littlebabyjesus
one of Maxwell's demons
ok. Fair enough. I stand corrected on that point.
"Banks create money out of nothing" - Guardian
- Thread starter Jazzz
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butchersapron
Bring back hanging
If we look at this chain, if we follow it back to start point it can only begin with us providing the boss with the means to employ us - that is with money to buy means of production, various inputs and hire labour-power. S/he has to get this money from somewhere - they cannot produce it themselves. They only have one place they can get it from. The workers actually pay the boss to employ them.
butchersapron
Bring back hanging
Better put than my effort!
littlebabyjesus
one of Maxwell's demons
Right. We lend them the value of our labour, but we have to borrow money in order to live until we're paid. I would think that you could test this empirically - it's a normal position for many people to live off their overdraft and go back up to zero when they're paid. And perhaps, for the system as a whole to function, the sum of the system has to be that this is the 'normal' way to be.
littlebabyjesus
one of Maxwell's demons
ok. That makes sense. But they pay with borrowed money, surely?
BigTom
Well-Known Member
Just to say I didn't do an economics degree, I started doing a politics & economics degree, then switched to straight politics after the first year cos the economics was such bullshit, but did political economy modules and my dissertation on economic theories of crisis in capitalism..
Thus I have read the major works of bigger economists like Smith, Marx, Keynes, Hayek, Galbraith and Freidman as well as quite a lot from less well known ones like Schumpeter, Veblen and JS Mill.. just never came across Minsky when I was doing all that, but then I had to stop reading for my dissertation because it was getting far, far too long, so perhaps I would have done, or perhaps if I'd been focused on finance capital I would have done.
Doing political economy also meant I avoided doing a lot of the maths that gets done, and would at least partly explain why I struggle so much with it now.
cesare
shady's dreams ♥
I was wondering if you'd meant more than me re the value v money aspect, and figured I'd soon find out
butchersapron
Bring back hanging
From who? And where does the money they borrow come from?
butchersapron
Bring back hanging
Won't be much more from me on this thread today very soon as it's almost BBQ time!
littlebabyjesus
one of Maxwell's demons
Well, this is the whole point of the endogenous theory of money creation. The money doesn't come from anywhere. It is created at the point of borrowing, making an equal and opposite deposit somewhere else.
butchersapron
Bring back hanging
From prior exploitation.
littlebabyjesus
one of Maxwell's demons
Enjoy your bbq. I'm going to think on about this, and maybe revisit Keen's maths too.
When I say that the money doesn't come from anywhere, that's not quite right - before the money can be created, there needs to be a situation in which a transaction involving real stuff can take place, so the real value needs to be there.
When I say that the money doesn't come from anywhere, that's not quite right - before the money can be created, there needs to be a situation in which a transaction involving real stuff can take place, so the real value needs to be there.
cesare
shady's dreams ♥
It depends on your benchmark of "normal". It's just as normal not to have credit and overdrafts ... There was a hell of a bloody furore* when employers started insisting on paying people into bank accounts rather than coin of the realm, for example.
* in manufacturing, retail etc
littlebabyjesus
one of Maxwell's demons
Normal was the wrong word. Rather, this has to necessarily be how it is. On average, we are in debt, in other words, and it is that very money that we've borrowed that ends up being used to pay us. The system couldn't function in any other way.
For instance, back when people were paid in cash, it was very common to buy stuff on tick from shops. And even then, being in debt was 'normal' - Robert Tressell talks a lot about this in his novel The Ragged Trousered Philanthropists. He describes a situation in which people get into desperate debt during periods of unemployment and then just about get their heads above water during periods of employment: a whole sector of workers who, in sum, are in debt.
For instance, back when people were paid in cash, it was very common to buy stuff on tick from shops. And even then, being in debt was 'normal' - Robert Tressell talks a lot about this in his novel The Ragged Trousered Philanthropists. He describes a situation in which people get into desperate debt during periods of unemployment and then just about get their heads above water during periods of employment: a whole sector of workers who, in sum, are in debt.
cesare
shady's dreams ♥
I don't know what the average person's debt is, and whether that average figure is referenced to class and type of labour. I suspect that the past 35 years has seen an increase in "normality" of having credit cards or overdrafts - or indeed reliance on banks. But I'm not sure that I agree that people start from a position of debt. I think workers start from a position of being owed, and it's a case of managing as best you can until you are paid for your labour.
littlebabyjesus
one of Maxwell's demons
But this begs the question about where the money they are owed comes from. I would suggest that it comes from the workers themselves, through their getting into debt. The debts create the money that is used to buy stuff, and that very money is used to pay workers.
cesare
shady's dreams ♥
Yep, I get where you're coming from, even if I'm not explaining myself well. OK, to put it in a different way, I think that the debt arises from the point where exchange of value isn't immediate.
cesare
shady's dreams ♥
I've only just seen your addition here. Yes, of course in periods of unemployment it's necessary to do whatever is necessary to survive including going into debt. But the debt default is with the bosses, because the labour is still there and not being withheld and it's the bosses that go into default. We've moved on a lot since Tressel's day, but even now redundancy pay is capped - the debt is part paid.
ItWillNeverWork
Messy Crimbobs, fellow humans.
A good way to get a feel for the sort of maths that Keen uses is to download a copy of some systems modelling software. Vensim is dead easy to get into, and it essentially is a way of graphically manipulating differential equations, i.e. stocks and flows (exactly what Keen's models consist of). Keen also has on his website a program called QED that is supposed to do something similar, although I haven't used it much so can't comment.
I'm not a fantastic mathematician, but my position is that if you can find a software tool to do something then why the fuck learn how to do it by hand? Would you feel the need to verify that the square root of 462 is 21.494, or would you just use a calculator? The same is with any other maths; just understand the concept vaguely, then confirm it in software.
BigTom
Well-Known Member
I'll have a look at that software, cheers.. I do like to be able to do it by hand though, to some extent anyway, as it's the only way I feel like I've really understood that the maths works, and how and why it works. There may be things in the maths that I can criticise, that I wouldn't be able to if it was done by computer - but that really depends how much is done by the computer and exactly what it is.
I wouldn't really say that the banks are 'lending the £10 on'. The loan is simply creating new money. There is no absolute association with the money that was deposited. All the bank has to make sure is that it will have enough 'cash' (cash, bank of england account) to cover the demand for withdrawals at any one time. Pertinently, when a new loan is going into another account at the same bank, then there is absolutely no change in the bank's cash position.
The key points that I would wish people to understand is that as a whole, we are renting our means of exchange from the banks, it's very much like a casino where the banks take a cut of every pot.
The money system is not creating value in the economy, but extracting it.
As I understand it, primitive societies generally settle on a 20-hour working week. Yet for most working people - despite great technological advancements helping us manage everything - a 20hr week simply isn't an option. It should really be clear that something is desperately wrong there. I say this is because our money system is enslaving us.
Bernie Gunther
Fundamentalist Druid
... and you're debating the number of lizards dancing on the head of a pin while they steal from us and laugh at us.
While they snigger in that characteristic public school way at old people starving and freezing to death, like it wasn't real people suffering because they aren't posh fuckers, when they make jokes about 'chavs' on sink estates and snort coke and loot our society.
Arrggh ... time for bed.
While they snigger in that characteristic public school way at old people starving and freezing to death, like it wasn't real people suffering because they aren't posh fuckers, when they make jokes about 'chavs' on sink estates and snort coke and loot our society.
Arrggh ... time for bed.
BigTom
Well-Known Member
I wouldn't really say that the banks are 'lending the £10 on'. The loan is simply creating new money. There is no absolute association with the money that was deposited. All the bank has to make sure is that it will have enough 'cash' (cash, bank of england account) to cover the demand for withdrawals at any one time. Pertinently, when a new loan is going into another account at the same bank, then there is absolutely no change in the bank's cash position.
The key points that I would wish people to understand is that as a whole, we are renting our means of exchange from the banks, it's very much like a casino where the banks take a cut of every pot.
The money system is not creating value in the economy, but extracting it.
As I understand it, primitive societies generally settle on a 20-hour working week. Yet for most working people - despite great technological advancements helping us manage everything - a 20hr week simply isn't an option. It should really be clear that something is desperately wrong there. I say this is because our money system is enslaving us.
Can you expand on what you mean by "no absolute association" please?
What is the association between deposits and loans? From your phrasing, I'm assuming you think that there is some association, meaning that the bank does need to the deposits in order to make the loans?
If they didn't then they wouldn't keep any deposits would they? Customer bank accounts aren't usually charged and savings accounts pay interest (and so did current accounts until recently) and the cost of having branches etc, the banks must make a loss on the customer side of their operation. Unless they need those deposits in order to make the loans which they make profit on, they wouldn't have them.. so what is the purpose of the deposits in your conception of the banking system?
Do banks keep 100% of customer deposits in reserve at the bank of england?
Wolveryeti
Detty Pig
I see it as doing both. Banks do create value - they help to pool risk so depositors can preserve the value of their income, whilst directing capital to projects that generate high returns*. The overall level of economic activity would probably be lower without banks, because many investment prospects would be unacceptably risky to individuals (who don't have the scale needed to carry out due diligence on many projects, or the spread of high return projects needed to balance out the ones that fail).
* I accept that's not always the way it works.
It's not a case of getting rid of lending institutions, just changing the nature of the money system. I don't see why as a nation we should have to rent our means of exchange, which is in a nutshell what is happening. It is very much living with a blood-sucking parasite! Banks should not have the flashiest buildings in town. It makes as much sense as having a cricket match in which the star of the show is the scorekeeper!
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