littlebabyjesus
one of Maxwell's demons
I'm starting a new thread on this to give it a bit of a fresh start. It concerns the way money is created and how value is attached to it.
Firstly, about money. Money has no value until it is spent. A measure of the wealth of a nation comes from adding up all the transactions that take place in any given time-period.
So to work out the wealth of a nation, you have to add up the value of all the transactions taking place in any given period, but then you also need a measure of how much money is worth - and you do that by taking a basket of goods and services and seeing how much they cost in that given timeframe.
And excluded from that have to be transactions that merely involve the borrowing of money. If I borrow £100 from the bank, that money has no value until I try to spend it. Indeed I do not find out what the value of the money is until I come to spend it.
The creation of the symbol to which value is to be attached is the act of a third party to any transaction - a bank of some description. One capitalist may agree to hand over capital to another capitalist, but they need an agreed system of representation by which to do this. The capitalists themselves do not create the symbol - what they do rather is attach value to the symbol by accepting it in return for real goods or services. They obtain the symbol to be handed over from the third party, which demands interest as the price for its service.
But what is given back to the bank is merely the symbol once again, and only the banks can create the symbol - others can make value but they cannot print money. So even if there is growth, if a bank has put 100 groats into the system for value to be attached to it and demands 110 groats in return, that same bank or another bank somewhere else will have to lend that same person or another person somewhere else the extra 10 groats. If there has been growth to match the interest, the extra money, when it is spent, will represent that extra wealth and the purchasing value of one groat will remain the same. But if there is no growth, there are now 110 groats in the system to represent the same total value, so you have inflation. If the bank has put the initial 100 groats into the system on the basis that it values an asset of the borrower at that level, when it comes to reloan the 110 groats, it has to do that by valuing the same asset at 110. Again, inflation.
The bank gains from this process through growth, because if there is growth, the real value of the assets against which the money is borrowed needs to go up. In return for a loan to cover the interest on the previous loan, the initial asset plus something else must be put up as security. If the debtor defaults on the debt, the bank takes possession of the assets. If it does this after, say, 100 years of steady growth, it has enabled itself to take possession of a far larger bunch of assets than those it initially created the money against.
If anyone is bothered to, can they explain what is wrong with the above scenario. It is the basis for my contention that the action of lending money at interest is the fundamental driver of inflation.
Firstly, about money. Money has no value until it is spent. A measure of the wealth of a nation comes from adding up all the transactions that take place in any given time-period.
So to work out the wealth of a nation, you have to add up the value of all the transactions taking place in any given period, but then you also need a measure of how much money is worth - and you do that by taking a basket of goods and services and seeing how much they cost in that given timeframe.
And excluded from that have to be transactions that merely involve the borrowing of money. If I borrow £100 from the bank, that money has no value until I try to spend it. Indeed I do not find out what the value of the money is until I come to spend it.
The creation of the symbol to which value is to be attached is the act of a third party to any transaction - a bank of some description. One capitalist may agree to hand over capital to another capitalist, but they need an agreed system of representation by which to do this. The capitalists themselves do not create the symbol - what they do rather is attach value to the symbol by accepting it in return for real goods or services. They obtain the symbol to be handed over from the third party, which demands interest as the price for its service.
But what is given back to the bank is merely the symbol once again, and only the banks can create the symbol - others can make value but they cannot print money. So even if there is growth, if a bank has put 100 groats into the system for value to be attached to it and demands 110 groats in return, that same bank or another bank somewhere else will have to lend that same person or another person somewhere else the extra 10 groats. If there has been growth to match the interest, the extra money, when it is spent, will represent that extra wealth and the purchasing value of one groat will remain the same. But if there is no growth, there are now 110 groats in the system to represent the same total value, so you have inflation. If the bank has put the initial 100 groats into the system on the basis that it values an asset of the borrower at that level, when it comes to reloan the 110 groats, it has to do that by valuing the same asset at 110. Again, inflation.
The bank gains from this process through growth, because if there is growth, the real value of the assets against which the money is borrowed needs to go up. In return for a loan to cover the interest on the previous loan, the initial asset plus something else must be put up as security. If the debtor defaults on the debt, the bank takes possession of the assets. If it does this after, say, 100 years of steady growth, it has enabled itself to take possession of a far larger bunch of assets than those it initially created the money against.
If anyone is bothered to, can they explain what is wrong with the above scenario. It is the basis for my contention that the action of lending money at interest is the fundamental driver of inflation.
