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Old 25th October 2017, 11:35 AM   #241
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Originally Posted by GnaGnaMan View Post
Well, if you re-define money to mean only cash then there is no money created during lending. However, even so, lending still leads to the creation of new base money. The private bank has more deposits, so it needs more reserves. So it borrows more base money from the cental bank.
I take back what I said earlier. You have got this nicely.
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Old 25th October 2017, 12:03 PM   #242
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Originally Posted by GnaGnaMan
I think I see the point you are trying to make. Since we can imagine the process being conducted with hard cash, there is no point at which new money is obviously booked into existence "from thin air".
The problem with the cash scenario is that it still breaks accounting convention. Every transaction, credit or debit, needs its counterpart. So we can't have one without the other. But as soon as the loan officer grabs the cash from the vault the first time, it is the same as a credit entry on the cash/reserve account. The problem is thus immediately obvious: there's nothing to debit. And in any case, what is needed is a credit entry to the liability side of the balance sheet, i.e., to the customer's deposit (which now can't be done because it's also a credit entry).

In effect, the cash scenario looks like this:
  • CREDIT cash account, -?-
  • CREDIT deposit account, DEBIT loan account
  • DEBIT cash account, -?-
I.e., this can't work.
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Old 25th October 2017, 12:13 PM   #243
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Originally Posted by psionl0 View Post
Demand deposits are classified as "M1" money but they are not Federal reserve notes. They are merely a declaration of what the bank owes you. IE they are IOUs.

IOUs can be considered to be a form of money which can be created by anybody. Whenever you say, "I will pay you later" and your offer is accepted you have created a verbal IOU and your word has paid for the purchase.
This is misleading. There is a big difference between the IOUs that you can scribble on a piece of paper, versus the ones that private banks are able to conjure out of thin air on a computer. That difference is the fact that the latter can be used to satisfy government and other legal obligations, ie: paying your taxes. It is "legal tender for all debts public and private".
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Old 25th October 2017, 12:20 PM   #244
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Originally Posted by JJM 777 View Post
Option 1: Would the central bank have the right to "print more money", in a manner that causes inflation?
They already do. In fact, central banks laughably claim that they are trying to increase inflation, but are "failing". In reality, their vast money creation is so concentrated among elites who are using it to steal all of the cash-flow producing assets in the world, that they're actually causing deflation as I explained in the other thread, but I do not think you understood.

Quote:

Option 2: So you basically suggest that fractional reserve banking is OK, but its required cash reserve ratio should be 50%, rather than the typical 10%. (According to my math, in your example the bank is allowed to double the amount of "money" in existence, while in the real world they have the right to multiply it 10-fold.)
As Lupus has pointed out in post after post, reserve requirement ratios are virtually meaningless anymore. Central banks have created so much in reserves at such low cost that member banks are awash in reserves and have the discretion to essentially create as much money as they want. The actual capital requirements by law in the US are fairly complicated, and vary greatly between different financial institutions, and different amounts of capital. It is not 10%.
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Old 25th October 2017, 12:33 PM   #245
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Originally Posted by GnaGnaMan View Post

Well, if you re-define money to mean only cash then there is no money created during lending. However, even so, lending still leads to the creation of new base money. The private bank has more deposits, so it needs more reserves. So it borrows more base money from the cental bank.
Lending creates new "checkbook" money, which is accounted for in M2. The world is so awash in reserves that banks have complete discretion over whether they want to create money, or not. It's important to understand that when loans are repaid, money is destroyed as well. But under a fractional reserve system, there is always a large "float" of checkbook money, legal tender for all debts, public and private. This float is inflationary, and causes both asset and consumer prices to rise.

The fraud exists due to the fact that the interest on these loans flows into the coffers of private banks, whereby it is the public who has their purchasing power stolen via the increase of prices from the float (just as their purchasing power is stolen when the central bank increases base money).

Either fractional reserve banking should be outlawed in favor of 100% reserve banking, or everyone should be allowed to create legal tender checkbook money, subject to the same lack of constraints.
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Old 25th October 2017, 12:58 PM   #246
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Originally Posted by Tippit View Post
This is misleading. There is a big difference between the IOUs that you can scribble on a piece of paper, versus the ones that private banks are able to conjure out of thin air on a computer. That difference is the fact that the latter can be used to satisfy government and other legal obligations, ie: paying your taxes. It is "legal tender for all debts public and private".
I think you slipped up a bit. We were referring to demand deposits - not Federal Reserve notes.
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Old 25th October 2017, 02:13 PM   #247
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Originally Posted by psionl0 View Post
I think you slipped up a bit. We were referring to demand deposits - not Federal Reserve notes.
Nope. Demand deposits are legal tender. How do I know? Because I've paid taxes with them.

Are you honestly with a straight face attempting to proclaim that random IOU scribbles on a piece of paper are equivalent to M2 checkbook money?
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Old 25th October 2017, 07:53 PM   #248
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Originally Posted by Tippit View Post
Nope. Demand deposits are legal tender. How do I know? Because I've paid taxes with them.
Silly boy. You know very well that something is legal tender only if a creditor is legally compelled to accept it as payment for a debt. That the tax man allows you to use your bank account directly to settle your tax bill doesn't make your bank account legal tender.

A creditor is not compelled to accept either a personal check or a bank check to settle a debt nor is he required to provide bank account details so that you can do a novation.

Originally Posted by Tippit View Post
Are you honestly with a straight face attempting to proclaim that random IOU scribbles on a piece of paper are equivalent to M2 checkbook money?
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Old 25th October 2017, 11:13 PM   #249
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Originally Posted by Tippit
Nope. Demand deposits are legal tender. How do I know? Because I've paid taxes with them.
Originally Posted by psionl0
Silly boy. You know very well that something is legal tender only if a creditor is legally compelled to accept it as payment for a debt. That the tax man allows you to use your bank account directly to settle your tax bill doesn't make your bank account legal tender.
If we're talking about the US, the Coinage Act of 1965 says the following:
Originally Posted by 31 U.S. Code 5103 - Legal tender
United States coins and currency (including Federal reserve notes and circulating notes of Federal reserve banks and national banks) are legal tender for all debts, public charges, taxes, and dues. Foreign gold or silver coins are not legal tender for debts.

This does, however, not preclude Tippit from paying his taxes by drawing from his bank account (i.e., DEBIT deposit account). This is just an ordinary payment instruction initiated by Tippit and thus he will only see the aforementioned first part of the transaction. The mechanism of the other part depends on the agreement between the bank and the tax authorities. But Tippit is probably released from his tax obligation because the bank has taken on the burden to finally pay the government.

The issue regarding when taxes or other payment obligations are legally considered to have been paid is a question which probably stems from the Middle Ages… and basically evolved into two different strands of interpretation: one considering it paid when the funds leaves the payer (Tippit—bank), the other when the payee receives the funds (bank—government).
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Old 25th October 2017, 11:58 PM   #250
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Originally Posted by psionl0 View Post
Silly boy. You know very well that something is legal tender only if a creditor is legally compelled to accept it as payment for a debt. That the tax man allows you to use your bank account directly to settle your tax bill doesn't make your bank account legal tender.
No need for the condescending remark, your analogy between private IOUs and bank created checkbook money was disingenuous and misleading. While it's technically true that checkbook money is not "legal tender", it practically is. It's the same unit of account as Federal Reserve Notes. When you write someone a check or pay with a credit card, the recipient is receiving dollars. When the loan that created the deposit was generated, the M1 money supply was increased. Checkbook money is money, and it's incorrect to suggest that they're IOUs just because they exist in a bank computer as zeros and ones.

Furthermore, not only will the tax man accept checks, credit cards, and cash, he will only accept these forms of payment. He will not accept US Treasury Notes. He will not accept mortgages, or promissory notes. He will not accept your friend's "word". He will not accept your scribbles on a piece of paper. That's it. That means that checkbook money is a lot closer to legal tender than any IOU.

Quote:

A creditor is not compelled to accept either a personal check or a bank check to settle a debt nor is he required to provide bank account details so that you can do a novation.
That is true, however, that doesn't mean that checkbook money in any way resembles private or personal IOUs, which is what you seemed to be implying. The suggestion is that anyone can create IOUs and be the functional equivalent of a bank in the SWIFT network is obviously not even close to being true, and so this doesn't minimize the impact of banks, private money creation, and the fractional reserve system one bit.
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Old 26th October 2017, 12:09 AM   #251
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Originally Posted by psionl0 View Post
Your maths is off.
But your proposal is "fractional reserve banking", so we are talking about its statistical risk factors, rather than its basic nature.
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Old 26th October 2017, 12:13 AM   #252
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Originally Posted by Tippit View Post
member banks are awash in reserves and have the discretion to essentially create as much money as they want.
Translate this eloquence into statistical figures: How many percent of the stock, real estate, or something else that matters is owned by these oligarchs?
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Old 26th October 2017, 12:18 AM   #253
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Originally Posted by Tippit View Post
No need for the condescending remark, your analogy between private IOUs and bank created checkbook money was disingenuous and misleading.
If you are going to feed me straight lines then it is hard to resist the temptation.

Stripped of all of your additional interpretations, I said that promises issued by strangers are IOUs and bank accounts are IOUs. I didn't say that promises issued by strangers are bank accounts.

ETA Just saw this alternate view.
Originally Posted by Tippit View Post
When you write someone a check or pay with a credit card, the recipient is receiving dollars.
Incorrect. Once the check has been processed, the bank's debt to you has been transferred to the recipient instead. This is called a "novation". If you pay by credit card then two debts are created: one from you to the bank and one from the bank to the recipient (assuming that the bank and the credit card company are one and the same).

The only time that the recipient receives "dollars" is when they make a cash withdrawal.

Originally Posted by Tippit View Post
Checkbook money is money, and it's incorrect to suggest that they're IOUs just because they exist in a bank computer as zeros and ones.
Why do you think we call this a "debt based" money system?
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Old 26th October 2017, 01:50 AM   #254
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Originally Posted by JJM 777 View Post
Translate this eloquence into statistical figures: How many percent of the stock, real estate, or something else that matters is owned by these oligarchs?
The Bank of England was created in 1694. How much could you buy with unlimited money over more than three centuries?

Then there is this:



Revealed – the capitalist network that runs the world

I disagree that it is a "capitalist" network, because fraud, much like armed robbery, doesn't have anything to do with capitalism (and indeed, in this case, undermines it). But there is scientific proof of concentrated power. It's very difficult to determine who owns what since the advent of trusts and foundations, but it is obvious that there is a very serious problem.
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Old 26th October 2017, 01:57 AM   #255
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Originally Posted by psionl0 View Post
Incorrect. Once the check has been processed, the bank's debt to you has been transferred to the recipient instead. This is called a "novation". If you pay by credit card then two debts are created: one from you to the bank and one from the bank to the recipient (assuming that the bank and the credit card company are one and the same).

The only time that the recipient receives "dollars" is when they make a cash withdrawal.


Why do you think we call this a "debt based" money system?
Tell me, is M1 denominated in dollars, or IOUs? This seems like the same type of misunderstanding you had when you insisted that Federal Reserve Notes are debts, simply because they're on the liability side of the balance sheet (as is stockholder's equity, also not a debt). The reality is that a Federal Reserve Note describes no debt, and checkbook money is actually money which affects prices, and generates fraudulent interest for the banks that conjure it into existence.

It seems that in addition to apologizing for central banks, you've flipped and are now apologizing for fractional reserve banking as well.

Note in the chart where the Y axis is labeled "billions of dollars":

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Old 26th October 2017, 02:09 AM   #256
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Originally Posted by Tippit View Post
Tell me, is M1 denominated in dollars, or IOUs? [ ... ] Note in the chart where the Y axis is labeled "billions of dollars":
https://fred.stlouisfed.org/graph/fredgraph.png?g=fxba
What does that prove? If I write an IOU "denominated in dollars" have I created currency?
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Old 26th October 2017, 02:17 AM   #257
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Originally Posted by psionl0 View Post
What does that prove? If I write an IOU "denominated in dollars" have I created currency?
If you're a member bank of the Federal Reserve System, you have created money as per M1, obviously. Currency is something else.

The important thing isn't what we call it, but the fact that it a) affects the prices of many things by a great deal and b) enables the banks to profit from a method that is exclusive to everyone else. This is why it is fraudulent.
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Old 26th October 2017, 02:24 AM   #258
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For the record, I was wrong about calling checkbook money legal tender. I agree that it's important to get the terminology right when describing things that are this important. Unlike lolmiller, and septicpk I am willing to admit when I'm wrong.

However, I would add that the similarities between cash and checkbook money are much more important and relevant than the differences between checkbook money and "IOUs" in general. Checkbook money affects prices and spends much like cash, as well as generating untold interest for the private banks that have the privilege of creating it.
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Old 26th October 2017, 03:46 AM   #259
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Originally Posted by Tippit View Post
The important thing isn't what we call it, but the fact that it a) affects the prices of many things by a great deal and b) enables the banks to profit from a method that is exclusive to everyone else.
Now our views are beginning to converge. There is no question that all debts are liabilities (for the debtor) but are all liabilities debts? That might be an interesting question if you are writing a dictionary but not so important in economics.

The all important issues are "liquidity" (how easily the instrument can be converted into official currency) and "negotiability" (how easily you can hand it off to somebody else). Legal tender obviously rates at 100% in both categories while a vague promise from a bum would be very low in both cases. Bank accounts are pretty high up there on the liquidity/negotiability scale.

Originally Posted by Tippit View Post
For the record, I was wrong about calling checkbook money legal tender. I agree that it's important to get the terminology right when describing things that are this important. Unlike lolmiller, and septicpk I am willing to admit when I'm wrong.
Heh I know a couple of posters on this forum who also suffer from that problem. In their cases, it is more Dunning-Kruger than anything else.
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Old 26th October 2017, 04:55 AM   #260
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Originally Posted by Tippit View Post
Lending creates new "checkbook" money, which is accounted for in M2. The world is so awash in reserves that banks have complete discretion over whether they want to create money, or not. It's important to understand that when loans are repaid, money is destroyed as well. But under a fractional reserve system, there is always a large "float" of checkbook money, legal tender for all debts, public and private. This float is inflationary, and causes both asset and consumer prices to rise.
Demand deposits are already in M1.

Existing reserves are not what gives private banks discretion over money creation. Central banks will provide as much base money as is required; or rather as private banks are willing to lend at a given interest rate. Otherwise the central bank rate would lose its function.
Excess reserves held by private banks simply mean that exactly this has happened and the CB has lost control over the interest rate. That doesn't put private banks in control. It means that there is no one in control.
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Old 26th October 2017, 05:03 AM   #261
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Originally Posted by psionl0 View Post
Heh I know a couple of posters on this forum who also suffer from that problem. In their cases, it is more Dunning-Kruger than anything else.
Says the guy who used to subscribe to freemen on the land notions.
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Old 26th October 2017, 05:05 AM   #262
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Originally Posted by Tippit View Post
Unlike lolmiller, and septicpk I am willing to admit when I'm wrong.
I admitted I was wrong when discussing the gold exchange standard here not too long ago. Have you worked out 911 yet?
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Old 26th October 2017, 06:47 AM   #263
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Originally Posted by GnaGnaMan
Excess reserves held by private banks simply mean that exactly this has happened and the CB has lost control over the interest rate. That doesn't put private banks in control. It means that there is no one in control.
Since the Fed switched to a floor system, paying interest on reserves (IOR) effectively became the Fed's interest rate tool. I.e., I think the Fed can still maintain control of the interest rate by paying the same (or nearly the same) interest on reserves as the target policy rate.
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Old 26th October 2017, 07:32 AM   #264
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Originally Posted by lupus_in_fabula View Post
Since the Fed switched to a floor system, paying interest on reserves (IOR) effectively became the Fed's interest rate tool. I.e., I think the Fed can still maintain control of the interest rate by paying the same (or nearly the same) interest on reserves as the target policy rate.
I'm not sure what the current situation is with the USD. The ECB currently "pays" -0.4% on reserves. That is, it actually charges for storage.
The problem is that - while CBs have a monopoly on creating base money - they do not have one for storing it. That means they cannot set arbitrarily low rates.
Interestingly, spending on law-enforcement is an obvious subsidy for reserve holders here.
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Old 26th October 2017, 08:07 AM   #265
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-0.4% is pretty close to the Eonia rate (-0.36%).

Thus the Euribor is also right there at between -0.37% and -0.18% depending on maturity (one month to a year), which are the reference rates for most bank loans.
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Old 26th October 2017, 09:16 AM   #266
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Originally Posted by psionl0 View Post
Now our views are beginning to converge. There is no question that all debts are liabilities (for the debtor) but are all liabilities debts? That might be an interesting question if you are writing a dictionary but not so important in economics.
I still maintain that Federal Reserve Notes are not "debts". I defy anyone to show me where on the note it describes any obligation. They are fiat money. Checkbook money is an IOU I suppose because bank deposits are not bailments, and because depositors are considered "unsecured creditors" of the bank by law. After the next manufactured crisis when depositors get "bailed-in" as a result of new legislation that barely anyone knows about, they will be shocked to receive shareholder equity in a failed bank in lieu of the money that they thought they had on deposit. Checkbook money, however, is also money, in terms of its economic effects. I objected to your (perhaps accidental) characterization that bank IOUs are similar to any other IOU. They are not.

Quote:

The all important issues are "liquidity" (how easily the instrument can be converted into official currency) and "negotiability" (how easily you can hand it off to somebody else). Legal tender obviously rates at 100% in both categories while a vague promise from a bum would be very low in both cases. Bank accounts are pretty high up there on the liquidity/negotiability scale.
Even this doesn't completely describe the situation. In fact there is a move towards cashless in the US. Some businesses will not accept "legal tender" anymore. Treasury appears to have a policy in which private businesses can decide what they can accept:

https://www.cbsnews.com/news/stores-...-welcome-here/

In these cases, checkbook money is even more tenderable than legal tender! Most of us know what happened in India as Modi cancelled the lowest rupee denominations.

Of course, this is sponsored by central banks and ZIRP who, in their zeal to steal everything from savers, wish to disallow them any recourse such as withdrawing their money in cold hard cash.
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Old 26th October 2017, 09:19 AM   #267
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I notice everyone just glossed over The Capitalist Network that Runs the World!

Hmmm. Nothing to see here.
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Old 26th October 2017, 09:56 AM   #268
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Originally Posted by Tippit View Post
I notice everyone just glossed over The Capitalist Network that Runs the World!

Hmmm. Nothing to see here.
Not a surprise. Karl Marx, 1867:

Originally Posted by Karl Marx
Apart from this, with capitalist production an altogether new force comes into play the credit system, which in its first stages furtively creeps in as the humble assistant of accumulation, drawing into the hands of individual or associated capitalists, by invisible threads, the money resources which lie scattered, over the surface of society, in larger or smaller amounts; but it soon becomes a new and terrible weapon in the battle of competition and is finally transformed into an enormous social mechanism for the centralisation of capitals.
Se also, for example, Hudson & Bezemer (Finance is Not the Economy) and Navidi (Superhubs)
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Old 26th October 2017, 09:56 AM   #269
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Originally Posted by lomiller View Post
There are many things that can act like money within an economy so economists need to consider it as such in their analysis. In the US, bank demand deposits are counted as part of the M1 money supply. Savings accounts are part of the M2 money supply. CDs are counted as part of the M3 money supply. Commercial paper is counted as part of the M4 money supply.
And just to round this out.

Cash in the Central Bank's vaults may or may not be money; it just depends on whether they have recorded it as issued or not.
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Old 26th October 2017, 10:35 AM   #270
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Originally Posted by Tippit View Post
Some businesses will not accept "legal tender" anymore. Treasury appears to have a policy in which private businesses can decide what they can accept:
"Legal tender" applies to debts - not purchases. Any proprietor can have a policy of not exchanging their wares for those filthy Federal reserve notes.
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Old 26th October 2017, 10:36 AM   #271
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Originally Posted by Sceptic-PK View Post
Says the guy who used to subscribe to freemen on the land notions.
What are YOU getting defensive about?
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Old 26th October 2017, 11:48 AM   #272
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Originally Posted by psionl0 View Post
"Legal tender" applies to debts - not purchases. Any proprietor can have a policy of not exchanging their wares for those filthy Federal reserve notes.
I don't think this is true. When you purchase something, you incur a debt. If you offer to pay in Federal Reserve Notes, a vendor is legally obligated to accept them else they have no recourse. I don't think it was meant to apply exclusively to loans.
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Old 26th October 2017, 11:49 AM   #273
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Originally Posted by lupus_in_fabula View Post
Not a surprise. Karl Marx, 1867:


Se also, for example, Hudson & Bezemer (Finance is Not the Economy) and Navidi (Superhubs)
This has everything to do with a corrupt monetary and banking system, and little to do with "capitalism".
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Old 26th October 2017, 12:33 PM   #274
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Originally Posted by Tippit View Post
I don't think .......
You're feeding me straight lines again.

The issue of legal tender and payment for goods and services is common knowledge. For example:
Quote:
Section 31 U.S.C. 5103, entitled "Legal tender," states: "United States coins and currency [including Federal reserve notes and circulating notes of Federal reserve banks and national banks] are legal tender for all debts, public charges, taxes, and dues."

This statute means that all United States money as identified above is a valid and legal offer of payment for debts when tendered to a creditor. There is, however, no Federal statute mandating that a private business, a person, or an organization must accept currency or coins as payment for goods or services. Private businesses are free to develop their own policies on whether to accept cash unless there is a state law which says otherwise.
https://www.federalreserve.gov/faqs/currency_12772.htm
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Old 26th October 2017, 10:17 PM   #275
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Originally Posted by Tippit
This has everything to do with a corrupt monetary and banking system, and little to do with "capitalism".
Not to derail too much into Marx-territory, but I think it's perfectly logical that institutional corruption (in the broad sense of the term) would find its way where the power in society resides.

Considering that capitalist production is pertinently about M—C—M (producing commodities for exchange for creating monetary profit and gain), it's no surprise it's going to be in banking and finance where we eventually find the most powerful hubs, keeping the rest of the economy trampled underfoot . . . Especially in the current neoliberal era which grew out of the late 1970s.

"Accumulate, accumulate! This is Moses and the Prophets!"
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Old 26th October 2017, 11:57 PM   #276
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Originally Posted by lupus_in_fabula View Post
Not to derail too much into Marx-territory, but I think it's perfectly logical that institutional corruption (in the broad sense of the term) would find its way where the power in society resides.
And so Marx's solution? Abolish private property and grant the state monopolies on everything. Of course, Marx and Engels were financed by western "capitalist" bankers who saw communism as the "ultimate" monopoly. Not very many communists are aware of this.

Quote:

Considering that capitalist production is pertinently about MCM (producing commodities for exchange for creating monetary profit and gain), it's no surprise it's going to be in banking and finance where we eventually find the most powerful hubs, keeping the rest of the economy trampled underfoot . . . Especially in the current neoliberal era which grew out of the late 1970s.

"Accumulate, accumulate! This is Moses and the Prophets!"
Absent fiat money, there are limits on profit and gain, and producers have to add value to society, and are subject to losses. Now, everything is rigged, with no hope other than monetary reform, which requires an awakened public. Good luck with that, considering I can't even convince a single person on a skeptic's forum of how important and corrupted the ability to create money is.

I would say the current era was ushered in around 1971, when Nixon defaulted on gold, or possibly 1933 when Roosevelt outlawed the private possession of gold. Or, maybe 1913, when Wilson signed the Federal Reserve and Federal Income Tax acts. Take your pick.
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Old 27th October 2017, 01:07 AM   #277
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Originally Posted by Tippit
And so Marx's solution? Abolish private property and grant the state monopolies on everything. Of course, Marx and Engels were financed by western "capitalist" bankers who saw communism as the "ultimate" monopoly. Not very many communists are aware of this.
Marx didn't have a solution (apart from some utopian thought experiments vaguely sketched here and there), he though the system would self-implode due its own contradictions.

The classical economists like Smith, Ricardo, Mill and even Marx would probably have been surprised how resilient the old power structures eventually turned out to be. The early ones though the whole feudal economic logic and the oligarchy of landlords would surely break under the pressure of the emerging market economy. Marx was more skeptical of the new emerging order and freaked everyone out by taking the early authors' premises and run with them to their logical conclusions. However, I think even Marx would have been surprised that 150 years later the economy turned out to be that of the similar old feudal kind, only redressed and more polished to meet current living standards and attitudes.

But it's the rentier logic that dominates to a great deal once again – 2.0 – and it's not necessarily that much about profit in the traditional sense anymore but about capital gains – hence why the rentiers may even pledge the (prospective) cash-flow income streams from owning property to paying interest to the banks, as long as they get to keep the capital gains.

To echo Hudson and the old Tatcherite saying: "Sorry you’ve lost your job. I hope you made a killing on the home you bought and in the stock market."

Originally Posted by Tippit
Absent fiat money, there are limits on profit and gain, and producers have to add value to society, and are subject to losses. Now, everything is rigged, with no hope other than monetary reform, which requires an awakened public. Good luck with that, considering I can't even convince a single person on a skeptic's forum of how important and corrupted the ability to create money is.

I would say the current era was ushered in around 1971, when Nixon defaulted on gold, or possibly 1933 when Roosevelt outlawed the private possession of gold. Or, maybe 1913, when Wilson signed the Federal Reserve and Federal Income Tax acts. Take your pick.
Credit has always been around, fiat or no fiat. It's probably always going to be around.

The dates you mention are just like steroid injections when the system seems to lose a bit of its own steam. There are many more such dates, especially during the whole neoliberal era with increasing globalization and finance sector deregulation.
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Old 27th October 2017, 04:22 AM   #278
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Originally Posted by Tippit View Post
I don't think this is true. When you purchase something, you incur a debt. If you offer to pay in Federal Reserve Notes, a vendor is legally obligated to accept them else they have no recourse. I don't think it was meant to apply exclusively to loans.
The vendor is not obliged to sell for money. Barter is perfectly legal. As long as both parties agree they can contract almost any way they like.
Legal tender simply means that if someone agreed to deal for money, they have to accept legal tender as money. They can't insist, eg, to be paid only in valuable, antique silver dollars. Of course, if someone specifically bought such an antique silver dollar, he can insist on getting one and does not need to settle for newly printed paper.

Also consider that not all debts are incurred voluntarily. Deals go bad and accidents happen. There must be some default that a court can award as damages and which must be accepted.
Suppose the defendant is a farmer and offers to deliver 1 ton of wheat every harvest for the next 10 years. That may be a good offer in terms of value but what would an ordinary person do with that?
OTOH. suppose the injured party insists on receiving, eg, the family photos; not because they have value but to inflict emotional harm in revenge. There must be something that the plaintiff can reasonably be made to accept.

Even if congress got rid of all legal tender statutes, the courts would have to redevelop them as case law.
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Old 27th October 2017, 05:06 AM   #279
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Originally Posted by GnaGnaMan View Post
The vendor is not obliged to sell for money. Barter is perfectly legal. As long as both parties agree they can contract almost any way they like.
Correct.

Originally Posted by GnaGnaMan View Post
Legal tender simply means that if someone agreed to deal for money, they have to accept legal tender as money.
Not correct.

A vendor can say "I will let you have this in exchange for a paypal transaction (or gold coin or Lincoln greenback etc)". If the purchaser doesn't agree then there is no contract and the exchange doesn't happen. *

It is only when the vendor says, "you can pay me later" that he can no longer refuse to accept Federal reserve notes because a debt has been created.

* Some states may not permit this. See above.
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Old 27th October 2017, 06:55 AM   #280
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Minor specification: Legal tender isn't always legally binding when talking about coins. So in many jurisdictions, like the UK and Canada, some coins are legal tender only up to some specified sum.
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