Forum Post: Federal Reserve Vs BitCoin
Posted 10 years ago on Feb. 27, 2014, 1:27 p.m. EST by JGriff99mph
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So the Fed says today that they have no ability to regulate Bitcoin.
Joe Manchin, another one of our fabulous political "leaders" is claiming its disruptive and a threat.
BitCoin might be about to get the Libya treatment from the US gov if it doesn't adhere to the almighty dollar.
I'm not in favour of volatile fiat currencies.
There's a think tank in the UK that's advocating the adoption of an updated version of the Chicago Plan. Even though it's still a fiat currency, it's not volatile.
http://www.positivemoney.org/our-proposals/
That's a very interesting site, thanks for that link.
The site explains money creation in general, but gets specific when it comes to countries with a reserve ratio of zero, such as the UK and Australia. The US has a reserve ratio, so it has greater constraints on money creation. You can see the reserve requirements on the Fed's website:
http://www.federalreserve.gov/monetarypolicy/reservereq.htm
If you already know all of this, then there's no need to read (probably should have started with that ^^).
First step to fixing any economy is make sure the money it uses is sound.
http://www.occupy.com/article/momentum-growing-occupy-fed-%E2%80%93-nationalizing-it
I am all for public banking - that is what all of the things I have posted - from Keynes to watts to kelton and max neef have been pointing towards. but no public banking in normal discourse is not what sound money means. sound money from Webster - stable money; specif : a currency based on or redeemable in gold - that is what is usually meant - if you were thinking of something different I am sorry for the4 bombardment of posts. I still believe that this is one of the crucial issues we all need to understand since it is the reason the right can say - "we don't have the money for that!" and that usually means whatever is good for the majority. they always find the money for the rich and powerful - witness the bank bailouts.
now the link shows nationalizing the fed but sound money usually means something else - no inflation.
for once I do not agree with you - have you read Stephanie kelton - google her and Italy and you will get lots on the conference there. very much worth reading I think. .here she is! ...............“I’m gonna introduce you to the basics of Modern Monetary Theory in four parts. Modern Monetary Theory is a revolutionary way to think about the way a modern capitalist economy works. The first part of the talk this morning will focus on money. It’s an essential part of the argument. You have to understand the difference between what we’re going to call a sovereign money and a non-sovereign money. This afternoon we’ll focus on the function of finance, another essential part of Modern Monetary Theory. It is the key to understanding how a modern economy can achieve what has for so long been unthinkable: full employment for all people with stable prices. Tomorrow, we’ll talk about the international economy and the way that the domestic economy is related to what happens in the rest of the world. We’ll question the conventional thinking about deficits and debt. And we’ll focus specifically on the future of Italy.
(c. 5:22) “So, let’s begin with the first lesson. What is money? All money exists as an IOU. It’s a debt. When we say, ‘I owe you,’ we mean two people are involved in every monetary relationship. The ‘I’ is the debtor. The ‘U’ is the creditor. I Owe You. IOUs are recorded in what we call the money of account. The money of account in Australia is the Australian dollar. The money of account in the U.S., the U.S. dollar. The money of account in Japan, the Japanese Yen. In Britain, the British pound. In Italy, the Euro. Do you see a difference? You will by the end of this talk.
(c. 6:21) “The money of account is something abstract, like a metre, a kilogram, a hectare. It’s not something you can touch or feel. It’s representational, something only a human could imagine. In any modern nation the money of account is chosen by the national government. MMT emphasises the state’s power over money. This is not something new. It dates back as far as Aristotle. You can find it in Adam Smith and in the work of John Maynard Keynes. I will read a brief quote from Keynes who said:
“‘The age of chartalist, or state money, was reached when the State claimed the right to declare what thing should answer as money of account. Today, all civilised money is, beyond the possibility of dispute, chartalist’—state money.
“A sovereign government defines the money of account. A sovereign government imposes taxes, fees, and other obligations to be paid to be paid to the state. A sovereign government decides what it will accept in payment to itself. And sovereign government chooses how it will make its own payments to others. Most governments in the world today choose their own unique money of account. And they issue their own unique currency. One nation, one money, is the rule in almost every corner of the world today. U.S. dollars, bills and coins. Mexican pesos, bills and coins. British pounds, notes and coins. Most governments also require that taxes be paid in a currency that the state has the exclusive power to issue. These currencies are sovereign money.
(c. 8:50) “As long as the state has the power to enforce its tax laws, the people will need the government’s money. The currency will have value. People will work to sell things—goods and services—to the government in order to get government money. Whatever the government accepts in payment to itself becomes the ultimate, ‘definitive,’ money in the economy. It is the only way to settle a debt. You must use government money. We can imagine in any economy a hierarchy of money. But not all money is created equal. The most acceptable money sits at the top of the pyramid. Those are the IOUs that everyone accepts and everyone must accept. Those are the IOUs that are ultimately needed to pay our debts. Those are the government’s IOUs. The rest of us can go in debt, issue IOUs, but our debt is not as good as government debt. It’s not as acceptable. It can’t be used to pay for things.
(c. 10:25) “In the U.S., the hierarchy looks like this: The government’s IOU—the United States dollar—sits at the top of the pyramid. It is a fiat currency. The United States government is the monopoly issuer of the U.S. dollar—the only entity on the planet that can legally create the currency. The U.S. government taxes in dollars. It spends in dollars. And it controls its own currency. Why is this important? What are the benefits of issuing your own currency? They are extraordinary.
(c. 11:19) “The government, when it issues its own currency, and goes into debt in that currency can always pay its debt, can never go broke, can never run out of money. It can afford anything that is for sale in that currency. It doesn’t need to borrow its own currency. And it can set its own interest rate. It does not have to pay what markets want. It does not become a victim to speculation, to bond vigilantes. It has additional policy space. It can do things for its economy and for its people that a government that does not have a sovereign currency cannot do.
(c. 12:18) “Think about what the hierarchy would look like under a gold standard. Many governments operated under gold or silver or both for some period of time in our world history. Under a gold standard, the government promises to convert its currency into gold. In that situation, what sits at the top of the pyramid is not the state’s currency, but the gold reserves. This means that the government must be careful about how much it spends. If it spends too much of its own currency, it can jeopardise the entire system because it may not be able to convert currency into gold as promised. You have to limit your spending and limit what you do with your policies. Governments operating under a gold standard do not have sovereign currency.
(c. 13:24) “In a similar way, a country that fixes its exchange rate to another country’s currency the way Argentina and Russia and others have done do not issue a sovereign currency. They must be careful about how much they spend. They must defend the reserves. If you promise to convert your currency into another country’s currency, you might go broke. You can run out. How do you get the other country’s currency? It requires trade surpluses to earn the other country’s currency. You become dependent on the rest of the world and their economic wellbeing to sustain your own wellbeing. The hierarchy in a country that operates fixed exchange rates places someone else’s currency at the top. You also lose control of your interest rate—something that’s crucial to retain control of—if a country is going to have a sustainable debt and full employment.”
(c. 14:49) “The euro is not a fixed exchange rate system, but it’s not a sovereign currency either. It’s an exceptional case, an unprecedented experiment where the currency is divorced from the individual nations themselves. The euro is effectively a foreign currency to you. All 17 governments that use the euro are not issuers of the currency, but users of the currency. They lack the powers that a sovereign issuer has. Japan, the United States, the U.K., Canada, Australia, these are sovereign issuers. The euro is not a sovereign currency. Governments that adopted the euro must borrow the currency. They must pay whatever the bond markets require. They can run out of money. And they lack the policy space of a sovereign issuer.
(c. 16:09) “If you imagine the hierarchy for a member of the Eurozone, such as Italy, you see the relationship between the government and the currency is different. Italy does not issue the currency that it uses. It is an essential point—money matters. A sovereign government should be in control of the currency that sits at the top of its pyramid. If it gives up control of the sovereign currency, it also gives up the power to set reasonable policy in its own country. It hands over that power to the bond markets who, ultimately, decide how much can be spent—what can be done.
(c. 17:12) “Abba Lerner was an economist, a contemporary of John Maynard Keynes. He saw this very clearly. He said:
“‘By virtue of the power to create or destroy money by fiat and its power to take money away from people through taxation, [the State] is in a position to keep the rate of spending in the economy at the level required [for full employment].’
“The problem with the euro is that it cannot be created at will. The governments must go out and get euros from someone else. They’ve sacrificed their ability to conduct sensible economic policy in every nation [...] and the effects are clearer now than ever. Thank you. [Applause]”
Bonnie Faulkner (c. 18:33): “You’ve been listening to professor and research scholar, Stephanie Kelton at the Summit on Modern Money Theory in Rimini, Italy.
I'm afraid that the above transcript is incorrect.
"Most governments also require that taxes be paid in a currency that the state has the exclusive power to issue." -Incorrect.
"The United States government is the monopoly issuer of the U.S. dollar—the only entity on the planet that can legally create the currency." -Incorrect.
The Federal Reserve is the only institution which is allowed to create cash (bills and coins), known in economics as M0. They also create digital money called Federal Reserve deposts which is used only in Federal Reserve accounts (only banks can have such accounts). Even though it isn't cold, hard cash, it's still U.S. dollars. When this is combined with M0, it's known as MB.
Private banks create money out of thin air when they issue loans. You give them an asset (a signed contract which says you'll pay them x amount plus interest) and they, in turn, enter numbers into your bank account - you call it U.S. dollars. You can use that newly created money to pay your taxes. In economics, when you combine M0 with the money in checking accounts, you get M1.
Some people will say that banks create money and not credit. Well, if the government guarantees that a certain amount of the savings you have in your bank account will be returned to you if the bank goes bust, then it's no longer credit - it's money!
According to the Federal Reserve website, there is $1.25 trillion of M0 in circulation. http://www.federalreserve.gov/faqs/currency_12773.htm
According to the Federal Reserve website, there is over $2.5 trillion in M1 and over $10.7 trillion in M2 (the link below explains what M2 is). http://www.federalreserve.gov/releases/h6/current/h6.htm
When JGriff99mph said that the first step to fixing any economy is to make sure that the money is sound, he was correct. Right now, the government doesn't have a monopoly on money creation - most of it is created by private banks. If we fix this, we fix a lot of other major problems by doing so. Fixing it isn't difficult - someone just needs to make the decision.
sound money is really the rallying cry of those who have money! in the same way a strong dollar has winners and losers (i assume you understand that - i can explain if needed) sound money also has winners and losers. sound money favors those with wealth and fiat currency favors the working classes and the masses since the money supply can be democratically controlled. read about the populist movement to understand it better. that is the fight of "sound money" j p morgan against the fiat currency of the populists. that is the most important point to understand here. not sure exactly what our disagreements might be on that subject. I understand your point about banks creating money - you also create money when you go to the store and buy the newspaper with your credit card - or buy a tv at walmart with that card. I think this is off the target. i believe the main point to think through is that the state and only the state can truly create money - or allow others to create it. the state can shut down any bank it wants and can shut down the fed also. just because our state has allowed this system to be created does not change stephanie's real point. I understand also the fed story and the problems some people have with it. the real problem is not the fiat money creation but control - it should be under democratic control not that of the banks. that is the fight the populists waged in the late 1800's. I think they were exactly correct and they were fighting for fiat currency and not "sound money." the second part of the golden rule - "those with the gold make the rules" - is that the gold must be kept the standard for money. i doubt that you realize it but you are making the argument for j p morgan and the like! i will leave you with two points - first inflation redistributes wealth! that is why the bond holders - those who own the country do not want inflation. during the inflation of the 70's my life was never better - my house increased in value - my mortgage got paid in cheaper and cheaper dollars and my wages rose every year - the big losers at that time were the banks and the bond holders . yes i realize it is not perfect and hyper inflation is a problem but try to stick to the main point here and not take it into ron paul land! lastly here is alan watts take on money -. on the fundamental confusion between money and wealth: Remember the Great Depression of the Thirties? One day there was a flourishing consumer economy, with everyone on the up-and-up; and the next, unemployment, poverty, and bread lines. What happened? The physical resources of the country -- the brain, brawn, and raw materials -- were in no way depleted, but there was a sudden absence of money, a so-called financial slump. Complex reasons for this kind of disaster can be elaborated at length by experts on banking and high finance who cannot see the forest for the trees. But it was just as if someone had come to work on building a house and, on the morning of the Depression, the boss had said, "Sorry, baby, but we can't build today. No inches." "Whaddya mean, no inches? We got wood. We got metal. We even got tape measures." "Yeah, but you don't understand business. We been using too many inches and there's just no more to go around." A few years later, people were saying that Germany couldn't possibly equip a vast army and wage a war, because it didn't have enough gold. What wasn't understood then, and still isn't really understood today, is that the reality of money is of the same type as the reality of centimeters, grams, hours, or lines of longitude. Money is a way of measuring wealth but is not wealth in itself. A chest of gold coins or a fat wallet of bills is of no use whatsoever to a wrecked sailor alone on a raft. He needs real wealth, in the form of a fishing rod, a compass, an outboard moter with gas, and a female companion.
Okay, I think I'm beginning to understand where you're coming from and why you believe things like "sound money favors those with wealth and fiat currency favors the working classes and the masses since the money supply can be democratically controlled." That's actually incorrect, but I think I understand how you came to that conclusion.
I agree with some of the things you say - fiat currency results in a greater supply of money as it isn't limited by the availability of gold, etc. You're right - that's a fact. However, the fact that there are no inherent constraints on it's creation causes problems (problems which benefited you). If banks are allowed to create fiat money without limit, they may inject too much money into the economy. When they do that, the purchasing power of the dollar goes down.
When the purchasing power of the dollar decreases, it makes it look like things are getting expensive. Your house didn't increase in value - the dollar decreased in value and more dollars were needed to buy your house. It sounds like your bank didn't consider this when they signed your mortgage contract and you only had to pay a certain amount which wasn't adjusted for inflation. Today, banks DO take that into account, so the rest of us won't be as lucky as you were.
Fiat currency benefited you on that lucky occasion (lucky because the bank were incompetent), but it usually doesn't benefit people as it's the main root cause of inflation.
There's a series of videos on the Peak Prosperity site which explain money creation (fractional reserve banking and fiat money) and other important fundamentals. I highly recommend watching them.
http://www.peakprosperity.com/crashcourse
Afterwards, you'll be able to see why the things you've seen happened. You'll also see where Stephanie Kelton has gaps in her knowledge and why her view doesn't add up when you look at the bigger picture.
I have watched too much of the money masters, ron paul type videos. a few simple points for you to respond to - right now I have a fixed 30 year mortgage - go on the internet and you will see that they are still offered everywhere. second, the dollar has decreased in value tremendously since the 1930 or so (long before also but no matter) - the country is much wealthier now than then. if inflation is so bad how did that happen? did you miss the part about democratic control over money? did you miss what alan watts said because that should be all that is required to understand the situation. sound money is a cruel system that benefits those with the money. very obvious. you have yet to explain pre ww2 germany or even the u.s. funding ww2. as long as we have the oil and the steel and the factories and labor we can make tanks and planes - the paper money is not relevant - Lincoln understood that in 1861!. I know your videos with their story about fractional reserve banking (democratic control remember!) and the rothschilds are entertaining and seductive but they are wrong. we can print all the money we need to pay social security and pensions and build roads etc.
Fixed rate mortgages are adjusted for inflation. It's the interested rate that's fixed, which is different from the rate of inflation.
I think I may understand what you think the future ought to look like. Are you saying that you're in favour of The Chicago Plan? That's a monetary system which replaces fractional reserve banking, yet is still fiat money. The idea is that, instead of lending money into existence, money is spent into existence. Some economists have updated the plan and the IMF even did some modeling on it.
http://en.wikipedia.org/wiki/The_Chicago_Plan_Revisited
Is that what you're getting at?
Even though it's fiat money, I can agree that it's certainly better than the current system because it's more democratic. It would also be far more stable and, in that sense, could possibly be considered to be 'sound money'. I think this is what you're talking about because you mentioned paying for social security, pensions and infrastructure, which are examples of the kinds of areas where money would be spent into existence, as well as education, healthcare, and bottom-up economic stimulus.
It may even be possible to do away with income tax with this system, though I have a feeling that taxes would continue until the current debt is paid off.
This is all aligned with the videos I recommended. Also, Stephanie Kelton still got her facts wrong about the fundamentals of money creation in the current system.
What do you think JGriff99mph meant by 'sound' money? I think that should be clarified in case there's been any incorrect assumption (I don't understand why you would think that sound money benefits the rich more than anyone else).
i am interested in this discussion but we seem to be talking past each other. i am trying to put up information that shows a different and more correct way to look at this issue but you seem to be hacking the same old line. I hope you do not own a home since you don't understand mortgages. I disagree with your whole idea of money - you need to blow up what you have learned and start over. reread what I sent from kelton and google the conference in Italy. reread alan watts and let it sink in. it is pretty obvious. the "we don't have enough money" crowd has got everybody worried about the "NATIONAL DEBT!" it is a joke. the government is not a business or a household. it can print money if needed! and we need it! to pay pensions and all of what I have said already. I will leave you with max neef and please read him and try to understand what he is saying. AMY GOODMAN: So, to avoid another catastrophe, collision, if you were in charge, what would you say has to happen?
MANFRED MAX-NEEF: First of all, we need cultured economists again, who know the history, where they come from, how the ideas originated, who did what, and so on and so on; second, an economics now that understands itself very clearly as a subsystem of a larger system that is finite, the biosphere, hence economic growth as an impossibility; and third, a system that understands that it cannot function without the seriousness of ecosystems. And economists know nothing about ecosystems. They don’t know nothing about thermodynamics, you know, nothing about biodiversity or anything. I mean, they are totally ignorant in that respect. And I don’t see what harm it would do, you know, to an economist to know that if the bees would disappear, he would disappear as well, because there wouldn’t be food anymore. But he doesn’t know that, you know, that we depend absolutely from nature. But for these economists we have, nature is a subsystem of the economy. I mean, it’s absolutely crazy.
And then, in addition, you know, bring consumption closer to production. I live in the south of Chile, in the deep south. And that area is a fantastic area, you know, in milk products and what have you. Top. Technologically, like the maximum, you know? I was, a few months ago, in a hotel, and there in the south, for breakfast, and there are these little butter things, you know? I get one, and it’s butter from New Zealand. I mean, if that isn’t crazy, you know? And why? Because economists don’t know how to calculate really costs, you know? To bring butter from 20,000 kilometers to a place where you make the best butter, under the argument that it was cheaper, is a colossal stupidity, because they don’t take into consideration what is the impact of 20,000 kilometers of transport? What is the impact on the environment of that transportation, you know, and all those things? And in addition, I mean, it’s cheaper because it’s subsidized. So it’s clearly a case in which the prices never tell the truth. It’s all tricks, you know? And those tricks do colossal harms. And if you bring consumption closer to production, you will eat better, you will have better food, you know, and everything. You will know where it comes from. You may even know the person who produces it. You humanize this thing, you know? But the way the economists practice today is totally dehumanized. AMY GOODMAN: And if you’re teaching young economists, the principles you would teach them, what they’d be?
MANFRED MAX-NEEF: The principles, you know, of an economics which should be are based in five postulates and one fundamental value principle.
One, the economy is to serve the people and not the people to serve the economy.
Two, development is about people and not about objects.
Three, growth is not the same as development, and development does not necessarily require growth.
Four, no economy is possible in the absence of ecosystem services.
Five, the economy is a subsystem of a larger finite system, the biosphere, hence permanent growth is impossible.
And the fundamental value to sustain a new economy should be that no economic interest, under no circumstance, can be above the reverence of life.
AMY GOODMAN: Go back to three: growth and development. Explain that further.
MANFRED MAX-NEEF: Growth is a quantitative accumulation. Development is the liberation of creative possibilities. Every living system in nature grows up to a certain point and stops growing. You are not growing anymore, nor he nor me. But we continue developing ourselves. Otherwise we wouldn’t be dialoguing here now. So development has no limits. Growth has limits. And that is a very big thing, you know, that economists and politicians don’t understand. They are obsessed with the fetish of economic growth.
And I am working, several decades. Many studies have been done. I’m the author of a famous hypothesis, the threshold hypothesis, which says that in every society there is a period in which economic growth, conventionally understood or no, brings about an improvement of the quality of life. But only up to a point, the threshold point, beyond which, if there is more growth, quality of life begins to decline. And that is the situation in which we are now.
I mean, your country is the most dramatic example that you can find. I have gone as far as saying — and this is a chapter of a book of mine that is published next month in England, the title of which is Economics Unmasked. There is a chapter called "The United States, an Underdeveloping Nation," which is a new category. We have developed, underdeveloped and developing. Now you have underdeveloping. And your country is an example, in which the one percent of the Americans, you know, are doing better and better and better, and the 99 percent is going down, in all sorts of manifestations. People living in their cars now and sleeping in their cars, you know, parked in front of the house that used to be their house — thousands of people. Millions of people, you know, have lost everything. But the speculators that brought about the whole mess, oh, they are fantastically well off. No problem. No problem.
First of all, I don't think I disagree with anything Manfred Max-Neef said in the transcript above. He's not talking about fiat currency, though, so I'm not sure why it's relevant to this conversation.
Okay, you believe that the government should just print money to pay for stuff. That's what they already do - they issue treasury bonds which will get paid back with interest and, after some middle men get involved, the Fed prints new money out of thin air.
If too much of this money is printed and the economy has more cash than it needs, it can result in hyper-inflation. This is what happened in Zimbabwe when the government thought it could print all the money it wanted - it became worthless.
Correct me if I'm wrong, but are you in favour of the government printing huge amounts of money in the hope that it will result in hyper-inflation so that you may pay off your mortgage more easily?
If that's the case, then I'd urge you to talk to the people at your bank (or some other consumer finance specialist) to see if your mortgage contract doesn't include a condition to say that your repayments aren't adjusted for inflation.
I would also point out that when hyper-inflation occurs, it results in people's savings becoming worth less (or worthless). Sure, they get higher salaries, etc., but the purchasing power of the money they've already saved up decreases.
I am going to do this twice since you haven't gotten it so far - Stephanie is right and you are wrong! here she is - “The government, when it issues its own currency, and goes into debt in that currency can always pay its debt, can never go broke, can never run out of money. It can afford anything that is for sale in that currency. It doesn’t need to borrow its own currency. And it can set its own interest rate. It does not have to pay what markets want. It does not become a victim to speculation, to bond vigilantes. It has additional policy space. It can do things for its economy and for its people that a government that does not have a sovereign currency cannot do. ..................... I refuse to continue unless you demonstrate better reading comprehension skills. I have answered most of this already. can you follow what I sent. are you a ron paul zealot - that is the only thing I can think of since you just keep hammering the same drum no matter what I send to you. I talked to a number of those guys in the park (yes zuccotti) and they were not capable of thought - just parroting slogans. I will try to keep it simple. first of all most americans have no savings - really - look it up. next - we have had tremendous inflation over the last 80 years and the country is much richer - please explain! lastly you paint a picture of the fed and treasuries and mention hyper inflation. where is the hyper inflation. I am not in favor of the fed printing money to give to the banks but we can print money to pay social security or as Stephanie says (once again - here it is - read it carefully!)- “The government, when it issues its own currency, and goes into debt in that currency can always pay its debt, can never go broke, can never run out of money. It can afford anything that is for sale in that currency. It doesn’t need to borrow its own currency. And it can set its own interest rate. It does not have to pay what markets want. It does not become a victim to speculation, to bond vigilantes. It has additional policy space. It can do things for its economy and for its people that a government that does not have a sovereign currency cannot do.
The materials I linked to earlier explain how money is created. They explain it in a very simple way which is easy to understand. I could link to more materials if you were to express a willingness to be open to ideas which are different to those you currently hold to be true. Let me know if you want them.
I'll use numbered points to explain the way things work right now. You put an enormous amount of faith into what Stephanie says, so it's important for you to understand where she's wrong. Feel free to tell me which numbers you think are wrong and I'll show you proof that they're right.
Cash creation 1) When the government needs money, it issues Treasury bonds and sells them. 2) These bonds are mainly bought by banks (domestic and foreign). 3) Banks then go to the Fed (or the central bank in their country if they're foreign) and ask for a loan so that they have enough liquidity to prevent them from going out of business. They use the bonds as collateral. The Fed prints money and lends it to the banks. 4) If the banks don't think that the government will repay its debts (whether they're right or wrong to believe this doesn't matter), they don't buy the Treasury bonds. This means that the government doesn't get the cash it needs, so they have to bend the rules. This article explains how they've been bending the rules: http://www.peakprosperity.com/blog/shell-game-how-federal-reserve-monetizing-debt/25806
Digital money creation 5) The Federal Reserve creates digital currency which only exists in Federal Reserve accounts. Only banks have such accounts. They can transfer this digital money between one another's accounts, but it's not allowed to leave the Federal Reserve. This type of money is under the control of the government and, together with cash, is called base money. 6) Private (i.e. commercial) banks create digital money. Together with base money, this is called broad money. 7) There are rules (reserve requirements) which place limits on how much money banks can create (using the money multiplier model). These requirements are listed on the Federal Reserve website: http://www.federalreserve.gov/monetarypolicy/reservereq.htm
If Stephanie is talking about the current monetary system, then she doesn't seem to understand 4,6 and 7. If you go by what she says, then you're ill-informed and should do your own research into how money is created and circulated within an economy. I can point you to multiple sources which back up what I'm saying, including the Federal Reserve itself!
I watched the following interview... http://www.youtube.com/watch?v=Yiw8Lyw1XGc ...and what she's describing is The Chicago Plan. However, it sounds like she seems to think that this is the current system, which it isn't.
Can you send me the link to the site where you get these Stephanie Kelton transcripts?
first of all stop reading that nonsense on peakprosperity - it is not helping you. they is making the case for the ruling elite (not sure if they know that but still the case) and not those who i am advocating for - the masses- the working class. i know all too well how things work now and it is not good - we agree on that. the fed is under the control of the elite and that is not good for the mass of the population - we agree on that. the rest you seem to fan on. too bad hopefully someone else is reading and can understand. I will send you all you want when you read what I sent and comprehend it. you are just repeating what you said before and I have made counter points to each of your points and you keep saying THE SAME THING! she is not describing the current system or the Chicago system but modern monetary theory. she is describing what is possible when a government has control over it's money supply. now since you like numbers i would like some answers to - 1. if inflation is bad for the economy, how is it that we have seen tremendous inflation over the years and the country is much, much richer! 2. what is the problem with debt if the government owes the money to itself! that is why can't we pay pensions etc. 3. how did Germany fund pre ww2 military after the hyper inflation of the 1930's??? read alan watts and report back to me where you don't follow him! now i am done unless you can come up with something more interesting - i refuse to keep saying the same thing and getting the same response
"she is not describing the current system or the Chicago system but modern monetary theory" Yes! You agree with what I've been saying from the beginning - she is not accurately describing the current system. It's unfortunate that she called her framework 'modern monetary theory' because it's misleading (in the sense that it sounds like she's describing the current system).
"how is it that we have seen tremendous inflation over the years and the country is much, much richer! " When you say that the country is much richer, what do you mean?
"what is the problem with debt if the government owes the money to itself!" Debt is only a problem if the creditors expect to be paid, especially if they want to be repaid. Japan has a huge debt (over 200% of GDP), but it's creditors are Japanese, so there's little pressure for them to address it. In Europe, countries with debts which are around 100% of GDP have to borrow money from the IMF to keep their creditors off their backs. That's when debt's a problem.
"how did Germany fund pre ww2 military after the hyper inflation of the 1930's???" This comes from Wikipedia - "The Reichsbank turned on the printing presses to finance Hitler's jobs programs. To control inflation, severe wage and price controls were instituted, foreign currency exchange rates were manipulated, and interest rates increased. Such measures were effective for a time but by January 1939 the Reichsbank president, Hjalmar Schacht was sounding the alarm and was summarily relieved of his post."
mmt is not misleading in anyway if you read! it is pretty obvious from what she writes what is being discussed here - (c. 6:21) “The money of account is something abstract, like a metre, a kilogram, a hectare. It’s not something you can touch or feel. It’s representational, something only a human could imagine. In any modern nation the money of account is chosen by the national government. MMT emphasises the state’s power over money. This is not something new. It dates back as far as Aristotle. You can find it in Adam Smith and in the work of John Maynard Keynes. I will read a brief quote from Keynes who said:
“‘The age of chartalist, or state money, was reached when the State claimed the right to declare what thing should answer as money of account. Today, all civilised money is, beyond the possibility of dispute, chartalist’—state money - ok, I have had enough - you must be young and this is your first attempt at understanding the real world economy - just keep in mind the golden rule and you will be ahead of the game!
thanks very much fro your permission to be critical. you are right - I am afraid. I am afraid you are too stupid to continue this conversation. sound money is what the rich and the owners of the country want. very obvious since they are the ones with the money. they live off of investments (dividends and interest) not wages. apparently your reading comprehension is so bad that you do not understand the phrase "read what I already sent!" so you would like me to paraphrase graeber's 500 page book since you are too busy salivating over peakprosperity. first of all i am old enough and lucky enough to have significant savings and could possibly be hurt by inflation. I have stated that inflation redistributes wealth from bond holders (OWNERS OF THE COUNTRY - in case you weren't sure) to the working class. i have pointed out how that works - mortgage payments decrease - house prices increase and wages (usually) increase - remember that the banks and the wealthy hold the mortgages. you stated that fixed mortgages include inflation - you are an idiot! so that blows up your first point. now respond to that not some of your usual nonsense. secondly, you seem to think that I have not done this- " Copy & pasting reams of transcript is one method, but it would benefit you (and everyone) if you pick out the important points and share them." - what can I say about that. just look below - I am not going to put up Stephanie or alan again - say something that makes sense - that refutes what they say or say nothing. you need to educate yourself - i have pointed you to many ways to do that. now get on with it - now respond to that. respond to what Stephanie and alan have said about money and debt - or please stop.
Would you consider public banking sound money?
ok, so now it I s clear that you do not read well - even what you write! did you read what you sent to me about Germany? in 1939 Schacht sounded the alarm and then what happened. did the economy implode - nope. hitler built an army that almost conquered the world. an army that only the Russians could fight on anything like equal terms. yes he ran out of oil, coal, steel and the resources needed to supply that army - making alan watts point. did he lose the war because he did not have enough paper money - no obviously. he ran out of real wealth. now lastly Stephanie addresses exactly your point about Japanese debt. she explains how a country with a sovereign debt can never go broke -once again I will make an attempt to help you - read it carefully and try to counter what she says not some off topic statement from paeknonsense - here she is - “The government, when it issues its own currency, and goes into debt in that currency can always pay its debt, can never go broke, can never run out of money. It can afford anything that is for sale in that currency. It doesn’t need to borrow its own currency. And it can set its own interest rate. It does not have to pay what markets want. It does not become a victim to speculation, to bond vigilantes. It has additional policy space. It can do things for its economy and for its people that a government that does not have a sovereign currency cannot do
sorry no time for this nonsense right now but really -I need to tell you how the country is richer than in 1930 - really. the army moved equipment by horse mostly. have you read history - do you know what the country looked like in 1920 and 30. yes todays middle class has been worked over (by the forces you promote - unknowingly I am sure but still that is the truth). but 90% of the population in 1920 would kill for a lower middle class lifestyle today. read and THINK! that is the hard part but it is worth it. read alan watts again and understand what he is saying. do not make me explain everything to you. think it through - think instead of parroting peakcrap
We need to make sure we aren't confusing technology with wealth. Honestly, I'm not terribly certain on how to do that.
Ridicule, insults and disinformation are not the same as explanation. They are an expression of your fear.
It is clear that you're promoting a system which would result in high inflation which would result in you getting more dollars. From what you've written, it appears that your aim is to benefit from such conditions because you believe they would make it possible for you to repay your mortgage with little effort.
This seems to be the root of your fear. I'm stating facts which would make it undesirable for other people to support your goal; high inflation would destroy the worth of their savings and make them worse off. The more apparent it is that I'm right, the more you say that you don't have time for it.
Instead of directing me to read so-and-so, it would benefit you (and everyone) to state their arguments and proofs here or, at the very least, provide links to them. Copy & pasting reams of transcript is one method, but it would benefit you (and everyone) if you pick out the important points and share them.
I'm sorry that this may come across as stern, but you have falsely stated that I promote forces responsible for the exploitation of workers. You did so without offering any analysis or proof. I would appreciate it if you would pick out the things I've said which led you to make that statement, what you think my agenda may be, be explicit about the points I've made that you think are wrong and then prove them wrong.
You have my permission to be as critical as you like, but keep in mind that resorting to insults only serves to make you look junior. Perhaps I should have said that to you before now, but it's become a pattern in your exchanges and needs to be stamped out.
I am sorry for that last response saying you are stupid - I need to realize that you are stupid and make things simple for you. so let's start with this - if inflation is bad then why is the country so much richer today - as I said before (and you didn't or couldn't respond to it properly) we have had tremendous inflation since 1920 and how has that impacted the wealth of the country that 's 1 - I know you do well with numbers). come on - you can do it - one simple question that blows up your whole thinking on this subject. ok, got it - answer that question and put some thought into it! please! now second - if we are on the gold standard then we cannot print more money unless we find more gold. with the population expanding that means there is less money per person - no (there is 2)?? would that be a good thing. this is the question the populists answered over 100 years ago and your stupid peakprosperity site either doesn't know or is lying - which do you think it is (don't answer that one)? so here is the third question - have you got the first two? #3 how can it be that a society (like ours) has an expanding population and oil, timber, steel for nails. factories lying idle and plenty of people who want to work - like building housing for the expanding population - but we can't do it unless we dig up more gold. refer back to Keynes money in bottles - yes I know it will take time for you to search my comments but do it - you have nothing better to do - that is pretty obvious! now answer 3 questions and we can continue or just stop and get to (the very hard) work educating yourself. please - see I am trying to be nice.
I would also suggest that you read david graeber's book - "debt the first 5000 years" to better understand money and it's history. he is one of the ideological founders of ows and his book pretty much blows up what we have been taught about "money"
I'm familiar with David Graeber as someone who led OWS down the wrong path (of not making demands). I haven't read his book, though I do like the writings of Jason Hickel (I've been told that they're similar).
Just so we're clear on the meaning of the term 'democratic money' which I'm going by: http://betwixtregimes.org/2014/02/25/what-is-democratic-money/
of course you are entitled to your opinion on the issue of demands but that is all it is - your opinion. time will tell how it all works out. I have an instinct to distrust those who tell me which path is right and wrong when that is unknowable! if you want to discuss money and it's history you need to educate yourself - I suggest once again that you read graeber - the book is not about the path ows should take but the history of debt and money
One could argue that unsound money is because of a structural set up, of which the elites are masters at manipulating and the poor the least qualified to work around.
i think i get what you are saying but seems to me that for the problems facing the country and the economy today (or let's say the 1930's) Stephanie is more to the point. we need a complete re education about money and debt. those who run the country want us to think that we have no money for social security or public worker pensions. no money to fix the roads and bridges. no money to get us off oil and on to renewables. the truth is as Stephanie points out - we can create all the money we need to do what ever we decide - but it should be done in a democratic way. with good accurate information for all to think about and make plans as to how we will move into the era of "resource scarcity!" just like alan watts point about pre ww2 germaqny -hitler figured it out - he realized that the could get the iron and coal - he had the labor and the factories - why would he need reichsmarks. take a look at how he did it - for that matter look to our civil war and it's funding or ww2 and how fdr funded it - war bond were a very small part! fiat currency - we need it!
well the elites are in control of the money supply so no surprise there. that was the fight during the populist movement and how the elites solved the problem of a central bank. and now they have us all confused about how money works. the cry of the right "we don't have enough money!! we can't pay you mother's pension or school teachers etc" is a sham - and too many are buying it! we can print all the money we legitimately need to run society - the proof that the elite understand that is in the bank bailout and aftermath. 16 trillion or some such they have given the banks and where is the problem - other than on mainstreet? did you read alan watts above - does that make sense to you? I think it says it all - there is a zen expression - "the wise boldly pick up a truth when they hear it - be quick or you'll lose your head!" in case you are wondering the zendog boy lost his long ago - that's why he barks the way he does!
I don't see how it matters exactly we look at it. you seem to think the country was richer in 1900 - is that right? if you want to think of the wealth of the country as advances in technology then that is just a start. how did we have the money to develop that technology and to build the airplanes and machines that power our society. I am not talking about iphones and video games but real wealth - improvement in living standards and medicine - washing machines and refrigerators - cars for almost everyone and central air and heat. try living in a house heated by the fireplace or try to get through a summer in Arizona without airconditioning and then you will know all you need to know. I could go on but I should not need to - think about life in 1915 and today - todays middle class lives like the elite did in the late 1800's and early 1900's (ok without the irish servants).
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