorta works, albeit in a flawed way, with something that's quite clearly not functional isn't a great idea, IMHO. It's the same story as capitalism and democracy. Both are concepts that have all sorts of issues and are as imperfect as you like. However, they're the best we got.

 

[scose-no-doubt]

It would also be important for interest rates to be determined by the free market after that.

How would that work for government funding particularly at auction/issuance and what's to stop the free market from artificially inflating "risk free" rates?

 

[darktone]

That would be unlikely if the initial link is determined by the free market over a period of time rather than it being made by Government edict. It would also be important for interest rates to be determined by the free market after that.

I agree with both of those points, but after the system is up and running what would stop the larger holders of gold / gold backed assets from 'not' loaning it out? In other words large lenders could still control the quantity of money in the public domain.

 

[Sidekicker]

There a few people promoting jubille years where debts are reset.
FIAT is the main problem.

 

[new_trader]

I agree with both of those points, but after the system is up and running what would stop the larger holders of gold / gold backed assets from 'not' loaning it out? In other words large lenders could still control the quantity of money in the public domain.

If you can believe the current stats from the WGC, The US is still the largest holder of gold by a very wide margin. Read up about the failed london gold pool.

Lessons From The London Gold Pool - Print Version

 

[scose-no-doubt]

How would that work for government funding particularly at auction/issuance and what's to stop the free market from artificially inflating "risk free" rates?

Also, if the markets don't set interest rates how come BTP hit >7%?

genuinely asking questions here, no snipes

 

[enragedcow]

Since the "real world" mechanics have all been described by previous posts I thought i'd add a more abstract version of money, stolen mostly from Adam Smith.

Money, ignoring its physical form (currency) is the direct reward for labour and therefore is equivalent to units of labour. The value of goods and services can be thought of then in terms of how many hours a man must work to earn those goods and services. For example my wage is $13 (ish) an hour so Skyrim ($113 ish) cost me 8.7 hours to earn.

I think many people forget this concept.

According to an essay my friend wrote, money is a god...

 

[darktone]

Part of the Positive Money Conference in London.

How Money is Made / Created: Ben Dyson Explains the Debt Crisis - YouTube