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    This thread is getting ridiculous.

    polymath, just give it up. Your don't understand the monetary system at even a completely basic level, you keep making horrible basic mistakes like claiming that the government can't create money, or that money can exist without an equal and opposite amount of debt.

    Unless you get your head around the basics, you can't hope to be able to partake in a discussion at a meaningful level.
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    (Original post by cole-slaw)
    This thread is getting ridiculous.
    Then graciously see yourself out.

    polymath, just give it up. Your don't understand the monetary system at even a completely basic level, you keep making horrible basic mistakes like claiming that the government can't create money, or that money can exist without an equal and opposite amount of debt.
    The point of a discussion is to come to an understanding of a subject, even at its basic level, through analysis and critique. It's unfortunate that you're unable mentally to grasp that mere assertions do not characterise an exchange of reasoned arguments.

    Unless you get your head around the basics, you can't hope to be able to partake in a discussion at a meaningful level.
    It appears you have no intent to partake in the discussion given that you have chosen to ignore my detailed response to you.

    Repeating that I have no understanding of the basics doesn't make it any truer. Good day to you.
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    (Original post by Polymath0)
    So where is the distinction between electronic credit and physical legal tender?
    The distinction is in how it comes into being.

    I can't see an argument here.
    I wasn't "arguing" anything. I was stating facts.

    The Bank of England can only fractionally create M0, the notes and coins, reactively to the proactive creation of electronic money by banks. The electronic money, therefore, constitutes the entire money supply since it is the only form of money which is created and loaned.
    You are confused. The Bank of England can create money electronically too (by buying bank assets like bonds, engaging in open-market operations, etc). You seem to be under a particular misapprehension as to what fractional-reserve banking is, and how that relates to notes and coins as against bank credit. Your claim that "the Bank of England can only fractionally create M0... reactively to the proactive creation of electronic money by banks" is quite simply wrong.

    The second part of your argument is nearly incoherent. Customers of commercial banks accept the loan, per se, not necessarily the process by which the loan is issued. In fact, a majority of bank customers have no knowledge that private commercial banks have the power to create money at will.
    You still appear to be confused. Customers will accept an electronic transfer into their account as payment in the same way they will accept a payment in cash. In practical terms people accept it as payment and that it is identical to money in the sense you understand it, therefore their "acceptance of the process" is utterly irrelevant.

    If someone took out a £5 million dollar loan in order to give you, personally, a £5 million gift, and transferred this money (which was commercial bank money in origin) to your account with no strings attached, you would then be able to go and spend that money. In fact, I doubt you would say that you are morally obligated not to accept it because it is somehow not real money and you don't "accept the process".

    By the way, I was making no "argument". I was stating facts, difficult as they are for you to accept.

    Bitcoin is in use on a limited scale and has not replaced the national currency. It's a completely false comparison.
    I'm sorry to say that this comment of yours suggests that you really do have a second-rate mind. It's almost as though you lack the intellectual capacity to understand the distinction between material and particular facts in an analogy. The concept there is that Bitcoin can be used as money, in the same way bank credit is used as money, because people accept it as such.

    Yet I still fail to grasp how this ties in with anything you've said.
    Your inability to grasp the matter at hand seems to be a recurring theme. New money is created by commercial banks when they extend a loan to a customer; they add a deposit to that customer's account electronically. That money then goes out into the economy, and in the aggregate some proportion of that money will be taken at as cash at some point (which means banks need to hold a reserve to meet that demand, say 3% for argument's sake).

    In order to have that cash available to be withdrawn (as opposed to electronic bank money, which obviously can't), the Bank of England supplies actual cash to commercial banks to meet their reserve requirement in exchange for other assets on their balance sheet (so banks do pay for it). As the principal of the loan is repaid it is "destroyed" or extinguished (the electronic bank money disappears) while the interest that has been generated is not and is kept by the bank as revenue.

    The Bank of England can create as much or as little cash money as is required for the operations of commercial banks. The Bank of England can also create real electronic money (untied to any commercial bank loan) in the form of Quantitative Easing where it buys up assets in the real economy with money it creates.

    Here is a simple explanation of how money is created by commercial banks, written by the Bank of England;

    http://www.bankofengland.co.uk/publi...ion.pdf#page=1
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    (Original post by SignFromDog)
    The distinction is in how it comes into being.
    But you were somehow blurring that distinction.

    I wasn't "arguing" anything. I was stating facts.
    For what purpose though? To what end? Facts are usually accompanied with evidence, by the way.

    You are confused. The Bank of England can create money electronically too (by buying bank assets like bonds, engaging in open-market operations, etc). You seem to be under a particular misapprehension as to what fractional-reserve banking is, and how that relates to notes and coins as against bank credit. Your claim that "the Bank of England can only fractionally create M0... reactively to the proactive creation of electronic money by banks" is quite simply wrong.
    According to whom is it an inaccurate description? The Bank of England research paper on money creation states that the commercial banks are provided with the required reserves on demand by the central bank, and the reserves constitute only a fraction of the entire money supply.

    You still appear to be confused. Customers will accept an electronic transfer into their account as payment in the same way they will accept a payment in cash. In practical terms people accept it as payment and that it is identical to money in the sense you understand it, therefore their "acceptance of the process" is utterly irrelevant.

    If someone took out a £5 million dollar loan in order to give you, personally, a £5 million gift, and transferred this money (which was commercial bank money in origin) to your account with no strings attached, you would then be able to go and spend that money. In fact, I doubt you would say that you are morally obligated not to accept it because it is somehow not real money and you don't "accept the process".
    By "process" I refer to the way in which money is created. I put it to you that one's contractual agreement, in the context of taking out a bank loan, does not de facto legitimise the process (i.e. money created as debt) by which the contract was brought about. It appears to me that you are legitimising money creation by private banks on the basis that the customer accepts the money. But this is analogous to legitimising child labour on the grounds that the child entered a contractual agreement with the employer. It leaves no room to expose the exploitation involved.

    Can you explain where I implied that electronic bank money is not "real money?" I haven't made that argument once.

    By the way, I was making no "argument". I was stating facts, difficult as they are for you to accept.
    Snide and uncalled for comments like that put me off even engaging with people like yourself. What need is there to adopt antagonism? When you assert that facts are "difficult" for me to accept, it illustrates clearly that you hold malice against me. Why? It seems you have no intention to have an illuminating, civil discussion.


    I'm sorry to say that this comment of yours suggests that you really do have a second-rate mind. It's almost as though you lack the intellectual capacity to understand the distinction between material and particular facts in an analogy. The concept there is that Bitcoin can be used as money, in the same way bank credit is used as money, because people accept it as such.
    I thought you were drawing a parallelism, in that the general public can create Bitcoin in the same way private banks create money. But it turns out that this is not what you were saying.

    You are basically concealing the flawed edifice of the monetary design on the basis that the bank credit is accepted. But that doesn't logically follow as a justification, as I explained before.

    Your inability to grasp the matter at hand seems to be a recurring theme.
    Your ability to cast aspersions and act obnoxiously seems to be a recurring theme.

    The Bank of England can create as much or as little cash money as is required for the operations of commercial banks. The Bank of England can also create real electronic money (untied to any commercial bank loan) in the form of Quantitative Easing where it buys up assets in the real economy with money it creates.
    Of course I don't deny that the Bank of England can create money. However, it only creates the base money for bank money creation after the fact, since the private banks control and allocate the distribution of money through their lending. It also engages in QE to indirectly encourage further credit creation by banks. People's QE on the other hand would have the Bank of England creating money ex nihlo for the government, which is what I advocate, but it does not fully address the debt-based private money system.

    Here is a simple explanation of how money is created by commercial banks, written by the Bank of England;

    http://www.bankofengland.co.uk/publi...ion.pdf#page=1
    I presented that document in the opening post, and in the first post on this page. Have you not paid attention?
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    SignFromDog,

    Out of courtesy I should inform you that I've reported your post #347. I will admit that I was a dolt for even bothering to make a response to you. Consider yourself utterly ignored. You are a contemptible individual.
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    (Original post by Polymath0)
    According to whom is it an inaccurate description? The Bank of England research paper on money creation states that the commercial banks are provided with the required reserves on demand by the central bank, and the reserves constitute only a fraction of the entire money supply.
    You are still confused. If the Bank of England only created money in response to demand from commercial banks, then they would not have any reserves and would not be capable of a QE programme. Both of those facts demonstrate your flawed understanding of the monetary system.

    Snide and uncalled for comments like that put me off even engaging with people like yourself. What need is there to adopt antagonism? When you assert that facts are "difficult" for me to accept, it illustrates clearly that you hold malice against me. Why? It seems you have no intention to have an illuminating, civil discussion.
    Oh get you, Prince Myshkin. Oh the irony. Go back and look at your response to my first long comment on this thread, then come back and you can decide whether you want to continue to feign this confected outrage.

    Of course I don't deny that the Bank of England can create money. However, it only creates the base money for bank money creation after the fact


    Wrong again. QE proves you wrong axiomatically. The Bank of England also holds reserves. The Bank of England also has the power to create money as much money as it wishes, whenever it chooses.

    I presented that document in the opening post, and in the first post on this page. Have you not paid attention?
    It's remarkable then that you could post that document and yet still completely misunderstand basically every element of the monetary system.
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    (Original post by Polymath0)
    SignFromDog,

    Out of courtesy I should inform you that I've reported your post #347. I will admit that I was a dolt for even bothering to make a response to you. Consider yourself utterly ignored. You are a contemptible individual.
    I would report your post #342 but I have something resembling dignity and a life. As for ignored; how shall I ever get over that? :lol:
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    (Original post by SignFromDog)
    I would report your post #342 but I have something resembling dignity and a life. As for ignored; how shall I ever get over that? :lol:

    I don't know why he won't listen to us. he is obviously interested in this subject, you would think he would want to learn about it and stop embarrassing himself from making such idiotic and embarrassingly inaccurate statements.
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    Just to make this clear, there is no such thing as "debt free money". Having money means someone owes you something. If your "money" is in the form of cash issued by the government, then the government owes you that amount of goods and services. If your money is in the form of a deposit in the bank, then it is the bank that owes you that amount of goods and services. If your money is in the form of an IOU note from your friend, then your friend owes you that amount of goods and services.

    Most money is exchangeable for other forms of money. You can exchange cash for your balance on your deposit account , and you can exchange an IOU note for cash, assuming your friend has some. Because the last one is somewhat dubious, then IOU notes are not counted towards the money supply. But in principle they are exactly the same thing. If your friend applied for a banking licence, then his IOU note would count towards the money supply.

    Ultimately, it doesn't matter how it is created or who by, but ALL money is debt. The value of money comes from your faith in the ability of the entity to repay your debt in goods and services on demand. Ultimately, the value of ALL money within a society is dependent upon its ability to be converted to liquid government debt so that you can claim goods and services with it. Without that debt, the money become instantly worthless. The notion of debt-free money is espoused only by people who didn't listen very carefully in the first class of monetary economics 101.


    The notion of the money multiplier is not relevant to the UK, because we abolished compulsory reserves in 1981. The amount of money in the system is entirely controlled by supply and demand, (I'm sure we all remember the money supply and demand curves) which is mitigated by the interest rate. The government sell print cash and sell it to the commercial banks at face value, the banks then pass the cash on to their customers on demand. Normally they keep about 3% of their short-term debts (ie deposit accounts) in cash.
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    (Original post by SignFromDog)
    I would report your post #342 but I have something resembling dignity and a life. As for ignored; how shall I ever get over that? :lol:
    That unworthy post of yours that I reported got deleted by a moderator. If you'd like to continue with the foul attitude, have at it.
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    (Original post by cole-slaw)
    I don't know why he won't listen to us. he is obviously interested in this subject, you would think he would want to learn about it and stop embarrassing himself from making such idiotic and embarrassingly inaccurate statements.
    Part of learning is to engage in discussion so as to acquire knowledge. If I ever want to learn how to act undignified through insult and mockery of others, you are rest assured the go-to guy. But that's the beginning and end of it.
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    (Original post by Polymath0)
    That unworthy post of yours that I reported got deleted by a moderator. If you'd like to continue with the foul attitude, have at it.
    Didn't you promise to ignore me? Going back on that undertaking simply makes you look erratic and emotional.

    I will say it gives me some mirth to know that two days after that conversation went down, and I'd completely forgotten about you, that you are still burning with frustration and upset over it.

    However, that mirth is tempered by my natural empathy in considering that you take this stuff so seriously.
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    (Original post by Polymath0)
    Part of learning is to engage in discussion so as to acquire knowledge. If I ever want to learn how to act undignified through insult and mockery of others, you are rest assured the go-to guy. But that's the beginning and end of it.
    If you actually read what I and signofdog have posted carefully, you would find you picked up a lot of knowledge about monetary economics.

    Are you really too stupid and arrogant to recognise this? Why do you insist on just repeating the same phrases that everyone here has already explained are self-contradictory idiotic nonsense?
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    (Original post by cole-slaw)
    Ultimately, it doesn't matter how it is created or who by, but ALL money is debt.
    The "all money is debt" faction confuse the nature of money through their observation of one perverted form of it, and subsequently deny that its form can change or be improved. The claim made is that because all money in circulation is issued as credit by banks, that therefore money is inherently debt-based. The reason why this faction find it so difficult to understand the concept of money as a distinct and separate entity to that of debt is twofold.

    1. A failure to recognise that money and credit denote two different things by virtue of the fact that they think money and credit are synonyms of sorts. On the contrary, each has a distinctly specific definition.
    Money withdrawn from one's debit account (e.g. wages) and spent directly on goods and services represents a current claim that does not require repayment.
    Credit is a deferred payment furnished by a bank to satisfy immediate consumption or investment by a customer and must be repaid over a scheduled period.

    2. An unwillingness to understand how money can be created and issued beyond the status quo; an unfortunate tunnel vision that is reinforced by an inability to distinguish between money and credit, as concisely defined above.

    In reality, government created money is practically feasible. The central bank would grant the government the debt-free financing it requires for the sole purpose of investment; namely, for the physical development of the economy that would cater to the basic social needs of every person in society. The money issued by government would originate as payment for whatever it was spent on, not deferred payment.
    The development and growth that would ensue as a result of debt-free financing with money, not credit, would allow government legal tender to circulate the economy and enter a pool of savings from which the commercial banks could make loans to the private sector; without the ability to create purchasing power as a result.

    The defenders of the debt-based monetary system who simultaneously tout the principle "the nation must live within its means" equivocate on the term "means." Intuitively, the only "means" one must "live within" are the observable constraints of physical resources, raw material, human capital and environment-related constraints. The current "means" are superficial and counterintuitive due to the fact that it clings to a flawed man-made monetary system that bears no consonance with the "means of reality."

    The following referential quote (in Creating New Money, Huber, J., p. 30) reveals how this misunderstanding of money is not novel.

    "... on UK banknotes the Bank of England’s Chief Cashier still says “I promise to pay the bearer on demand the sum of...”. As long ago as the parliamentary debate on the 1954 Currency and Banknotes Act, this was being ridiculed as meaningless. The idea that money is not actually money but only a promise to pay money, and is therefore a debt, is a good example of the “smoke and mirrors” which characterise the present monetary system. By contrast, US Federal Reserve Notes (dollar bills) state clearly “This note is legal tender for all debts, public and private.""
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    (Original post by Polymath0)
    The "all money is debt" faction confuse the nature of money through their observation of one perverted form of it, and subsequently deny that its form can change or be improved. The claim made is that because all money in circulation is issued as credit by banks, that therefore money is inherently debt-based. The reason why this faction find it so difficult to understand the concept of money as a distinct and separate entity to that of debt is twofold.

    1. A failure to recognise that money and credit denote two different things by virtue of that fact that they think money and credit are synonyms of sorts. On the contrary, each has a distinctly specific definition.
    Money withdrawn from one's debit account (e.g. wages) and spent directly on goods and services represents a current claim that does not require repayment.
    Credit is a deferred payment furnished by a bank to satisfy immediate consumption or investment by a customer and must be repaid over a scheduled period.

    2. An unwillingness to understand how money can be created and issued beyond the status quo; an unfortunate tunnel vision that is reinforced by an inability to distinguish between money and credit, as concisely defined above.

    In reality, government created money is practically feasible. The central bank would grant the government the debt-free financing it requires for the sole purpose of investment; namely, for the physical development of the economy that would cater to the basic social needs of every person in society. The money issued by government would originate as payment for whatever it was spent on, not deferred payment.
    The development and growth that would ensue as a result of debt-free financing with money, not credit, would allow government legal tender to circulate the economy and enter a pool of savings from which the commercial banks could make loans to the private sector; without the ability to create purchasing power as a result.

    The defenders of the debt-based monetary system who simultaneously tout the principle "the nation must live within its means" equivocate on the term "means." Intuitively, the only "means" one must "live within" are the observable constraints of physical resources, raw material, human capital and environment-related constraints. The current "means" are superficial and counterintuitive due to the fact that it clings to a flawed man-made monetary system that bears no consonance with the "means of reality."

    The following referential quote (in Creating New Money, Huber, J., p. 30) reveals how this misunderstanding of money is not novel.

    "... on UK banknotes the Bank of England’s Chief Cashier still says “I promise to pay the bearer on demand the sum of...”. As long ago as the parliamentary debate on the 1954 Currency and Banknotes Act, this was being ridiculed as meaningless. The idea that money is not actually money but only a promise to pay money, and is therefore a debt, is a good example of the “smoke and mirrors” which characterise the present monetary system. By contrast, US Federal Reserve Notes (dollar bills) state clearly “This note is legal tender for all debts, public and private.""
    Again, and I'm getting rather bored of saying this, you haven't actually provided an argument, but have simply restated your claim without any form of logical reasoning behind it. Your post then goes off at a complete tangent and starts to talk about fiscal policy, which are completely irrelevant to this discussion, presumably because it is cut and paste from somewhere else and you don't have the necessary academic background to know which bits are relevant to the discussion and which aren't.

    This is really not good enough. You're wasting everyone's time. If this was an undergraduate paper I was marking, I would give you a very low score, maybe 2/10 at best, for such a poor attempt. You don't even really appear to have understood what it is you're attempting to discuss.
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    (Original post by cole-slaw)
    Again, and I'm getting rather bored of saying this, you haven't actually provided an argument, but have simply restated your claim without any form of logical reasoning behind it. Your post then goes off at a complete tangent and starts to talk about fiscal policy, which are completely irrelevant to this discussion, presumably because it is cut and paste from somewhere else and you don't have the necessary academic background to know which bits are relevant to the discussion and which aren't.
    I would ask you to pinpoint a flaw in the logic, and how fiscal policy is irrelevant in a discussion arguing for a plain monetary function to be assumed by the government. Unfortunately, I am afraid you will continue with the demeaning, accusatory comments instead of tackling the substance of the matter head on. As is usual with you. In which case I advise you not to bother.

    This is really not good enough. You're wasting everyone's time. If this was an undergraduate paper I was marking, I would give you a very low score, maybe 2/10 at best, for such a poor attempt. You don't even really appear to have understood what it is you're attempting to discuss.
    I don't believe you actually fit the criteria to be marking dissertations.
    Here's the thing: a competent and genuine marker would not leave the following feedback for the student: "You don't even really appear to have understood what it is you're attempting to discuss." This marker would be disqualified for being unable to offer criticism that is insightful, meaningful and specific.
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    (Original post by Polymath0)
    I would ask you to pinpoint a flaw in the logic, and how fiscal policy is irrelevant in a discussion arguing for a plain monetary function to be assumed by the government. Unfortunately, I am afraid you will continue with the demeaning, accusatory comments instead of tackling the substance of the matter head on. As is usual with you. In which case I advise you not to bother.



    I don't believe you actually fit the criteria to be marking dissertations.
    Here's the thing: a competent and genuine marker would not leave the following feedback for the student: "You don't even really appear to have understood what it is you're attempting to discuss." This marker would be disqualified for being unable to offer criticism that is insightful, meaningful and specific.
    Honestly, I have marked dissertations and if I received a submission like yours that didn't make the slightest attempt to address the question, I would be honest in my appraisal.

    Lets start from simple principles.

    Money has value because you can exchange it for goods and services. ie: owning £10 of money means you own the right to receive £10 of goods and services. Without that connection, money has no value.


    Do you accept that? Try to keep your response to a single sentence.
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    (Original post by cole-slaw)
    Lets start from simple principles.

    Money has value because you can exchange it for goods and services. ie: owning £10 of money means you own the right to receive £10 of goods and services. Without that connection, money has no value.
    Yes. Money, in simple terms, represents the aggregate worth of goods and services in the economy. But allow me to emphasise that it is specifically a trusted symbol of exchange which is spent at face value, not a promise of payment like credit. The distinct definition between the two terms is key.
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    (Original post by Polymath0)
    Yes. Money, in simple terms, represents the aggregate worth of goods and services in the economy. But allow me to emphasise that it is specifically a trusted symbol of exchange which is spent at face value, not a promise of payment like credit. The distinct definition between the two terms is key.
    So you keep saying, but you have provided no logical explanation as to why you think there is a distinction between a tool of exchange and a promise of payment.

    As you have already agreed, owning £10 of money means you own the right to receive £10 of goods and services.

    For that to be the case, someone else must owe you £10 worth of goods and services, agreed?
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    (Original post by cole-slaw)
    So you keep saying, but you have provided no logical explanation as to why you think there is a distinction between a tool of exchange and a promise of payment.
    A tool of exchange and a promise of payment differs somewhat. In the latter, there is a contract between the parties, whereby the promise of performance can be enforced legally (though practical results may differ). A tool of exchange, however, does not identify the parties to the exchange and the exchange cannot be legally enforced merely by just referencing to the tool.
 
 
 
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