Money and value

[love detective]

Trying that with.......

Again no attempts to address my points - I haven't read any of the above post as until you address (or even acknowledge the existence of) the valid critique I made of your 'theory' I have no interest going into other detail with you - your arrogance thinks it's acceptable to ignore considered responses to your points while demanding others engage with what particular thing you happen to decide that you want to discuss (conveniently a thing which deflects from you having to address the more substantive points) - so sorry, like you i'm going to ignore any efforts you make into this

I raised my original rebuttals of it nearly three months ago now, so if you feel like you can defend your theory against them then go ahead - otherwise your points are irrelevant to me

Even within your own system of logic you trip yourself up:-

- You claim new money needs to come into the system to service debt

- You claim new money enters the system as debt

- inherent within the concept of debt is a party on each side, each owing/lending the same amount, with the net coming to zero

- ergo, if new money needs to enter the system to service interest, that money comes in as debt, and like all other debt sums to zero - the position is zero both before any new money enters the system and after

Now I don't even agree with all of your premises - but you should be able to hold the logic correct within the framework of your premises but you don't

what you're arguing above is the logical equivalent of saying not all bachelors are unmarried men - you're trying to break what is an analytic a priori

Likewise empirically your theory predicts high inflation in periods where empirically inflation was low and likewise predicts low inflation in periods where empirically inflation has been high - so despite your theory having no rational or empirical basis to exist - you cling on to it, through what looks like faith alone

More fundamentally you don't understand the system you are trying to analysis money within - all that crap about Gessell shows that - you think you can just tinker with money (whose workings is a manifestation/crystalisation of the underlying social relations of capitalism) and make a great new system - this is nonsense

 

[articul8]

ouch

 

[Johnny Canuck3]

what you're arguing above is the logical equivalent of saying not all bachelors are unmarried men - you're trying to break what is an analytic a priori

This analogy isn't clear to me.

 

[Jazzz]

Even within your own system of logic you trip yourself up:-

- You claim new money needs to come into the system to service debt

- You claim new money enters the system as debt

- inherent within the concept of debt is a party on each side, each owing/lending the same amount, with the net coming to zero

- ergo, if new money needs to enter the system to service interest, that money comes in as debt, and like all other debt sums to zero - the position is zero both before any new money enters the system and after

So the sum of money in the whole world is zero? This is just flippancy. Of course LBJ is not talking about money as being a total which comes to zero. He is talking about the credit side of the equation - the circulation.

It's really not much good if the interest only exists on the side of the bank's accounting ledgers: the point is that it needs to be there as credits in circulation for the people to pay back their loans with.

From a conference recently: http://www.positivemoney.org.uk/2011/10/breath-fresh-air-conference-banking/

The two main speakers at the free public session were Lord Adair Turner (both Financial Services Authority and Committee on Climate Change chairman) and Prof Richard Werner (of the University of Southampton’s school of management). I’ll give you my summary and impressions of what each of them said.

First Prof. Richard Werner, who was a breath of fresh air. It’s heartening for “cranks” everywhere to see an Oxbridge educated economics professor stand up at a conference in a suit and tie and state that:

“It is basically an accounting trick … Banks create money. They don’t lend it ... When a bank gives out what is called a loan, it basically pretends that you have deposited the money… it has to invent the liability … This is how the money supply is created.”​

 

[deke t lefel]

can't anybody create debt/money by writing an IOU and then guaranteeing it, or is money only defined as legal tender backed by the government?

it seems like the government's proposed credit easing will mean that corporation bonds will now be backed by the tax payer (which is the prime source of value)

 

[Jazzz]

can't anybody create debt/money by writing an IOU and then guaranteeing it, or is money only defined as legal tender backed by the government?

I didn't want to fry everyone's brain too much... but this is in fact precisely what is happening. I have been saying the banks create it out of thin air - but in fact this is not quite true. In fact, we create it out of thin air by signing a loan agreement which is.... a 'promise to pay' (promissory note!). That is what the cash is! (look at the ten pound note in your pocket and the promise on it). The banks/loan companies then take our created cash, then change it up for us into a credit that we can use.

"What they [banks] do when they make loans is to accept promissory notes in exchange for credits to the borrowers' transaction accounts. Loans (assets) and deposits (liabilities) both rise by [the amount of the "loan"]."
Modern Money Mechanics, Federal Reserve Bank of Chicago

The loan agreement is a swap! There is no loan.

 

[butchersapron]

Donkey crackers

 

[Jazzz]

Donkey crackers

I suggest you try going into the Bank of England, present one of their promissory notes and demand that the chief cashier honours it for you, and see what happens.

 

[butchersapron]

I stand by my post.

 

[Jazzz]

I stand by my post.

You weary me.

 

[butchersapron]

I may do, but you are a donkey running around with a cracker tied to its tail. You have no idea.

 

[Jazzz]

I may do, but you are a donkey running around with a cracker tied to its tail. You have no idea.

Kindly produce something that isn't mindless abuse or piss off, there's a good chap.

 

[butchersapron]

That wasn't mindless abuse. It was mindful abuse. Actually, it wasn't abuse at all. You've just tied money to nothing. There's literally nothing in your fantasy. Do you want to talk about the invention of money? Ok, shall we do that?

 

[Jazzz]

That wasn't mindless abuse. It was mindful abuse. Actually, it wasn't abuse at all. You've just tied money to nothing. There's literally nothing in your fantasy.

The whole thing is indeed the most extraordinary illusion.

Do you want to talk about the invention of money? Ok, shall we do that?

go ahead

 

[butchersapron]

The whole thing is indeed the most extraordinary illusion.

go ahead

That you were unable to tie it value in any way whatsoever. And you were unable to do so because you don't appreciate that value is tied to production. To something concrete. This whole thread is a fairy story.

Ok, tell me how money was invented. You have a theory. let's hear it.
You must have a start point right?

 

[Jazzz]

That you were unable to tie it value in any way whatsoever. And you were unable to do so because you don't appreciate that value is tied to production. To something concrete. This whole thread is a fairy story.

Ok, tell me how money was invented. You have a theory. let's hear it.
You must have a start point right?

I think you would fully realise if you were alive in Germany 1923, or China 1948, or Poland 1989, that money may not be tied to anything. It's you who wishes to talk about the invention of money.

 

[butchersapron]

I think if you were alive today you should realise that it's tied directly to production of value. But you don't because you're donkey crackers. You don't tie value to money yet you criticise banks for not tying money to value. The examples you give are of value forcing itself on money.

 

[love detective]

jazz and lbj,
in a tree,
k.i.s.s,
i.n.g,
first came money,
in their analysis,
which then ensured their total paralysis

 

[Random]

I didn't want to fry everyone's brain too much...

Jazz - the holder of dangerous truths. Wielding the flaming sword of knowledge, but beware- it burns all the way to the pommel.

 

[Jazzz]

jazz and lbj,
in a tree,
k.i.s.s,
i.n.g,
first came money,
in their analysis,
which then ensured their total paralysis

A curious post because it seems to be you who was left unable to reply.

 

[love detective]

your right, i was left unable to reply, but not for the reasons you think

 

[Jazzz]

your right, i was left unable to reply, but not for the reasons you think

seriously I would advise you to just forget all the rubbish about economics that is in your brain, start again with this video

 

[Random]

seriously I would advise you to just forget all the rubbish about economics that is in your brain, start again with this video

Jazzz! Holder of the truth! Patiently explaining powerful knowledge to the sheeple.

 

[love detective]

seriously I would advise you to just forget all the rubbish about economics that is in your brain, start again with this video

at least you make me laugh

 

[petee]

jazz and lbj,
in a tree,
k.i.s.s,
i.n.g,
first came money,
in their analysis,
which then ensured their total paralysis

crikey, l.d.

 

[Will2403]

can someone please summarize all this money as debt, fractional reserve, central banking jazz for me in simple sentences. except for jazz and lbj and dwyer.

someone who's not insane.

it sort of seems like sense, but all you wise sages think it's not. so what's right and what's wrong.

TIA!

 

[Random]

Will, I'm not as knowledgabe about money and value as LD, but I'd say one important flaw in this idea of 'banks creating money' is that money is only a reflection of really existing value. It can be a bad, distorted reflection, it is, in practice, often created by private banks, but the function of money is basically to allow value to be easily traded by capital owners.

To say that it's all a trick set up by the banks gives them too much credit (lol), when they're really only one of the branches that just provides a serviceamong others, to help capital keep rolling on. Saying that banks are controlling this also seems to leads us easily into traditional banking conspiracy theories, which overlap with antisemitic anti-banking conspiracies.

 

[love detective]

lbj and dwyer are by no stretch of the imagination insane

 

[deke t lefel]

I didn't want to fry everyone's brain too much... but this is in fact precisely what is happening. I have been saying the banks create it out of thin air - but in fact this is not quite true. In fact, we create it out of thin air by signing a loan agreement which is.... a 'promise to pay' (promissory note!). That is what the cash is! (look at the ten pound note in your pocket and the promise on it). The banks/loan companies then take our created cash, then change it up for us into a credit that we can use.

"What they [banks] do when they make loans is to accept promissory notes in exchange for credits to the borrowers' transaction accounts. Loans (assets) and deposits (liabilities) both rise by [the amount of the "loan"]."
Modern Money Mechanics, Federal Reserve Bank of Chicago

The loan agreement is a swap! There is no loan.

money is derived from work and value, the three now go round and round in a spiral

 

[Falcon]

Butchersapron is correct.

The locus of "value" is in the matter/energy system. This is a physical system.

The locus of "money" is in the financial system. This is an abstract system.

Being different systems, and different categories of system, they are governed by different rules. The matter/energy system is constrained by physical reality. Specifically, it cannot expand indefinitely. The financial system is constrained only by rules as abstract as the system. Specifically, it is free to expand indefinitely.

I have two pigs. They represent "value". My pigs can die. Although my two pigs can multiply, they can only do so within the limits imposed by the conversion of the flow of sunlight on the forest floor into truffles. When my supply of pigs exceeds my supply of truffles, my supply of pigs cannot increase.

I owe you two pigs. Your claim of "minus two pigs" - the impact of your claim on my inventory of pigs - is "money".

Your claim of "minus 2 pigs" cannot die.

"Minus two pigs" has an abstract meaning i.e. as money. It has no physical meaning i.e. as value - if I have only 1 pig, I cannot fulfil my promise by owning "minus 1 pig".

Your "money" of "minus 2 pigs" can (and, because of usury, does) become "minus four pigs", "minus eight pigs", "minus sixteen pigs" through the abstract process of compound interest. There is no upper bound.

My source of value can only relate to pigs which currently exist. Your supply of money can relate to pigs which do not yet exist, or cannot ever exist with this supply of truffles.

I could figure out how to feed my pigs on, e.g. oil and, providing more calories than truffles, my supply of pigs might expand very much faster than previously. On that basis, I might agree to owe you "minus 20 pigs" next year, corresponding to when you hoped to retire, in return for you desisting in that tiresome practice of withdrawing your labour all the time in protest at having fewer pigs than me.

The bankers, observing that the supply of pigs has been increasing recently, might offer to print "minus 2 pig" vouchers for the government - for a modest fee of "minus 2 pig" vouchers, of course - to help the government with an increase in demand of "minus 2 pig" vouchers required by pensioners salivating at the prospect of all that bacon - to be repaid by those future pigs that will surely be born now we've cracked the business of perpetual pig food. The government might decide that would also be a jolly good way to pay for the "minus 2 pig" vouchers demanded by the road builders, too, and order some more. This would Please the bankers.

The sum of all "money" therefore does not correspond to the sum of all "value", even in a world of zero interest. "Money" in interest systems expands in a way that has no correspondence with physical expansion. "Money" does not die in the way that physical value does. "Money" may be issued in the expectation of future pigs which, in reality, never materialise.

With all these mechanisms for producing more "minus pig" vouchers than there are pigs, any correspondence between abstract "minus pig" vouchers and the number of actual pigs eventually and inevitably breaks down, and the vouchers become more valuable as toilet paper.

It is the divergence between the physically constrained "value" system and the unconstrained "money" system which is the root of the instability in the global financial system.

There is a brief period of time when the matter/energy system *is* capable of sustaining a few octaves of compound growth. During this period, it appears that it is the *financial* system which is driving the *matter/energy* system (especially amongst those infected by the hubris and mythology of neoclassical economics, man's triumph over nature mediated by technology, etc.). This illusion is so strong that the matter/energy system disappears completely. Thus analysis reduces to the behaviour of the abstract system e.g. the impact of "interest rates" (an abstract property of the financial system) on "inflation" (an abstract property of the financial system). Cures are devised having the same relationship to the matter/energy system as sticking plasters have to cancer of the bowel.

P.S. Schumpeter attempted to write a book on money. Schumpeter famously declared at the end of the attempt that he never managed to understand money. Schumpeter, being a neoclassical economist, formally denied the interrelationship between money and matter/energy. It is not possible to form an understanding of money without an understanding of the matter/energy system from which it derives.

P.P.S. Credit creation/quantitative easing/etc. - printing "minus pig" vouchers - stands in approximate relation to wealth creation as masturbation does to sexual congress - creating an evanescent sensation of pleasure, with nothing of lasting substance. Many are unaware that this is the source of the frequent confusion between the terms "banker" and "wanker".