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Old 1st August 2017, 08:43 PM   #121
Saggy
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Originally Posted by Tippit View Post
For just a small example of this, check out Alan Grayson's video confronting Bernanke in congress:

Alan Grayson: "Which Foreigners Got the Fed's $500,000,000,000?" Bernanke: "I Don't Know."

Keep in mind that foreign currency swaps are just one example of the Fed's power to monetize virtually anything via private and theoretically unaccountable, non-transparent loans.
What an extraordinary clip. If you go back to the start of the thread you'll see there is an MIT reference that states that, simplified, the assets of the Fed are govt. bonds. I guess that has been superseded, which became an issue following 2008. But the authorization for the Fed quoted by Bernanke, Sect. 14, is an amendment to the Federal Reserve Act going back to the 50s. So, it appears the Fed can do just about what it damn well pleases, as that amendment gives it the right to buy various things including 'bills of exchange' which are "a written order to a person requiring them to make a specified payment to the signatory or to a named payee; a promissory note." which translates into 'just about anything' I'll guess. So, you're right the Fed can print money buy virtually anything.

So, this represents another level of complete insanity in addition to the one resulting from commercial banks printing and lending money at interest that I was thinking of in the OP.
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Old 2nd August 2017, 12:46 AM   #122
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Originally Posted by 3point14 View Post
they can do it exactly as the bank do it. What's so special about private institutions?
I am not enamoured with government's ability to provide efficient services to customers, especially not in a monopolised market (though I accept some exceptions can or do exist).

Originally Posted by 3point14 View Post
If a moneyed institution wants to lend its actual cash to a private individual, no trouble.

If they want to create that money out of thin air by writing a credit on one side, a debit on the other and lending to the customer money that did not exist before the transaction, then I'm more than happy for the government to have a monopoly on that.
Yeah I don't think the whole "out of thin air" meme is appropriate; deposit expansion merely represents more borrowers having access to the same pool of a bank's reserves. Yes, this creates credit which most of the time we're all happy to treat as money, and in certain measures is counted as money, but it's still different to what a central bank does so again I disagree with you implying they're the same.

Originally Posted by 3point14 View Post
This power should either be reserved for government or I should be able to do it myself and avoid all those troublesome interest charges that the bank apply for the privilege.
That's the thing, you can do it yourself.

Get 10 of your mates to entrust you with $1K each and pay them 0% for the privilege. Lend yourself $9K of the $10K. Withdraw that $9K but make sure you write that in the Excel spreadsheet. Now you have $9K, and each of your mates has a deposit slip which confirms you owe them $1K. Let's pretend that in any given day, your mates only ever need to withdraw 10c from their record on the spreadsheet, and that 10c eventually makes its way back to you before too long.

So now your spreadsheet looks something like this:
$1K cash stuffed under the mattress;
$10K owed to your buddies; and
the $9K loan you gave yourself.

Voila, money out of thin air. The main difference in this silly example is that in the real world, banks and consumers treat the Excel IOUs as good as the money you've stuffed under the mattress.

(psi, this was for demonstrative purposes only )
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Old 2nd August 2017, 12:56 AM   #123
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Originally Posted by Saggy View Post
And it makes sense that the Federal Reserve should be illegal, since it’s real purpose is to transfer the wealth of working US citizens to the bankers, by means of interest charges on an inevitably rising public debt, even though the bankers never did any work to justify their possession of that wealth.
This is complete nonsense. The Fed only sets the floor in the interbank lending rate- banks can and do charge whatever they like for a variety of credit products, and this would be the case if you abolish the Fed tomorrow. In normal conditions, most of the funds loaned by banks comes from customer deposits + money market borrowing.

Central banks' primary roles typically revolve around balancing unemployment with inflation, setting interest rates, acting as a lender of last resort and (jurisdiction depending) performing various financial regulatory functions. Even if the Fed had the exact same structure as, say, The Reserve Bank of Australia, the functions it performed wouldn't change. For most intents and purposes the Fed is an independent federal government authority.
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Old 2nd August 2017, 01:01 AM   #124
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Originally Posted by Hans View Post
I've read all your stuff before, so don't waste your time trying to work your 'magic' on me. I'm uninterested in going over that stale dried up idea once again.
He seriously has but one record in his collection.
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Old 2nd August 2017, 02:27 AM   #125
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Originally Posted by Tippit View Post
Well for the scammers? Absolutely.
I'm not a scammer. I suspect that you're not a scammer and yet you seem to be living in relative comfort, if you have the internet and the time to use it to complain about economics.
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Old 2nd August 2017, 02:28 AM   #126
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Originally Posted by Sceptic-PK View Post
I am not enamoured with government's ability to provide efficient services to customers, especially not in a monopolised market (though I accept some exceptions can or do exist).



Yeah I don't think the whole "out of thin air" meme is appropriate; deposit expansion merely represents more borrowers having access to the same pool of a bank's reserves. Yes, this creates credit which most of the time we're all happy to treat as money, and in certain measures is counted as money, but it's still different to what a central bank does so again I disagree with you implying they're the same.



That's the thing, you can do it yourself.

Get 10 of your mates to entrust you with $1K each and pay them 0% for the privilege. Lend yourself $9K of the $10K. Withdraw that $9K but make sure you write that in the Excel spreadsheet. Now you have $9K, and each of your mates has a deposit slip which confirms you owe them $1K. Let's pretend that in any given day, your mates only ever need to withdraw 10c from their record on the spreadsheet, and that 10c eventually makes its way back to you before too long.

So now your spreadsheet looks something like this:
$1K cash stuffed under the mattress;
$10K owed to your buddies; and
the $9K loan you gave yourself.

Voila, money out of thin air. The main difference in this silly example is that in the real world, banks and consumers treat the Excel IOUs as good as the money you've stuffed under the mattress.

(psi, this was for demonstrative purposes only )

sounds a bit, er, Ponzi to me.

Is it legal?
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Old 2nd August 2017, 04:01 AM   #127
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Originally Posted by 3point14 View Post
sounds a bit, er, Ponzi to me.

Is it legal?
Sigh. Fractional lending relies on the fact that most of the time, money sits around doing nothing. By pooling resources large loans can be made while still meeting demands from depositors. This idea that banks can just magic up money they don't have is nonsense; indeed the fun fact in all of this is many of the people who claim fractional lending causes runs on banks, at the same time believe these same banks can create money out of thin air.

Last edited by Sceptic-PK; 2nd August 2017 at 04:04 AM.
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Old 2nd August 2017, 04:15 AM   #128
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Originally Posted by 3point14 View Post
sounds a bit, er, Ponzi to me.

Is it legal?
If people agree that something is money, then it is.

In this example if 2 of the mates decided to do a deal - say swap a motorcycle for 1 of the deposit slips - then that is probably legal. The problem comes when you have to deal with somebody who doesn't agree that the deposit slip is money.

EDIT: This is the reason for legal tender laws - they make it clear that something is definitely money.
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Old 2nd August 2017, 04:31 AM   #129
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Originally Posted by Sceptic-PK View Post
Sigh. Fractional lending relies on the fact that most of the time, money sits around doing nothing. By pooling resources large loans can be made while still meeting demands from depositors. This idea that banks can just magic up money they don't have is nonsense; indeed the fun fact in all of this is many of the people who claim fractional lending causes runs on banks, at the same time believe these same banks can create money out of thin air.

Not the tender. The system
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Old 2nd August 2017, 04:40 AM   #130
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Originally Posted by 3point14 View Post
Not the tender. The system
Which law might you imply that "the system" is breaking?
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Old 2nd August 2017, 05:14 AM   #131
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Originally Posted by Sceptic-PK View Post
Which law might you imply that "the system" is breaking?

I have no idea. As may be apparent, my knowledge is a very, very long way from extensive in the matter.
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Old 2nd August 2017, 05:17 AM   #132
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Originally Posted by 3point14 View Post
I have no idea. As may be apparent, my knowledge is a very, very long way from extensive in the matter.
Seems like the mechanics of loaning money and holding an IOU would be a pretty basic bit of individual adult competence.

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Old 2nd August 2017, 07:04 AM   #133
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Originally Posted by Tippit View Post
There isn't much evidence of human interactions in antiquity. But we know a priori that human beings exchanged things before there was money. This can be described as barter and is the definition of barter.

Do we? After all, that is precisely what we’re discussing, whether the barter economy had actually existed. Barter appears intuitively “natural”, and Psion10 showed us (or at least, showed me -- you may have been aware already of that alternative hypothesis, I don’t know) that there are other hypotheses that can equally well explain how we exchanged goods prior to the invention of money. To simply state that the barter economy did exist “a priori”, sounds a bit circular-ish to me! That’s simply, like, your opinion, right?

Unless I’m misunderstanding your argument?


Originally Posted by Tippit View Post
We also know, through various historical accounts, that gold and silver were widely accepted as money. This likely occurred due to the problem of the double coincidence of wants, whereby in order to complete a barter exchange, both parties must want exactly what the other has to offer, now. Gold and silver became money because of properties including durability, scarcity, and divisibility, and because it was a commodity that everyone was willing to accept as payment for goods and services, now, in lieu of other commodities that one party may not want for various reasons.

Sure, gold and silver would be “commodity money”. Understood.


Originally Posted by Tippit View Post
I'm neither a historian nor an anthropologist. I would agree that human beings were probably subject to a lot more coercion than the alternative, but I also think it's far more likely that they were free to exchange things in barter than not, and so I think the idea that barter didn't exist is kind of ridiculous.

I do beg your pardon, but I can’t help, once again, finding that argument wholly circular. You’re simply saying “I think it’s far more likely that they were free to exchange things in barter”, and therefore, “I think the idea that barter didn’t exist is kind of ridiculous”, without throwing either any reasoning or any evidence in support of that position.

You’re merely expressing an unsupported opinion. A strongly-held opinion, seemingly, but unsupported for all that. Which is fine, as long as we’re clear that that is all it is.

Unless I am, once more, misunderstanding your argument? (I keep on asking that, because your other posts in this thread show that your knowledge of economics is far greater than my own sketchy acquaintance with this subject, so it could be that I’m not able to infer some portions of your argument that you may not have explicitly stated but which may be obvious to you. If that is the case, would you please spell it out for me?)


Originally Posted by Tippit View Post
This idea is independent of the idea that leaders demand tribute, because taxation in one form or another has been around since antiquity as well, and I have no doubt that tribal leaders and early politicians had no problems demanding tribute. They would simply show up at your hut, or send knights to your farm to collect, and that was that.

Unless I’m mistaken (and Psion10 can correct me if I am wrong, since I’m only paraphrasing what I think he meant to convey), the idea that he had put forward had nothing to do with taxation. That, like you say, is a separate and unrelated discussion. (Or at least, not wholly unrelated, but not central to what we’re discussing here.) I think what he’s saying is that the actual producers (the hunters, the farmers, the club-makers and the spear-makers and sling-makers, the potters, whatever) brought their excess goods (that portion of what they produced that they didn’t themselves consume) to their tribal chiefs and priests, and these chiefs and priests, in turn, distributed these goods to those other villagers/tribesmen who did need those goods. And they may have used tokens to keep track of such transactions, tokens like gold and silver, perhaps backing up such tokens up with religious voodoo to further reinforce the value of those tokens (over and above the implicit authority and/or exchange value those tokens carried).

At least that is what I gather is the alternative that Psion10 is presenting, as an alternative to the barter economy hypothesis. The taxation part in this scenario, which would correspond with the chiefs keeping apart a portion of those goods for themselves as their legitimate share, would be a side-issue I suppose, not central to the hypothesis itself.


Originally Posted by Tippit View Post
it seems like this hypothesis you're advocating is some kind of audacious academic attempt to rewrite the monumental role of gold and silver, and the barter that preceded it, out of history.

I’m not “advocating” either hypothesis. I’d started out accepting without question what I’d been taught in my (very basic level) economics classes about the barter economy having been the precursor to our money system. In this thread I was introduced, for the first time, to the idea that the barter hypothesis is no more than just that, an unproven hypothesis, in other words speculation ; and I was also introduced to this alternative hypothesis about how our economy may have developed. I was just trying to discuss both options in order to understand them better.

Incidentally, I don’t think this other alternative (that Psion10 advocates) is trying to rewrite role the gold and silver. Although yes, it does indeed try to rewrite (or at least, to re-examine) the (alleged) role of barter which preceded the use of gold of silver. And also speculates one possible means by which we humans may have come to attach to gold and silver their intrinsic value (whereas as far as I can see the barter economy hypothesis does not offer even any speculation around how gold and silver came to be valued for themselves).


Originally Posted by Tippit View Post
Fake news, meet fake history?

Hold on, where did that come from? “Fake” is pretty loaded word. In the context of “fake news”, it implies not only an erroneous position, but hints at a deliberately erroneous position. Why get into all that, in what was intended to be a simple, casual and wholly disinterested discussion? Do you, by any chance, believe that there are people “out there” who’re running some concerted campaign, and whose nefarious agenda is to besmirch the fair names of Adam Smith and the barter economy, something like that?

I wouldn’t, of myself, talk (or even think) of what we’ve discussed here in terms of fake-ness, but since you bring it up yourself, you’ll excuse me if I point out frankly that in our very short exchange, the only part that can be remotely thought of as “fake” would be where you state that “there is a lot of evidence that commerce evolved from barter of commodities”, but are unable to present, or even discuss, any evidence when requested. That, and your somewhat dogged defense of the barter system hypothesis as the only possible precursor to a money economy, in what seems to be the complete absence of evidence either way, and your seeing all other proposed alternatives as “ridiculous”, that does appear just a bit curious to me.

It could be that you're right. But the discussion here thus far does not reflect that. You've indicated that you're not aware of any evidence as such, so if you do have any reasoning that conclusively supports the one hypothesis over the other (not just your unsupported opinion that you find the one more likely), then I'd be very interested to know.


But it doesn’t have to be just the one option, does it? Psion10's take on this seems reasonable to me. Human societies developed in many isolated pockets around the world, isolated from one another. Perhaps the most likely option is that some individual tribes (or collection of tribes) came up with barter economies ; and others came up with priest-led or chief-led redistribution systems, the type that Psion10 talks of ; perhaps there were other models as well, perhaps some kind of implicit debt system (debt as in favor, obligation, that sort of thing, not debt of money) ; and most of these pre-money economies ended up arriving more or less independely at some kind of money system (involving gold, silver, shells, grain, heads of cattle/poultry, whatever). It does seem likely that it doesn’t have to be just one single “system” that preceded the use of gold/silver/whatever as money.
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Old 2nd August 2017, 07:10 AM   #134
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Originally Posted by Sceptic-PK View Post
He seriously has but one record in his collection.
Yes and it is heavily scratched
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Old 2nd August 2017, 07:12 AM   #135
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Originally Posted by psionl0 View Post
There is no hard data about those early times so we can't rule anything out.

There were a large number of diverse societies around with each operating under their own system. In many, the big cohunu received everything and took responsibility for distribution according to his largess. In others, individuals may have been freer to keep and trade some of their possessions. Depending on the complexity of the society (how many different kinds of goods and services there were) barter may have been practised to some extent.

It seems likely that the use of gold and other precious materials as a medium of trade had its origins in religion (the gods liked this pretty stuff).

You’re right, it doesn’t have to be an either-barter-or-else-something-different scenario. It could have been any or all of those, given that human societies have evolved largely isolated from one another, back in primitive times.

But to get back to what I'd asked you, it seems, then, we don’t really have hard evidence either way. But, like you’d pointed out originally, there is no reason (as far as I can see) to assume (as I at any rate had done) that direct barter had necessarily been the (only) precursor to our present economy.

Thanks for your inputs on this, Psion10.

Incidentally : Asking Google about “evidence barter economy” throws up plenty of interesting-looking links in the first few search pages. I haven’t the time just now, but I’ve bookmarked the Google search page, it might be interesting to check out some of those links later at leisure.
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Old 2nd August 2017, 01:26 PM   #136
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Originally Posted by 3point14 View Post
I think the outrage is that it's private companies that profit from this government granted ability when it could just as easily be the government.
It can't though. Creating demand deposits is an essential part of what banks are and what they do. If you don’t allow them to create deposits they are not really banks. Is creating and managing deposits really something that can “just as easily be done by government”?

The disconnect is that people treat demand deposits as if they were money. This isn’t something that the bank does, it’s something the banks customers do. There is no real way to stop them from doing it even if there were a good reason to so it’s not like Congress can just step in and say “it’s not money don’t act like it is”.

Because people treat demand deposits like money, economists also need to treat them like money when considering the economic implications. This is why you get different definitions of money like base, M1, M2 etc. But the strictest definition, base money, is directly managed by Congresses delegated body (the Fed).
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Old 2nd August 2017, 02:34 PM   #137
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Originally Posted by Hans View Post
If it were a scam then you might have a leg to stand on. I've read all your stuff before, so don't waste your time trying to work your 'magic' on me. I'm uninterested in going over that stale dried up idea once again.

Concentrate on Saggy he has something he really wants to add to the discussion.
If counterfeiting is illegal, then why is it legal for the Fed to create money out of thin air and loan it to private entities? Are you capable of answering a simple question?
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Old 2nd August 2017, 02:37 PM   #138
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Originally Posted by Argumemnon View Post
I'm not a scammer. I suspect that you're not a scammer and yet you seem to be living in relative comfort, if you have the internet and the time to use it to complain about economics.
I think your reading comprehension needs work. I didn't accuse you of being a scammer. If you own assets in rich western countries, then you've benefited from a side effect of confiscatory monetary policy in which the people who have the right to create money can bid on, and acquire virtually anything with money they didn't earn, conjured out of thin-air.
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Old 2nd August 2017, 02:57 PM   #139
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Originally Posted by Chanakya View Post
To simply state that the barter economy did exist “a priori”, sounds a bit circular-ish to me! That’s simply, like, your opinion, right?

Unless I’m misunderstanding your argument?
No, that's correct. It's entirely ridiculous that human beings did not barter throughout history, because that would require them to have never exchanged anything. So we do know a priori that barter economies have existed. The scope and frequency of barter throughout history is certainly debatable, but I am confident that mainstream history is pretty clear about this.

Quote:

I do beg your pardon, but I can’t help, once again, finding that argument wholly circular. You’re simply saying “I think it’s far more likely that they were free to exchange things in barter”, and therefore, “I think the idea that barter didn’t exist is kind of ridiculous”, without throwing either any reasoning or any evidence in support of that position.

You’re merely expressing an unsupported opinion. A strongly-held opinion, seemingly, but unsupported for all that. Which is fine, as long as we’re clear that that is all it is.
I've bartered, I know friends that have bartered, and I've read historical accounts of barter economies. That is an argument based on a posteriori reasoning. Given the fact that I and others i've known have bartered, I find it quite reasonable to assume that people have bartered throughout history. That is an argument based on a priori reasoning.

In fact, it's patently ridiculous to presume that barter economies haven't existed at one time or another, because to presume that this couldn't be true is to presume that people haven't exchanged things for other things without money, which is also patently ridiculous.

You are of course, free to reject this argument, or talk about why there isn't much evidence for the scope and frequency of barter throughout history. If you want to pretend that it never happened, you will have to take that up with someone else, as I'm not interested.

Quote:

Unless I’m mistaken (and Psion10 can correct me if I am wrong, since I’m only paraphrasing what I think he meant to convey), the idea that he had put forward had nothing to do with taxation. That, like you say, is a separate and unrelated discussion. (Or at least, not wholly unrelated, but not central to what we’re discussing here.) I think what he’s saying is that the actual producers (the hunters, the farmers, the club-makers and the spear-makers and sling-makers, the potters, whatever) brought their excess goods (that portion of what they produced that they didn’t themselves consume) to their tribal chiefs and priests, and these chiefs and priests, in turn, distributed these goods to those other villagers/tribesmen who did need those goods. And they may have used tokens to keep track of such transactions, tokens like gold and silver, perhaps backing up such tokens up with religious voodoo to further reinforce the value of those tokens (over and above the implicit authority and/or exchange value those tokens carried).

At least that is what I gather is the alternative that Psion10 is presenting, as an alternative to the barter economy hypothesis. The taxation part in this scenario, which would correspond with the chiefs keeping apart a portion of those goods for themselves as their legitimate share, would be a side-issue I suppose, not central to the hypothesis itself.
The hypothetical you just described is in fact a form of taxation. In addition, as counterfeiting money (illegally creating money) is a form of theft, legal money creation by a government, presumably for the benefit of its citizens, is a form of taxation called seigniorage.

Quote:

Incidentally, I don’t think this other alternative (that Psion10 advocates) is trying to rewrite role the gold and silver. Although yes, it does indeed try to rewrite (or at least, to re-examine) the (alleged) role of barter which preceded the use of gold of silver. And also speculates one possible means by which we humans may have come to attach to gold and silver their intrinsic value (whereas as far as I can see the barter economy hypothesis does not offer even any speculation around how gold and silver came to be valued for themselves).
I already referred to the double coincidence of wants problem. If a barter participant does not want the only commodity that his trading partner is offering, the exchange does not take place. Gold and silver arose out of barter to become something different, money, a medium of exchange and a store of value.

Quote:

Hold on, where did that come from? “Fake” is pretty loaded word. In the context of “fake news”, it implies not only an erroneous position, but hints at a deliberately erroneous position. Why get into all that, in what was intended to be a simple, casual and wholly disinterested discussion? Do you, by any chance, believe that there are people “out there” who’re running some concerted campaign, and whose nefarious agenda is to besmirch the fair names of Adam Smith and the barter economy, something like that?
I'm not accusing you of that, I'm accusing the academic who is attempting to revise economic history. If you have a link to any of this material, I would be happy to read it.
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Old 2nd August 2017, 09:08 PM   #140
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Originally Posted by Tippit View Post
No, that's correct. It's entirely ridiculous that human beings did not barter throughout history, because that would require them to have never exchanged anything.
That is not the argument.

The idea that in the beginning there were barter only economies and the reason that money arose was to solve the "double coincidence" problem is what is in question. It is unproven. In fact, the "double coincidence" problem is an argument against a barter only economy. It is more likely that community pooling was the name of the game in non-subsistence cultures and any bartering was less frequently practised on the side by select groups of people.

One theory that I have seen is that evolution beyond a subsistence culture and specialization of production was fueled by the need for individuals to not only feed themselves but also feed the leaches who bullied ruled over them. Part of staying at the top would have been convincing the commoners that they had the ears of the gods and that involved maintaining an aura of mystical knowledge including concepts such as debt and the means to service that debt.
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Old 3rd August 2017, 12:17 AM   #141
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Originally Posted by lomiller View Post
It can't though. Creating demand deposits is an essential part of what banks are and what they do. If you don’t allow them to create deposits they are not really banks. Is creating and managing deposits really something that can “just as easily be done by government”?

At a fundamental level, yes. Of course. There's no magic in it. A publicly owned institution could do it just as a privately owned one could.
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Old 3rd August 2017, 12:56 AM   #142
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I've always considered ethnographic and anthropological evidence to have been pointing towards barter as primarily a between-group phenomenon (e.g. Mauss, Malinowski, Graeber etc.).

Good old Marx also worked from such a premise. For example, in Capital he pretty much says what Mauss said some 50 years later:

Originally Posted by Karl Marx, Capital vol. I
Objects in themselves are external to man, and consequently alienable by him. In order that this alienation may be reciprocal, it is only necessary for men, by a tacit understanding, to treat each other as private owners of those alienable objects, and by implication as independent individuals. But such a state of reciprocal independence has no existence in a primitive society based on property in common, whether such a society takes the form of a patriarchal family, an ancient Indian community, or a Peruvian Inca State. The exchange of commodities, therefore, first begins on the boundaries of such communities, at their points of contact with other similar communities, or with members of the latter. So soon, however, as products once become commodities in the external relations of a community, they also, by reaction, become so in its internal intercourse.
Originally Posted by Marcel Mauss, The Gift
In the systems of the past we do not find simple exchange of goods, wealth and produce through markets established among individuals. For it is groups, and not individuals, which carry on exchange, make contracts, and are bound by obligations; the persons represented in the contracts are moral persons – clans, tribes, and families; the groups, or the chiefs as intermediaries for the groups, confront and oppose each other.
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Old 3rd August 2017, 04:06 AM   #143
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Originally Posted by Tippit View Post
If counterfeiting is illegal, then why is it legal for the Fed to create money out of thin air and loan it to private entities?
Please provide an example of a counterfeiting law which lists what acts are illegal, and then this can be discussed further.
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Old 3rd August 2017, 04:42 AM   #144
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Originally Posted by Tippit View Post
I think your reading comprehension needs work. I didn't accuse you of being a scammer.
If I'm a willing participant in what is a scam, what does that make me? Perhaps your the problem lies with your writing, instead.

Quote:
If you own assets in rich western countries, then you've benefited from a side effect of confiscatory monetary policy in which the people who have the right to create money can bid on, and acquire virtually anything with money they didn't earn, conjured out of thin-air.
That's a nice fiction.
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Old 3rd August 2017, 05:06 AM   #145
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Originally Posted by 3point14 View Post
sounds a bit, er, Ponzi to me.

Is it legal?
Why does everybody immediately say "Ponzi" when something seems not quite right?

Banks don't just rely on new depositors to pay out existing withdrawals. IF borrowers make their repayments then the banks don't need new depositors at all.

You could compare banks to a storage warehouse where you might store your furniture until needed. You would of course expect to be able to remove the furniture any time you liked. If the warehouse were to lease out your furniture without your consent in the hope that you don't come back for it too soon then they might be facing criminal charges.

Of course, banks are not exactly like this. Money is fungible and banks are not loaning out deposits. They are creating new deposits. Nevertheless, the principle is similar. Banks are taking risks with your money - which would be fair enough if you deposited it into a savings account and earned interest but not so much if it is in a checking account that effectively offers no interest.
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Old 3rd August 2017, 06:23 AM   #146
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Originally Posted by 3point14 View Post
At a fundamental level, yes. Of course. There's no magic in it. A publicly owned institution could do it just as a privately owned one could.
I disagree. I think you want a distinct separation between administration and rule making/oversight. Banks should follow well thought out rules wrt what they can and can’t do concerning bank deposits. Having the same people write the rules they are supposed to be following seems like a bad idea to me.

There is also the fact that government isn’t as agile, innovative, efficient or good at providing services as private businesses are. As long as you can maintain a regulatory structure needed to keep an efficient and effective and available to everyone government should always step back and let private businesses do the work.
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Old 3rd August 2017, 07:16 AM   #147
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Originally Posted by lomiller View Post
I disagree. I think you want a distinct separation between administration and rule making/oversight. Banks should follow well thought out rules wrt what they can and can’t do concerning bank deposits. Having the same people write the rules they are supposed to be following seems like a bad idea to me.
I don't agree.


Quote:
There is also the fact that government isn’t as agile, innovative, efficient or good at providing services as private businesses are. As long as you can maintain a regulatory structure needed to keep an efficient and effective and available to everyone government should always step back and let private businesses do the work.
Can you demonstrate this? It's been bandied about as long as I can remember. I've never seen it proven.
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Old 3rd August 2017, 07:17 AM   #148
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Originally Posted by 3point14 View Post
Quote:
I disagree.
I don't agree.
Yeah? Well, I disagree with both of you!
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Old 3rd August 2017, 07:34 AM   #149
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Originally Posted by 3point14 View Post
I have no idea. As may be apparent, my knowledge is a very, very long way from extensive in the matter.
It doesn’t have to be very extensive. At it’s core it’s actually pretty simple, but as with many things with lots of different players involved the way it works is practice can sound a lot more complex.

You walk into a business and borrow $1000 which you promise to replay over the next year, they hand you 10 $100 bills and you walk out. They have 10 fewer $100 bills less and a promise that you will repay them. You have 10 more $100 bills and a debt to repay. No money is created or destroyed, the same number of $100 bills exist, they are just in different places.

You walk across the street and deposit those 10 $100 bills with another business that agrees to give up to $1000 in bills of any denomination to you or anyone else of your choosing whenever you instruct them to do so. Once again the same number or $100 bills exist, noting has changed there but the promise to pay on demand can be used as something like money, but isn’t exactly money. Using a strict definition of money, none has been created or destroyed. But, for many purposes the “like money” deposit also needs to be considered so there is a broader definition of money that includes it, and under that broader definition there is $1000 more than before.

There are a lot of legitimate questions about this scenario, but all have legitimate answers. Like most CT theories these questions are poised in as confusing and/or complex a way as possible to make it sound like there are no answers, when in fact there are answers.


Some people like dwell on the fact that banks do all of this is a single transaction and claim that makes it different somehow. It’s not. It’s no different than simplifying an algebra equation, as long as the rules are followed nothing fundamentally changes, you just have a simpler easier to use form. Saying money creation via banking is fundamentally different than the process described above is done to further confuse the issue because it allows them to hand wave away many answers they receive as to why things work how they do. Again it's done to sow confusion to make the CT version sound plausible and the actual reason sound too complex to understand.
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Old 3rd August 2017, 07:37 AM   #150
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The champion of state owned banks that I'm familiar with is Ellen Brown, who has written a book on the history of money in the US, 'Web of Debt', and who writes articles advocating state owned banks. There is currently only one state owned bank in the US, in ND, discussed in this article ...

https://ellenbrown.com/2016/05/02/ba...or-california/

and this vid ...

https://www.youtube.com/watch?v=v6Q0YWQdnfU
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Old 3rd August 2017, 07:55 AM   #151
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Originally Posted by 3point14 View Post

Can you demonstrate this? It's been bandied about as long as I can remember. I've never seen it proven.
I guess that depends on what you’ve seen “bandied about”. The version Libertarians often advance is best considered a special case lacking all nuance and is frequently wrong in the context it’s presented. Mainstream economists typically looks at finding the right balance of government regulation and intervention. From a pragmatic perspective when properly regulated todays banking system works, and works far better than anything else that ever been tried and works far better than most of the proposed “improvements” would.

Anyway some examples as to why government can be inefficient:
https://en.wikipedia.org/wiki/Government_failure
https://en.wikipedia.org/wiki/Deadweight_loss
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Old 3rd August 2017, 08:07 AM   #152
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Originally Posted by 3point14 View Post
I don't agree.

Shrug I can’t help you there other than to point out separation of operations and oversight is a key feature of nearly every successful endeavour.

Perhaps a change of tact then. If they were all strictly run by government, what is it you would be different wrt deposits? Eg. would the tell people “sorry we’ve created all the M1 money we want for now so you can’t make any deposits to your account” or “sorry we don’t want the M1 money supply to drop so you can’t make withdrawals from your account”?
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Old 3rd August 2017, 08:22 AM   #153
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Originally Posted by lomiller View Post
Once upon a time ....

You walk into a business and borrow $1000 which you promise to replay over the next year, they hand you 10 $100 bills and you walk out. < .... snip .... >

.... And they all lived happily ever after.
ftfy.

THAT is how you begin and end a fairy tale.
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Old 3rd August 2017, 08:28 AM   #154
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Originally Posted by lomiller View Post
If they were all strictly run by government, what is it you would be different wrt deposits? Eg. would the tell people “sorry we’ve created all the M1 money we want for now so you can’t make any deposits to your account” or “sorry we don’t want the M1 money supply to drop so you can’t make withdrawals from your account”?
Since when did customer deposits or withdrawals change the M1 money supply?
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Old 3rd August 2017, 09:00 AM   #155
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Originally Posted by psionl0 View Post
ftfy.

THAT is how you begin and end a fairy tale.
For those who may not have picked up on it thus far in this thread, psionl0 is almost as far afield as Saggy or Tippet wrt to banking systems. I even added a few lines to specific address his oft refuted position that todays banks are somehow doing something entirely different and as a results really are “creating money out of thin air to loan to customers” the way the FRB nuts claim.

Originally Posted by lomiller View Post
Some people like dwell on the fact that banks do all of this is a single transaction and claim that makes it different somehow. It’s not. It’s no different than simplifying an algebra equation, as long as the rules are followed nothing fundamentally changes, you just have a simpler easier to use form.
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Old 3rd August 2017, 10:08 AM   #156
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Originally Posted by lomiller View Post
For those who may not have picked up on it thus far in this thread, psionl0 is almost as far afield as Saggy or Tippet wrt to banking systems. I even added a few lines to specific address his oft refuted position that todays banks are somehow doing something entirely different and as a results really are “creating money out of thin air to loan to customers” the way the FRB nuts claim.
If I remember rightly, your position is:
- deposits increase the money in circulation
- withdrawals decrease the money in circulation
- full reserve banking means that you can't get a loan unless you already have the money.

Yeah, you are so with it.
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Old 3rd August 2017, 10:49 AM   #157
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Originally Posted by psionl0 View Post
If I remember rightly, your position is:
- deposits increase the money in circulation
- withdrawals decrease the money in circulation
Deposits ARE the money “created” by fractional reserve banking. All M1 and M2 money other than base money and traveller’s checks are deposits of on form or another. Increasing deposits IS by definition increasing the money supply. Decreasing deposits IS by definition decreasing the money supply.
Originally Posted by psionl0 View Post
- full reserve banking means that you can't get a loan unless you already have the money.
I’ve no idea what you are trying to say. I will say this however, depending on what you mean by “Full Reserve Banking” it’s either an undesirable inefficient system or a nonsensical contradiction in terms. I’ve no doubt I’ve followed your logic to it’s inevitable nonsensical conclusion to demonstrate how flawed it was, so maybe that’s where you are getting this from.



Hope that helps
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Old 3rd August 2017, 02:35 PM   #158
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Originally Posted by lomiller View Post
For those who may not have picked up on it thus far in this thread, psionl0 is almost as far afield as Saggy or Tippet wrt to banking systems. I even added a few lines to specific address his oft refuted position that todays banks are somehow doing something entirely different and as a results really are “creating money out of thin air to loan to customers” the way the FRB nuts claim.
Is this still going on? Ha.

Anyway banks never ever loan money to customers. That is insane. Loan is a noun. They lend it.

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Old 3rd August 2017, 02:45 PM   #159
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Originally Posted by psionl0 View Post
There were a large number of diverse societies around with each operating under their own system. In many, the big cohunu received everything and took responsibility for distribution according to his largess. In others, individuals may have been freer to keep and trade some of their possessions. Depending on the complexity of the society (how many different kinds of goods and services there were) barter may have been practised to some extent.
Do you have an example of such a society? I'd expect that either the society would be small enough as to be classless or too large for a single person to decide upon the distribution of the totality of production.
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Old 3rd August 2017, 02:53 PM   #160
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Originally Posted by psionl0 View Post
There is nothing wrong with lending money out at interest. Fractional Reserve Banking might be a terrific thing for the banks but calling is a "scam" or "insanity" is stretching it a little.
Lending money out at interest requires the economy to grow sufficiently so as to pay it back, which constitutes (indefinite) exponential growth on a finite resources planet. I'd say that qualifies as (literal) insanity.

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