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Showing 20 of 93 results by Iseree22
You see, it's the private banks that create the currency, and it's the governments that borrow this money from them. With compounding interest.
Don't worry your not the only one that has been conned into believing this. This is partly true, private entities create Horizontal Money(Credit Money), and the State creates Vertical Money.
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The debt is evil indeed. Because for instance in the USA this debt shouldn't have existed in the first place, as according to the constitution it is congress only that has the right to print and issue money.
And so, as the national debt of the USA has been created illegally, there is no legal necessity to pay it back.
And the same goes for the interest.
And so, as the national debt of the USA has been created illegally, there is no legal necessity to pay it back.
And the same goes for the interest.
What have you been smoking?? The debt-limit is the true source of Vertical Money in the U.S, which is under Congressional Authority, so yes, currently as it has always been, Congress remains the body with control over the creation of money(Vertical Money).
You obviously have not read and understood what has already been written in this topic, please do so!
Another thought related to saving:
One gold miner found a small piece of gold, he use that piece of gold to exchange for several bag of bread from a farmer, and he eat those bread for one week
After one week, farmer still holds the gold, but there is no bread, since farmer think that he could use that gold to buy same amount of bread
This means: Farmer need some incentive to continously produce the bread, otherwise there will be inflation
One gold miner found a small piece of gold, he use that piece of gold to exchange for several bag of bread from a farmer, and he eat those bread for one week
After one week, farmer still holds the gold, but there is no bread, since farmer think that he could use that gold to buy same amount of bread
This means: Farmer need some incentive to continously produce the bread, otherwise there will be inflation
So how do you give the farmer the incentive?
It might be my opinion and I'm different than others' in this forum, but money is wealth. Real Wealth.
That is exactly most of the people think, not those from economy school. Because this, we can say that wealth is destroyed if there is a rate hike (money destroyed by central bank)
Now I have a better view!
Imagine a simple game:
First year, A sell his house to B for $3 million
Second year, B sell the house to C at $4 million
Third year, C sell to D at 5 million
In this process, the amount of money required for transaction increased so much that bank must provide them bigger and bigger loans, thus lots of money must be created to facilitate the trades, and wealth is created from newly provided loans for this bubble (or bad investment, but you can never tell in forehand, if the price continously rise, then it is a good investment!)
Then, at certain point, most of the people have joined the game and bought a house, there is not enough new buyers join the game to keep the price hype, at the same time, FED has realized this might be a bubble and start to tighten. Then the house price will fall back to 4 million and 3 million. It's this tighten really detroyed the wealth (or money), what we see after 2008 is the consequence of tightening during 2007, but the wealth is already destroyed in 2007
How do you deal with the mess afterwards?
IMO you would need to keep prices as stable as possible. Which would mean offsetting the contraction in Horizontal Money(Credit Money) with an expansion in Vertical money. The expansion in vertical money would offset the unemployment and related suffering caused by the Horizontal Money contraction. If prices are not kept reasonably stable then it is harder for economic participants to plan ahead, which may lead to significant malinvestment. Furthur, whenever the financial system is disproportionally distorted by a subset of economic participants, then prices in the economy will not reflect their actual relative worth. This is what actually causes the malinvestment too begin with.
The sources of such distortion varies depending upon who you ask. Some say there is too much regulation, some say too little. However, given that the financial system is formed on the basis of common ownership, then all participants of the financial system should have an equal say in how price information flows through the financial system. Therefore the value of any regulatory framework upon the financial system should be judged on this basis, that is, how well does it allow participants to equally decide how price information flows through the financial system.
As bitcoin has proven, pre conceived notions can sometimes be turned on their heads!
Precisely!
I've been pondering for a while this question about the need for a national debt or not. Still undecided, but there seems to be an element of 'we should do it this way, because that's what we've always done'.
My personal opinion is NO, National Debt is an obsure invention that allows Bond Rentiers to collect interest for doing nothing productive. Plus people don't understand the function of national debt within Society, and makes it harder for the general public to grasp the underlying mechanics of their economy.
The notion of National Debt should be removed. Instead, their should be a popular body that decides how much money should be created/destroyed each year/month. This money is added to the Treasury Account, and spent by the Government into the economy. There would then need to be another body responsible for managing the 'Credit Money' supply, similar to the function of the current FED(Reserve Bank). However, interest-rate policy is implemented by paying interest only on Cash Deposits, as opposed to using Repos. This makes the Monetary System easier to understand and more straightforward.
Repo and reverse-repo transactions are a tool for implementing monetary policy on the short run for up to 65 days, but usually overnight. Their total annual volume is in trillions, it's nonsensical to claim the Fed's whole security inventory is the result of repos. You are also confusing the agents roles: the Central Bank initiates the repo as a tool of monetary policy, a bank short on reserves can't request a repo. A bank can either sell securities on the open market or in cases of emergency request financing at the discount window, at above market rates. If it could simply request a repo then what's the purpose of the discount window ?
Table 1 is a result of the purchase made during Q.E 1, and Q.E 2. Table 10, shows the current collateral held by the FED in exchange for reserves, emphasis on Treasuries.
For an explanation of what can be pledged as collateral at the discount window, see here. As written, "obligations of the United States Treasury".
Yes, your right generally, when short liquidity a bank will try to obtain a repo from another private institution before going to the FED. The discount window set by the FED forces the interest rate between primary dealers. If the bank is short reserves and has eligible collateral, it can goto the FED and obtain reserves at the discount window. The discount window is implemented by Repos.
Quote from: Bubbleboy
Bickering about the technicalities of US monetary policy loses sight .....
But such bickering is necessary in order to establish the function of Government Debt in an economy.
Quote from: Bubbleboy
Furthermore, unlike US many countries don't have a repo market.
Incorrect,
Sweden Repo explanation
Australian Repo Market
Canada Central Bank
I am in no way suggesting the United States defaults. I am only pointing out that comparison to Japan is absurd. If the Japanese government defaulted on its debt the entire nation would implode. It can also sustain huge debt with no inflation because the debt is held almost exclusively by a homogeneous nationalistic culture.
I think however that you can compare Japan of the past decade or two with the entire world today, but not any one nation, and most certainly not the United States.
I think however that you can compare Japan of the past decade or two with the entire world today, but not any one nation, and most certainly not the United States.
What about Canada then?
With 16.5% of total public debt held by Non-Residents. Canada has a public debt ratio of 84% of GDP, compared with America's 62% of GDP. Wouldn't Canada be in more of a debt crisis than America???
http://www.fin.gc.ca/dtman/2009-2010/DMR2010_ENG.pdf (Pg 23.)
Yea I agree with most of this. But there are two types of money, Credit Money( the money you talk about) and 'State' money. Simply, Credit money is derived from 'State' money, and to pay interest on 'credit monies' there must be an ever expanding supply of 'State' money. When I say 'State' money, that could also mean Gold, or other similar token type.
See the bold part. What makes you think this?
One physical paper dollar bill would be sufficient to extinguish all debts (credit money), if it was busy enough.
Equation of Exchange
MV = PQ,
Money Supply = MV. So when I say money supply I mean this quantity.
Cypherdoc, do you know of the announcement that caused the SPX & other global equity indices, to rally 3+ % in an hour yesterday?
based on a rumor Dexia would be split into a good bank bad bank. followed up by the supposed "realization that the Euro officials needed to do something".
don't buy into it. these types of sharp straight up rallies occurred multiple times in 2008. don't overleverage yourself so that your acct can handle these types of spikes out of nowhere. looks like we're already turning back down. look at the banks.
My 'feeling' is that equities are bottoming, treasuries and gold are topping. I guess we will see.
Which is the definition of money.
Money is an agreed upon medium of exchange and store of value or just a medium of exchange.
Modern fiat is just a medium of exchange in most countries, and if you are in a country with it's own printing press powers there are several ways in which it is produced, but the debt as money has far outpaced the printing press.
Debt as money is not inherintly a bad thing, but interest on that debt is. Let's assume for the sake of argument there is no printing press and all money comes from a promised debt with some amount of interest. You have 100 people "borrow" into existence 20 dollars each so there is now $2000 dollars in the economy, and it is all borrowed at 10% non-compounding interest for a total of $200 in interest. Now the money lender turns off the borrowing faucet because they have taken on too much "risk" or they are retiring... whatever reason. $2000 (current total in circulation) / $22 (Principle + Interest paid in full) = 90.909... (The number of people who *could possibly have a chance to pay off their loan in full, because in the realm of fake money once the $ is paid back it ceases to exist again.)
This is why debt based monetary creation has exploded and why the printing presses have no hope to keep up and this is the race the world is in now, so long as the money creation can outpace healthy repayment then economies move along swimmingly but as soon as the Interest monster starts catching up and potentially exceeding what an economy can sustain then collapse is inevitable.
Yea I agree with most of this. But there are two types of money, Credit Money( the money you talk about) and 'State' money. Simply, Credit money is derived from 'State' money, and to pay interest on 'credit monies' there must be an ever expanding supply of 'State' money. When I say 'State' money, that could also mean Gold, or other similar token type.
Your conclusion about how states can always and easily print their way out of recession is almost surreal, so I'm going to limit myself to a few closing remarks.
What about Bitcoin? Bitcoins are literally created out of thin air, how come bitcoin hasn't fallen apart? Are you saying it will?
Quote from: BubbleBoy
The link you have supplied shows the Fed's balance sheet, on one hand the assets (table 1) it has acquired in exchange for freshly printed monetary base, and on the other hand it's liabilities, things like outstanding currency and bank reserves (table 1 continued). Commercial banks can't simply deposit treasuries towards the reserve requirements as you claim, the Fed only acquires treasuries when it decides to do so, so banks looking to meet reserve requirements need to trade the treasuries on the market. This clamps the money multiplier to a value controlled by the Central Bank, and not an ever increasing quantity proportional to the national debt.
Read it properly please. The FED accepts Treasuries in exchange for reserves when it conducts Repo transactions. If you don't know what a Repo is, please look it up. Therefore, if someone is short reserves, and wants to convert a Treasury into reserves it simply enters into a Repo Transaction with the FED. The Repo transaction involves the FED holding a Treasury(or other form of public debt) for a short period of time, in exchange for Reserves given to the private sector. The private sector will then treat these reserves like cash.
You seem to operate under the mistaken assumption that M2 and M3 are interchangeable with M1 and expanding one has the same inflationary results. That is not correct. Treasuries are long term debt that is very liquid and secure, but it's still traded long term debt . It's liquidity comes from the underlying assumption that a very small portion of the debt is traded in a given period, in other words that investors in treasuries don't make a "run on the bank". This guarantees a very small velocity of this pseudo-monetary base so it has very reduced bearing on the inflation (as I hope you agree, there is a direct proportionality between the price level and the velocity of money; if you don't I will be forced to withdraw from this debate).
I'm not sure what you mean. M2-M1 are exchangeable with M0 with little change in prices. M3, Credit Money, is different. I am definitely not saying that M3 and Treasuries are functionally equivalent.
If you deposit a Treasury with a face-value of $1000 upon expiry, but its current value is only say $950, then banks will issue the Treasury holder with $950. Did you read the FED Statement I posted, and do you understand the structure of a Treasury? The FED Statement clearly shows Treasuries being counted towards Reserve balances, therefore Treasuries are cash-like. If someday you decide to 'run' the bank, then you will receive the current value of the Treasury minus the value of any credits you have spent. Therefore the velocity of the Treasury deposit is similar to the velocity of a Cash Deposit, and a large portion of the Treasury value is 'tradeable'.
Quote from: BubbleBoy
You are saying that because this debt is traded, and you can always get close to 1 FRN dollar for 1 T-Bill dollar, then the two are functionally equivalent. To make an analogy, you are saying that if AAA mortgage-back securities traded very liquidly before the Lehman fall, then they were inflationary cash equivalents, in other words the private sector can expand the monetary base indefinitely. Well the cash equivalence of MBS stopped as soon as investors made a run on the market in a failed attempt to increase the velocity - the price dropped near zero. This is similar to what happened with Greece.
I haven't said anything directly about the Treasuries being traded. I have described properties of Treasuries being similar, if not the same to normal cash. So if cash is being Traded, then would one expect Treasuries to be traded also? Of course, but I have not really talked about that, and I don't need too, its implicit. If AAA Lehman securities or MBSs were also backed by the U.S Treasury, then yes they would be functionally the same. But they are not backed by the Treasury, and so they are quite different and constitute a proportion of the Credit Money supply.
What happened in Greece is different to what happened during the Financial Crisis. Greece's debts are denominated in Euros, and Greece is unable to create new Euros to pay back the debts.
Quote from: BubbleBoy
Bottom line: the government does not create money when it issues debt; it can create debt up to a limit where the market will no longer deem it credible. Govt debt really is an appropriation of taxes from the future, a lease on society and the future generations, a proof of the current society's self-indulgence. The idea of financing deficits by printing money is a way to destroy the currency as a stable medium of exchange.
How can a country that issues its own money run out of money ?!? This is absurd.
The only way for America to create more wealth and solve the current unemployment crisis, is to issue more debt and thereby create more money. This will soak up excess supply(unemployment) and create the next 'wave' of growth. There is nothing indulgent about people being unemployed.
The recent debt crisis has been nothing but a vehicle to justify cutting spending to regulatory agencies that are responsible for seeking Justice for the GFC.
All you debt ceiling Nazis, why hasn't Japan defaulted with a debt of 198% of GDP ??
Simple. Because the vast majority of Japanese debt is held by the Japanese people.
The US could immediately and surprisingly default on its foreign held debt, bail out the US banks, insurance companies, monetize social security, and probably still come out of it with a stronger US dollar.
That is silly. By that logic, we could issue more debt and sell it only to Americans, and the problem is fixed. Also what % does it become a problem??
http://upload.wikimedia.org/wikipedia/commons/1/17/Estimated_ownership_of_treasury_securities_by_year.gif
The amount of owned by foreigners has barely moved over the last 15 years, why hasn't it been an issue before?
Then there is Canada, with 16.5% of total public debt held by Non-Residents. Canada has a public debt ratio of 84% of GDP, compared with America's 62% of GDP. Wouldn't Canada be in more of a debt crisis than America???
http://www.fin.gc.ca/dtman/2009-2010/DMR2010_ENG.pdf (Pg 23.)
The Government does create, indirectly via the issuance of Treasuries, money.
Government debt may have a value equivalent to cash if you are large financial institution able to trade them. But it's not monetary base, it's long term debt. You can't buy a Big Mac with bonds. They are not legal tender. You can't deposit them in bank for interest, they are already producing interest. If you are a bank you can't use them to constitute minimal reserves at the Fed onto which to extend credit. The bulk of debt is held by institutional investors for years or decades, and it's not traded. Debt held by foreign governments in reserve is rarely if ever traded, the same for debt held by pension funds or inter-governmental debt.
The velocity of treasuries is one order of magnitude lower than monetary base, so if you really want to count them as money you would do so towards the M3. As any macro professor will tell you, financing by bonds is less inflationary than financing by monetary expansion.
See here, http://www.federalreserve.gov/releases/h41/current/h41.htm. This shows U.S Treasuries being counted towards Reserve Requirements. So yes Government Debt is a close equivalent to cash.
I can deposit the Treasury with the bank, and they will issue credit over it. Why? Because the Treasury is obligated to pay an amount of 'legal tender' notes in the future. From the Bank's perspective, the Treasury is an asset, and is willing to lend credit. You can then go purchase a Big Mac meal. The bank can then exchange the Treasury for cash with other banks or the central bank. It can use this money to issue new loans, and fulfill reserve requirements. IMO Krugman is very good fictional writer, who is looking out for vested interests.
Quote from: BubbleBoy
Quote from: Iseree22
If the supply of Treasuries compared to cash is too great, then the Central Bank will step in, and purchase Treasuries with new cash.
The Central Bank is under no obligation to do such a thing. The Central European Bank certainly did not step in to buy hundreds of billions of Greek debt when the supply was too great. And it is certainly too great: investors are currently unloading them at 50-70% discounts. The Central Bank can purchase bonds, but it's a policy option towards it's main goal of inflation, exchange rate or interest targeting.
I meant interest rates are affected by the amount of cash circulating relative to Government Debt. This has an affect upon interest rates, which the Central Bank will respond to, given that inflation is within the target band.
Also the Greek Situation is a little different, because Greece doesn't issue its own currency. If it did, then like Japan there would not have an issue with its public debt.
Quote from: BubbleBoy
The central bank could give money directly to the government for spending when it would decide to expand the money supply. The advantage of borrowing it to the government is that when inflation hits the excess liquidity can be sterilized by forcing the government to tax and pay the debt.
Please explain to me how bond holders have the power to force Governments to raise taxes to pay debt??
Quote from: BubbleBoy
From the money the Fed has created, a vast quantity sit as excess reserves in the Feds accounts. They are simply idle because the banks are unable or unwilling to find able borrowers. You will notice that the shape of the curve matches the total monetary base curve almost perfectly, and by subtracting the former from the later you will get the total monetary base that actually circulates in the economy. From the 1900 blns created since 2008 only 300 are circulating; the other 1600 blns are simply numbers in the fed's computers. That, coupled with a deflationary economic environment is the real the reason you don't see massive price inflation.
I don't see the point of your graph. For the FED to create reserves it must purchase an asset. Therefore the growth in red-line means that the balance-sheet of the FED has dramatically expanded. That means that the FED has purchased assets from the Private Sector, in exchange for monetary base. A % of the 'new' monetary base, may stay with the FED(excess reserves), for which the FED will pay interest on, a tool the FED got in 2008.
All you debt ceiling Nazis, why hasn't Japan defaulted with a debt of 198% of GDP ??
Does your country create its own money? Basically out of thin air right?
Then how can it run out of money?
Does your country create its own money? Basically out of thin air right?
Then how can it run out of money?
What is wealth measured in? Currency units. Therefore the total wealth of an economy is going to track very closely with the amount of money in circulation.
You have absolutely no idea what you're talking about. By this logic, Zimbabwe should be one of the richest countries, since it has a huge amount of money in circulation.
The Weimars had so much cash, they burned it to keep warm! So much for 'currency units'. Rofl.
You don't make any sense. If you go back and read carefully and, think just a little, then you will realize that wealth in every country is measured in currency units. We don't compare how many pigs, shoes, cars, etc, etc we have, instead we do something that may appear complex to some, but after carefully thinking the process through it is actually quite simple. We sum the value of everything we have in currency units, and call this wealth.
Let me know if you have trouble getting your head around that concept.
Once you have understood that, there is another concept called currency purchasing power. But first we should get a handle of the basics before moving to more advanced topics.
I think there is a chance that Treasuries will also fall. There seems to be some correlation between Treasuries and Gold recently. Although Gold is starting to move by itself, unrelated to global uncertainty.
There's a fair bit of stress on a woman's body during pregnancy. Large health risks. Why shouldn't she alone be the judge on weather or not she's prepared to take those risks?
+1
Using the woman's body as a moral battleground shows how these ideologues struggle to reconcile complex situations with their impractical simple moral rules. Lets all decide what the women can do with her body. That is the only moral and just way to solve this situation.
Quote from: TiagoTiago
Somthing else you need to take in consideration is that if you consider a fetus to have all those rights way before it's much more than a simple organism, then shouldn't other similarly simple organisms have the same rights even if currently we don't have the technology to advance them to a similar level as an adult human?
+10
Your too far ahead.