Austrian School: Crap/Not Crap?

[phildwyer]

LBJ was putting forward the case that this is how the current system actually works (which is what this discussion has been about) - trust me if it was like this it would have broke properly a long time ago

LBJ is perfectly right, and you are once again wrong.

Not only is fiat money, interest and so on created out of thin air, all money is created out of thin air. It could be no otherwise. Why not? Because money is thin air, that is why. Money--or at least the financial value it purportedly contains--does not, that is to say, exist,

If anyone, such as the one who currently chooses to call himself "Love Detective," ever tries to deny this, or to assert the empirical reality of money, simply ask them to show you a bit of this fabled "money" of theirs.

They will be unable to do so. Instead they will tell you that your question is naive, that you have clearly never studied economics, that you lack a basic understanding of the necessary concepts--which they are getting downright fed up of having to explain over and over again.

Just smile politely, and request again that they show you a bit of "money."

 

[phildwyer]

your orignal assertion was that the money supply could be expanded through the creation of money/credit from banks out of thin air - you have not done anything to back this up yet

Common sense and everyday experience back him up.

To grasp the absurdity of Love Detective's "realist" position with regard to money, all one has to do is open a savings account. What happens? Little bits of money begin to magically appear in you bank account, without you or anyone else doing anything material to cause this. Value has been created out of thin air.

Love Detective will claim that this is not what really happens. In reality, he will claim, this money refers to human labor-power, and without that labor-power it could not exist. And logically speaking he is of course quite right.

Pragmatically speaking however, he is entirely wrong. Ours is a society accustomed to taken empirical appearances for reality. Because of this custom, our society is organized around the principle that money reproduces itself out of thin air. Love Detective may protest that money is only a representation of an ulterior reality, but ours is a society in which representation is more important than reality. Indeed ours is a society that recognizes no distinction between representation and reality, one in which that distinction has therefore failed to hold.

Which rules the world: symbolic exchange-value or the labor-power it represents?

In such a society, to insist on the "realist" or referential model of money is simply to deny reality. Denying reality is no way to change it.

 

[phildwyer]

I got the impression in your previous post on his model that you were using that to back up your point that money could be created out of thin air (as long as it kept on happening) - at least that was the context you referred to it in

To be honest, I'm getting a little bit tired of having to address this matter over and over again. Simply changing your username does not make your arguments any better. But still...

Look, money really is created out of thin air you know. What about interest on a loan? Or interest on that interest? Or the interest on the confidence that this interest will reach a rate lower than that at which it was originally sold within a six-month period? The connection to anything real or material is pretty distant in such calculations, is it not? Nor does anything material or real have much to do with the manner in which such calculations progress, does it?

All money is symbolic, and in that sense unreal. And yet this unreal symbol has become far more important and influential than the reality it represents. This importance and influence enables it to disregard the insignificant matter of its own non-existence, and to carry on behaving as if it existed. I don't see, in that case, why you bother to insist on its non-existence.

For example: which determines when a factory should close down: symbolic money or real labor-power? Obviously the former. Labor-power can jump up and down crying "you can't do that, I'm realer than you," and symbolic money will simply retort: "Realer than me are you? Fine, now fuck off and be real on the dole."

 

[love detective]

Phil, I need to insist that if you want to contribute to this thread you first take some time to understand what is being talked about before you jump in and make yourself look silly

money,like value, is immaterial (but objective) - this doesn't mean the conditions that are required for it to exist and be expanded can be created out of thin air. the activities that lead to the expansion of the money supply cannot be created by an individual bank out of thin air. this is the discussion that is being had on this thread - you pointing out omgzzz money is immaterial so that means nothing exists so that means everything is just magic and created out of thin air, is just schoolboy contrarian nonsense, that shows little attempt to connect with the subject matter

you've regressed back to what was being discussed on page 1 of this thread - where you conflate the few taps on a keyboard that form one step in a chain of steps/activities that are required to 'create' money with that overall process itself - you can't magic the material conditions that are required for this process into existence from thin air, therefore you can't create money from thin air, and no amount of sophistry is going to make that possible

so now please, stop embarrassing yourself - you continually fall into the trap of fetishising money, and indeed Marx points out that the relations of capital assume their most externalised and fetish like form in 'interest bearing capital'. So it's no surprise that someone of your idealist posturing nature and demented bishop berkleyism would fall into that trap easier than others - your surface level analysis of money is third rate vulgar political economy, which simply repeats surface form appearances for the explanation of why things happen (stones fall to the ground not through gravity but because stones have a tendency to fall to the ground, cows in the distance really are small, money is magic ) - this may be suitable for trolling on a message board, but not i'm afraid for serious discussion, so please take it elsewhere

 

[camouflage]

Common sense and everyday experience back him up.

To grasp the absurdity of Love Detective's "realist" position with regard to money, all one has to do is open a savings account. What happens? Little bits of money begin to magically appear in you bank account, without you or anyone else doing anything material to cause this. Value has been created out of thin air.

Love Detective will claim that this is not what really happens. In reality, he will claim, this money refers to human labor-power, and without that labor-power it could not exist. And logically speaking he is of course quite right.

Pragmatically speaking however, he is entirely wrong. Ours is a society accustomed to taken empirical appearances for reality. Because of this custom, our society is organized around the principle that money reproduces itself out of thin air. Love Detective may protest that money is only a representation of an ulterior reality, but ours is a society in which representation is more important than reality. Indeed ours is a society that recognizes no distinction between representation and reality, one in which that distinction has therefore failed to hold.

Which rules the world: symbolic exchange-value or the labor-power it represents?

In such a society, to insist on the "realist" or referential model of money is simply to deny reality. Denying reality is no way to change it.

I think there's been a fundamental confusion between the terms 'Money' and 'Credit/Debt' on this thread. Credit/Debt's the important bit, two people can make up Credit/Debt all day long and pass it round between themselves and even interested third-parties with no problem. In fact one could say that 'thin air' is way under-valued by people who don't understand exactly where ideas, value-systems and plans for the future are hosted.

I think what ld meant was that you can't create Debt without the other side of the coin also being created... Credit. Or "what comes to the same thing"... you can't create Credit without creating Debt.

Reserve requirements etc specify how much Debt has to be 'backed' when creating Credit, but that's about all.

 

[littlebabyjesus]

I agree that credit/debt is what is important here. This rather begs a question, though, wrt reserves. How can there ever be more deposits than there are loans? Where would the 'extra' bit of the deposit come from?

 

[butchersapron]

*weeps into rum*

 

[phildwyer]

money,like value, is immaterial (but objective) - this doesn't mean the conditions that are required for it to exist and be expanded can be created out of thin air.

Except that in practice, in real life, it is money (or rather financial value) that determines the nature of these "conditions that are required for it to exist."

What determines who will perform which material acts of labor, under what conditions and for whom? Money (or rather financial value) determines this, does it not?

And yet as you admit here financial value has no material existence at all, but is a mere symbol or to put it colloquially "thin air."

So it seems that the conditions that are required for financial value to exist are indeed created out of thin air, and that you are once again proved wrong.

 

[littlebabyjesus]

*weeps into rum*

It's just so easy, this stuff, isn't it? How could anybody get it wrong?

 

[Hocus Eye.]

I have been following this thread from the beginning and was just dreading phildwyer coming on to it with his oft repeated idea that money is spiritual and proof of the existence of god or some similar twaddle which is completely out of context with the arguments here.

 

[phildwyer]

I have been following this thread from the beginning and was just dreading phildwyer coming on to it with his oft repeated idea that money is spiritual and proof of the existence of god or some similar twaddle which is completely out of context with the arguments here.

I understand: you assume that economics can be separated from philosophy, and perhaps also that philosophy can be separated from theology.

I think you are wrong on both counts.

 

[love detective]

I'll leave you to it Phil, you clearly know what you are talking about, you've really got to the crux of the issue here i feel and I think we can all learn a lot from what you have to say (well LBJ & Jazz won't because you all seem to be on the same page anyway, but the rest of us, boy, there's a lot to pick up there)

 

[littlebabyjesus]

tbh, ld, your recent posts show me that you don't really get what I've been saying.

 

[phildwyer]

tbh, ld, your recent posts show me that you don't really get what I've been saying.

You're speaking a language he doesn't understand: philosophy.

Thing is, economics is premised on bullshit, philosophically speaking. Philosophy undermines the most basic assumptions of economics, making it impossible for those who accept those assumptions to continue the conversation on their own terms.

A classic example is your insistence that money can be created out of thin air. Philosophically speaking, of course, you are right--all money is thin air. But the terms of the discipline of economics are premised on the assumption that money is somehow real, or at least that it refers to something real, and within that discipline there are ways to sustain that assumption, as we have just seen.

From any extra-economic perspective however, that assumption like so many others is manifestly and patently absurd.

 

[love detective]

tbh, ld, your recent posts show me that you don't really get what I've been saying.

I'll leave you, Jazz and Phil Dwyer to revel in your collective correctness then (and i'm sure no one will judge the quality of your analysis by the company they keep)

 

[littlebabyjesus]

I'll leave you, Jazz and Phil Dwyer to revel in your collective correctness then (and i'm sure no one will judge the quality of your analysis by the company they keep)

What kind of nonsense is this? You have misunderstood a few of my points. I highlighted one - I merely said that the act of circulation attaches value to money, not that it creates value. There is another - that the system would seize up without central bank intervention because the reserve requirement is being violated - not because the system cannot work like that, but because by working like that, the system breaks the rules of reserves. The central bank's own rules would cause a seizure - so it basically breaks its own rules to keep the system going.

And yes, we are going round in rather large circles because any 'deposit-first' theory of money creation begs the question: where did that deposit come from? Keen and others say that this isn't a problem as it isn't the way money is created, and that there is good hard evidence for this in the timing of central bank base money expansion. I've been saying for a while now that your system assumes that money is already present in the system, and does not account for the creation of money. To my mind, the endogenous theory, as I outlined it, does.

 

[camouflage]

I agree that credit/debt is what is important here. This rather begs a question, though, wrt reserves. How can there ever be more deposits than there are loans? Where would the 'extra' bit of the deposit come from?

Do you mean to ask how can there be more loans than there are deposits?

If so, I reckon that the 'extra bit' be the wealth creation, or the anticipation of future value, the "if" in "build it and they will come", or at least the 'objective truth' in the market research that says people will pay good money (or even crap money if stack em high sell em cheap's your game) for what you've taken the loan to build/invest in in the first place. It's the Confidence in future growth.

Out of 'thin air' is precisely where we get all our stuff from, why the outrage and shock that it's where we get money, credit and debt from too.

 

[ItWillNeverWork]

Just wondering, but do banks report their balances on a periodic basis or continually? If it is the former, then there is a way in which banks might be able to expand the money supply whilst maintaining a situation in which all loans are backed by deposits.

An individual bank will have a projection of how much money it expects will be coming into its coffers each period, and using this projection it will plan to lend out a certain amount. Imagine this projection is 100 million, and so the bank authorises it's branches to lend out that amount over the coming period. The money gets lent out to firms that pay for goods and services from people who deposit that money back in the same bank.So here we are at the end of the period, with both sides of the balance sheet summing to zero.

Now imagine the bank projects it will have 105 million deposited next period, and so lends out 105 million. Once again the money gets lent out to firms that pay for goods and services from people who, again, deposit that money back in the same bank. In this situation, loans have created deposits just like Keen argues, and there is no problem with all loans being fully backed by deposits so long as the balances are reported at the end of the period. So long as that flow keeps circulating, of course.

 

[love detective]

What kind of nonsense is this?

It's merely pointing out that in your travails to expertly explain to us how you think things work, the only people who you've ended up agreeing with (or agreeing with you) have been Jazz, Phil Dwyer and Milton Friedman - as i said, if you judge people's analysis on the company they keep you don't come out of this looking to well with those as bed fellows

(and it rich you calling nonsense, with some of the nonsical shite you've come out with on this topic over the last year or so - and i notice once again when i take the time to respond line by line to your ramblings, you can never actually come back and respond to them, you just do this vague, 'oh you don't understand' shite without actually doing what i do and taking the time to respond as to why - as to why that is the case i'll leave it to others to make up their minds on)

 

[littlebabyjesus]

Well you misrepresented what I said. Add to that a dig and an attempt to belittle, which you do a lot of. You're the only one here claiming expertise. You and perhaps dwyer. How you think what I'm saying is in agreement with Friedman I simply don't understand.

 

[love detective]

http://www.urban75.net/forums/threads/money-and-value.276954/page-5#post-10490295

and by the way, if people go about pompously projecting an air of authority about a subject they know very little about, then I think it is important to belittle them - otherwise others may accept what you are saying just because 'who' is saying it (rather than basing it on whether what is being said is actually correct) - that is dangerous as it allows people who know very little about an important topic to spread misinformation about it - the example in the post linked to above is a case in point, something that you argued until you were blue in the face for, while i patiently and calmly countered your points until you conceeded that you were in fact talking a load of crap (a load of crap that Friedman also spouted)

 

[littlebabyjesus]

You attack me in this thread for something I said in the past? Why not address the endogenous theory as I laid it out? You might like to read one or two of the links I've provided because you indicate to me that you don't really get it. I might have got the theory wrong, but I don't think I have and others who are reading the same stuff as me seem to think it means the same as I think it means.

But you prefer to make out that I'm spouting random crap. You are the pompous one here, belittling anybody who questions you.

 

[ItWillNeverWork]

I don't think Friedman thinks that the money supply is endogenous, does he? I mean, a central assumption of Monetarism is that the money supply can and should be controlled by the central bank. That hardly fits in with what lbj has been saying here. The opposite in fact.

 

[redsquirrel]

So it's no surprise that someone of your idealist posturing nature and demented bishop berkleyism

 

[phildwyer]

Well you misrepresented what I said. Add to that a dig and an attempt to belittle, which you do a lot of. You're the only one here claiming expertise. You and perhaps dwyer.

Erm.. excuse me, but where have I claimed any "expertise?"

I think you'll find that I've been very reticent about any credentials any of us might or might not have. I have allowed my arguments to do their work on their own merit.

 

[phildwyer]

It's merely pointing out that in your travails to expertly explain to us how you think things work, the only people who you've ended up agreeing with (or agreeing with you) have been Jazz, Phil Dwyer and Milton Friedman - as i said, if you judge people's analysis on the company they keep you don't come out of this looking to well with those as bed fellows

What a pathetic, pompous twat you truly are.

Your technique of argumentation is pathetic. You've been exposed as a fraud and a fake, and your only recourse is to personal abuse. Useless.

 

[JimW]

What a pathetic, pompous twat you truly are.

Oh, phil's resorted to personal abuse.

...exposed as a fraud and a fake, and your only recourse is to personal abuse. Useless.

Hmm.

 

[ymu]

Don't fall for it Jim, he knows perfectly well how ridiculous those posts are - he only uses that sort of overblown rhetoric when he's trying to get someone to bite. This is a decent thread - don't let him ruin it.

 

[JimW]

Don't fall for it Jim, he knows perfectly well how ridiculous those posts are - he only uses that sort of overblown rhetoric when he's trying to get someone to bite. This is a decent thread - don't let him ruin it.

I guessed as much, as it seemed a fairly obvious direct self-contradiction. Shame phil won't try and make a contribution instead, he's not stupid.

 

[love detective]

You attack me in this thread for something I said in the past?

I summed up in my post that in your travails to expertly explain to us how money & value work (in general, not this particular thread) you have collected an odd bunch of bedfellows who agree with your 'work' - Jazz, Phil Dwyer and Friedman for example

And it's a good example to point out I think - it shows how mixed up and muddled your own pompous shite actually is in this area, one minute you are confidently telling us all how something works which is straight out of a friedmanite monetarist perspective, then the next you've swung the other way and arguing the opposite - all while maintaining that at all times you of course are right and people who don't agree with you just don't understand you.

Why not address the endogenous theory as I laid it out? You might like to read one or two of the links I've provided because you indicate to me that you don't really get it. I might have got the theory wrong, but I don't think I have and others who are reading the same stuff as me seem to think it means the same as I think it means.

can't believe you are accusing me of not addressing your posts on this - i've made plenty long and detailed posts responding to your points on this matter - here and here for example, and as usual you do your usual, when faced with a comprehensive response to your posts, you either go silent for a few weeks or claim you don't have time to respond to it (and give a one line response) and then moan at others for not responding to you. Why not address my replies to your posts instead of disingenuously suggesting that I haven't addressed your points?

But you prefer to make out that I'm spouting random crap.

If one minute you are arguing crude friedmanesque monetarist theory (the post i linked to on the other thread) and the next you are arguing pretty much the complete opposite of it, then yes, i think that is spouting random crap - it shows that you have no fundamental framework/grasp of the topic you are trying to project knowledge on. At least if i'm wrong, i'll be consistently wrong on it as everything I am saying is coming from a framework that i've established from over twenty years of both theoretical and practical research into this area (i know this counts for nothing against you looking up a couple of pages on wikipedia though)

You are the pompous one here, belittling anybody who questions you.

as i said above, i belittle pompous fakes like you (and Phil), who have little knowledge of the topic but project an air of confidence about it that is unmerited by their understanding of the topic. which as i've said before i think is dangerous as people can end up just taking what you say as correct because of 'who' says it (well obviously they don't with Phil, but you know what i mean) - if you don't like it, then take a bit of time to understand something properly before you confidently spourt your shite, or failing that, once just once, actually admit you're not as clever as you like to think you are - it won't hurt.