tag:blogger.com,1999:blog-1141932539860553199.post7579046793674732801..comments2024-03-05T10:52:24.691+00:00Comments on Mark Wadsworth: This money creation nonsense, to summarise for the umpteenth time.Mark Wadsworthhttp://www.blogger.com/profile/07733511175178098449noreply@blogger.comBlogger36125tag:blogger.com,1999:blog-1141932539860553199.post-10100523175304409902016-08-03T12:51:10.925+01:002016-08-03T12:51:10.925+01:00Worth a read:-
http://bawerk.net/2016/06/30/off-ta...Worth a read:-<br />http://bawerk.net/2016/06/30/off-target/<br />Lolahttps://www.blogger.com/profile/04586735342675041312noreply@blogger.comtag:blogger.com,1999:blog-1141932539860553199.post-61374176176244412712016-08-01T14:42:21.085+01:002016-08-01T14:42:21.085+01:00L, Din, B, MW, D, thanks for back up, looks like m...L, Din, B, MW, D, thanks for back up, looks like most of us understand this :-)Mark Wadsworthhttps://www.blogger.com/profile/07733511175178098449noreply@blogger.comtag:blogger.com,1999:blog-1141932539860553199.post-42005142894890142562016-08-01T13:56:10.867+01:002016-08-01T13:56:10.867+01:00MW. Yes, I am aware of that. IMHO he has analysed...MW. Yes, I am aware of that. IMHO he has analysed only half the problem. It is the preceding bubble, engendered by the absence of a Gold Standard that permits the massive expansion of money and credit that then leads to a bust.<br /><br />Yes, indeed inflicting a gold standard on Greece - at the wrong price - will have such an effect as all the bubble activities are unwound. A parallel although not exact one is the UK return to the Gold standard in the 1930's at the old pre WW1 rate.Lolahttps://www.blogger.com/profile/04586735342675041312noreply@blogger.comtag:blogger.com,1999:blog-1141932539860553199.post-1954616003304641382016-08-01T13:07:54.030+01:002016-08-01T13:07:54.030+01:00Must admit that I don't see an incompatibility...Must admit that I don't see an incompatibility between what the BoE says and what Mark says. In essence the BoE explains how money is created. And It basically says that borrowers are required to accept debt for the creation process. Mark is merely pointing out that there are limits to how much debt borrowers will agree to take on, limits which depend to a large extent on the demand for land.<br /><br />As far as I can see that doesn't contradict anything that the BoE is saying.Derekhttps://www.blogger.com/profile/06296053477905542366noreply@blogger.comtag:blogger.com,1999:blog-1141932539860553199.post-42937947044000223662016-08-01T13:07:28.151+01:002016-08-01T13:07:28.151+01:00DBC Reed above, I use the language the same way as...DBC Reed above, I use the language the same way as you. St Louis Fed also has published a similar paper to BOE. The Benaky said money was created by typing it into a computer at the Fed. The Fed/USA can 'never run out'. <br /><br />How about: The State creates a legal structure that enshrines into being debtors and creditors. It creates courts that will judge who is who. It invents police or military who will enforce this and prisons or exile as punishment for ultimate non compliance with the above.<br />So banks 'monitise' this process and record it in the money unit of the state. Who owes who. Therefore If 'Create' = 'monitise'onto the Bank ledger these social debt arrangements you are both correct!<br /><br />ps above, I always thought Keynes: 'pushing on a string' described the situation where there were no takers of debt at a lower and lower price.<br /><br />Lola, please reread the Wayne Godley quote. Putting Greece et al, on a Gold standard destroyed it/them. This is how Godley knew the Euro would fail as early as 1992. Max Kieser Gold Standard = massive shocks no ability to adjust and 50%+ youth unemployment, then your real problems start!MikeWhttps://www.blogger.com/profile/15455583313857077618noreply@blogger.comtag:blogger.com,1999:blog-1141932539860553199.post-68426499215353854462016-08-01T12:35:28.463+01:002016-08-01T12:35:28.463+01:00"In all this arrogance, there is a steadfast ..."In all this arrogance, there is a steadfast refusal to address the Bank of England's authoritative rulings on the creation of money ,none more authoritative."<br /><br />Since when has the BoE been, like the Pope, infallible? The creation of money is something that happened many thousands of years ago. I would have thought it better to listen to historians on the subject than the BoE.Bayardhttps://www.blogger.com/profile/15211150959757982948noreply@blogger.comtag:blogger.com,1999:blog-1141932539860553199.post-37684163481694721542016-08-01T12:34:03.641+01:002016-08-01T12:34:03.641+01:00> DBC Reed
the BoE article you refer to &qu...> DBC Reed <br /><br />the BoE article you refer to " Money Creation in the modern economy" tallies with Mark W's Post . <br /><br />Mark has - " 7. It is important to note that total bank lending is limited only by people's willingness to borrow. That is what creates the indebtedness of which money is merely a measure. The banks do not create the indebtedness, they just measure it and make a record of it. To say that banks 'create money' is only true in bookkeeping terms, but they have no more created it than Ole Romer decided what the speed of light is or created it."<br /><br />the BoE Document has -<br /> <br /><br />"Limits to broad money creation"<br /><br />"Although commercial banks create money through their<br />lending behaviour, they cannot in practice do so without limit.<br />In particular, the price of loans — that is, the interest rate (plus<br />any fees) charged by banks — determines the amount that<br />households and companies will want to borrow."<br /><br />and<br /><br />"The ultimate constraint on money creation is monetary<br />policy. By influencing the level of interest rates in the<br />economy, the Bank of England’s monetary policy affects<br />how much households and companies want to borrow."<br /><br />"In order to make extra loans, an individual<br />bank will typically have to lower its loan rates relative to its<br />competitors to induce households and companies to borrow<br />more."<br /><br />end quote.<br /><br />no so different, very similar indeed.Dinerohttps://www.blogger.com/profile/14632385731642361211noreply@blogger.comtag:blogger.com,1999:blog-1141932539860553199.post-35870728815332487372016-08-01T11:10:25.495+01:002016-08-01T11:10:25.495+01:00@L
Fraid there's still too much thought crime ...@L<br />Fraid there's still too much thought crime here.And you've said "a loan created out of thin air". No hope for you then. DBC Reedhttps://www.blogger.com/profile/17891849727783879145noreply@blogger.comtag:blogger.com,1999:blog-1141932539860553199.post-75494049387225665112016-08-01T10:50:31.872+01:002016-08-01T10:50:31.872+01:00DBCR, well as far as I know that 'banks create...DBCR, well as far as I know that 'banks create most of the money in the economy' is exactly what MW has said. What he has also said, is that it is the privatisation of land taxes combined with the current banking settlement, which drives this money creation. The deposits made by landlords on the receipt of the sale of land financed by a bank loan, a loan created from thin air as permitted and encouraged by The Power That Be.Lolahttps://www.blogger.com/profile/04586735342675041312noreply@blogger.comtag:blogger.com,1999:blog-1141932539860553199.post-22117339539146640802016-08-01T09:06:12.623+01:002016-08-01T09:06:12.623+01:00@Lola
Naughty, naughty, you say above "Banks ...@Lola<br />Naughty, naughty, you say above "Banks create most money in the economy"How many times has MW told you, banks don't create money?<br />I am shocked, truly shocked.Don't you know that in a town with low cost rented housing there is no buying and selling so no need for banks at all?Why is it you cant get your head round this simple, realistic scenario?DBC Reedhttps://www.blogger.com/profile/17891849727783879145noreply@blogger.comtag:blogger.com,1999:blog-1141932539860553199.post-36897526964624159222016-08-01T06:22:53.981+01:002016-08-01T06:22:53.981+01:00Me: "The point about banks is that they creat...Me: "<i>The point about banks is that they create most money in the economy because of the state monopoly and their special privilege sanctified by the various banking Acts…."</i><br /><br />You: "<i>No that is not the point. Banks piggy back on land ownership. People are prepared to pay for land because they are forced to. Banks also benefit from bail outs, state subsidies etc but that is a secondary issue."</i><br /><br />I think we are talking at cross purposes. Both me and you are right. I am not denying that banks create money so that people can / are forced to buy / rent land. It's the special privileges that help that along the way - including the bail outs.<br /><br />Going back to Gold, I am no gold bug. But using your own tried and tested test, gold has always worked as money. The GBP 'promise to pay' is a statement of the guarantee of convertibility, now of course abandoned. People, money users, felt safe knowing that they could get a real thing in exchange for paper promises, at any time. <br /><br />I actually think that money is probably mankind's greatest invention. It enables the exchange economy and specialisation and all the benefits that flow from that. It frees workers from being 'bondsmen'. It gives us all a measure by which we can successfully prioritise. And because it is such a good thing and that if one can become a monopoly producer it bestows on you enormous power. Which is why all governments through time have sought to monopolise it. It also makes it possible to collect taxes (all taxes, and rent is a tax). Having the monopoly means that governments have no effective limit on what they can spend - in the same way as your rents create money analogy - government spending creates taxes. And what they cannot get by taxes they get by 'borrowing', aka printing even more of the stuff. And that is where currency convertibility comes in. It effectively stops government forever inflating. It makes money sound. Which also affects rents. That is LVT/Bank Asset Taxes etc are all well and good, but they must be accompanied by other reforms, and sound money and banking reform are fundamental ones of those.Lolahttps://www.blogger.com/profile/04586735342675041312noreply@blogger.comtag:blogger.com,1999:blog-1141932539860553199.post-50190171955138483972016-08-01T04:29:13.886+01:002016-08-01T04:29:13.886+01:00Hi Mark,
thanks for taking the time to reply. I d...Hi Mark,<br /><br />thanks for taking the time to reply. I do get where you are coming from in that banks are also "a product of the system" and that removing them leaves the inherent issue of landed vs serf.<br /><br />However I think the banks could be allowed to exist were land value tax to be used in conjunction with state issued money via some kind of basic income. In stating this I mean to also say that banks are making a bad situation much worse by being such blood sucking sods! They have become *so* efficient in reacting to productivity improvements and mopping them up with new fiat issuance.Ben Fhttps://www.blogger.com/profile/13760806340684934435noreply@blogger.comtag:blogger.com,1999:blog-1141932539860553199.post-41779671918139306172016-07-31T23:49:47.265+01:002016-07-31T23:49:47.265+01:00DBC: "Where does the bank find the money from...DBC: <i>"Where does the bank find the money from to loan if it doesn't have 100% reserves?"</i><br /><br />To recap:<br /><br />"Money" is a unit of measurement of indebtedness. The debt and the asset net off.<br /><br />Tenants are already in debt to landowners. They are face with a lifetime of paying hundred of pounds a month in rent. The landowner has a corresponding asset (the right to receive hundreds of pounds a month forever.<br /><br />Tenants can choose, instead, to paying slightly more to pay off a mortgage debt for a shorter period. The landlord can choose to forego hundreds of pounds a month forever in exchange for a large lump sum today.<br /><br />So that indebtedness/asset which the land market creates are then converted to a single lump sum today.The banks solemnly record the collectible from the borrower and the payable to the seller and act as debt collectors.<br /><br />In case you failed to read all my previous replies - imagine a town where everybody gets a low rent council house for life as of right and private renting or selling of land is illegal - could banks "create money" in this town? No, of course not. Nobody would want to buy and there would be nothing to sell. <br /><br />Mark Wadsworthhttps://www.blogger.com/profile/07733511175178098449noreply@blogger.comtag:blogger.com,1999:blog-1141932539860553199.post-40787762821714877352016-07-31T22:46:49.623+01:002016-07-31T22:46:49.623+01:00@MW
You are refuting that banks create money as th...@MW<br />You are refuting that banks create money as the Bank of England explains in good plain English. God knows why.Your insistence that you have dealt with points somewhere else and can't be bothered to explain them again is verging on the megalomaniac.Go on then, as its so straightforward to explain,"Where does the bank find the money from to loan if it doesn't have 100% reserves?" Can't be that difficult surely?DBC Reedhttps://www.blogger.com/profile/17891849727783879145noreply@blogger.comtag:blogger.com,1999:blog-1141932539860553199.post-11007309793941810352016-07-31T22:28:10.007+01:002016-07-31T22:28:10.007+01:00L: "MW Doesn't your Ford analogy show you...L: <i>"MW Doesn't your Ford analogy show you where actual 'money' comes from. That is it arises in the market from the creation of value?"</i><br /><br />In an ideal world yes, Ford (company and workers and suppliers) create value. Good stuff. People are prepared to pay for value others created (and expect to be paid for value that they create).<br /><br /><i>"The point about banks is that they create most money in the economy because of the state monopoly and their special privilege sanctified by the various banking Acts…."</i><br /><br />No that is not the point. Banks piggy back on land ownership. People are prepared to pay for land because they are forced to. Banks also benefit from bail outs, state subsidies etc but that is a secondary issue.<br /><br /><i>"This is where a Gold Standard comes in, but I am not going to go into that now, here."</i><br /><br />Here we heartily disagree. If landowners can extract rent, and banks can extract rent from landowners and those wishing to buy land, then it matters not whether the rent is measured in £, in gold or in cucumbers.<br /><br />BF, I completely agree with all of your comment, except for maybe this bit:<br /><br /><i>"in theory the house seller might arrange with the "buyer" to take repayments over 30 years. In practice it's the bank debt drug pushers who facilitate this."</i><br /><br />I covered that already. If banks and lending on land were made illegal and unenforceable tomorrow, the transfer of wealth from tenants/purchasers to landowners would remain much the same. Banks just tap into/facilitate that transfer of wealth.Mark Wadsworthhttps://www.blogger.com/profile/07733511175178098449noreply@blogger.comtag:blogger.com,1999:blog-1141932539860553199.post-11638225692227391742016-07-31T21:22:09.126+01:002016-07-31T21:22:09.126+01:00Hi
"If instead of buying on credit from Ford...Hi<br /><br />"If instead of buying on credit from Ford you take out a personal loan, then what Ford gets is a deposit with the same bank - all the bank does is act as debt collector for Ford. The bank did not create the car, the value or the indebtedness."<br /><br />I feel this analogy is terminally broken by the supply side. If everyone in the world wanted to buy a Ford they could scale up production to meet this demand.<br /><br />Land is artificially constrained by planning and genuinely constrained by physical space (in some cases). Demand exceeds supply. When this is the case banks facilitate a bidding war at and above the possible amount that could be borne under normal circumstances. This pushes up prices to the max available credit, which basically tops out at a lifetime's earnings.<br /><br />Yes in theory the house seller might arrange with the "buyer" to take repayments over 30 years. In practice it's the bank debt drug pushers who facilitate this.<br /><br />I really can't agree that the banks are not culpable. They are part of the pipeline that is rent extraction.<br /><br />Yes kids might start refining their own heroin if drug pushers were not in town, but most likely they'd just buy beer.Ben Fhttps://www.blogger.com/profile/13760806340684934435noreply@blogger.comtag:blogger.com,1999:blog-1141932539860553199.post-63086280480049125932016-07-31T21:07:21.485+01:002016-07-31T21:07:21.485+01:00MW Doesn't your Ford analogy show you where a...MW Doesn't your Ford analogy show you where actual 'money' comes from. That is it arises in the market from the creation of value? The fact that that value is measured in GBP (say) is not really relevant. It just so happens that we have a nationalised money protected by legal tender laws to exclude alternatives (competition).<br /><br />The point about banks is that they create most money in the economy because of the state monopoly and their special privilege sanctified by the various banking Acts. (The BoE can also create money). I found that BoE report that states very clearly the 95% of the money in the UK is created by banks - lost the link I am afraid.<br /><br />So if it wasn't for the money monopoly Ford could create 'Fords' to pay their suppliers and to measure the price / value of their cars and trucks. This has actually happened in the past. (Matthew Boulton did exactly that, and his coins or 'tokens' were widely accepted.). As long as Fords were exchangeable with other moneys at no fixed price (Gresham's Law) then quality would be assured (which has also happened before).<br /><br />Overall I really don't think it matters who makes money, as long as who makes it can be trusted to make good, 'sound', money - which the current banking settlement means that banks not only can't and won't but are positively encouraged not to.<br /><br />This is where a Gold Standard comes in, but I am not going to go into that now, here.Lolahttps://www.blogger.com/profile/04586735342675041312noreply@blogger.comtag:blogger.com,1999:blog-1141932539860553199.post-15608498970729462122016-07-31T19:52:02.609+01:002016-07-31T19:52:02.609+01:00DBC, I referred you to the relevant paragraph. The...DBC, I referred you to the relevant paragraph. There is not much point you continuing with blanket denial of everything for sport.<br /><br />Anyway, I am not "refuting" what the BoE said. I merely explained the background position which enables banks to do what the BoE says they do.Mark Wadsworthhttps://www.blogger.com/profile/07733511175178098449noreply@blogger.comtag:blogger.com,1999:blog-1141932539860553199.post-10920370639648898552016-07-31T17:32:41.757+01:002016-07-31T17:32:41.757+01:00@MW There are numerous numbered paragraphs and ste...@MW There are numerous numbered paragraphs and steps in your refutations of the Bank of England.Please write the correct one out.DBC Reedhttps://www.blogger.com/profile/17891849727783879145noreply@blogger.comtag:blogger.com,1999:blog-1141932539860553199.post-85443674161614384392016-07-31T16:07:30.484+01:002016-07-31T16:07:30.484+01:00DBC: "Where does the bank find the money from...DBC: <i>"Where does the bank find the money from to loan if its doesn't have 100% deposits?"</i><br /><br />See para 5, step 3. I covered that!Mark Wadsworthhttps://www.blogger.com/profile/07733511175178098449noreply@blogger.comtag:blogger.com,1999:blog-1141932539860553199.post-7134573313462676632016-07-31T15:49:11.310+01:002016-07-31T15:49:11.310+01:00@MW
You do not set the Bank of England straight b...@MW <br />You do not set the Bank of England straight because you cannot.You have chickened out of the outrageous challenge you have foolishly taken on, seeing that the BoE is clearly gunning for people like you who misrepresent the money creation process.<br />To tempt you out of the bunker , I will use your language:<br />"We agree that banks do not have to take deposits to make loans" Where does the bank find the money from to loan if its doesn't have 100% deposits?DBC Reedhttps://www.blogger.com/profile/17891849727783879145noreply@blogger.comtag:blogger.com,1999:blog-1141932539860553199.post-77955908192323954622016-07-31T14:51:36.834+01:002016-07-31T14:51:36.834+01:00R, ta for back up, I think we ought to see "g...R, ta for back up, I think we ought to see "government money" (tax and spend) as a separate cycle.<br /><br />Din, ta for back up. <br /><br /><i>"it is the borrowers debt contract that is prime in creating the money, the deposits."</i><br /><br />Exactly! The banks can only "create" money if there is a borrower willing and able to repay the debt (and something which is he is wants to buy so urgently that he is willing to borrow money to do so).<br /><br />Clearly, this post looks at "land backed money" which is different to "government money" and indeed the small + and - balances required to oil the wheels of the economy (truly private money). They use the same unit of measurement, so are interchangeable in practice.Mark Wadsworthhttps://www.blogger.com/profile/07733511175178098449noreply@blogger.comtag:blogger.com,1999:blog-1141932539860553199.post-48439864299001533832016-07-31T14:07:36.172+01:002016-07-31T14:07:36.172+01:00The currency’s value is the economic resources sol...The currency’s value is the economic resources sold by the borrowers who issued the debt that the consequentially issued currency represents.<br />In the analysis described my Mark W the economic resource sold is more often than not land.<br /><br />DBC Reed , there nothing in the BoE article to contradicts the observation thank banks create money in concert with borrower, and so it is the borrowers debt contract that is prime in creating the money, the deposits.<br /><br />Mark W , money is a "measurement" that's a good point.<br /><br />Ralph M - that would ony be true if the thing used as collateral was sold to the bank.Dinerohttps://www.blogger.com/profile/14632385731642361211noreply@blogger.comtag:blogger.com,1999:blog-1141932539860553199.post-79630051218222332952016-07-31T13:31:09.587+01:002016-07-31T13:31:09.587+01:00DBC, I covered that at point 5 of the post.
Can y...DBC, I covered that at point 5 of the post.<br /><br />Can you please go back to my first reply to you and tell me which of these statements you do not agree with:<br /><br /><i>We agree that banks do not have to take deposits to make loans.<br /><br />We agree that "loans create deposits"<br /><br />We appear to be agreed that these loans and deposits are merely manifestations or a written record of actual underlying indebtedness - the fact the tenants are indebted to landlords and the only way to free themselves is to make themselves indebted to banks.<br /><br />We agree that banks can only cash in on this to the extent that the government does not collect the land rent itself in LVT or indeed give people low cost council houses.</i><br /><br />So far you have just done ad hominem attacks, you say I'm wrong but without saying what the right explanation is. To save a lot of time, can you please tell me which of those statements you do not agree with?Mark Wadsworthhttps://www.blogger.com/profile/07733511175178098449noreply@blogger.comtag:blogger.com,1999:blog-1141932539860553199.post-33977747300826422052016-07-31T10:36:10.470+01:002016-07-31T10:36:10.470+01:00In all this arrogance, there is a steadfast refus...In all this arrogance, there is a steadfast refusal to address the Bank of England's authoritative rulings on the creation of money ,none more authoritative. You cannot engage in an argument on a public matter without mentioning the rationale of the system the public authority is enacting .Yet you do, despite being directly challenged to do so in a simple demonstrable way, instead preferring to argue on your own eccentric terms on your own turf. (Likewise my challenge to disavow the anti-immigration Brexit strategy, the popularity of which now makes it impossible for us to continue in the EU free trade area while there is no prudential plan for an alternative. It is also immoral and Neo Nazi something which certain Brits seem too up themselves to notice.) DBC Reedhttps://www.blogger.com/profile/17891849727783879145noreply@blogger.com