"Banks create money out of nothing" - Guardian

[love detective]

The OP points out that only 3% of "money" is represented by the activities of commercial banks.

christ you're almost as thick as Jazz on this - at least he can read, which you appear unable to

what the article in the OP says is 3% of the money system is base money created by the bank of england (not the opposite of this as you bizarrely claim in your post where you suggest the OP says 'only 3% of money is represented by the activities of the commercial banks'), this then circulates in the system and expands through circulation and fractional reserve lending - there is nothing magical, mystical or confusing about this - it's just money circulating at various speeds which in turns has the same effect as an increase in the money supply (i.e. £10 doing one transaction a day, is the same as £1 doing ten transactions a day)

Jazz (and the fuckwit author of the guardian article) claims that money however can be created without this circulation having to happen, he claims all that is required is some tapping away on the keyboard, with no other dependencies required. This is patent nonsese

And yes, you're right I am fixated on circulation as circulation is the 'material' basis for the existence of that 'money' in the first place - if circulation didn't exist neither would that expanded money supply - which you laughably think you can explain the existence of without reference to circulation

 

[JimW]

Was reading a book on Marx on money, which quotes Arghiri Emmanuel stating that the ex nihilio creation of money by central banks, 'fictive purchasing power', is necessarily destablising - AFAICT that in turn shows that money is in fact something (here, p.166) as suddenly tinkering with its nominal supply necessitates real-world adjustments.

 

[Falcon]

this then circulates in the system and expands through circulation and fractional reserve lending - there is nothing magical, mystical or confusing about this

OK. You appear to have absolutely no conception of the significance of the relationship between your abstract tokens and the physical world (and, therefore, the significance of changes in the physical world on your tokens), or even any curiosity about the limitations of your mental model. Lets leave it there.

 

[love detective]

OK. You appear to have absolutely no conception of the significance of the relationship between your abstract tokens and the physical world (and, therefore, the significance of changes in the physical world on your tokens)

Very disingenuous statement. The crux of the issue in terms of understanding this, I set out in this post here in response to Jazz's obsession with only looking at money in terms of understanding the wider system (i.e. my categorisation of him as a 'money first' freak):-

The disconnect you refer to is between money & value and to be understood properly needs to be located within a wider analysis of capitalism, wage labour, commodity production and value - that is the root of any crisis under capitalism

So, to say what you do above proves further that you are either unable to read or to understand what is written by others on threads like this

Lets leave it there.

So I can see why you want to leave it there - given your embarassing attempts at contributions so far combined with your inability to even read/understand both what the point of the OP was, and that of those who responded to it

 

[Falcon]

The disconnect you refer to is between money & value and to be understood properly needs to be located within a wider analysis of capitalism, wage labour, commodity production and value - that is the root of any crisis under capitalism.

Not once do you acknowledge the role of energy. An 8 year old child understands what happens to the Energizer(tm) bunny when you take the batteries out, yet you appear not to.

The "wider analysis" of capitalism, wage labour, commodity production and value has only ever been performed under conditions of monotonically increasing available energy viz. wood -> coke -> coal -> oil, and takes such conditions totally for granted. It has never been performed under conditions of monotonically decreasing available energy viz. oil -> sunbeams/summer breezes. Nowhere in your analysis (such as it is) do you acknowledge, let alone attempt to account for, how any correspondence between your tokens and physical wealth is to be maintained as the basis for generating new wealth and maintaining existing wealth is eroded by declining marginal energy supply.

You studiously ignore this most basic criticism of your nostrums for how the financial system is supposed to work, while emitting tiresome smokescreens of invective designed to mask the fact.

 

[love detective]

Not once do you acknowledge the role of energy. An 8 year old child understands what happens to the Energizer(tm) bunny when you take the batteries out, yet you appear not to.

yeah because commodity production doesn't involve the use of energy

Your grasping at straw men now

 

[Falcon]

yeah because commodity production doesn't involve the use of energy

Your grasping at straw men now

Toto, I've a feeling we're not in Kansas any more. Give an example of a commodity which doesn't involve the use of energy ...

 

[love detective]

that's my point dipshit - you claim I don't acknowledge the role of energy in all this, but my using the wider term of commodity production implies the role of energy within that analysis (as you yourself prove by doing exactly that in the above post), an integral part of it indeed

(i know you like to say energy a million times in every post, but just because some of us don't mention it explicitly at the rate that you do, it doesn't mean its role is not implicitly acknowledge within the wider analysis)

again, it really feels like you are are unable to read what appears before you on your screen, let alone make a cogent & coherent response to it

 

[Falcon]

Commodity production doesn't involve the use of energy (your precise words), and now it does but your reference to it is implied, and the problem is that I'm unable to read what appears before me on my screen?

OK.

Your theory is broken. Specifically, you have no argument to make that your tokens have lost any correspondence with physical reality and therefore your speculations about their properties are irrelevant. Implicit isn't good enough, I'm afraid.

 

[BigTom]

Commodity production doesn't involve the use of energy (your precise words), and now it does but your reference to it is implied, and the problem is that I'm unable to read what appears before me on my screen?

OK.

Your theory is broken. Specifically, you have no argument to make that your tokens have lost any correspondence with physical reality and therefore your speculations about their properties are irrelevant. Implicit isn't good enough, I'm afraid.

Falcon, LD was clearly being sarcastic in that post, read it again with your sarcasm detector turned on.

 

[love detective]

Commodity production doesn't involve the use of energy (your precise words)

you're not very great at picking up on sarcasm as a method of pointing out how ridiculous someone's else assertion is, are you

Your theory is broken. Specifically, you have no argument to make that your tokens have lost any correspondence with physical reality

Again disingenuous crap - this is exactly what I point to being the crux of the matter - the disconnect between money, value & use values, being at the root of all crisis under capitalist social relations - that you choose to ignore this and then posit its existence as non-existence says far more about you than anything else

it's not my fault you have such an autistic approach to discussion

 

[Falcon]

this is exactly what I point to being the crux of the matter - the disconnect between money, value & use values, being at the root of all crisis under capitalist social relations

The crux of the matter is, in fact, that the disconnection is independent of any particular ideology. This is a physical phenomenon - the overshoot of our resource base - not a political-economic one. The crisis isn't even peculiar to capitalist social relations.

I'll leave it to others to judge the integrity of an argument that relies on sarcasm and implication, while accusing others of not reading what is being said.

 

[belboid]

The crisis isn't even peculiar to capitalist social relations.

To what other social relations do you refer?


(this should be amusing)

 

[butchersapron]

Astonishing that the set of social relations/conditions that led to the purported situation are non-political as well.

 

[Falcon]

Falcon, LD was clearly being sarcastic in that post, read it again with your sarcasm detector turned on.

Big Tom - I regularly engage in debate with people in these forums who believe what LD stated i.e. that energy plays no role in economic processes. Meanwhile, I share the general view that sarcasm as a substitute for discussion more or less indicates that the depths of the argument has been plumbed, and was giving him the benefit of the doubt.

 

[love detective]

The crux of the matter is, in fact, that the disconnection is independent of any particular ideology. This is a physical phenomenon - the overshoot of our resource base - not a political-economic one. The crisis isn't even peculiar to capitalist social relations.

I'll leave it to others to judge the integrity of an argument that relies on sarcasm and implication, while accusing others of not reading what is being said.

given generalised commodity production & value are forms specific to a particular set of social relations - then it's appropriate to refer to that specific set of social relations when discussing those particular forms

that you seem to think that crisis can only emerge when there is a disconnect between physical things and money, and not between the objective yet immaterial categories of money & value - shows how inapproriate and ahistorical your analysis is to the set of social relations we actually live within, and one which is incapable of explaining most of the crises that we've seen over the last few hundred years

(cue a lot of stuff about oil in 1970's)

 

[Falcon]

To what other social relations do you refer?(this should be amusing)

The ones not encapsulated by LD's decision to qualify them. Ask him.

 

[belboid]

The ones not encapsulated by LD's decision to qualify them. Ask him.

No, I'm asking you. You made the statement, back it up. If you can.

 

[Falcon]

that you seem to think that crisis can only emerge when there is a disconnect between physical things and money, and not between the objective yet immaterial categories of money & value - shows how inapproriate and ahistorical your analysis is to the set of social relations we actually live within, and one which is incapable of explaining most of the crises that we've seen over the last few hundred years

Nope. Affirmation of the consequent fallacy (again - you do that a lot). "Also". Not "only".

All of your theories about the crises that emerge when there is a disconnect between the objective yet immaterial categories of money & value (which may or may not be valid - it is irrelevant) have been devised under conditions when there has been no disconnection between money and physical things, and an implicit assumption that they are connected.

Now, there is such a disconnection, and those theories are indeterminate. Rather than being ahistorical, I explicitly acknowledge that history offers us no guide, since historical conditions no longer pertain.

Since the crises that we've seen over the last few hundred years have taken place under conditions of monotonic energy expansion, it should not surprise you that an analysis which seeks to explain events under conditions of monotonic energy contraction does not even attempt to explain them.

Equally, since the analysis you favour has only ever been able to explain crises under conditions of monotonic energy expansion, it should not surprise you that your confidence that they offer anything of interest in predicting events under conditions of monotonic energy contraction is challenged.

 

[Falcon]

No, I'm asking you. You made the statement, back it up. If you can.

I realise that you would love to engage in a lovely exercise in misdirection debating the finer points of capitalist social relations. Since it is my position that they are irrelevant to the thread - the role of banks in creating money - I'll respectfully decline. Meanwhile, feel free to make your case as to why you think such a debate might be fruitful, given my observations in the previous post.

 

[cesare]

How can capitalism be irrelevant to banks creating money?

 

[belboid]

I merely want to see if you are capable of defending your assertions, as you have wholly failed to do so to date. Your previous post is simply a host of assertions, posted without any accompanying evidence.

 

[butchersapron]

How can capitalism be irrelevant to banks creating money?

Because physical things exist. I think that's it.

 

[Falcon]

I merely want to see if you are capable of defending your assertions, as you have wholly failed to do so to date. Your previous post is simply a host of assertions, posted without any accompanying evidence.

No, you picked one phrase from one sentence out of the last 20 posts, which itself was simply the repetition of a phrase used by someone else, and are now attempting to manufacture the appearance of not defending assertions from it. Lets keep it real, shall we?

What evidence would you like? Do I really have to post a graph of total energy consumption with a big red "Marx born here" arrow on it? Happy to, if that is the sort of thing you need. Otherwise, state what you believe requires evidence.

 

[love detective]

I'll leave it to others to judge the integrity of an argument that relies on sarcasm and implication, while accusing others of not reading what is being said.

Do you still stand by your assertion that the article in the OP was about the creation of money by the central bank?

And that despite the article saying otherwise you think it says that 'only 3% of "money" is represented by the activities of commercial banks'

If not, then admit your error, if so then that proves you cannot read what is being said

 

[love detective]

Nope. Affirmation of the consequent fallacy (again - you do that a lot). "Also". Not "only".

All of your theories about the crises that emerge when there is a disconnect between the objective yet immaterial categories of money & value (which may or may not be valid - it is irrelevant) have been devised under conditions when there has been no disconnection between money and physical things, and an implicit assumption that they are connected.

Now, there is such a disconnection, and those theories are indeterminate. Rather than being ahistorical, I explicitly acknowledge that history offers us no guide, since historical conditions no longer pertain.

Since the crises that we've seen over the last few hundred years have taken place under conditions of monotonic energy expansion, it should not surprise you that an analysis which seeks to explain events under conditions of monotonic energy contraction does not even attempt to explain them.

Equally, since the analysis you favour has only ever been able to explain crises under conditions of monotonic energy expansion, it should not surprise you that your confidence that they offer anything of interest in predicting events under conditions of monotonic energy contraction is challenged.

monotonic energy contraction

 

[Falcon]

Because physical things exist. I think that's it.

Well, almost. This is a slightly longer explanation. In a nutshell - without surplus energy to process physical things into useful forms, everything - including capitalism - is irrelevant to making money.

 

[love detective]

without the existence of human beings, everything - including monotonic energy contraction - is irrelevant to making money

without the sun not burning itself out, everything - including monotonic energy contraction - is irrelevant to making money

without the big bang, everything - including monotonic energy contraction - is irrelevant to making money

etc. etc..-

 

[belboid]

No, you picked one phrase from one sentence out of the last 20 posts, which itself was simply the repetition of a phrase used by someone else, and are now attempting to manufacture the appearance of not defending assertions from it. Lets keep it real, shall we?

What evidence would you like? Do I really have to post a graph of total energy consumption with a big red "Marx born here" arrow on it? Happy to, if that is the sort of thing you need. Otherwise, state what you believe requires evidence.

Keep it real? Lol, you're so hip, But you are also incapable of defending your assertions. The fact that you wrote needing an arrow to show "Marx born here" rather implies you dont really understand what capitalism even is.

Now, you have to try and show how energy is the determinant of wealth - not just a contributory factor, but the determining one.

 

[Falcon]

Do you still stand by your assertion that the article in the OP was about the creation of money by the central bank? And that despite the article saying otherwise you think it says that 'only 3% of "money" is represented by the activities of commercial banks'

Allow me to quote the very first paragraph - the caption to the photograph:

Banks should lend from their captial (sic.), not from money conjured out of the thin air of cyberspace, writes Deborah Orr.

i.e. the opening statement anchors the piece in the practice by central banks of creating money out of thin air.

Then, in para. 3:

What is overlooked is that one sector did a gargantuan amount of manufacturing during this period. The big international banks manufactured money, using very simple raw materials.

Again, the practice of creating money out of thin air (as distinct from the operations to which you referred).

Then, in para. 5:

Now, only 3% of the "money" in Britain is cash from the Bank of England. The rest is electronic, created by the banks, simply by virtue of the fact that the Bank Charter Act didn't foretell the advent of computer-screen credit, and no one stepped in to arrest its development.

Let me turn it around: are you asserting that the article is not about the creation of money out of thin air by central banks, and that 97% of all the money handled by commercial banks has not been created electronically out of thin air?

More to the point - is there any significance to this questioning, or are you merely hoping to avoid questioning about the relationship between your belief system and the ongoing inflection point in the global energy system?