WHY DO WE DEVALUE OUR CURRENCY?
Edgar Svendsen
me that ever since the government banned private currencies it has pursued
monetary policies designed to make the money of its citizens less valuable.
And it has been very successful! A 2002 dollar is worth only a small
fraction of a 1802 dollar. Why does the government do this? How does the
government benefit when it devalues its own money? Is there any benefit to
the citizens that compensates for the loss of value in their savings, and
the loss of purchasing power?
Ed
Robert Cohen
>From: "Edgar Svendsen" solo...@earthlink.net
>Date: 7/4/02 8:32 AM Eastern Daylight Time
>Message-id: <ufXU8.584$x6....@newsread1.prod.itd.earthlink.net>
IIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIInflation of the
money supply--when done ever so slowly & slightly--is not a bad thing in the
real world as it exists.
Private money such as the bartering currencies, ITEK and BXI, do exist--look
'em up under "barter."
Private, mostly uninsured banks went bust during the Depression, and my Dad
then in his teens/early 20's lost his life savings of $300.
My Republican Grandfather became a New Deal Democrat.
The Federal Reserve perhaps too precipitously tinkered with the stock market
borrowing margin rate; but also had stupidly tightened the money supply--OOOPS.
The Federal Government and the Fed Reserve must continually deal with complex
dynamical happenings and changing demands having to do with trade balances,
military functioning, and the myriad of social welfare programs.
The government's precious responsibility is to facilitate real growth in the
economy.
In both fiscal and monetary tinkering, there is an advisable goal of
productivity enhancement, while some temporary inflation or de-flation is a
consequence of real world slop-over brewing.
Doctors Milton Monetarist and J. Maynard Fiscal may not exactly put it this
way, but I just have.
Economics is a f'ing dismal art.
The Chicago monetarists have successfully prevailed during the past couple of
decades, until Greenspan's irrational exhuberance became Greenspan's scared
sh_tless.
The Greenbackers were a populistic political party in the late 19th century
which advocated paper currency rather than gold and silver 1 to 1 backing the
currency.
De-flation to extreme is not such a good thing. For instance: Do you want the
value of your house to diminish rather than increase?
The Depression was too de-flationary.
The Vietnam War was too in-flationary.
Lionel Van Leeuw
I will try to answer this in a rational and apolitical way before
someone who has a political and ideological problem with the system does.
First a vocabulary question: when the value of a currency is fixed to
another currency, such as gold, and that value is officially lowered,
the currency is *devalued*. When the value of the currency is not
officially fixed and goes down, the currency *depreciates*.
As the value of the currency has never been fixed to general prices, the
question is: "why do we depreciate our currency?"
1. Why does the government do this?
* gold standard period (1791-1913 in the US): When the value of the
currency was linked to gold, people argued during recessions that the
cause of the recession was that money was worth too much (1) or that
interest rates were too high (2) and that debts could thus not be easily
repaid, causing bankruptcies and a lack of financing for people needing
money to invest. (1) was an appeal to devalue the currency. (2) was an
appeal to abondon the gold standard and manage interest rates with a
central bank so that interest rates could no longer "become too high".
* fixed exchange rates central banking (1913-1973 in the US): sometimes
it was argued that the central bank had been wrong in its currency
management and that devaluation was needed to resolve the problem. That
was especially the case during the Great Depression when devaluation
(effective in 1934) was thought to be necessary to combat deflation.
Furthermore Keynes claimed that a burst of inflation lowered real wages
and could bring unemployment down. That was interpreted as to claim that
constant inflation could do the same. Also because central banks were
afraid of the Great Depression they preferred to maintain a bit of
inflation to avoid deflation afterwards.
* floating exchange rates period (1973-now): central banks were not used
to manage floating currencies without any reference to gold when they
came into being in 1973. They were still afraid of creating deflation
and did not understand that a floating currency needed a more agressive
policy, eg. with interest rates. Inflation spun out of control until
central banks adapted their policy in the 80s. Since then they target
very low inflation (under 3%). Why? Again because they are afraid of
deflation, and because some economists claim that low inflation is
better for unemployment than 0 inflation, because people do not notice
it, ask lower wages in effect or that it allows industries in
difficulties to cut wages without doing so officially. Also inflation
tends to be exaggerated because product quality improves all the time.
2. How does the government benefit when its depreciates its currency?
How do governments put currency (banknotes, coins and bank reserves, NOT
bank accounts) into circulation? They simply buy something and pay for
it with currency. The government gets something real, the public gets
paper. When one gives something to someone and expects to be repaid
later, one does a loan. Here the public does an interest free loan to
the government because of course there is no interest on banknotes. If
there is inflation, the public will need new currency to compensate for
the loss of value of the outstanding one and the government will get
more free loans. The revenue the government gets by issuing currency is
called seigniorage. The higher the inflation rate, the higher the
seigniorage. However, except in extreme cases of inflation, seigniorage
is always quite small compared to other taxes.
Also politically the government can state inflation is necessary to
fight unemployment, as written higher.
3. Are the citizens compensated for inflation?
It depends. When they hold government currency, no of course.
When they hold other financial assets, they are compensated for
"expected" inflation. The interest someone pays on a loan is divided
into an implicit real interest rate, that compensates the lender for not
spending money, and an "inflation premium" that compensates the lender
for the loss of purchasing power of the principal when the loan is
repaid. For example if the real interest rate is 1.5% and the expected
inflation during the loan 2% per year, the nominal interest rate will be
3.5%. If the loan has a 1-year maturity, the lender needs to get 102% of
what he lended to be able to purchase as much with it in a year time
than now. So in the end 2% of the 3.5% interest rate is imaginary. The
real income is 1.5%, ie the "real" interes rate.
When someone has a bank account, the amount in it is money lent to the
bank that in turn lends it to a borrower. Thus when one does have a bank
account one does indirectly lend money and gets the interest rate that
the borrowers pay minus the bank service price paid through an interest
rate margin.
When inflation is unexpected, the inflation premium is insufficient; the
lender is disadvantaged while the borrower is favoured. In a
hyperinflation, all previous debts and savings are in effect cancelled.
To avoid that, especially in countries with bad currencies, loans are
sometimes indexed to a price index, so that the principal to repay and
the interest rate stay constant in real terms. For example, the US
government does offer indexed bonds. While classic 10-year bonds offer
rates around 5%, indexed 10-year bonds offer rates around 3%, meaning
that the buyers of such bonds expect inflation to average 2% in the next
ten years.
--
Lionel Van Leeuw
Lantern
>Why does the government do this?>
Well, Edgar you asked the question. You got a couple of pretty learned answers.
Do you still want to know more about economics? Give up? Sound ok to you?
Lantern - Trying to shed light on things, but it is awful dark out there.
Visit my web page about productivity at
http://hometown.aol.com/gchand4059/myhomepage/chatprofile.html
Robert Vienneau
Svendsen" <solo...@earthlink.net> wrote:
I think most use "devaluation" to refer to a change in foreign exchange
rates. For example, suppose a dollar is worth, say, two euros. Suppose
that the value of a dollar changes to be worth one euro. Then the dollar
has been devalued with respect to euros. Why the U.S. government would
want this to happen sometimes I could go on about. But that's not really
your question.
I'm not sure that your question is clear on the nature of money, either.
There are two ways of thinking about money that reflect the historical
evolution of financial institutions.
One way is to think of money as a commodity, like gold or cigarettes in
POW camps, that became used as a standard of value. Suppose that Anne
wants to buy an orange from Bob, Bob wants to buy an apple from Chuck,
and Chuck wants to buy a pear from Anne. They cannot do this by
pairwise barter because there is no "double coincidence of wants".
If everybody knows that everybody will accept some commodity, say,
a cow of some standard quality, then A can pay B, B can pay C, and
C can pay A. Nobody wants to eat beef, but its use makes everybody
better off.
Of course, it is inconvenient to lug cows around. So why not use pieces
of paper that certify ownership of the monetary commodity somewhere?
I think tobacco was once used for money in Virginia. You can imagine
warehouses issuing certificates when a farmer deposits tocabbo there.
These certificates can circulate as money. People can show up at the
warehouse to obtain tobacco who have never deposited tobacco there.
They merely need a certificate which they have received for selling
something to somebody who has.
It didn't take banks long to notice not everybody shows up at the
same time. More certificates can be in circulation than gold is
stored at the bank. The bank need merely issue lines of credit.
In the limit, the commodity is not needed at all. This leads to the
second way of thinking of money, as the second-hand circulation of
debts. A can pay B an IOU. C can accept that IOU on A from B in
payment for an apple. And then C can pay A the same IOU on A,
thereby cancelling it out. Banks, under this idea, become
clearinghouses for cancelling debts. In a closed system, any
quantity of money can be created and circulated.
You should notice that even though private currencies are not
widely used in the United State - caveat: LETS in Ithaca, NY, for
example - sophisticated financial institutions are always
evolving new markets for trading in debt instruments. Mortages
can be bought and sold. Debt streams of various maturities
and risks can be traded - that's what derivatives are. Some debt
instrument becomes more like money the "thicker" the market,
the more its liquidity is increased.
How does a government benefit from inflation of its currency?
Let's go back to the time when gold was money. It is inconvient
to constantly being arguing about the weight and purity of gold.
So if the king would certify the weight of a piece of gold in
the form of a coin, then that coin would become used as money.
So a given number of coins would represent certain bundles of
commodities, given prices. Suppose coins are "clipped" by the
mint. The coins certify they contain a given amount of gold,
but they contain less. Then the government can use a given quantity
of gold to buy a greater quantity of commodities. Inflation
is a kind of tax.
In a sense, inflation remains a tax even though, in the United
States, no commodity is used any more as money. It's important
to realize, though, that the government need not be the source
of inflation. Suppose the workers succeed in raising their money
wages, firms have some market power, and they consequently
pass at least part of those raises along in the form of higher
prices. This is cost-push inflation, and it reflects a lack
of consensus on income distribution and in institutions by which
wages are determined.
The consequences of inflation are not bad for everybody. If you
have a debt, like a mortage, you anticipate making a certain
stream of payments in the future. You have some idea of what
sorts of bundles of goods you might have otherwise purchased
with those payments. Unanticipated inflation reduces how much
those payments represent to you in terms of such bundles of goods.
So inflation helps debtors, but hurts creditors.
Since creditors are generally richer than debtors, inflation is
generally for those badly off. Those on fixed-incomes are an
exception. There's also important differences among the well-off.
Firms buy their inputs before they sell what they can get
produced. So they operate on lines of credits and debt. Thus,
inflation is in their interest. It's also the case that in
an inflationary period, financial speculators generally prefer
stocks to bonds, the reverse in a deflationary period.
--
Try http://csf.colorado.edu/pkt/pktauthors/Vienneau.Robert/Bukharin.html
To solve Linear Programs: .../LPSolver.html
r c A game: .../Keynes.html
v s a Whether strength of body or of mind, or wisdom, or
i m p virtue, are found in proportion to the power or wealth
e a e of a man is a question fit perhaps to be discussed by
n e . slaves in the hearing of their masters, but highly
@ r c m unbecoming to reasonable and free men in search of
d o the truth. -- Rousseau
Edgar Svendsen
food for thought. Your answers were to the point and mentioned many factors
that I, in my naivety, had not even considered. I guess I better go read
some basic economics!
Ed
"Edgar Svendsen" <solo...@earthlink.net> wrote in message
news:ufXU8.584$x6....@newsread1.prod.itd.earthlink.net...
Micron
"Lionel Van Leeuw" <Lionel.V...@ulb.ac.be> wrote in message
news:3D246138...@ulb.ac.be...
> Edgar Svendsen wrote:
> > This is a naive question from someone untrained in economics. It
> > seems to me that ever since the government banned private currencies
> > it has pursued monetary policies designed to make the money of its
> > citizens less valuable. And it has been very successful! A 2002
> > dollar is worth only a small fraction of a 1802 dollar. Why does the
> > government do this? How does the government benefit when it devalues
> > its own money? Is there any benefit to the citizens that compensates
> > for the loss of value in their savings, and the loss of purchasing
> > power?
>
> I will try to answer this in a rational and apolitical way before
> someone who has a political and ideological problem with the system does.
Anyone in favour of the current system isn't being political?
Even mainstream science has some politics in it, and that's
about the one thing I've never heard economics called.
"The problem is, of course, that not only is economics bankrupt
but it has always been nothing more than politics in disguise ...
economics is a form of brain damage." -- Hazel Henderson
BTW, by your estimation, this is not a political statement %).
> When someone has a bank account, the amount in it is money lent to the
> bank that in turn lends it to a borrower.
Here is an illustration of mainstream politics. Your statement
here used to be the official, 'apolitical' and 'rational' economic
stance. Now this simple and obvious concept is accurately
termed as false, by both mainstream and dissident alike.
Banks do not lend the money of the average depositor, but
create new money for the average borrower. This is the
primary cause of inflation, as that money is created as debt,
at compound interest.
A benefit of interest is that it functions as a form of demurrage,
that helps keep money in circulation. It also ameliorates the growing
debt by making it a smaller percentage of the money in circulation.
It is also generally held to transfer money from poor to rich, with
the third world being the most obvious example. Ownership of
assets is the primary factor here.
"As a result of fractional reserve banking over 90% of our money
supply is loaned into existence by commercial banks and thus must
grow by enough to at least pay the interest on the loan by which
it was created. This gives a basic growth bias to the economy.
Fractional reserve banking also transfer to private hands the
state's traditional right to issue money, and does so in a way
that increases the cyclical instability of the economy. The
corrective call for 100% reserve requirements has been made
periodically not only by so-called 'monetary cranks'(Frederick
Soddy), but also by economists of impeccable reputation such as
Frank Knight and Irving Fisher." Prof. Herman Daly, co-author
of For the Common Good, former economist World Bank.
Dan Parker
Michael L. Coburn
This question is getting a lot of play and it danged well should.
I don't know enough about the EU and its bank to comment, but
the value of the US dollar is not really controlled by the
US Federal Reserve as many might think. A nation's currency
will include its bonds and debt instruments as well as its
circulating money. The Federal Reserve can only increase the
amount of money in this broadened sense of money, and thus,
the Federal Reserve can only decrease the value of money.
Attempts by the Fed to control inflation merely destroy the
economy for the sake of protecting bond holders. The net
value of the nations total supply of money will then fall
(inflation made worse) because the productive capacity of
the nation goes to hell in a hand basket. -- re Volcker.
Thus, the central bank plays a pivotal role in the screwing
of the productive members of the economy to aid the rentiers.
Only fiscal policy can increase the value of the nation's
money. Only by taxation or productivity can increase the
value of a nation's total money. The slide of the
US dollar while the Republicans are singing the increased
productivity song might tell us why statistics can be
worse than "damned lies". Imported Mexicans that clean
bathrooms in rich people's houses don't add to the nation's
productivity because the rich people aren't producing
anything anyway.
Nations do not purposefully reduce the value of their
money but at a slow rate that will encourage the circulation
of that money as opposed to the hoarding of it. When money
is hoarded then any sense of deterioration of value in the
money will cause such hoards to be traded for some other
token of value. And as that happens the value of the subject
money will fall further. The classic phrase of
"intervention" by the central bank comes to mind and I wonder
how much gold is in Fort Knox. If the Fed wants to save the
US dollar it will need to sell that gold. You can bet your
sweet ass that George "tax cut for the rich" Bush isn't
going to raise the value of the dollar. Give a rich guy a
tax break and he will have more money. End of story.
--
Mike Coburn
"It's the tax system, stupid. No, it's the ludicrous
banking system. Well, actually, its both. With proper
consideration we find these injustices are made
possible by the lack of representation of The People
in their government". -- http://GreaterVoice.org
Lionel Van Leeuw
> "Lionel Van Leeuw" <Lionel.V...@ulb.ac.be> wrote in message
> news:3D246138...@ulb.ac.be...
>> someone who has a political and ideological problem with the system
>> does.
>
>
> Anyone in favour of the current system isn't being political? Even
> mainstream science has some politics in it, and that's about the one
> thing I've never heard economics called.
I did not support the system, I did describe the system. There is no
judgement of anything in my post. In that way it is apolitical.
>> When someone has a bank account, the amount in it is money lent to
>> the bank that in turn lends it to a borrower.
>
>
> Here is an illustration of mainstream politics. Your statement here
> used to be the official, 'apolitical' and 'rational' economic stance.
> Now this simple and obvious concept is accurately termed as false, by
> both mainstream and dissident alike. Banks do not lend the money of
> the average depositor, but create new money for the average borrower.
> This is the primary cause of inflation, as that money is created as
> debt, at compound interest.
Thank you very much but I know how banks create money thanks to their
lending. The fact that banks create the money for their borrowers should
not obfuscate the fact that when you have money in a bank account you
indirectly lend it even if it is the bank that took the initial decision
to create the money and lend it and not the saver. That is why a bank is
called an intermediary. It was not necessary to describe the lending
process in full because it had no importance in the context.
--
Lionel Van Leeuw
Matthew Gardiner
"Edgar Svendsen" <solo...@earthlink.net> wrote in message
news:ufXU8.584$x6....@newsread1.prod.itd.earthlink.net...
Obviously you're too stupid to realise that devaluing the dollar results in
imports being higher, thus, giving extra protection to local industry.
In New Zealand, when the NZ$ fell 1cent against the American, Fonterra earned at
extra $100million.
Matthew Gardiner
Lionel Van Leeuw
> "Edgar Svendsen" <solo...@earthlink.net> wrote in message
> news:ufXU8.584$x6....@newsread1.prod.itd.earthlink.net...
>
>> This is a naive question from someone untrained in economics. It
>> seems to me that ever since the government banned private
>> currencies it has pursued monetary policies designed to make the
>> money of its citizens less valuable. And it has been very
>> successful! A 2002 dollar is worth only a small fraction of a 1802
>> dollar. Why does the government do this? How does the government
>> benefit when it devalues its own money? Is there any benefit to
>> the citizens that compensates for the loss of value in their
>> savings, and the loss of purchasing power?
>
>
> Obviously you're too stupid to realise that devaluing the dollar
> results in imports being higher, thus, giving extra protection to
> local industry.
"Obviously you're too stupid to realise that" there is a difference
between the internal and external value of a currency. If the external
value of the currency falls ultimately its internal value does too and
the net effect is nil. Only sudden devaluations can bring protection to
the domestic industry. If the devaluation is continuous it does not have
any effect because it is predictable.
> In New Zealand, when the NZ$ fell 1cent against the American,
> Fonterra earned at extra $100million.
In New Zealand the Reserve Bank has an inflation target and lets the
currency float. It fluctuates; sometimes favours local industry
sometimes harms it. In the long run it follows the domestic depreciation
engineered by the Reserve Bank at the rhythm of 1.5% a year.
--
Lionel Van Leeuw
Micron
> Micron wrote:
> > "Lionel Van Leeuw" <Lionel.V...@ulb.ac.be> wrote in message
> > news:3D246138...@ulb.ac.be...
> >> I will try to answer this in a rational and apolitical way before
> >> someone who has a political and ideological problem with the system
> >> does.
> >
> >
> > Anyone in favour of the current system isn't being political? Even
> > mainstream science has some politics in it, and that's about the one
> > thing I've never heard economics called.
>
> I did not support the system, I did describe the system. There is no
> judgement of anything in my post. In that way it is apolitical.
You described the system according to what our politics of
the day says it is. A Christian could say Jesus is the only son
of God, and that they are not supporting Christianity, just
describing it the way it is.
> >> When someone has a bank account, the amount in it is money lent to
> >> the bank that in turn lends it to a borrower.
Or a better example would be the previous Christian prohibition
against interest charges, since this belief has changed, just as has
the mainstream political stance of banks lending money of their
depositors, which you still thought was the system.
> > Here is an illustration of mainstream politics. Your statement here
> > used to be the official, 'apolitical' and 'rational' economic stance.
> > Now this simple and obvious concept is accurately termed as false, by
> > both mainstream and dissident alike. Banks do not lend the money of
> > the average depositor, but create new money for the average borrower.
> > This is the primary cause of inflation, as that money is created as
> > debt, at compound interest.
>
> Thank you very much but I know how banks create money thanks to their
> lending. The fact that banks create the money for their borrowers should
> not obfuscate the fact that when you have money in a bank account you
> indirectly lend it even if it is the bank that took the initial decision
> to create the money and lend it and not the saver. That is why a bank is
> called an intermediary.
I function as an intermediary if I work for a counterfeiter
passing counterfeit currency in a bar %). Go look up
the definition. Although the term is meaningless, there
has started to be hedging about this term by *some*, with
Merrill Lynch referring to Banks and Intermediaries,
Hummel referring to banks as 'not ordinary intermediaries'
(whatever that means) etc. What a tangled web.
>It was not necessary to describe the lending
> process in full because it had no importance in the context.
You haven't described any of it with the least bit
of accuracy.
Why not just admit your 'lending' statement was in error, which
it obviously was? You could have made the argument that the
depositor provides the 'capital adequacy' that enables a bank
to create the $100. In this case I would have pointed out that
the depositors money is listed as a liability by the bank, as well
as an asset.
This is Australian, but it captures the essence of Western
banking.
http://dkd.net/davekidd/politics/moneyalt.html
Dan Parker
"The study of money, above all other fields
in economics, is one in which complexity is used
to disguise truth or to evade truth, not to reveal
it."
Money: Whence it came, where it went - 1975, p15
John Kenneth Galbraith
The process by which banks create money is
so simple that the mind is repelled. Money:
Whence it came, where it went - 1975, p29
> --
> Lionel Van Leeuw
>
Lionel Van Leeuw
>>>> When someone has a bank account, the amount in it is money lent
>>>> to the bank that in turn lends it to a borrower.
>>> Here is an illustration of mainstream politics. Your statement
>>> here used to be the official, 'apolitical' and 'rational'
>>> economic stance. Now this simple and obvious concept is
>>> accurately termed as false, by both mainstream and dissident
>>> alike. Banks do not lend the money of the average depositor, but
>>> create new money for the average borrower. This is the primary
>>> cause of inflation, as that money is created as debt, at compound
>>> interest.
>>
>> Thank you very much but I know how banks create money thanks to
>> their lending. The fact that banks create the money for their
>> borrowers should not obfuscate the fact that when you have money in
>> a bank account you indirectly lend it even if it is the bank that
>> took the initial decision to create the money and lend it and not
>> the saver. That is why a bank is called an intermediary.
>
>
> I function as an intermediary if I work for a counterfeiter passing
> counterfeit currency in a bar %). Go look up the definition.
> Although the term is meaningless, there has started to be hedging
> about this term by *some*, with Merrill Lynch referring to Banks and
> Intermediaries, Hummel referring to banks as 'not ordinary
> intermediaries' (whatever that means) etc. What a tangled web.
in暗er搶e搞i戢r暄
adj.
1. Existing or occurring between; intermediate.
2. Acting as a mediator or an agent between persons or things.
There are savers who want to put their money in a bank. They are
borrowers who want money from a bank. The banks allows them to match
their desires. What is a bank then if it is not an intermediary?
> Why not just admit your 'lending' statement was in error, which it
> obviously was? You could have made the argument that the depositor
> provides the 'capital adequacy' that enables a bank to create the
> $100. In this case I would have pointed out that the depositors
> money is listed as a liability by the bank, as well as an asset.
When you have money in the bank, you have a financial asset. The bank
has a corresponding liability. The bank has to repay you a sum of
currency at a known time and a fixed amount of interest on it. If this
does not describe a loan you make to your bank, what does it describe?
If you have borrowed money from a bank, you have a financial liability.
The bank has a corresponding asset. You have to repay a sum of currency
at a known time and a fixed amount of interest on it. If this does not
describe a loan the bank has made to tou, what does it describe?
If as the owner of a deposit you lend to the bank and the bank lends the
same amount to a borrower, why is this no indirect lending?
Again to repeat I know the bank creates the deposit in the first place.
But this was not relevant in the context.
The money is not is listed as a liability and an asset. It is only
listed as a liability. The assets are the loans. Deposits and loans are
distinct. If the loan goes bad the corresponding deposit does not go
bad. The bank only has to take a loss. When you purchase something I do
not think you give the seller paper that states he owes something to
somebody. I cannot possibly imagine how you want to create 'capital
adequacy' with a liability.
--
Lionel Van Leeuw
Lionel Van Leeuw
> The money is not is listed as a liability and an asset. It is only
> listed as a liability.
The first sentence should read: "The money is not listed as a liability
and an asset."
--
Lionel Van Leeuw
Lantern
>Thank you to those who responded! I got more then I expected and now have
>food for thought. Your answers were to the point and mentioned many factors
>that I, in my naivety, had not even considered. I guess I better go read
>some basic economics!>
Have fun trying to learn economics. As you read consider the notion that the
answer to your question: "Why do we devalue (or depreciate) our currency?" - A
direct answer might be: Because that is the way our present system works. The
present system, of course is the Federal Reserve System. The FED was set-up in
1913. Maybe we could do better.
Micron
Yes this proves my point about both the counterfeit passer
being an intermediary and about how the term is meaningless
in the context you used it in; as though the bank was 'indirectly'
loaning the depositors money to the borrower.
>
> There are savers who want to put their money in a bank. They are
> borrowers who want money from a bank. The banks allows them to match
> their desires. What is a bank then if it is not an intermediary?
Read again above. I said no such thing as the bank
was not an intermediary. I said the term *was meaningless* in
the context used, which was that the bank lent the money of the
depositors, 'indirectly' or directly (as you originally stated). I
illustrated this, in an apt manner, by pointing out a counterfeit
passer is *also* an intermediary. Then I stated even though
the term was meaningless in this context, that didn't stop some
monetary apologists from trying to move banks away from this
description. That is: it made no sense, but then that's like most
of what monetary apologists write. And no, banks do not match
the desires of saver with that of the borrower. If I am credit worthy
the bank will create money to lend me, even if you are on your
way to deposit some or all of that amount and instead decide
to get a hooker %).
>
> > Why not just admit your 'lending' statement was in error, which it
> > obviously was? You could have made the argument that the depositor
> > provides the 'capital adequacy' that enables a bank to create the
> > $100. In this case I would have pointed out that the depositors
> > money is listed as a liability by the bank, as well as an asset.
>
> When you have money in the bank, you have a financial asset. The bank
> has a corresponding liability. The bank has to repay you a sum of
> currency at a known time and a fixed amount of interest on it. If this
> does not describe a loan you make to your bank, what does it describe?
So we've gone from the banks loaning the money of their depositors,
to banks loaning the money of their depositors 'indirectly' to the
depositors loan the banks money; in defense of the same point?
Over and out. I never thought I'd see the day I missed Ed the
Fed and his monetary explanations.
Dan Parker
Micron
That clears it up. Thanks
Dan Parker
> --
> Lionel Van Leeuw
>
Lionel Van Leeuw
>> >>>> When someone has a bank account, the amount in it is money lent
>> >>>> to the bank that in turn lends it to a borrower.
>>
>> >>> Here is an illustration of mainstream politics. Your statement
>> >>> here used to be the official, 'apolitical' and 'rational'
>> >>> economic stance. Now this simple and obvious concept is
>> >>> accurately termed as false, by both mainstream and dissident
>> >>> alike. Banks do not lend the money of the average depositor, but
>> >>> create new money for the average borrower. This is the primary
>> >>> cause of inflation, as that money is created as debt, at compound
>> >>> interest.
>> >>
>> >> Thank you very much but I know how banks create money thanks to
>> >> their lending. The fact that banks create the money for their
>> >> borrowers should not obfuscate the fact that when you have money in
>> >> a bank account you indirectly lend it even if it is the bank that
>> >> took the initial decision to create the money and lend it and not
>> >> the saver. That is why a bank is called an intermediary.
> Yes this proves my point [...] about how the term is meaningless
> in the context you used it in; as though the bank was 'indirectly'
> loaning the depositors money to the borrower.
quote from me earlier:
> when you have money in
> a bank account you indirectly lend it even if it is the bank that
> took the initial decision to create the money and lend it and not
> the saver.
Where did I write *the bank* was lending 'indirectly'? The bank borrows
directly from its depositors and lends directly to its borrowers, the
latter preceding the former.
>>There are savers who want to put their money in a bank. They are
>>borrowers who want money from a bank. The banks allows them to match
>>their desires. What is a bank then if it is not an intermediary?
>
>
> And no, banks do not match
> the desires of saver with that of the borrower. If I am credit worthy
> the bank will create money to lend me, even if you are on your
> way to deposit some or all of that amount and instead decide
> to get a hooker %).
Banks do have to match the desires, at least in a broad meaning. The
banking system cannot afford to create less demand for its deposits than
the outstanding amount of its loans because it has to buy the banknotes
the deposit holders need if they withdraw their money. If it creates an
insufficient demand for bank deposits, it gets a bank run and is
basically heading for bankruptcy. So yes the desires have to match.
>> > Why not just admit your 'lending' statement was in error, which it
>> > obviously was? You could have made the argument that the depositor
>> > provides the 'capital adequacy' that enables a bank to create the
>> > $100. In this case I would have pointed out that the depositors
>> > money is listed as a liability by the bank, as well as an asset.
>>
>>When you have money in the bank, you have a financial asset. The bank
>>has a corresponding liability. The bank has to repay you a sum of
>>currency at a known time and a fixed amount of interest on it. If this
>>does not describe a loan you make to your bank, what does it describe?
>
>
> So we've gone from the banks loaning the money of their depositors,
> to banks loaning the money of their depositors 'indirectly' to the
> depositors loan the banks money; in defense of the same point?
See above for your "banks lend indirectly" imaginary quote.
I have not moved, I have always stated the following:
* 1. depositors lend money to their bank (you did not deny it)
* 2. the bank lends the same amount (note the reserves that are now
financial assets are also lent) to borrowers
* Conclusion: depositors indirectly lend to the bank borrowers.
Is that so illogical?
That (2) occurs before (1) is irrelevant because the bank has to
convince depositors to freely keep their deposits in the bank. So
depositors freely lend money to the bank.
--
Lionel Van Leeuw
Matthew Gardiner
Hash: SHA1
> > In New Zealand, when the NZ$ fell 1cent against the American,
> > Fonterra earned at extra $100million.
>
> In New Zealand the Reserve Bank has an inflation target and lets
> the currency float. It fluctuates; sometimes favours local industry
> sometimes harms it. In the long run it follows the domestic
> depreciation engineered by the Reserve Bank at the rhythm of 1.5% a
> year.
Living in Australia, I have seen the inflation rate jump up to 3%
without much issues. Compare that to New Zealand where the inflation,
after taking out abnormalities, is around 0.9%.
Matthew Gardiner
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Harvey Boldt
"Lantern" <gchan...@aol.com> wrote in message
news:20020705162231...@mb-bk.aol.com...
> Ed wrote:
>
> >Thank you to those who responded! I got more then I expected and now
have
> >food for thought. Your answers were to the point and mentioned many
factors
> >that I, in my naivety, had not even considered. I guess I better go read
> >some basic economics!>
>
nor economics because they are written for the sole purpose of
confusion..---To understand these subjects just take a pencil , a sheet of
paper and imagine you are the chairman of the federal reserve, or a bank
manager, and figure out all the ways you could distribute the money from the
printing press to the consumer then figure all the neat ways you could use
to recover that money and recirculate it.---------------------
William F Hummel
<Lionel.V...@ulb.ac.be> wrote:
>Where did I write *the bank* was lending 'indirectly'? The bank borrows
>directly from its depositors and lends directly to its borrowers, the
>latter preceding the former.
>
>Banks do have to match the desires, at least in a broad meaning. The
>banking system cannot afford to create less demand for its deposits than
>the outstanding amount of its loans because it has to buy the banknotes
>the deposit holders need if they withdraw their money. If it creates an
>insufficient demand for bank deposits, it gets a bank run and is
>basically heading for bankruptcy. So yes the desires have to match.
>
>
>See above for your "banks lend indirectly" imaginary quote.
>
>I have not moved, I have always stated the following:
>* 1. depositors lend money to their bank (you did not deny it)
>* 2. the bank lends the same amount (note the reserves that are now
>financial assets are also lent) to borrowers
>* Conclusion: depositors indirectly lend to the bank borrowers.
>
>Is that so illogical?
>That (2) occurs before (1) is irrelevant because the bank has to
>convince depositors to freely keep their deposits in the bank. So
>depositors freely lend money to the bank.
If I understand what is being said here, I would largely
disagree.
Direct lending means the transfer of funds from the ultimate
lender to the ultimate borrower. An example is a private party
purchasing the bonds issued by a firm. The bonds are usually
sold through an underwriter who resells at a markup, but the
contract is between the ultimate lender and the ultimate
borrower. A default by the borrower is at the expense of the
lender.
Indirect lending is lending by the ultimate lender to a financial
intermediary who pools the funds of many lenders and lends in
smaller amounts at a markup. There are two sets of contracts,
one between the ultimate lender and the intermediary and the
other between the intermediary and the ultimate borrower. The
ultimate borrower is normally unknown to the ultimate lender. In
case of a default by the ultimate borrower, the intermediary
takes the loss, not the ultimate lender.
Intermediaries can be divided into two categories, banks and
non-banks such as a finance companies, Banks are depositories
and thus not ordinary intermediaries. Their lending
automatically creates new deposits and does so without disturbing
existing deposits. Thus bank lending increases the money supply.
Non-banks are ordinary intermediaries and cannot accept deposits.
They simply transfer the ownership of existing funds from their
own bank account to the bank account of the borrower. Their
lending does not increase the money supply.
A bank does not lend the money of depositors. In fact it can
create its first deposit without yet having acquired any
depositors. It simply needs enough capital to satisfy the
capital ratio requirement. However banks do normally seek
deposits to avoid having to borrow the required reserves in the
money market or from the central bank. Large banks often lend
without having sufficient reserves, and seek the necessary funds
(reserves) after the fact. That can cause a shortage of bank
reserves in the aggregate and force the central bank to add
reserves itself in order to maintain control of the interbank
lending rate, i.e. to maintain control of the price of credit.
William F Hummel
Harvey Boldt
> Edgar wrote:
>
> Lantern ---Lantern---Listen up The productivity that you write about is
not the same as the "productivity" that economists refer to when they talk
about production. Their "productivity" concerns the amount of production
they can get from you for each dollar they have to pay you.
Micron
> Micron wrote:
>
>
> I have not moved, I have always stated the following.
> * 1. depositors lend money to their bank (you did not deny it)
I said the bank made an entry on the liability and asset
side of the ledger for desposits. If someone loans you
money, do you say he owes you, and you owe him
the same amount?
> * 2. the bank lends the same amount (note the reserves that are now
> financial assets are also lent) to borrowers.
Banks lend their reserves? Well they certainly did in Canada when
the BIS put the level at 0% (adding a few billion to the public debt).
I don't think the U.S. went for this, and kept some single digit level.
> * Conclusion: depositors indirectly lend to the bank borrowers.
Great, you've disproven Hummel. Good work.
> Is that so illogical?
Not at all, in the context of conventional economics.
> That (2) occurs before (1) is irrelevant because the bank has to
> convince depositors to freely keep their deposits in the bank. So
> depositors freely lend money to the bank.
Here is a site that trys to break through the flat earth
view of economics. The bottom line is this. Anything
that is physically possible, is financially possible. We
can solve poverty, hunger, environmental destruction
and most else, with the relative effort of the wink of
an eye, once this concept is realized.
http://www.lightparty.com/Economic/GreedScarcity.html
Micron
news:hvpciuoj7r9uh5i6e...@4ax.com...
This is incorrect. Some corporations have built
up sufficient reserves that they extend credit, or
money, in the same manner the banks do, for car
loans etc. Primary examples are GMAC and GE
Capital. Thus, you have Greenspan saying he
can't get a finger on the liquidity of the U.S. in
the Congressional Humphrey-Hawkins hearings
of Feb 17, 2000.
excerpt Greenspan
The difficulty is in defining what part of our liquidity structure
is truly money. We have had trouble ferreting out proxies for
that for a number of years. And the standard we employed
is whether it gives us a good forward indicator of the direction
of finance and the economy.
end except
Start excerpt accurate analysis
"The system is so silly that I really have difficulty knowing
how to describe it.......I have had considerable practice
digging for words but in this case, but I found nothing
seemed adequate. Ridiculous, inane, insane, grotesque,
absurd and other adjectives crossed my mind, but in each
case they fail to portray the enormity of the situation and the
outrage that fills my mind when I think how perverse the
system really is. Finally, one evening, as I was contemplating
the stars and the distant galaxies, the word infinite came
to mind. That was it. Our present monetary system is
an infinitely silly system."
Paul Hellyer, ex-deputy Prime Minister of Canada
in Funny Money, p. 44
Dan Parker
Dan Parker
Lionel Van Leeuw
> On Sat, 06 Jul 2002 02:07:18 +0200, Lionel Van Leeuw
> <Lionel.V...@ulb.ac.be> wrote:
>
>
>>Where did I write *the bank* was lending 'indirectly'? The bank borrows
>>directly from its depositors and lends directly to its borrowers, the
>>latter preceding the former.
>>
>>Banks do have to match the desires, at least in a broad meaning. The
>>banking system cannot afford to create less demand for its deposits than
>>the outstanding amount of its loans because it has to buy the banknotes
>>the deposit holders need if they withdraw their money. If it creates an
>>insufficient demand for bank deposits, it gets a bank run and is
>>basically heading for bankruptcy. So yes the desires have to match.
>>
>>
>>See above for your "banks lend indirectly" imaginary quote.
>>
>>I have not moved, I have always stated the following:
>>* 1. depositors lend money to their bank (you did not deny it)
>>* 2. the bank lends the same amount (note the reserves that are now
>>financial assets are also lent) to borrowers
>>* Conclusion: depositors indirectly lend to the bank borrowers.
>>
>>Is that so illogical?
>>That (2) occurs before (1) is irrelevant because the bank has to
>>convince depositors to freely keep their deposits in the bank. So
>>depositors freely lend money to the bank.
>
>
> If I understand what is being said here, I would largely
> disagree.
> Indirect lending is lending by the ultimate lender to a financial
> intermediary who pools the funds of many lenders and lends in
> smaller amounts at a markup. There are two sets of contracts,
> one between the ultimate lender and the intermediary and the
> other between the intermediary and the ultimate borrower. The
> ultimate borrower is normally unknown to the ultimate lender. In
> case of a default by the ultimate borrower, the intermediary
> takes the loss, not the ultimate lender.
If you read the previous posts in this thread, you will see that I
recognize the fact that deposits and loans are distinct and that bad
loans do not necessarily mean the cancellation of deposits because it is
the bank that takes the risk. Our disagreement is largely a vocabulary
issue. Ie, may we say that depositors indirectly lend money to bank
borrowers? Yes, because the balance sheet shows it is the case. No,
because the depositors do not take risks and the bank first lends
without the consent of the future depositors. Which argument prevails?
> A bank does not lend the money of depositors. In fact it can
> create its first deposit without yet having acquired any
> depositors. It simply needs enough capital to satisfy the
> capital ratio requirement. However banks do normally seek
> deposits to avoid having to borrow the required reserves in the
> money market or from the central bank. Large banks often lend
> without having sufficient reserves, and seek the necessary funds
> (reserves) after the fact. That can cause a shortage of bank
> reserves in the aggregate and force the central bank to add
> reserves itself in order to maintain control of the interbank
> lending rate, i.e. to maintain control of the price of credit.
Indeed. The point I raise is that the banking system must act for all
practical intents and purposes as if it lends the money of the
depositors. Depositors are free to withdraw their money. If they do and
the demand for deposits falls short of their supply, the banking system
exhausts its available assets needed to buy banknotes. Then it cannot
respect its convertibility pledge between deposits and base money. It
becomes illiquid and/or insolvent (cf. Argentina). Though the banking
system may initially lend without the consent of depositors, it must in
practice get this consent after the fact or it is in serious trouble.
--
Lionel Van Leeuw
Lionel Van Leeuw
>>I have not moved, I have always stated the following.
>>* 1. depositors lend money to their bank (you did not deny it)
>
>
> I said the bank made an entry on the liability and asset
> side of the ledger for desposits. If someone loans you
> money, do you say he owes you, and you owe him
> the same amount?
The deposits are ONLY on the liability side. The loans are on the asset
side. A depositor has an asset (for him) and the bank a liability. Thus
the bank owes the depositor currency. In other words, the depositor
lends to the bank.
>>* 2. the bank lends the same amount (note the reserves that are now
>>financial assets are also lent) to borrowers.
>
>
> Banks lend their reserves? Well they certainly did in Canada when
> the BIS put the level at 0% (adding a few billion to the public debt).
> I don't think the U.S. went for this, and kept some single digit level.
Reserves are now financial assets. The owner of a bond lends money to
the issuer (direct lending, so no vocabulary issue here). Banks own as
reserves bonds and reserve accounts. Both are loans, to the state or the
central bank. The only difference between reserves and the usual assets
of a bank, ie. classic loans, is that reserves are negotiable, liquid
and very secure assets. In fact the government bonds are the only assets
the central bank accepts with some commercial paper.
What has the Bank for International Settlements to do with the reserve
requirements in Canada? In the eurozone, the reserve requirement is not
0% but the ECB pays on reserves the same interest rate than the one at
which it lends them. So financially speaking, there is no difference
with a 0% reserve requirement system. In the US, the reserve requirement
is at 10% of a rather narrow deposit base. No interest is paid on
reserves so banks have had incentives to invent creative deposit
bookkeeping so that transaction deposits disappear overnight during
"sweeps" in non-transaction deposits not subject to the reserve
requirement. In the end the reserve requirement measured as a fraction
of M3 is 0.50% in the US and 2.4% in the eurozone.
The BIS has on the other hand something to do with the capital adequacy
requirements, which state how much of a bank assets must be "secure" to
protect the bank against losses. The ratio is the result of an
international agreement and stands at 8%. These assets are the real
reserves of a bank.
>>* Conclusion: depositors indirectly lend to the bank borrowers.
>
>
> Great, you've disproven Hummel. Good work.
I hope not because he is right. It is merely a vocabulary issue. May we
say depositors lend indirectly despite that the bank create their
deposits in the first place? I would say yes, and he would say no. No
big deal. It is only a perception issue about the end result of bank
lending and deposit taking.
--
Lionel Van Leeuw
Lionel Van Leeuw
>> > In New Zealand, when the NZ$ fell 1cent against the American,
>> > Fonterra earned at extra $100million.
>>
>>In New Zealand the Reserve Bank has an inflation target and lets
>>the currency float. It fluctuates; sometimes favours local industry
>>sometimes harms it. In the long run it follows the domestic
>>depreciation engineered by the Reserve Bank at the rhythm of 1.5% a
>>year.
>
>
> Living in Australia, I have seen the inflation rate jump up to 3%
> without much issues. Compare that to New Zealand where the inflation,
> after taking out abnormalities, is around 0.9%.
In the first quarter of 2002 it jumped to 2.6%.
In Australia the Reserve Bank has an inflation target of 2.5% and a
target range of 2% to 3%, a bit higher than in New Zealand where it is
1.5% and a range of 0% to 3%.
Both central banks are busy increasing interest rates to restrain
inflation, without much concern for the exchange rate, apart for the
effects that the exchange rate itself has on inflation.
--
Lionel Van Leeuw
Lionel Van Leeuw
> "William F Hummel" <wfhu...@attbi.com> wrote in message
>>Intermediaries can be divided into two categories, banks and
>>non-banks such as a finance companies, Banks are depositories
>>and thus not ordinary intermediaries. Their lending
>>automatically creates new deposits and does so without disturbing
>>existing deposits. Thus bank lending increases the money supply.
>>Non-banks are ordinary intermediaries and cannot accept deposits.
>>They simply transfer the ownership of existing funds from their
>>own bank account to the bank account of the borrower.
>
>
> This is incorrect. Some corporations have built
> up sufficient reserves that they extend credit, or
> money, in the same manner the banks do, for car
> loans etc. Primary examples are GMAC and GE
> Capital. Thus, you have Greenspan saying he
> can't get a finger on the liquidity of the U.S. in
> the Congressional Humphrey-Hawkins hearings
> of Feb 17, 2000.
But the Fed already as a mechanism to track all that with its money with
zero maturity (MZM) indicator. Of course since non-banks are not subject
to reporting requirements the 90 billion dollars of GE Capital short
term debts are not included.
These short term debts might really begin to look like money if some
money market fund buys them and offers checking facilities on them. But
in the end since the Fed targets inflation with interest rates using
indicators that do not include monetary aggregates anymore, it does not
really need to worry about exactly how much money, quasi-money, etc. is
out there.
--
Lionel Van Leeuw
William F Hummel
>"William F Hummel" <wfhu...@attbi.com> wrote>
>> Intermediaries can be divided into two categories, banks and
>> non-banks such as a finance companies, Banks are depositories
>> and thus not ordinary intermediaries. Their lending
>> automatically creates new deposits and does so without disturbing
>> existing deposits. Thus bank lending increases the money supply.
>> Non-banks are ordinary intermediaries and cannot accept deposits.
>> They simply transfer the ownership of existing funds from their
>> own bank account to the bank account of the borrower.
>
>This is incorrect. Some corporations have built
>up sufficient reserves that they extend credit, or
>money, in the same manner the banks do, for car
>loans etc. Primary examples are GMAC and GE
>Capital. Thus, you have Greenspan saying he
>can't get a finger on the liquidity of the U.S. in
>the Congressional Humphrey-Hawkins hearings
>of Feb 17, 2000.
No. When finance companies like GMAC and GE Capital lend, they
simply transfer funds from their own accounts to a borrower's
account. They have no depository function and therefore cannot
increase the money supply as normally defined. If they borrow
from a bank to gain funds for lending, they would increase the
money supply. But most of their borrowing is directly from the
money market and not from banks.
>
>excerpt Greenspan
>
>The difficulty is in defining what part of our liquidity structure
>is truly money. We have had trouble ferreting out proxies for
>that for a number of years. And the standard we employed
>is whether it gives us a good forward indicator of the direction
>of finance and the economy.
>
>end except
Greenspan recognizes that the definition of money is arbitrary,
and one should not get hung up on definitions. Liquidity is the
real issue. Liquidity is difficult to measure because it comes
in many forms. One of the more important is money market mutual
funds which are included in M2, but are not bank liabilities.
They are actually shares in short term debt instruments with
checking privileges. They effectively convert instruments that
are not a part of any monetary aggregate into a money proxy.
MMMFs could just as well have been assigned to M1 because they
are widely used as an alternate to bank transaction accounts.
>
>Start excerpt accurate analysis
>
>"The system is so silly that I really have difficulty knowing
>how to describe it.......I have had considerable practice
>digging for words but in this case, but I found nothing
>seemed adequate. Ridiculous, inane, insane, grotesque,
>absurd and other adjectives crossed my mind, but in each
>case they fail to portray the enormity of the situation and the
>outrage that fills my mind when I think how perverse the
>system really is. Finally, one evening, as I was contemplating
>the stars and the distant galaxies, the word infinite came
>to mind. That was it. Our present monetary system is
>an infinitely silly system."
>
>Paul Hellyer, ex-deputy Prime Minister of Canada
>in Funny Money, p. 44
Yet another quote from Parker, proving that he keeps a big file
of quotes to offer in place of rational argument.
No doubt the ex-deputy Prime Minister of Canada is a nice fellow,
but he hasn't said anything in the above quote that shows he
understands the monetary system of Canada, or any other monetary
system for that matter. In truth, Canada has a good monetary
system since it was upgraded in the late 1990s.
WFH
William F Hummel
>"William F Hummel" <wfhu...@attbi.com> wrote>
>> Intermediaries can be divided into two categories, banks and
>> non-banks such as a finance companies, Banks are depositories
>> and thus not ordinary intermediaries. Their lending
>> automatically creates new deposits and does so without disturbing
>> existing deposits. Thus bank lending increases the money supply.
>> Non-banks are ordinary intermediaries and cannot accept deposits.
>> They simply transfer the ownership of existing funds from their
>> own bank account to the bank account of the borrower.
>
>This is incorrect. Some corporations have built
>up sufficient reserves that they extend credit, or
>money, in the same manner the banks do, for car
>loans etc. Primary examples are GMAC and GE
>Capital. Thus, you have Greenspan saying he
>can't get a finger on the liquidity of the U.S. in
>the Congressional Humphrey-Hawkins hearings
>of Feb 17, 2000.
No. When finance companies like GMAC and GE Capital lend, they
simply transfer funds from their own accounts to a borrower's
account. They have no depository function and therefore cannot
increase the money supply as normally defined. If they borrow
from a bank to gain funds for lending, they would increase the
money supply. But most of their borrowing is through bonds and
commercial paper or directly from the money market and not from
banks.
>
>excerpt Greenspan
>
>The difficulty is in defining what part of our liquidity structure
>is truly money. We have had trouble ferreting out proxies for
>that for a number of years. And the standard we employed
>is whether it gives us a good forward indicator of the direction
>of finance and the economy.
>
>end except
Greenspan recognizes that the definition of money is arbitrary,
and one should not get hung up on definitions. Liquidity is the
real issue. Liquidity is difficult to measure because it comes
in many forms. One of the more important is money market mutual
funds which are included in M2, but are not bank liabilities.
They are actually shares in short term debt instruments with
checking privileges. They effectively convert instruments that
are not a part of any monetary aggregate into a money proxy.
MMMFs could just as well have been assigned to M1 because they
are widely used as an alternate to bank transaction accounts.
>
>Start excerpt accurate analysis
>
>"The system is so silly that I really have difficulty knowing
>how to describe it.......I have had considerable practice
>digging for words but in this case, but I found nothing
>seemed adequate. Ridiculous, inane, insane, grotesque,
>absurd and other adjectives crossed my mind, but in each
>case they fail to portray the enormity of the situation and the
>outrage that fills my mind when I think how perverse the
>system really is. Finally, one evening, as I was contemplating
>the stars and the distant galaxies, the word infinite came
>to mind. That was it. Our present monetary system is
>an infinitely silly system."
>
>Paul Hellyer, ex-deputy Prime Minister of Canada
>in Funny Money, p. 44
Yet another quote from Parker, proving that he keeps a big file
William F Hummel
<Lionel.V...@ulb.ac.be> wrote:
>William F Hummel wrote:
> > A bank does not lend the money of depositors. In fact it can
> > create its first deposit without yet having acquired any
> > depositors. It simply needs enough capital to satisfy the
> > capital ratio requirement. However banks do normally seek
> > deposits to avoid having to borrow the required reserves in the
> > money market or from the central bank. Large banks often lend
> > without having sufficient reserves, and seek the necessary funds
> > (reserves) after the fact. That can cause a shortage of bank
> > reserves in the aggregate and force the central bank to add
> > reserves itself in order to maintain control of the interbank
> > lending rate, i.e. to maintain control of the price of credit.
>
>Indeed. The point I raise is that the banking system must act for all
>practical intents and purposes as if it lends the money of the
>depositors. Depositors are free to withdraw their money. If they do and
>the demand for deposits falls short of their supply, the banking system
>exhausts its available assets needed to buy banknotes. Then it cannot
>respect its convertibility pledge between deposits and base money. It
>becomes illiquid and/or insolvent (cf. Argentina). Though the banking
>system may initially lend without the consent of depositors, it must in
>practice get this consent after the fact or it is in serious trouble.
We may have a basic difference of opinion here, which relates to
the endogeneity of bank reserves. Banks normally try to obtain
the missing reserves by borrowing in the money market, not
through the discount window. If a net shortage of reserves
develops because of bank lending or because depositors have
withdrawn substantial reserves from banks as cash, that only
becomes clear toward the end of the reserve maintenance period,
as evidenced by the upward pressure on the interbank lending
rate. The culprits responsible for the reserve deficiency cannot
be readily identified. In any case, the Fed has no choice but to
add the reserves itself, assuming it doesn't want to lose control
of the Fed funds rate. Banks recognize this and thus they do not
really operate under the constraint on lending that your analysis
seems to imply. Ultimately it is the demand for credit, as
influenced by its price set and controlled by the Fed, together
with the willingness of banks to lend to those requesting loans,
that determines how much lending will occur. That in turn
determines the amount of reserves that must be created by the
Fed.
William F Hummel
Lionel Van Leeuw
I agree that bank reserves are endogenous to the banking system and the
Fed only accomodates the banking system demand for them.
If a net shortage of reserves develops due to cash withdrawals, the Fed
will *try* to resorb it by buying securities from the banks in open
market operations. But what if the banks do not have any securities left
to sell? The Fed then has to rediscount commercial paper with the
discount window. What happens if commercial paper runs out too?
I do not think banks are restrained in their lending. Banks only have to
offer attractive deposit conditions so that savers keep their money in
the bank. Attractive conditions in the end are nothing more than a
deposit interest rate close enough to lending rates and the central bank
target rate. They have nothing to do with monetary conditions in a broad
meaning. It will always be interesting to put money in a bank at good
market interest rate, whether money in general is easy or tight.
Banks in Argentina are in such a disastrous situation because depositors
were convinced the government was going to devalue or seize their
savings, even if they were in dollars. The banks were more or less
convinced too and began to build such an interest rate margin in their
favour to protect them in case of a crisis and widespread default that
in the end deposit conditions became very bad too, in addition to the
devaluation prospects. For example in September the interbank 30-day
offered rate was around 35% with the bid rate around 30% for private
banks (the bid rate was lower for public ones). A 5% spread on an
interbank rate. You can guess spreads for ordinary deposits and loans.
The drain on reserves began to be enormous. The disaster prophecy got
self-fullfilling in the end.
--
Lionel Van Leeuw
Lionel Van Leeuw
time. But in the end the only consequence of that is that the central
bank was unable to be a lender of last resort in the usual way. Anyway,
in the US the Fed never has to lend without backing even in stressed
times. And the FDIC is only there to repay depositors after bankruptcy
occurs, not before. The way it operates could be emulated in a currency
board system since it is simply funded by its members in normal times
and by government, not central bank, bailouts during crises.
--
Lionel Van Leeuw
William F Hummel
<Lionel.V...@ulb.ac.be> wrote:
>I agree that bank reserves are endogenous to the banking system and the
>Fed only accomodates the banking system demand for them.
I'm glad we agree on this point. There are many who do not agree
or understand it.
>
>If a net shortage of reserves develops due to cash withdrawals, the Fed
>will *try* to resorb it by buying securities from the banks in open
>market operations. But what if the banks do not have any securities left
>to sell? The Fed then has to rediscount commercial paper with the
>discount window. What happens if commercial paper runs out too?
But banks don't have to sell securities to obtain currency from
the Fed. They normally obtain currency in exchange for a debit
against their (reserve) deposits at the Fed. If there were large
cash withdrawals from banks by depositors, the loss of reserves
would force the Fed to activate its open market operation to
restore those reserves in the aggregate. Any particular bank
short of reserves due to cash withdrawals may have to borrow in
the Fed funds market to pay for the cash it needs, but that
should be no problem after the Fed has done its job.
The OMO of the Fed to restore reserves involves buying Treasury
securities or doing repos with about 40 authorized dealers in
securities. Only a fraction of those are banks. I don't
believe there is any likelihood of a shortage of eligible
Treasury securities for the Fed to buy.
>
>I do not think banks are restrained in their lending. Banks only have to
>offer attractive deposit conditions so that savers keep their money in
>the bank. Attractive conditions in the end are nothing more than a
>deposit interest rate close enough to lending rates and the central bank
>target rate. They have nothing to do with monetary conditions in a broad
>meaning. It will always be interesting to put money in a bank at good
>market interest rate, whether money in general is easy or tight.
I agree that banks must offer competitive rates to attract
depositors. However some larger banks depend much more on
borrowing in the money market than on their depositors.
>
>Banks in Argentina are in such a disastrous situation because depositors
>were convinced the government was going to devalue or seize their
>savings, even if they were in dollars. The banks were more or less
>convinced too and began to build such an interest rate margin in their
>favour to protect them in case of a crisis and widespread default that
>in the end deposit conditions became very bad too, in addition to the
>devaluation prospects. For example in September the interbank 30-day
>offered rate was around 35% with the bid rate around 30% for private
>banks (the bid rate was lower for public ones). A 5% spread on an
>interbank rate. You can guess spreads for ordinary deposits and loans.
>The drain on reserves began to be enormous. The disaster prophecy got
>self-fullfilling in the end.
I don't think banking systems in the G-7 countries learn much
from the mess in Argentina. Corruption and mismanagement have
plagued the Argentine monetary system for years.
William F Hummel
Lionel Van Leeuw
>>If a net shortage of reserves develops due to cash withdrawals, the Fed
>>will *try* to resorb it by buying securities from the banks in open
>>market operations. But what if the banks do not have any securities left
>>to sell? The Fed then has to rediscount commercial paper with the
>>discount window. What happens if commercial paper runs out too?
>
>
> But banks don't have to sell securities to obtain currency from
> the Fed. They normally obtain currency in exchange for a debit
> against their (reserve) deposits at the Fed. If there were large
> cash withdrawals from banks by depositors, the loss of reserves
> would force the Fed to activate its open market operation to
> restore those reserves in the aggregate. Any particular bank
> short of reserves due to cash withdrawals may have to borrow in
> the Fed funds market to pay for the cash it needs, but that
> should be no problem after the Fed has done its job.
There is a catch: you basically state that when there is insufficient
demand for bank deposits someone, who has not to be a banker, will stand
ready to sell governments securities in an OMO. True enough. Where now
where will the proceeds of the sale end up? In a Fed account first and
then in the bank account of the seller. But the postulate here is that
deposit demand is not increased by this action. So these new funds are
again withdrawn. And the reserve deficit is there again.
--
Lionel Van Leeuw
William F Hummel
The scenario under discussion started with cash withdrawals by
bank depositors causing a net shortage of aggregate bank
reserves. You noted that the Fed would buy securities from banks
to replace those reserves, but then questioned what happens if
the banks run out of securities to sell.
I pointed out that it didn't matter because the banks can borrow
whatever they need in order to buy the cash they need from the
Fed. Further, that banks themselves don't need to be the seller
of those securities. The Fed will be obtain them from whichever
of its 40 authorized dealers wishes to sell. It is very unlikely
there will be a shortage of Treasury securities to buy, but in a
pinch could buy any high quality securities. The Fed will buy
only what it needs to provide the reserves that banks must have
to meet their reserve requirements in order to hold the Fed funds
rate on target.
If that results in more transaction deposits than depositors wish
to hold, they have one of three options: (1) convert the excess
funds to non-transaction (interest bearing) deposits, (2) buy
other financial assets like stocks and bonds, or (3) convert them
to cash.
In case (1) banks in the aggregate will then have more reserves
than they need, so the Fed will have to absorb the excess by
selling securities. In case (2) banking system reserves will be
shuffled around but there will be no change in the aggregate.
The Fed funds market will resolve the redistribution and the Fed
itself will have nothing to do. In case (3) the Fed will have to
buy securities. However we can ignore this case as not realistic
because a person does not normally add to his cash holding simply
because he has a larger transaction deposit than desired.
So case (1) is the only one that might cause a problem in
satisfying banking demand for reserves and depositor demand
transaction deposits simultaneously. Bank term deposits must
compete in yield and maturity with many non-bank options, like
short-term eurodollars, T-bills, money market funds, etc. In
general the options offered at banks are not quite as good as the
other options. So I doubt that the case you are concerned about
is of great significance.
William F Hummel
William F Hummel
After going through a more careful analysis, I agree with your
conclusion here. I did not understand your key point at first.
I believe that point is: banks themselves must be the sellers of
the securities in exchange for cash from the Fed in order to
simultaneously satisfy the demand for bank reserves and customer
deposits. So if banks run out of eligible securities to sell to
the Fed, this presents a problem in achieving equilibrium. In
truth, banks are a major holders of Treasury securities in the
US. They are highly negotiable and are therefore useful as
secondary reserves. So the scenario we are talking about here
may be more academic than real.
I dispatched a post earlier that came to an erroneous conclusion
on this subject, but cancelled it so it may not appear on your
screen.
William F Hummel
Mark Neglay
Oh boy. You're in for a hoot.
I tried, I really tried with this guy. He is a mystery to me.
At some point you have to assume it clicks in his mind, and he
understand why the debt virus is hogwash or why you must accept
deposits to create money. I'm sure that some of these things have
started to make sense. So the only thing I can assume is that he
doesn't care. He is happy to knowingly promote ignorant ideas because
even that is better than accepting he was wrong.
Micron
"Lionel Van Leeuw" <Lionel.V...@ulb.ac.be> wrote in message
news:3D26C9BF...@ulb.ac.be...
> Micron wrote:
>
> > "William F Hummel" <wfhu...@attbi.com> wrote in message
>
> >>Intermediaries can be divided into two categories, banks and
> >>non-banks such as a finance companies, Banks are depositories
> >>and thus not ordinary intermediaries. Their lending
> >>automatically creates new deposits and does so without disturbing
> >>existing deposits. Thus bank lending increases the money supply.
> >>Non-banks are ordinary intermediaries and cannot accept deposits.
> >>They simply transfer the ownership of existing funds from their
> >>own bank account to the bank account of the borrower.
> >
> >
> > This is incorrect. Some corporations have built
> > up sufficient reserves that they extend credit, or
> > money, in the same manner the banks do, for car
> > loans etc. Primary examples are GMAC and GE
> > Capital. Thus, you have Greenspan saying he
> > can't get a finger on the liquidity of the U.S. in
> > the Congressional Humphrey-Hawkins hearings
> > of Feb 17, 2000.
>
> But the Fed already as a mechanism to track all that with its money with
> zero maturity (MZM) indicator.
From the same hearing Humphrey Hawkins hearing.
Regrettably, none of those which have been able to develop, including MZM -
has not done that. That does not mean that we think that money is
irrelevant. It means that we think our measures of money have been
inadequate.
Alan Greenspan.
Micron
"William F Hummel" <wfhu...@attbi.com> wrote in message
news:3g4eiuss4jei0omsp...@4ax.com...
Crikey, I was the one saying that the GMAC, GE
capital etc. argument about what was money primarily
rested on the definition of money. The store of value
bit is increasing put on the sidelines, with medium of
exchange taking centre stage. At root is the fact that
money should carry accurate information about how
to create value, and I think the emphasis of the new
definition makes sense here.
>
> >Start excerpt accurate analysis
> >
> >"The system is so silly that I really have difficulty knowing
> >how to describe it.......I have had considerable practice
> >digging for words but in this case, but I found nothing
> >seemed adequate. Ridiculous, inane, insane, grotesque,
> >absurd and other adjectives crossed my mind, but in each
> >case they fail to portray the enormity of the situation and the
> >outrage that fills my mind when I think how perverse the
> >system really is. Finally, one evening, as I was contemplating
> >the stars and the distant galaxies, the word infinite came
> >to mind. That was it. Our present monetary system is
> >an infinitely silly system."
> >
> >Paul Hellyer, ex-deputy Prime Minister of Canada
> >in Funny Money, p. 44
>
> Yet another quote from Parker, proving that he keeps a big file
> of quotes to offer in place of rational argument.
If someone has good quotes, that proves something about
their ability to argue rationally? Your statement is of course
irrational according to the most basic precepts of logic.
Dan Parker
>
> No doubt the ex-deputy Prime Minister of Canada is a nice fellow,
> but he hasn't said anything in the above quote that shows he
> understands the monetary system of Canada, or any other monetary
> system for that matter. In truth, Canada has a good monetary
> system since it was upgraded in the late 1990s.
Yes he is a nice person. I was just floored to meet
an honest politician.
>
> WFH
Micron
"William F Hummel" <wfhu...@attbi.com> wrote in message
news:3g4eiuss4jei0omsp...@4ax.com...
> On Sat, 06 Jul 2002 07:07:22 GMT, Dan Parker wrote
>
> >"William F Hummel" <wfhu...@attbi.com> wrote>
>
> >> Intermediaries can be divided into two categories, banks and
> >> non-banks such as a finance companies, Banks are depositories
> >> and thus not ordinary intermediaries. Their lending
> >> automatically creates new deposits and does so without disturbing
> >> existing deposits. Thus bank lending increases the money supply.
> >> Non-banks are ordinary intermediaries and cannot accept deposits.
> >> They simply transfer the ownership of existing funds from their
> >> own bank account to the bank account of the borrower.
> >
> >This is incorrect. Some corporations have built
> >up sufficient reserves that they extend credit, or
> >money, in the same manner the banks do, for car
> >loans etc. Primary examples are GMAC and GE
> >Capital. Thus, you have Greenspan saying he
> >can't get a finger on the liquidity of the U.S. in
> >the Congressional Humphrey-Hawkins hearings
> >of Feb 17, 2000.
>
> No. When finance companies like GMAC and GE Capital lend, they
> simply transfer funds from their own accounts to a borrower's
> account. They have no depository function and therefore cannot
> increase the money supply as normally defined.
Again, it is not necessary to have depository functions
in order to increase the money supply. Why someone
would argue this who knows that banks do not lend
the money of depositors, I don't know. It doesn't
make sense. You know deposits aren't needed in order
to create money.
"GE Capital CEO Gary Wendt, who supervises the
lending of more *money* to business than any *banker*
.....
all financed without a penny of bank loans"...
p. 25 The Bankers, The New Generation, Martin
Mayer
"Marvelous Wise, an unequalled mastery of
the subject" -L. A. Times
"If anyone knows more about *money*, banking
and investments, he is keeping the information to
himself" - Grant's Interest Rate Observer
Oh no! I just arged irrationally by quoting experts
in the field. Sorry bout that.
Dan Parker
Micron
Supercalisfragilisticexpaladocious.
Dan Parker
Lionel Van Leeuw
<Lionel.V...@ulb.ac.be> wrote:
>>>>If a net shortage of reserves develops due to cash withdrawals, the Fed
>>>>will *try* to resorb it by buying securities from the banks in open
>>>>market operations. But what if the banks do not have any securities left
>>>>to sell? The Fed then has to rediscount commercial paper with the
>>>>discount window. What happens if commercial paper runs out too?
>>
>>demand for bank deposits someone, who has not to be a banker, will stand
>>ready to sell governments securities in an OMO. True enough. Where now
>>where will the proceeds of the sale end up? In a Fed account first and
>>then in the bank account of the seller. But the postulate here is that
>>deposit demand is not increased by this action. So these new funds are
>>again withdrawn. And the reserve deficit is there again.
>
>
> After going through a more careful analysis, I agree with your
> conclusion here. I did not understand your key point at first.
> I believe that point is: banks themselves must be the sellers of
> the securities in exchange for cash from the Fed in order to
> simultaneously satisfy the demand for bank reserves and customer
> deposits. So if banks run out of eligible securities to sell to
> the Fed, this presents a problem in achieving equilibrium. In
> truth, banks are a major holders of Treasury securities in the
> US. They are highly negotiable and are therefore useful as
> secondary reserves. So the scenario we are talking about here
> may be more academic than real.
for a bank account if the circumstances are as described here. Would a
holder of government securities sell them in exchange for a Fed account?
Never. Would he do it for a bank account? Only if the conditions are
interesting. But they clearly are not in this scenario.
> In truth, banks are a major holders of Treasury securities in the US.
Certainly they have the legal ownership of a lot of the government
securities. But often the beneficial ownership is not theirs. A big part
of their holdings might thus be impossible to sell. Also I suppose that
this part is also not available as collateral.
> I dispatched a post earlier that came to an erroneous conclusion
> on this subject, but cancelled it so it may not appear on your
> screen.
Indeed it does not appear in my newsreader but it does in Google Groups,
which never honors cancellation demands. Effective cancellation there
necessitates the use of the Google interface. This is why I prefer not
to cancel my posts even if I spot some minor problems, eg. typos or
omissions.
--
Lionel Van Leeuw
William F Hummel
>
>"William F Hummel" <wfhu...@attbi.com> wrote in message
>news:3g4eiuss4jei0omsp...@4ax.com...
>> On Sat, 06 Jul 2002 07:07:22 GMT, Dan Parker wrote
>>
>> >"William F Hummel" <wfhu...@attbi.com> wrote>
>>
>> >> Intermediaries can be divided into two categories, banks and
>> >> non-banks such as a finance companies, Banks are depositories
>> >> and thus not ordinary intermediaries. Their lending
>> >> automatically creates new deposits and does so without disturbing
>> >> existing deposits. Thus bank lending increases the money supply.
>> >> Non-banks are ordinary intermediaries and cannot accept deposits.
>> >> They simply transfer the ownership of existing funds from their
>> >> own bank account to the bank account of the borrower.
>> >
>> >This is incorrect. Some corporations have built
>> >up sufficient reserves that they extend credit, or
>> >money, in the same manner the banks do, for car
>> >loans etc. Primary examples are GMAC and GE
>> >Capital. Thus, you have Greenspan saying he
>> >can't get a finger on the liquidity of the U.S. in
>> >the Congressional Humphrey-Hawkins hearings
>> >of Feb 17, 2000.
>>
>> No. When finance companies like GMAC and GE Capital lend, they
>> simply transfer funds from their own accounts to a borrower's
>> account. They have no depository function and therefore cannot
>> increase the money supply AS NORMALLY DEFINED.
>
>Again, it is not necessary to have depository functions
>in order to increase the money supply. Why someone
>would argue this who knows that banks do not lend
>the money of depositors, I don't know. It doesn't
>make sense. You know deposits aren't needed in order
>to create money.
The money supply AS NORMALLY DEFINED is bank liabilities plus
cash plus money market mutual funds. Look it up.
>
>"GE Capital CEO Gary Wendt, who supervises the
>lending of more *money* to business than any *banker*
>.....
>all financed without a penny of bank loans"...
Quite true, and totally unrelated to the issue of money creation.
GE Capital borrows to lend, but not from banks. Without
borrowing from banks it cannot increase the money supply *as
normally defined.* QED.
>
>p. 25 The Bankers, The New Generation, Martin
>Mayer
>
>"Marvelous Wise, an unequalled mastery of
>the subject" -L. A. Times
>
>"If anyone knows more about *money*, banking
>and investments, he is keeping the information to
>himself" - Grant's Interest Rate Observer
>
>Oh no! I just arged irrationally by quoting experts
>in the field. Sorry bout that.
When you use testimonials to support your case, they should at
least be relevant. In any case, they have little persuasive
value, except to the ignorant. One can find any number of
testimonials on either side of an argument from the best of
authorities. And certainly testimonials in support of the author
of testimonials don't add a thing. Try using logic for once.
You might even discover errors in your own views.
WFH
Michael L. Coburn
Since you boys have finally turned to butter and gotten down to
brass tacks so to speak, I'd like to attempt to enter the thread.
Hopefully, I won't be treated to the OMO, discount rate, repo,
flippo shuffle at this point since all that crap has been covered.
I am of the opinion that government backed securities (series a - z
bonds, T bills, T notes, and all other forms of repos flippos and
harpos) should be refereed to as money and that the federal reserve
should simply get out of the way and let the holders of these
instruments play games with one another till they puke. There
is much more than an adequate amount of money in existence using
this CORRECT definition of the term. The notion that banks (private
or otherwise) need to create any more money is an absurdity, and
the "control" of interest rates is simply a ruse to allow the
holder of bonds and such to collect fees for something (money)
which is (at this point) not scarce in the more general since of
the term.
http://GreaterVoice.org/econ/glossary/fiat_money.php
Do not mistake me, kids. The Fed is most certainly that part
of the government that is to uphold the value of the money,
and the Fed, even as it exists (meaning the actual folks in
that organization), are as good a candidate as anyone (and probably
a lot better then most) to continue to try to fulfill that
obligation. But the mechanism needs to be changed (see below).
The point is that the value of money really has little to do
with banks if banks are not authorized to create money and
are not insured by the federal government. And this SHOULD
be the primary. Most banks should accept any and all forms of
bonds as though the were cash and credit the current value
of the bonds to the owner's account in the banking system.
Banks would then operate as S&L's or finance companies,
lending from established accounts. There should be banks
that are government insured and these banks simply store
money and they would charge a small fee (about 1.5% per annum)
for this service. These are demand deposits and these
deposits will move in and out of other banks and other
"investment" systems at the will of the owner of the money.
This would be called a "free market" for money.
The actual stone cold value of money is determined by the
sovereign and there is little that the Fed or any other
banking institution can do about it. If the sovereign
sends forth the soldiers as tax collectors and take all
the money in taxes then the money will become very scarce
and very valuable. And if the sovereign simply prints
up money and hands it out to those the sovereign might
deem worthy and then refuses to demand the eventual return
of the money, the money will be come worthless. This same
condition will result if the sovereign attempts to retrieve
the money from those that don't have it as is the current
situation. Hard to get money from the unemployed. And no matter
how many T-bills, Bonds, repos, or gizmos the Fed and the
bankers may want to devise, the value of the overall MONEY
is not going to change but so as to become less valuable.
http://GreaterVoice.org/econ/glossary/value.php
We submit that the control of the value of money is actually
the control of the relative value of money to rudimentary
labor http://GreaterVoice.org/econ/glossary/rudimentray_labor.php
This is true because ALL economic value is measured in labor.
And if the Fed is to be the controller of inflation then the
proper definition of inflation is this relative value:
http://GreaterVoice.org/econ/glossary/inflation.php
The value of dollars outside the borders of the United
States is the responsibility of the sovereign, but the
value of dollars inside the sovereignty of the USA
can be the responsibility of the Fed. The Fed can manage
its responsibility by creating money in that bank I described
above in the account of every voter in the sovereignty
in equal amounts so as to insure that money does not increase
in value in relation to labor AND ONLY TO THAT EXTENT.
This mechanism if far superior to the current method
of interest rate control because there is no case by case
value judgment involved and no special segment of the
society is making the decisions. The function is automatic
and outside the purview of politics.
--
Mike Coburn
"It's the tax system, stupid. No, it's the ludicrous
banking system. Well, actually, its both. With proper
consideration we find these injustices are made
possible by the lack of representation of The People
in their government". -- http://GreaterVoice.org
Lantern
>The productivity that you write about (on your website) is
>not the same as the "productivity" that economists refer to when they talk
>about production.>
Yes, you're probably right. I may need to modify my web page. Thanks. On the
other hand, just to spice things up a bit, I may not want any economist to read
my site - they just screw things up with their empty definitions and fruitless
discussions. (Case in point this thread: " Why do we devalue our currency",
notice the fruitless discussion by economists? They tend to happily argue
amoungst themselves and the problem sits there, unanswered not helped, except
to stimulate other economist :)
Michael L. Coburn
So you would prefer and answer like:
We devalue our currency so as to piss people off and start
stupid arguments between various religious organizations?
My answer to this question was that a slow deterioration
in the value of a currency keeps that currency in motion
and prevents the hoarding of in in someone's mattress.
I does not matter whether the mattress is located in the
USA or in Bimini.
Countries also will willingly devalue their currencies to
prevent trade deficits, but more often, the trade deficits
lead to the devaluation of the currency (the reverse of
the aforementioned cause and effect).
All of the discussion about the Fed and how it masterbates
and gyrates is, as you say, somewhat irrelevant.
Micron
> borrowing from banks it cannot increase the money supply *as
> normally defined.* QED.
> >
> >p. 25 The Bankers, The New Generation, Martin
> >Mayer
> >
> >"Marvelous Wise, an unequalled mastery of
> >the subject" -L. A. Times
> >
> >"If anyone knows more about *money*, banking
> >and investments, he is keeping the information to
> >himself" - Grant's Interest Rate Observer
> >
> >Oh no! I just arged irrationally by quoting experts
> >in the field. Sorry bout that.
>
> When you use testimonials to support your case, they should at
> least be relevant. In any case, they have little persuasive
> value, except to the ignorant. One can find any number of
> testimonials on either side of an argument from the best of
> authorities. And certainly testimonials in support of the author
> of testimonials don't add a thing. Try using logic for once.
> You might even discover errors in your own views.
"A huge amount of credit (and ultimately money) creation is happening
outside of the control of the Fed. It's happening at GE credit, GMAC, Ford
Motor Credit, Fannie Mae, Freddie Mac, FHLB, to say nothing of the Diamond
Center at the local shopping mall."
http://www.contraryinvestor.com/moarchive/mo012000.htm
oops. what was that about ignorance?
Dan Parker
>
> WFH
Micron
"Micron" <mic...@telus.net> wrote in message
news:6OWV8.77040$vo2.3...@news2.telusplanet.net...
>
> "William F Hummel" <wfhu...@attbi.com> wrote in message
> news:3g4eiuss4jei0omsp...@4ax.com...
> > On Sat, 06 Jul 2002 07:07:22 GMT, Dan Parker wrote
> >
> > >"William F Hummel" <wfhu...@attbi.com> wrote>
> >
> > >> Intermediaries can be divided into two categories, banks and
> > >> non-banks such as a finance companies, Banks are depositories
> > >> and thus not ordinary intermediaries. Their lending
> > >> automatically creates new deposits and does so without disturbing
> > >> existing deposits. Thus bank lending increases the money supply.
> > >> Non-banks are ordinary intermediaries and cannot accept deposits.
> > >> They simply transfer the ownership of existing funds from their
> > >> own bank account to the bank account of the borrower.
> > >
> > >This is incorrect. Some corporations have built
> > >up sufficient reserves that they extend credit, or
> > >money, in the same manner the banks do, for car
> > >loans etc. Primary examples are GMAC and GE
> > >Capital. Thus, you have Greenspan saying he
> > >can't get a finger on the liquidity of the U.S. in
> > >the Congressional Humphrey-Hawkins hearings
> > >of Feb 17, 2000.
> >
> > No. When finance companies like GMAC and GE Capital lend, they
> > simply transfer funds from their own accounts to a borrower's
> > account. They have no depository function and therefore cannot
> > increase the money supply as normally defined.
This is another thing I find strange. Anyone with a bit
of knowledge knows that the above is false, since local
currency efforts create money without taking deposits.
It's not like I'm arguing that the monetary prostitutes have
somehow overlooked this bit that *proves* them wrong.
It has been pointed out to them. Yet they keep repeating
the mantra, without ever discussing that which has proved
them wrong.
Dan Parker
Micron
> On Sun, 07 Jul 2002 12:50:10 GMT, Dan Parker wrote:
> >
> The money supply AS NORMALLY DEFINED is bank liabilities plus
> cash plus money market mutual funds. Look it up.
Look up a lie. How do I do that?
"But self-absorption and consistent policy error are just two of
the endemic problems of the leading American economists, and not
even the most serious among them. The deeper problem is the nearly
complete collapse of the prevailing economic theory--of the
structure of thought that supports their policy ideas. It is a
collapse so complete, so pervasive, that the profession can only
deny it by refusing to discuss theoretical questions in the first
place."
-- James Galbraith
http://www.prospect.org/prin
Dan Parker
Micron
man for people mass murdering those in poorer
countries? Not that I think this would bother you.
Its been my experience that some pieces of protoplasm
resembling humans actually enjoy the suffering of others.
'It's a little like the Middle Ages. When the patient died they would say
well, we stopped the bloodletting too soon, he still had a little blood in
him.' - Josesph Stiglitz on third world debt, ex-chief economist at the
World Bank.
Dan Parker
"William F Hummel" <wfhu...@attbi.com> wrote in message
news:amlgiuok5l27ianek...@4ax.com...
darkness
> This is a naive question from someone untrained in economics. It seems to
> me that ever since the government banned private currencies it has pursued
> monetary policies designed to make the money of its citizens less valuable.
> And it has been very successful! A 2002 dollar is worth only a small
> fraction of a 1802 dollar. Why does the government do this? How does the
> government benefit when it devalues its own money? Is there any benefit to
> the citizens that compensates for the loss of value in their savings, and
> the loss of purchasing power?
>
> Ed
1. actually, the price level barely rose in the 19th century (thinking
US and UK examples) despite massive real economic pressures
(population growth, increased supply of gold, increased velocity of
transactions via telegraph, train, etc.)
2. post WWI, the Central Banks were desparate to restore the old
stability, which they did so by precipitating short, sharp deflations
in the US (1919-20) and Great Britain (1924), which were very painful
(unemployment rose in the UK to over 20%, briefly in an age of very
limited poor relief)
3. the breakpoint was the Great Depression. Tough monetary policies
were held to have exacerbated the Depression and turned a normal
correction into a 10 year disaster which led to the rise of fascism
and WWII.
Post WWII, it became part of the new orthodoxy that the Central Banks
would act to stabilise economic activity, as well as the growth of
monetary aggregates and the rate of inflation.
It has also become clear through the myriad banking crises, like the
Third World Loans debacle of the 1970s, that there are some commercial
banks which are 'too big to fail' in terms of the Central Banks
bailing out banks in trouble.
The result was a 'legitimicisation' of inflation and the use of
monetary policy to, in effect, validate that inflation, rather than
extinguish it.
Post the 1970s debacle of high inflation and low growth, Central Banks
(especially New Zealand and Canada) swung back to a more pure
anti-inflation stance. The result, in the eyes of their critics, was
excessive unemployment and economies performing below potential (the
argument here is that while economies can deal easily with small
amounts of inflation, they deal very poorly with *deflation* because
wages and prices do not move downwards in nominal terms: hence a
deflationary force in an economy tends to lead to unemployment, rather
than lower wages and prices).
Another point worth considering is the experience of Japan. A central
bank seems *unable* to prevent *deflation*, once a certain confluence
of deflationary factors has built up.
So its still an open question whether inflation and deflation are
primarily monetary factors or whether they are simply the responses of
a sophisticated economy to real shocks like changes in technology, oil
and commodity prices, etc.
Lionel Van Leeuw
> Hey William, you did know that you are a point
> man for people mass murdering those in poorer
> countries? Not that I think this would bother you.
> Its been my experience that some pieces of protoplasm
> resembling humans actually enjoy the suffering of others.
What exactly should civilized human beings think about this kind of
distateful and gratuitous statement? For a human biological entity,
specializing in moralizing others about how they are lying and
threatening to put them in killfiles as soon as they might begin to
prove the accusation wrong, such a conduct shows that the end justifies
the means, including the use of heinous propangada that we thought
forgotten since long ago.
--
Lionel Van Leeuw
Michael L. Coburn
GMAC is not on the oil, gold, or US government dollar standard. And
they are not even on the car standard. Their fractional reserve
system is on the good fairy standard. The cars are sold (actually
rented) to the buyers (actually the renters) with "cash back" and
lip gloss incentives that are the stock and trade of all snake oil
salesmen. And on GMAC's books there be a liability for the amount
of the cost of the car, and on the same books there be an asset in
the form of a note for this same amount plus interest. All of this
appears to be a straight profit type of deal because GMAC does not
actually have to pay anything but whatever actual costs GMAC may
incur in its ongoing operation. We have yet to touch the banking
system at all unless GMAC has borrowed money from that system to
support its ongoing operation. The difference between the incoming
car payments (rent) and the operating costs are the gross profit
of GMAC. How do we distinguish between the profit of GMAC and
created money? The amount of "money" in the system is the amount
of consumer debt. Just as a bank can run a fractional reserve
system than so too can GMAC. They can and will sell cars to any
person who is willing to take on the debt regardless of the
individual's ability to pay. Money is thus created. A lot of
worthless money. And the problem, of course, is wages.
American wages have been utterly destroyed by the Republican
tax code and Americans are encouraged by every Republican ad
campaign to take on more and more debt. The lying filth
Republicans screw with all the employment and wage data to
hide any semblance of truth as they continue to turn the
American people into indentured servants. Enron is nothing
compared to the BLS. (Bureau of Lying Statistics) And the GDP
keeps on rising as the debt keeps on rising. Yep. All we need
is another tax cut for the rich. That'll fix it.
What a bunch of morons.
William F Hummel
<mik...@gte.net> wrote:
>How do we distinguish between the profit of GMAC and
>created money? The amount of "money" in the system is the amount
>of consumer debt. Just as a bank can run a fractional reserve
>system than so too can GMAC. They can and will sell cars to any
>person who is willing to take on the debt regardless of the
>individual's ability to pay. Money is thus created.
It's OK to redefine "money", it's a free country. But your kind
of money I don't need. If consumer debt is "money," I'll gladly
exchange mine for a bank deposit. I would even sell it for a $20
bill.
Now to be fair, I suspect you vaguely had in mind securitizing
the receivables on auto debt. Those could be sold for real money
and the proceeds used to issue further loans to auto buyers. But
nowhere in this scenario has the money supply as ordinarily
defined been increased.
WFH
William F Hummel
wrote:
>
>"Micron" <mic...@telus.net> wrote in message
>news:6OWV8.77040$vo2.3...@news2.telusplanet.net...
>>
>> "William F Hummel" <wfhu...@attbi.com> wrote in message
>> news:3g4eiuss4jei0omsp...@4ax.com...
>> > No. When finance companies like GMAC and GE Capital lend, they
>> > simply transfer funds from their own accounts to a borrower's
>> > account. They have no depository function and therefore cannot
>> > increase the money supply as normally defined.
>
>This is another thing I find strange. Anyone with a bit
>of knowledge knows that the above is false, since local
>currency efforts create money without taking deposits.
>It's not like I'm arguing that the monetary prostitutes have
>somehow overlooked this bit that *proves* them wrong.
>It has been pointed out to them. Yet they keep repeating
>the mantra, without ever discussing that which has proved
>them wrong.
Local currency may be included in the broad definition of money,
but it is not part of any of the monetary aggregates that are
used by economists. It has no effect on the value of money as
normally defined, no legal tender status, and cannot be used in
payment of taxes.
Local currencies are an interesting phenomenon, but their real
value depends on their exchange value with a national currency.
No local group of any significance exists in isolation. Trade
between the local group and the outside world must be done in the
outside currency, i.e. the national currency. Thus the value of
local currency is ultimately determined by its purchasing power
outside the group.
WFH
William F Hummel
wrote:
>"William F Hummel" <wfhu...@attbi.com> wrote in message
>news:amlgiuok5l27ianek...@4ax.com...
>> On Sun, 07 Jul 2002 12:50:10 GMT, Dan Parker wrote:
>> >
>> The money supply AS NORMALLY DEFINED is bank liabilities plus
>> cash plus money market mutual funds. Look it up.
>
>Look up a lie. How do I do that?
I suspect you are capable of doing that without help.
>
> "But self-absorption and consistent policy error are just two of
> the endemic problems of the leading American economists, and not
> even the most serious among them. The deeper problem is the nearly
> complete collapse of the prevailing economic theory--of the
> structure of thought that supports their policy ideas. It is a
> collapse so complete, so pervasive, that the profession can only
> deny it by refusing to discuss theoretical questions in the first
> place."
> -- James Galbraith
It's not surprising to see yet another quote posted by Parker.
What is surprising is the message it contains. Parker himself
refuses to discuss theoretical questions in a serious way, but
offers instead simple analogies and the "wisdom" of others.
WFH
Micron
> On Mon, 08 Jul 2002 15:26:24 GMT, "Michael L. Coburn"
> <mik...@gte.net> wrote:
>
> >How do we distinguish between the profit of GMAC and
> >created money? The amount of "money" in the system is the amount
> >of consumer debt. Just as a bank can run a fractional reserve
> >system than so too can GMAC. They can and will sell cars to any
> >person who is willing to take on the debt regardless of the
> >individual's ability to pay. Money is thus created.
>
> It's OK to redefine "money", it's a free country. But your kind
> of money I don't need. If consumer debt is "money," I'll gladly
> exchange mine for a bank deposit. I would even sell it for a $20
> bill.
Over 90% of the money issued by banks is issued as debt.
It is also a basic fact that much of what Hummel calls 'real'
money has been issued as debt for consumer purchases.
This *fact* will not stop Hummel from making his distinction
again about how this makes bank issued money different
from G.E or GMAC money.
Here is Greenspan commenting on what GMAC, GE Capital
and so on have done to the money supply. I wonder why he
doesn't just ask Hummel to fill him in on the details %?
Now Greenspan is clearly saying that even he doesn't have a
firm grip on what constitutes the money supply. Clearly, and
repeatedly. This gives a lot of credence to the quote from
ex-deputy prime minister Paul Hellyer, who called the present
monetary system an 'infinitely silly' system.
Consider the words of Allan Greenspan during testimony at the
Humphrey-Hawkins hearings of February 17, 2000.
Mr. Greenspan: "Let me suggest to you that the monetary aggregates as we
measure them are getting increasingly complex and difficult to integrate
into a set of forecasts. The problem that we have is not that money is
unimportant, but how we define it. By definition, all prices are indeed the
"ratio of an exchange of a good for money." And what we seek is what that
is. Our problem is we used M-1 at one point as the proxy of money, and it
turned out to be a very difficult indicator of any financial state. We then
went to M-2 and had the similar problem. We have never done M-3 per se
because it largely reflects the extent of expansion of the banking industry.
And when in effect banks expand, in and of itself, it doesn't tell you
terribly much about what the real money is. So our problem is not that we
do not believe in sound money. We do. We very much believe that, if you have
a debased currency, that you will have a debased economy. The difficulty is
in defining what part of our liquidity structure is truly money. We have had
trouble ferreting out proxies for that for a number of years. And the
standard we employed is whether it gives us a good forward indicator of the
direction of finance and the economy. back to Table of Contents
Regrettably, none of those which have been able to develop, including MZM -
has not done that. That does not mean that we think that money is
irrelevant. It means that we think our measures of money have been
inadequate.
Dan Parker
Micron
> On Mon, 08 Jul 2002 05:34:59 GMT, "Micron" <mic...@telus.net>
> wrote:
> >
> >"Micron" <mic...@telus.net> wrote in message
> >news:6OWV8.77040$vo2.3...@news2.telusplanet.net...
> >>
> >> "William F Hummel" <wfhu...@attbi.com> wrote in message
> >> news:3g4eiuss4jei0omsp...@4ax.com...
>
> >> > No. When finance companies like GMAC and GE Capital lend, they
> >> > simply transfer funds from their own accounts to a borrower's
> >> > account. They have no depository function and therefore cannot
> >> > increase the money supply as normally defined.
> >
> >This is another thing I find strange. Anyone with a bit
> >of knowledge knows that the above is false, since local
> >currency efforts create money without taking deposits.
> >It's not like I'm arguing that the monetary prostitutes have
> >somehow overlooked this bit that *proves* them wrong.
> >It has been pointed out to them. Yet they keep repeating
> >the mantra, without ever discussing that which has proved
> >them wrong.
>
> Local currency may be included in the broad definition of money,
> but it is not part of any of the monetary aggregates that are
> used by economists. It has no effect on the value of money as
> normally defined, no legal tender status, and cannot be used in
> payment of taxes.
It proves you wrong, end of story. GMAC, GE Capital and
so on also prove you wrong, according to monetary guru
Martin Mayer and the clip I took off the web from a quick google
search. Yet you don't mention these. Why? Here it is
again. See how this fits in with the Greenspan quote at
the Feb 17, 2000 Humphrey Hawkins hearing. See how
more and more evidence is showing that you are wrong.
excerpt
A huge amount of credit (and ultimately money) creation is happening outside
of the control of the Fed. It's happening at GE credit, GMAC, Ford Motor
Credit, Fannie Mae, Freddie Mac, FHLB, to say nothing of the Diamond Center
at the local shopping mall. This is what truly is different this go around.
Never before has so much credit been able to be created outside of the
traditional (and regulated) banking system. Outside of the direct influence
of the Federal Reserve.
http://www.contraryinvestor.com/moarchive/mo012000.htm
Dan Parker
William F Hummel
>>
>> When you use testimonials to support your case, they should at
>> least be relevant. In any case, they have little persuasive
>> value, except to the ignorant. One can find any number of
>> testimonials on either side of an argument from the best of
>> authorities. And certainly testimonials in support of the author
>> of testimonials don't add a thing. Try using logic for once.
>> You might even discover errors in your own views.
>
> "A huge amount of credit (and ultimately money) creation is happening
>outside of the control of the Fed. It's happening at GE credit, GMAC, Ford
>Motor Credit, Fannie Mae, Freddie Mac, FHLB, to say nothing of the Diamond
>Center at the local shopping mall."
Yet another quote from the folder titled "Wisdom" on Parker's C:
drive.
>
> http://www.contraryinvestor.com/moarchive/mo012000.htm
>
>oops. what was that about ignorance?
>
If you check the author of the quote, you should understand.
WFH
Micron
news:3D299F1D...@ulb.ac.be...
UNICEF estimates 500,000 children per year die because
of interest payments demanded on fraudulent loans. I
wonder what the surviving family members would say
if they were shown the monetary figures and how the
unpayable debt system works. Would they consider people
who defended such a system as civilized?
You have no concept of what civilization, or outrageous
behaviour, really is. You can put suits and polite words
on top the monetary fraud, but that just makes it hypocritical,
not less monstrous. You think name-calling is remotely
similar to unnecessary deaths caused by the theft of resources
from people who barely have enough to survive?
Anyone who has seriously studied the monetary system
and who still defends it should be ashamed of themselves.
'It's a little like the Middle Ages. When the patient died they would say
well, we stopped the bloodletting too soon, he still had a little blood in
him.' - Josesph Stiglitz on third world debt, ex-chief economist at the
World Bank.
Dan Parker
Dan Parker
> --
> Lionel Van Leeuw
>
Micron
news:AaiW8.3265$I02...@nwrddc04.gnilink.net...
> Micron wrote:
>
> >
>The lying filth
> Republicans screw with all the employment and wage data to
> hide any semblance of truth as they continue to turn the
> American people into indentured servants. Enron is nothing
> compared to the BLS. (Bureau of Lying Statistics) And the GDP
> keeps on rising as the debt keeps on rising. Yep. All we need
> is another tax cut for the rich. That'll fix it.
I'm not a bible thumper or church goer, but I think
the condemnation of dancing around a golden calf,
and a reverence for a code of ethics, was some key
advice that humanity will have to rediscover, if it is
to prosper, or even survive.
Dan Parker
Michael L. Coburn
>
> "William F Hummel" <wfhu...@attbi.com> wrote in message
> news:amlgiuok5l27ianek...@4ax.com...
>> On Sun, 07 Jul 2002 12:50:10 GMT, Dan Parker wrote:
>> >
>> The money supply AS NORMALLY DEFINED is bank liabilities plus
>> cash plus money market mutual funds. Look it up.
>
> Look up a lie. How do I do that?
>
> "But self-absorption and consistent policy error are just two of
> the endemic problems of the leading American economists, and not
> even the most serious among them. The deeper problem is the nearly
> complete collapse of the prevailing economic theory--of the
> structure of thought that supports their policy ideas. It is a
> collapse so complete, so pervasive, that the profession can only
> deny it by refusing to discuss theoretical questions in the first
> place."
> -- James Galbraith
> http://www.prospect.org/prin
The problem we have is based on the _rent_ paid to money, the
slick snake oil salesmen has got us again, and you are right
to lay it at the feet of the economics profession. I use land
to illustrate the concept of rent. But any monoploy privilege
based on force (government force) will do as well. There are
good reasons for property ownership (which is, after all, a
monopoly privilege), but we seem to let it get out of hand.
And we continually fail to distinguish between property as that
which is earned, and privilege as that which is simply
appropriated. Fiat money is not deserving of any "interest"
in the classical economic sense of that term. I am not all
that certain as to how to control the creation of money
through the creation of credit as is done by GMAC and other
very large organizations. But I also wonder whether there is
a need for it.
General motors, Ford, Chrysler, etc. will build cars and
they will compete one with the other. The people will make
a deal in which they will promise to deliver some of their
future wages to one of the car builders in return for the
right to poses the car and to eventually "own" the car.
The car builder uses this income to pay for the building
of more cars, to create new capital (plant and equipment)
to better produce cars and to pay all the people that are
building the cars. We can see that there is no need for
the friggin bank or the bonds in this arrangement. What
we have is an agreement between all the participants and
so long as people can and will own up to those agreements
then all is well. The inventor of a new car building
apparatus will be rewarded for such innovaton by virtue
of a very large share of the labor saved (the value of
such labor) but he maximizes his own benefit by sharing
(by increasing the car output or by increasing wages).
Money is a very good tool to keep track of what is going
on in this deal. It also provides a way to "save" (i.e.
to forego the consumption or investment of one economic
player while another borrows -- hopefully so as to become
more productive). Interest as paid by the borrower is
justified only on the basis of risk. And if the liquidity
is provided by an outside agent such as the banking system
then the interest awarded to the saver (the person foregoing
investment/consumption) can be done away with so long as
the saver is protected from any devaluation of his
savings but for a very small service charge.
In the above scenario the bank plays a role in that
the bank will store the savings of an economic participant
and lend to another economic participant, acting as an
intermediary. The bank will charge "interest" so as to
cover the costs of defaults and to pay the people that
run the bank. A rather pedestrian affair.
The question arises as to where this money will have
been created and how, exactly will its value be enforced.
The answer to the first question is that the money is
created by signing a contract and as much money as
necessary will exist at all times so as to allow the
signing of as many contracts as people are willing to
sign. So long as there is no reward to holding this
money (interest paid to a pocket full on numbers) then
there is no reason to create contracts that are
unenforcible, i.e. there is simply no way to gain
from creating excess money unless the value of new
money is more or less than old money.
So now we arrive at the real crux of the matter: How
do we control the _value_ of money The answer is to
first acknowledge that a contract is a promise of future
labor. People promise to deliver a share of their
future labor in return for the right to use and eventually
own a car. The labor is accounted by the money. And
so long as there is a constant relationship between
rudimentary labor and money (the accounting entries) then
the value of the money is not in question. The holder
of money (the saver) will gain or loose purchasing power
due to population growth, oil embargoes, and land rent.
He will gain purchasing power through the advent of
_real_ capital and so will the debtor. But the value
of the money is the value of labor and that is all that
must remain stable. All contracts are based on the
delivery of future labor and so too the value of money.
http://GreaterVoice.org/econ/glossary/value.php
--
Michael L. Coburn
I have yet to see _any_ form of proof coming from anywhere
that would disprove the underlying thesis that interest
paid to fiat money is anything other than economic rent.
http://GreaterVoice.org/econ/glossary/Economic_Rent.php
or anything that offers any rebuttal to THE value theory:
http://GreatorVoice.org/econ/glossary/value.php
or anything that would contradict
http://GreaterVoice.org/econ/glossary/inflation.php
or, or, or any other substantive discussion on the
real underlying economics of money itself.
What I see is a tail chasing repetitive explanation of the
piece of dog doo-doo we have for a banking system,
Bonds, my achin ass. Hummel seems to understand the current
system quite well. If that is true, then by defending it
he is supporting a fraud quite knowingly. Where does that
leave us?
William F Hummel
<mik...@gte.net> wrote:
>I have yet to see _any_ form of proof coming from anywhere
>that would disprove the underlying thesis that interest
>paid to fiat money is anything other than economic rent.
I thought interest was paid to creditors, but Coburn says it's
paid to fiat money (whatever that means). Perhaps Coburn doesn't
believe creditors exist, or perhaps he believes they shouldn't
exist. Ah well, if he wants to buy a home, tell him to earn the
money first. It's cash on the barrel head for him.
>....
>or, or, or any other substantive discussion on the
>real underlying economics of money itself.
For the uninformed, a substantive discussion on money is one that
follows the Coburn line -- tax assets not income. We've had
several years of his lectures on this subject and maybe people
have just tired of hearing about it.
>
>What I see is a tail chasing repetitive explanation of the
>piece of dog doo-doo we have for a banking system,
>Bonds, my achin ass. Hummel seems to understand the current
>system quite well. If that is true, then by defending it
>he is supporting a fraud quite knowingly. Where does that
>leave us?
Indeed, Hummel is a conspirator who, together with fellow
conspirators like the Rothschilds and the Rockefellers, set up
the Fed many years ago for their own private interests. That
cabal is still working today. Most everyone thinks the Fed is a
government agency. What a laugh, what easy pickings!
Micron
We went through several discussions, over some
time, where I addressed your points. You know
this. You know it is in the Google archives.
Yet you continue to lie.
You know as well as I do why you hate the quotes.
Your primary weapon of posing as some super-knowledgable
expert is kind of useless when it is Nobel Laureates
economists etc. that are kicking the stuffings out of your
arguments. And the cutting and pasting saves me time for
doing better things than trying to reason with a pathological
liar.
WM> >> The money supply AS NORMALLY DEFINED is bank liabilities plus
> >> cash plus money market mutual funds. Look it up.
> >
DP> >Look up a lie. How do I do that?
Here is the quote that disproves your statement, again.
Go argue it with Greenspan. Explain this, how Greenspan
isn't aware of your supposed answer about what the money
supply is; or monetary guru Martin Mayer etc. etc. etc.
Consider the words of Allan Greenspan during testimony at the
Humphrey-Hawkins hearings of February 17, 2000.
Mr. Greenspan: "Let me suggest to you that the monetary aggregates as we
measure them are getting increasingly complex and difficult to integrate
into a set of forecasts. The problem that we have is not that money is
unimportant, but how we define it. By definition, all prices are indeed the
"ratio of an exchange of a good for money." And what we seek is what that
is. Our problem is we used M-1 at one point as the proxy of money, and it
turned out to be a very difficult indicator of any financial state. We then
went to M-2 and had the similar problem. We have never done M-3 per se
because it largely reflects the extent of expansion of the banking industry.
And when in effect banks expand, in and of itself, it doesn't tell you
terribly much about what the real money is. So our problem is not that we
do not believe in sound money. We do. We very much believe that, if you have
a debased currency, that you will have a debased economy. The difficulty is
in defining what part of our liquidity structure is truly money. We have had
trouble ferreting out proxies for that for a number of years. And the
standard we employed is whether it gives us a good forward indicator of the
direction of finance and the economy.
Regrettably, none of those which have been able to develop, including MZM -
has not done that. That does not mean that we think that money is
irrelevant. It means that we think our measures of money have been
inadequate.
> WFH
Micron
Actually Hummel, I think you would enjoy yourself
in such a situation, but the truth is your shallow
viewpoint would be all your own . Rothschild and
Rockefeller members have made it clear for years
that they are interested in something greater than
themselves (not just by words, but by actions).
I think their main methods are outdated, but I still
have to respect their concepts about ending wars
and so on.
Try as I may, I can find nothing to respect about
you. Don't you ever feel like actually doing something
in support of what is right, or is guard dog duty going
to be the limits of your entire existence?
excerpt
When we accuse the world's great financiers of being
merely conscienceless buccaneers, there is a sense
in which we do them less than justice, and at the
same time fail to recognize the deadly danger which
they embody. The great financier is in most cases
a great idealist, and sooner or later constructs a
Utopia which it is his constant endeavour to impose
upon the world....society is never in more deadly
danger than when it is committed to the mercies
of the idealist, and particularly the Utopianist. The
fact is that there is no single Utopia which would
give satisfaction to more than a small percentage of
us, and that what we really demand of existence
is not that we shall be put into somebody else's
Utopia, but that we shall be put into a position to
construct a Utopia of our own.....As the human
personality develops, it becomes more individualized,
and specialized in its outlook, and less and less
amenable to centralized direction.
C.H. Douglas, Social Credit founder.
Dan Parker
Mark Neglay
> "William F Hummel" <wfhu...@attbi.com> wrote in message
> news:fecjiukld3lntifq2...@4ax.com...
> > On Mon, 08 Jul 2002 15:26:24 GMT, "Michael L. Coburn"
> > <mik...@gte.net> wrote:
> >
> > >How do we distinguish between the profit of GMAC and
> > >created money? The amount of "money" in the system is the amount
> > >of consumer debt. Just as a bank can run a fractional reserve
> > >system than so too can GMAC. They can and will sell cars to any
> > >person who is willing to take on the debt regardless of the
> > >individual's ability to pay. Money is thus created.
> >
> > It's OK to redefine "money", it's a free country. But your kind
> > of money I don't need. If consumer debt is "money," I'll gladly
> > exchange mine for a bank deposit. I would even sell it for a $20
> > bill.
>
> Over 90% of the money issued by banks is issued as debt.
Banks don't issue money. They loan it in to existence. Additionally,
when banks loan it in to existence, every penny of it is debt. That's
why they call it a "loan".
I know these are tough concepts for a real researcher, but you will
get the hang of them sooner or later.
> It is also a basic fact that much of what Hummel calls 'real'
> money has been issued as debt for consumer purchases.
> This *fact* will not stop Hummel from making his distinction
> again about how this makes bank issued money different
> from G.E or GMAC money.
Well, there is the fact that if you don't accept deposits, you cannot
create money the way banks do. But you know better than everyone else
so you go right on believing that non-depository institutions create
money.
Greenspan is stating that he thinks it is difficult to say what is
"money" and he is right to do so, since so many instruments are "near
money" and share most of money's characteristics. For example, I can
put my money in to a brokerage account with a margin agreement. The
brokerage allows me checkwriting ability, meaning that by the typical
definition of the term, I have a demand deposit. Meanwhile, the
brokerage can rehypothecate the funds inside and, as long as you
consider my asset to be money, then the brokerage firm can create
money much the same way that banks do. More to Greenspan's point, do
we consider, say, a bond maturing tomorrow to be money? But none of
this has anything to do with your point, which is basically to take
the words of a man you simply don't understand and pretend to find
meaning in them that is not there.
(For those who weren't paying attention, that is probably why the Fed
is also in charge of setting margin and rehypothecation limits on
brokerage accounts.)
Now the problem is, Parker, that while there are many different
opinions on what is money, very few consider GMAC debt bonds to be
money.
-It cannot be traded for goods and services. It has to be liquidated
first.
-It cannot be liquidated immediately (can take hours, days, or even
months or years depending on liquidity.
-It will not be surrendered on demand from GMAC. As stated, the only
way to get you money back is to sell your asset to someone else or to
wait until the bond matures.
Now since GMAC does not accept deposits, logic dictates that all of
its lending activity is financed with loans or owner equity and
therefore it cannot create money.
Parker, you just don't know what you are talking about. As long as
you continue to discuss banking and money on Usenet, I will continue
to remind the world how little you know about the subjects. I will do
this unless and until you admit you were wrong about the issues we
discussed in the "Who is this MIcron..." thread, and more importantly,
admit you were an ass and I was polite and non-confrontational when we
first discussed these issues.
> Dan Parker
>
> >
> > Now to be fair, I suspect you vaguely had in mind securitizing
> > the receivables on auto debt. Those could be sold for real money
> > and the proceeds used to issue further loans to auto buyers. But
> > nowhere in this scenario has the money supply as ordinarily
> > defined been increased.
No, I have figured out that this is not an issue of whether bonds can
be defined as money, or whether GMAC accepts deposits. He simply
doesn't understand the basic mechanics. He really just believes that
the simple act of loaning money, acting as an intermediary of any
type, will create money. Push the issue farther and you just end up
in his mythical kill-file.
William F Hummel
>> It's not surprising to see yet another quote posted by Parker.
>> What is surprising is the message it contains. Parker himself
>> refuses to discuss theoretical questions in a serious way, but
>> offers instead simple analogies and the "wisdom" of others.
>
>We went through several discussions, over some
>time, where I addressed your points. You know
>this. You know it is in the Google archives.
>Yet you continue to lie.
You've presented your position but without a logical development
that I am aware of. Continuing as you have to argue by simple
analogy or quoting others is superficial stuff.
You also made it clear that your understanding of monetary
systems is woefully inadequate for a decent interchange. Anyone
who actually believes in the debt virus hypothesis or that the
Fed is privately owned and controlled can't be taken seriously.
I presented detailed arguments with supporting data showing why
those beliefs are nonsense. Your response was more quotes from
so-called authority. So I'll let you babble on by yourself from
here.
WFH
Mark Neglay
> > >> non-banks such as a finance companies, Banks are depositories
> > >> and thus not ordinary intermediaries. Their lending
> > >> automatically creates new deposits and does so without disturbing
> > >> existing deposits. Thus bank lending increases the money supply.
> > >> Non-banks are ordinary intermediaries and cannot accept deposits.
> > >> They simply transfer the ownership of existing funds from their
> > >> own bank account to the bank account of the borrower.
> > >
> > >This is incorrect. Some corporations have built
> > >up sufficient reserves that they extend credit, or
> > >money, in the same manner the banks do, for car
> > >loans etc. Primary examples are GMAC and GE
> > >Capital. Thus, you have Greenspan saying he
> > >can't get a finger on the liquidity of the U.S. in
> > >the Congressional Humphrey-Hawkins hearings
> > >of Feb 17, 2000.
> >
> > simply transfer funds from their own accounts to a borrower's
> > increase the money supply as normally defined.
>
> Again, it is not necessary to have depository functions
> in order to increase the money supply. Why someone
> would argue this who knows that banks do not lend
> the money of depositors, I don't know. It doesn't
> make sense. You know deposits aren't needed in order
> to create money.
-Dan Parker, Showing the World how little he understands.
> "GE Capital CEO Gary Wendt, who supervises the
> lending of more *money* to business than any *banker*
> .....
> all financed without a penny of bank loans"...
>
> p. 25 The Bankers, The New Generation, Martin
> Mayer
-Martin Mayer, describing the lending activity of GE Capital, as if
this is supposedly a contested fact.
Stop stating a completely uncontroversial *fact*, and pretending that
this proves something completely different.
> "Marvelous Wise, an unequalled mastery of
> the subject" -L. A. Times
So the LA Times thinks that Martin Mayer is a master of the subject,
and Martin Mayer thinks that GE Capital makes lots of loans.
GE Capital makes loans!?!?!?!?
> "If anyone knows more about *money*, banking
> and investments, he is keeping the information to
> himself" - Grant's Interest Rate Observer
Wow, will the uncontroversial facts ever cease?
Please, discontinue the onslaught of things everyone already knows!
> Oh no! I just arged irrationally by quoting experts
> in the field. Sorry bout that.
>
> Dan Parker
>
> > from a bank to gain funds for lending, they would increase the
> > money supply. But most of their borrowing is through bonds and
> > commercial paper or directly from the money market and not from
> > banks.
> > >
> > >excerpt Greenspan
> > >
> > >The difficulty is in defining what part of our liquidity structure
> > >is truly money. We have had trouble ferreting out proxies for
> > >that for a number of years. And the standard we employed
> > >is whether it gives us a good forward indicator of the direction
> > >of finance and the economy.
> > >
James Hogan
> On Sat, 06 Jul 2002 23:05:25 +0200, Lionel Van Leeuw
> <Lionel.V...@ulb.ac.be> wrote:
>
> >William F Hummel wrote:
> >
> >>>If a net shortage of reserves develops due to cash withdrawals, the Fed
> >>>will *try* to resorb it by buying securities from the banks in open
> >>>market operations. But what if the banks do not have any securities
left
> >>>to sell? The Fed then has to rediscount commercial paper with the
> >>>discount window. What happens if commercial paper runs out too?
> >>
> >> But banks don't have to sell securities to obtain currency from
> >> the Fed. They normally obtain currency in exchange for a debit
> >> against their (reserve) deposits at the Fed. If there were large
> >> cash withdrawals from banks by depositors, the loss of reserves
> >> would force the Fed to activate its open market operation to
> >> restore those reserves in the aggregate. Any particular bank
> >> short of reserves due to cash withdrawals may have to borrow in
> >> the Fed funds market to pay for the cash it needs, but that
> >> should be no problem after the Fed has done its job.
> >
> >There is a catch: you basically state that when there is insufficient
> >demand for bank deposits someone, who has not to be a banker, will stand
> >ready to sell governments securities in an OMO. True enough. Where now
> >where will the proceeds of the sale end up? In a Fed account first and
> >then in the bank account of the seller. But the postulate here is that
> >deposit demand is not increased by this action. So these new funds are
> >again withdrawn. And the reserve deficit is there again.
I apologize in advance, but I have lost a part of this thread due to my
server. ("This message is no longer available on this server.")
>
> After going through a more careful analysis, I agree with your
> conclusion here. I did not understand your key point at first.
> I believe that point is: banks themselves must be the sellers of
> the securities in exchange for cash from the Fed in order to
> simultaneously satisfy the demand for bank reserves and customer
> deposits.
Exactly where do banks get "securities" to sell to the FED? Exactly what of
value do they exchange for dollars in their account? I guess a more
specific question is" What does the FED get in return for these
"securities"?
It is becoming more and more apparent that the FED's "ability" to "provide
liquidity to the system" is nothing more than simply giving more money to
the banks. What does the FED get in return?
The answer is nothing. That is, the FED gets absolutely nothing but an IOU.
Talk about borrowing from Peter to pay Paul! But Peter is broke...
So if banks run out of eligible securities to sell to
> the Fed, this presents a problem in achieving equilibrium. In
> truth, banks are a major holders of Treasury securities in the
> US. They are highly negotiable and are therefore useful as
> secondary reserves. So the scenario we are talking about here
> may be more academic than real.
It is only academic when it doesn't matter. It is beginning to matter.
Something must equal somthing, and something has become nothing.
William F Hummel
<jhog...@attbi.com> wrote:
>
>Exactly where do banks get "securities" to sell to the FED?
They buy them on from the Treasury and in the secondary market,
spending their own capital. No different than when you buy
bonds. You trade your own money for the bonds.
>Exactly what of
>value do they exchange for dollars in their account? I guess a more
>specific question is" What does the FED get in return for these
>"securities"?
You got it backwards. The Fed gets the securities and credits
the seller with a deposit at the Fed.
>
>It is becoming more and more apparent that the FED's "ability" to "provide
>liquidity to the system" is nothing more than simply giving more money to
>the banks. What does the FED get in return?
If you can't keep the transactions straight, how do you expect to
make sense out them? As noted above, the Fed gets securities in
return. Banks give up a valuable asset, the Treasury bond, in
order to acquire reserves, i.e. a deposit at the Fed. No free
lunch.
>
>The answer is nothing. That is, the FED gets absolutely nothing but an IOU.
>Talk about borrowing from Peter to pay Paul! But Peter is broke...
I suggest you read http://wfhummel.net/moneybasics.html
William F Hummel
They buy them from the Treasury and in the secondary market,
spending their own capital. No different than when you buy
bonds. You trade your own money for the bonds at the market
price.
>Exactly what of
>value do they exchange for dollars in their account? I guess a more
>specific question is" What does the FED get in return for these
>"securities"?
Wha? The Fed gets the securities and credits the seller with a
deposit at the Fed, creating new money in the process. Perhaps
you don't understand where money comes from.
>
>It is becoming more and more apparent that the FED's "ability" to "provide
>liquidity to the system" is nothing more than simply giving more money to
>the banks. What does the FED get in return?
As noted above, the Fed gets securities in return. A bank gives
up a valuable asset, the Treasury bond, in order to acquire
reserves, i.e. a deposit at the Fed. No free lunch for the
bank.
>
>The answer is nothing. That is, the FED gets absolutely nothing but an IOU.
>Talk about borrowing from Peter to pay Paul! But Peter is broke...
Correct. It delivers its own IOU to the bank in exchange for the
Treasury's IOU from the bank. What's the big deal?
Grinch
wrote:
>...
>I apologize in advance, but I have lost a part of this thread due to my
>server. ("This message is no longer available on this server.")
You can pick up the whole thread easily enough at
http://groups.google.com/advanced_group_search
It's very useful when one checks a newsgroup only once in a while, or
wonders if someone really said such-and-such way back then.
>....
Harold
>news:84afiu8d3qbu199ut...@4ax.com...
[deleted]
>> After going through a more careful analysis, I agree with your
>> conclusion here. I did not understand your key point at first.
>> I believe that point is: banks themselves must be the sellers of
>> the securities in exchange for cash from the Fed in order to
>> simultaneously satisfy the demand for bank reserves and customer
>> deposits.
>
>Exactly where do banks get "securities" to sell to the FED?
They bought them from the US Treasury Department, or from people who
had themselves purchased them from the Treasury.
>Exactly what of value do they exchange for dollars in their account?
The above mentioned US government bonds.
>I guess a more specific question is" What does the FED get in
>return for these "securities"?
That is an entirely different question. The FED gets the government
bonds and, ultimately, the interest on those bonds from the Treasury.
Just like you would, if you bought the bonds.
>
>It is becoming more and more apparent that the FED's "ability" to "provide
>liquidity to the system" is nothing more than simply giving more money to
>the banks. What does the FED get in return?
>
>The answer is nothing. That is, the FED gets absolutely nothing but an IOU.
The IOU the FED gets is from the US government. Most people consider
those to be desirable.
[deleted]
Regards, Harold
-----
"Economic ignorance is the breeding ground of totalitarianism."
---John Jewkes
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Michael L. Coburn
> On Sun, 21 Jul 2002 04:13:45 GMT, "James Hogan"
> <jhog...@attbi.com> wrote:
>>
>>Exactly where do banks get "securities" to sell to the FED?
>
> They buy them on from the Treasury and in the secondary market,
> spending their own capital. No different than when you buy
> bonds. You trade your own money for the bonds.
>
But if banks must acquire these securities instead of just
printing them up in their basement then they would need to have
traded something for the securities. One would assume that
money was traded for these securities and that the Fed is now
trading money to the banks so as to "buy" the securities back
from the banks. --- but, but, but -- if all money is created
in this way, then where did the money come from that was
used to place these securities in the vaults of the private
banks? Let us imagine in our little heads that the Fed used
paper money or some from of T-Bills or bonds to buy all the
gold in the vaults of all the banks and to transfer that gold
to the Fort Knox where it formed the original "reserves".
William F Hummel
<mik...@gte.net> wrote:
>William F Hummel wrote:
>
>> On Sun, 21 Jul 2002 04:13:45 GMT, "James Hogan"
>> <jhog...@attbi.com> wrote:
>>>
>>>Exactly where do banks get "securities" to sell to the FED?
>>
>> They buy them on from the Treasury and in the secondary market,
>> spending their own capital. No different than when you buy
>> bonds. You trade your own money for the bonds.
>>
>
>But if banks must acquire these securities instead of just
>printing them up in their basement then they would need to have
>traded something for the securities. One would assume that
>money was traded for these securities and that the Fed is now
>trading money to the banks so as to "buy" the securities back
>from the banks. --- but, but, but -- if all money is created
>in this way, then where did the money come from that was
>used to place these securities in the vaults of the private
>banks? Let us imagine in our little heads that the Fed used
>paper money or some from of T-Bills or bonds to buy all the
>gold in the vaults of all the banks and to transfer that gold
>to the Fort Knox where it formed the original "reserves".
Did you understand the original question?
James Hogan
"Grinch" <oldn...@mindspring.com> wrote in message
news:t9dmjugceh42076mu...@4ax.com...
True enough. I do check this newsgroup regularily, but some of the more
recent posts were "not available" while some of the past posts were. That's
why I apologized for this apparent technical glitch. Why did this happen?
I dunno...
>
> >....
>
>
James Hogan
> On Sun, 21 Jul 2002 04:13:45 GMT, "James Hogan"
> <jhog...@attbi.com> wrote:
> >
> >Exactly where do banks get "securities" to sell to the FED?
>
> They buy them from the Treasury and in the secondary market,
> spending their own capital. No different than when you buy
> bonds. You trade your own money for the bonds at the market
> price.
>
> >Exactly what of
> >value do they exchange for dollars in their account? I guess a more
> >specific question is" What does the FED get in return for these
> >"securities"?
>
> Wha? The Fed gets the securities and credits the seller with a
> deposit at the Fed, creating new money in the process.
What does the FED get in return for these "securities"? Are you claiming
that the banks have some amount of real money that they provide to the FED?
If so, then where did they get it? Did they manufacture it out of thin air,
or did it fall from the skies? The point here is that the banks are
exchanging an IOU for something of value, which is to say they are swapping
nothing for something. (A very good corollary is the "purchase" of
TIme-Warner by AOL.)
In other words, banks have nothing to offer except their willingness to
accept debt as a condition for receiving money from the FED. All debt
implies interest. The banks, and their subscribers, must shoulder this debt
, and the interest, as a condition of receiving money from the FED.
It wasn't supposed to be this way. The way it was supposed to be, as
described in the US Constitution, is that the Congress shall have the power
to coin (create) money. No others could create money in the name of the
United States; those that do are counterfeitors.
That is why I said earlier in this thread that the US Government could
simply create enough money, through spending on the infrastructure, to
sustain the expansion in the US economy. No interest would have ever been
involved in the creation of that money. I realize I didn't make that
explicit enough, but I gave credit to those interested in this subject to
pick up on that.
> >
> >It is becoming more and more apparent that the FED's "ability" to
"provide
> >liquidity to the system" is nothing more than simply giving more money to
> >the banks. What does the FED get in return?
>
> As noted above, the Fed gets securities in return. A bank gives
> up a valuable asset, the Treasury bond, in order to acquire
> reserves, i.e. a deposit at the Fed. No free lunch for the
> bank.
> >
> >The answer is nothing. That is, the FED gets absolutely nothing but an
IOU.
> >Talk about borrowing from Peter to pay Paul! But Peter is broke...
>
> Correct. It delivers its own IOU to the bank in exchange for the
> Treasury's IOU from the bank. What's the big deal?
So far, about $7 trillion worth of "big deal." That's how much that has
been lost thus far since the top of this bubble, and it isn't over yet.
The public is left to pick up the pieces and try to make it whole again. A
war will follow, but it too will be a bust. Stupid people in high places
with their fingers on the war button, accompanied by other stupid people
with their fingers on the printing presses, abetted by other stupid people
deep in debt, is a sure recipe for a national disaster.
>
> I suggest you read http://wfhummel.net/moneybasics.html
Did that, several times. I suggest you upgrade that link to an advanced
course.
William F Hummel
<jhog...@attbi.com> wrote:
>
>"William F Hummel" <wfhu...@attbi.com> wrote in message
>news:0lilju03bp9413grh...@4ax.com...
>> On Sun, 21 Jul 2002 04:13:45 GMT, "James Hogan"
>> <jhog...@attbi.com> wrote:
>> >
>> >Exactly where do banks get "securities" to sell to the FED?
>>
>> They buy them from the Treasury and in the secondary market,
>> spending their own capital. No different than when you buy
>> bonds. You trade your own money for the bonds at the market
>> price.
>>
>> >Exactly what of
>> >value do they exchange for dollars in their account? I guess a more
>> >specific question is" What does the FED get in return for these
>> >"securities"?
>>
>> Wha? The Fed gets the securities and credits the seller with a
>> deposit at the Fed, creating new money in the process.
>
>What does the FED get in return for these "securities"?
You started off by asking "Exactly where do banks get
"securities" to sell to the FED?" When you straighten out
exactly what you have mind, maybe someone will bother to answer
the question.
>Are you claiming
>that the banks have some amount of real money that they provide to the FED?
>If so, then where did they get it? Did they manufacture it out of thin air,
>or did it fall from the skies? The point here is that the banks are
>exchanging an IOU for something of value, which is to say they are swapping
>nothing for something. (A very good corollary is the "purchase" of
>TIme-Warner by AOL.)
All money is an iOU, so don't get hung up on that. A bank must
have a sufficient amount of its own money at risk to operate as a
bank. It gets that money from investors and from retained
earnings. And no, It doesn't fall from the sky.
>
>In other words, banks have nothing to offer except their willingness to
>accept debt as a condition for receiving money from the FED. All debt
>implies interest. The banks, and their subscribers, must shoulder this debt
>, and the interest, as a condition of receiving money from the FED.
OK, better try reading http://wfhummel.net/bankingbasics.html
>
>It wasn't supposed to be this way. The way it was supposed to be, as
>described in the US Constitution, is that the Congress shall have the power
>to coin (create) money. No others could create money in the name of the
>United States; those that do are counterfeitors.
OK, you've peddled this counterfeit money line before, and I went
into some detail to explain why it's pure nonsense. If this
represents your deep conviction, then join the alt.conspiracy
group where they will no doubt lap up your stuff.
>
>That is why I said earlier in this thread that the US Government could
>simply create enough money, through spending on the infrastructure, to
>sustain the expansion in the US economy. No interest would have ever been
>involved in the creation of that money. I realize I didn't make that
>explicit enough, but I gave credit to those interested in this subject to
>pick up on that.
Why should anyone care what you said earlier when you haven't
shown the slightest understanding of the subject?
>> >
>> >It is becoming more and more apparent that the FED's "ability" to
>"provide
>> >liquidity to the system" is nothing more than simply giving more money to
>> >the banks. What does the FED get in return?
>>
>> As noted above, the Fed gets securities in return. A bank gives
>> up a valuable asset, the Treasury bond, in order to acquire
>> reserves, i.e. a deposit at the Fed. No free lunch for the
>> bank.
>> >
>> >The answer is nothing. That is, the FED gets absolutely nothing but an
>IOU.
>> >Talk about borrowing from Peter to pay Paul! But Peter is broke...
>>
>> Correct. It delivers its own IOU to the bank in exchange for the
>> Treasury's IOU from the bank. What's the big deal?
>
>So far, about $7 trillion worth of "big deal." That's how much that has
>been lost thus far since the top of this bubble, and it isn't over yet.
>
>The public is left to pick up the pieces and try to make it whole again. A
>war will follow, but it too will be a bust. Stupid people in high places
>with their fingers on the war button, accompanied by other stupid people
>with their fingers on the printing presses, abetted by other stupid people
>deep in debt, is a sure recipe for a national disaster.
>
>>
>> I suggest you read http://wfhummel.net/moneybasics.html
>
>Did that, several times. I suggest you upgrade that link to an advanced
>course.
>
I was going to suggest a 6th grade primer, but I doubt that would
help.
James Hogan
> On Tue, 23 Jul 2002 03:12:00 GMT, "James Hogan"
> <jhog...@attbi.com> wrote:
> >
> >"William F Hummel" <wfhu...@attbi.com> wrote in message
> >news:0lilju03bp9413grh...@4ax.com...
>
> >> On Sun, 21 Jul 2002 04:13:45 GMT, "James Hogan"
> >> <jhog...@attbi.com> wrote:
> >> >
> >> >Exactly where do banks get "securities" to sell to the FED?
> >>
> >> They buy them from the Treasury and in the secondary market,
> >> spending their own capital. No different than when you buy
> >> bonds. You trade your own money for the bonds at the market
> >> price.
> >>
> >> >Exactly what of
> >> >value do they exchange for dollars in their account? I guess a more
> >> >specific question is" What does the FED get in return for these
> >> >"securities"?
> >>
> >> Wha? The Fed gets the securities and credits the seller with a
> >> deposit at the Fed, creating new money in the process.
> >
> >What does the FED get in return for these "securities"?
>
> You started off by asking "Exactly where do banks get
> "securities" to sell to the FED?" When you straighten out
> exactly what you have mind, maybe someone will bother to answer
> the question.
This question is as straight-forward as it can be made. The reality of the
situation is that the major money center banks exchange exactly *NOTHING*
for money, and when they do so, they get an "asset" on their books that
draws interest to them. In other- simpler-words, they exchange nothing for
something of value, and in the end, they collect this interest from the US
government itself. This is one of the principal (no pun intended) reasons
why we have a national debt.
> >Are you claiming
> >that the banks have some amount of real money that they provide to the
FED?
> >If so, then where did they get it? Did they manufacture it out of thin
air,
> >or did it fall from the skies? The point here is that the banks are
> >exchanging an IOU for something of value, which is to say they are
swapping
> >nothing for something. (A very good corollary is the "purchase" of
> >TIme-Warner by AOL.)
>
> All money is an iOU, so don't get hung up on that. A bank must
> have a sufficient amount of its own money at risk to operate as a
> bank. It gets that money from investors and from retained
> earnings. And no, It doesn't fall from the sky.
Money is money. Money is not debt. Debt is debt The only way that money
can be "an IOU" is if money is debt, which it isn't. Therefore all money
that is based on debt is unlawful.
...Which means that if a bank runs out of capital, it is broke. But under
this perverted system we have in place today, no bank need ever run out of
money to lend, because the US government will step in and "create" an
"asset" for the banks to lend. The bankers need never worry about such
things as "frugality" or even the possibility that they might not ever be
repaid, no matter how goofy the loans they make are. See AOL/TIme-Warner
for an acute example of this goofiness. There were literally thousands of
other loans made, many in the "new economy' (mostly the high-tech sector)
that had no realistic hope of ever being successful. But the bankers and
their buddies in the stock markets took us all to the cleaners, for the most
part. Many of them became gazillionaires and the rest of us are left with
the debt they created.
In sharp contrast to this system of creating money for the banks, the US
Government could just as easily create money to spend into the economy, and
THEN the banks could try to collect it, and lend it out. Spent frugally,
the citizens of the US would have something to show for the money. And
there is more than ample evidence that those resources that were
misallocated during the 1990s would have been more properly spent doing the
public's work, rather than making a few very rich. The problems that were
neglected are still there, festering.
> >
> >In other words, banks have nothing to offer except their willingness to
> >accept debt as a condition for receiving money from the FED. All debt
> >implies interest. The banks, and their subscribers, must shoulder this
debt
> >, and the interest, as a condition of receiving money from the FED.
>
> OK, better try reading http://wfhummel.net/bankingbasics.html
> >
> >It wasn't supposed to be this way. The way it was supposed to be, as
> >described in the US Constitution, is that the Congress shall have the
power
> >to coin (create) money. No others could create money in the name of the
> >United States; those that do are counterfeitors.
>
> OK, you've peddled this counterfeit money line before, and I went
> into some detail to explain why it's pure nonsense. If this
> represents your deep conviction, then join the alt.conspiracy
> group where they will no doubt lap up your stuff.
The reason that I say that is because it is true: Only the US government
can issue money in the name of the United States.
Your own writings reveal that money is borrowed into existence. This is
presently true. Borrowing means that someone must pay interest. That
someone is the US public, and as a member of the US public, I object.
> >That is why I said earlier in this thread that the US Government could
> >simply create enough money, through spending on the infrastructure, to
> >sustain the expansion in the US economy. No interest would have ever been
> >involved in the creation of that money. I realize I didn't make that
> >explicit enough, but I gave credit to those interested in this subject to
> >pick up on that.
>
> Why should anyone care what you said earlier when you haven't
> shown the slightest understanding of the subject?
Do you have even the most remote idea of what you speak of: Where does
money come from? Despite your website and your many posts here, I don't
think you have an inkling of an idea.
In a fiat money system , money comes from the government, which obligates
the citizens to stand behind the money. This is as it should be because the
government is the citizens. The citizens use the money to conduct commerce.
Money is not a vehicle for the enrichment of the already reich, which it has
become, but it is a means of conducting the division of labor in the
society. Money is the means by which the government pays for its own
operations.
This huge debt load that has built up between the government, the corporate
sector and the private sector can never be repaid. The US government tries
to gloss over the problem via accounting measures, that if engaged by the
corporate sector, would land the entire US Government in jail. The private
sector--the citizenry--is in debt to such an extent that it is becoming more
and more difficult for the private sector to take on any more debt.
The way out of this hole is for the US government to begin spending--via US
Currency, not Federal Reserve Notes--on infrastructure: on roads, water and
sanitation systems, high-speed rail services, electric generating systems,
schools, and the like. Things that make the US more productive and enhance
the quality of life in the United States.
William F Hummel
>
>> All money is an iOU, so don't get hung up on that. A bank must
>> have a sufficient amount of its own money at risk to operate as a
>> bank. It gets that money from investors and from retained
>> earnings. And no, It doesn't fall from the sky.
>
>Money is money. Money is not debt. Debt is debt The only way that money
>can be "an IOU" is if money is debt, which it isn't. Therefore all money
>that is based on debt is unlawful.
>
>...Which means that if a bank runs out of capital, it is broke.
If you understand what it means when a bank goes broke, how can
you be so confused about the banking system, as in your following
remarks?
>But under
>this perverted system we have in place today, no bank need ever run out of
>money to lend, because the US government will step in and "create" an
>"asset" for the banks to lend. The bankers need never worry about such
>things as "frugality" or even the possibility that they might not ever be
>repaid, no matter how goofy the loans they make are. See AOL/TIme-Warner
>for an acute example of this goofiness. There were literally thousands of
>other loans made, many in the "new economy' (mostly the high-tech sector)
>that had no realistic hope of ever being successful. But the bankers and
>their buddies in the stock markets took us all to the cleaners, for the most
>part. Many of them became gazillionaires and the rest of us are left with
>the debt they created.
If the government sees to it that no bank need ever run out of
money to lend, then why do so many banks fail?
I know I'm fighting an uphill battle, but where there's life
there's hope. I assume you are alive and not just a recording,
although there is mounting evidence of a broken record here.
>In sharp contrast to this system of creating money for the banks, the US
>Government could just as easily create money to spend into the economy, and
>THEN the banks could try to collect it, and lend it out. Spent frugally,
>the citizens of the US would have something to show for the money. And
>there is more than ample evidence that those resources that were
>misallocated during the 1990s would have been more properly spent doing the
>public's work, rather than making a few very rich. The problems that were
>neglected are still there, festering.
But the US government does create money, in fact ALL of the real
money (i.e. base money) in the economy. Banks issue credit,
backed by government regulation that requires them to hold
adequate capital, i.e. base money. Bank-issued credit is a proxy
for base money. Credit is what we exchange when we pay with
checks, while banks exchange base money to clear those checks.
>>
>> OK, you've peddled this counterfeit money line before, and I went
>> into some detail to explain why it's pure nonsense. If this
>> represents your deep conviction, then join the alt.conspiracy
>> group where they will no doubt lap up your stuff.
>
>The reason that I say that is because it is true: Only the US government
>can issue money in the name of the United States.
So you believe that the Federal Reserve is not a part of the US
government. Apparently you've adopted this as religion, which
makes it hopeless to argue the point further.
>
>Your own writings reveal that money is borrowed into existence. This is
>presently true. Borrowing means that someone must pay interest. That
>someone is the US public, and as a member of the US public, I object.
>
Apparently you object to the payment of interest but not the
receiving of interest. Do you also object to giving the
government an interest-free loan by accepting its currency
(dollar bills) instead of its bonds?
>
>> Why should anyone care what you said earlier when you haven't
>> shown the slightest understanding of the subject?
>
>Do you have even the most remote idea of what you speak of: Where does
>money come from? Despite your website and your many posts here, I don't
>think you have an inkling of an idea.
I can understand why you think that. There are a few who find it
difficult to grasp.
>
>In a fiat money system , money comes from the government, which obligates
>the citizens to stand behind the money. This is as it should be because the
>government is the citizens. The citizens use the money to conduct commerce.
I see you refer here to money as an obligation. An obligation is
a debt, right? Strange then that you cannot make the obvious
connection between money and an IOU (debt).
Here's a little food for thought: In a barter economy, the buyer
must offer real goods of the same value as the goods purchased.
If the seller agrees to deliver the goods in exchange for a
promise to receive equivalent value later, he has accepted an
IOU. That IOU is a credit for the seller and a debt for the
buyer. If the IOU is negotiable and readily accepted in exchange
for goods sold by others, that IOU has become money. In essence,
money is credit that is widely accepted as a medium of exchange.
>Money is not a vehicle for the enrichment of the already reich, which it has
>become, but it is a means of conducting the division of labor in the
>society. Money is the means by which the government pays for its own
>operations.
Money is the measure of financial wealth. It is not what causes
some to become very wealthy.
>
>This huge debt load that has built up between the government, the corporate
>sector and the private sector can never be repaid. The US government tries
>to gloss over the problem via accounting measures, that if engaged by the
>corporate sector, would land the entire US Government in jail. The private
>sector--the citizenry--is in debt to such an extent that it is becoming more
>and more difficult for the private sector to take on any more debt.
How can anyone take your reference to "accounting measures"
seriously, since you haven't shown any understanding of
accounting?
>
>The way out of this hole is for the US government to begin spending--via US
>Currency, not Federal Reserve Notes--on infrastructure: on roads, water and
>sanitation systems, high-speed rail services, electric generating systems,
>schools, and the like. Things that make the US more productive and enhance
>the quality of life in the United States.
>
So you propose that the government spend but never tax because
there is no need to recapture any of that money. It is all
nicely backed by permanent assets like highways and bridges. So
the money supply grows continuously with government spending.
But some of that spending is just to maintain the highways and
bridges in order to keep them from becoming useless.
Infrastructure, once built, isn't forever. The government also
buys aircraft and tanks that become obsolete junk or lost in
battle. Do you see anything wrong then with the notion that all
money is backed by real assets created by the government?
WFH
Lantern
>Your (Hummel's) own writings reveal that money is borrowed into existence.
This is
presently true. Borrowing means that someone must pay interest. That
someone is the US public, and as a member of the US public, I object.
>
Have you heard of the National Dividend System? Under this proposed scheme
money would be put into existence via a "gift" or "dividend" to each citizen.
The FED's Open Market Committee method would be eliminated.
Lantern - Trying to shed light on things, but it is awful dark out there.
"The future is here. It's just not evenly distributed yet." Science-fiction
writer William Gibson.
Grinch
wrote:
>
>"William F Hummel" <wfhu...@attbi.com> wrote in message
>news:m5lpjugji191g12f7...@4ax.com...
>>.....
>> OK, you've peddled this counterfeit money line before, and I went
>> into some detail to explain why it's pure nonsense. If this
>> represents your deep conviction, then join the alt.conspiracy
>> group where they will no doubt lap up your stuff.
>
>The reason that I say that is because it is true: Only the US government
>can issue money in the name of the United States.
Let's nail this down once and for all.
In a post a while back I asked you *exactly where* this "counterfeit"
money enters the money creation process. But you didn't answer, so
I'll ask again what I asked before...
~~
... let's step through the process and you can tell us just exactly
where the unconstitutionalilty takes place.
Step 1: You take your roll of awkward & heavy one-dollar US coins
[genuine US money coined by action of Congress!] that a Post Office
vending machine dumped on you as change for a stamp, and deposit them
in your savings account in a local bank.
Step 2: The bank loans the dollar coins out to someone else. Or
perhaps it spends them for its own account on its own costs.
No unconstitutionality there, it surely seems. The bank didn't
"create" those dollar coins, the US mint created them. The bank just
passed them on.
No money created.
Step 3: The bank credits the value of your deposit to your savings
account, increasing it by that much.
THIS is the money that is "created" by the bank -- the entry in
your savings account passbook showing how much more the bank owes you.
The money supply now equals the coins in circulaton *and* your the
amount of your deposit in the bank, noted in its books..
And you will note that the bank does *not* collect interest on
this money it created, it PAYS interest on it TO YOU.
So please now explain where the unconstitionality arises.
Perhaps you believe that if you deposit money in a savings account,
it is "unconstitutional" for the bank to note how much it owes you as
a result? ;-)...
~~
So I'll ask again: Where's the "counterfeit" money, exactly?
>Your own writings reveal that money is borrowed into existence. This is
>presently true. Borrowing means that someone must pay interest. That
>someone is the US public, and as a member of the US public, I object.
No it is *not* the public that pays the interest. The public
*collects* interest when money is "created". It is the bank that pays
the interest.
You are the public when you deposit dollar coins in the bank.
You *collect* interest on the new money created in the process.
You seem to be under some strange illusion that lending creates money.
Not so!
Accepting deposits is what creates money. A bank creates money
*without lending anything* when it accepts deposits and, without
lending any money out, spends the deposits for its own account on rugs
or advertising or teller salaries or whatever. And the bank pays
interest on deposits.
Lending = no new money.
Accepting deposits --> new money even if no lending.
And banks PAY money on deposits
Get it?
Does this make you feel better?
>.........
Michael L. Coburn
This step is totally incorrect. It does not reflect what actually
happens, nor does it reflect what should happen, nor does it reflect
anything that ever has happened in the world of banking in the last
300 years.
The bank may be an intermediary between a buyer and a seller that insures
the "wholeness" of a seller in an exchange. Credit money is created
in this process and many will refer to this credit as money because
the recipient of this credit money can indeed use the proceeds of the
sale in settlement of taxes. Let us accept for the nonce that this
so called money _will_ be erased from reality as the debt is paid; as
the guy that owes actually pays the bank that which has been borrowed.
There was a time when I thought the bank pocketed the money. But it
seems the bank can only pocket the fees charged for its services. It
seems that the borrower will be supplying all of the money needed to
pay the seller and the bank fees, no matter what they are. And after
this loan is repaid there is no more or no less realio trulio money
in the system than there was before that can be traced back to this
kind of a transaction.
> Step 3: The bank credits the value of your deposit to your savings
> account, increasing it by that much.
> THIS is the money that is "created" by the bank -- the entry in
> your savings account passbook showing how much more the bank owes you.
> The money supply now equals the coins in circulaton *and* your the
> amount of your deposit in the bank, noted in its books..
> And you will note that the bank does *not* collect interest on
> this money it created, it PAYS interest on it TO YOU.
>
> So please now explain where the unconstitionality arises.
>
> Perhaps you believe that if you deposit money in a savings account,
> it is "unconstitutional" for the bank to note how much it owes you as
> a result? ;-)...
> ~~
>
> So I'll ask again: Where's the "counterfeit" money, exactly?
It would seem The bank does not "create money" as a result of the
deposits from the private sector EITHER. This particular money and
any "interest" awarded thereto is a redistribution of money from
the borrowers to the savers and the bankers. It can be argued that
the bankers have a monopoly and that the the distribution of
"rent" on money between bankers and savers is wrong and or that
the bankers share of the rent is exorbitant. But there has been
no _obvious_ money creation at this point. The creation and
injection of additional money into this system is, so far,
a matter of monetary policy conducted by the Fed.
>>Your own writings reveal that money is borrowed into existence. This is
>>presently true. Borrowing means that someone must pay interest. That
>>someone is the US public, and as a member of the US public, I object.
>
> No it is *not* the public that pays the interest. The public
> *collects* interest when money is "created". It is the bank that pays
> the interest.
>
> You are the public when you deposit dollar coins in the bank.
>
> You *collect* interest on the new money created in the process.
There isn't any REAL money created by any process that is discussed
in the analysis so far and that is the best way to look at it.
See below:
> You seem to be under some strange illusion that lending creates money.
> Not so!
>
> Accepting deposits is what creates money.
Not so! Read on.
A bank creates money
> *without lending anything* when it accepts deposits and, without
> lending any money out, spends the deposits for its own account on rugs
> or advertising or teller salaries or whatever. And the bank pays
> interest on deposits.
>
> Lending = no new money.
> Accepting deposits --> new money even if no lending.
>
> And banks PAY money on deposits
>
> Get it?
>
> Does this make you feel better?
>
>>.........
I hope we can get this straighten out without insulting each other
but it probably won't happen:
The "consumer debt" which currently stands at 29 trillion or some
other enormous number is what Joe and Sally owe the people that
built cars and houses and tennis shoes plus the cost of banking.
Sally has agreed that she will be sending the bank a portion of
her future income so that she might possess the car she is driving.
The car company has been accounted the entire balance of the
transaction in the books of the bank. If you want to look at the
note Sally has signed and call it money than that is OK and you
can say that the banks have "created" 29 trillion in money, that's
fine. Go ahead. But the money was not created by a greedy
banker. It was created by a binding contract in which Sally
has agreed to pay a portion of her future income. If you want
to call that contract "money" it is OK to do so.
The interesting part of this is the _FACT_ that no safe full of
gold bullion or money needs to exist to support these transactions.
The "money" is automatically created every time there is a signed
contract between a borrower and some supplier of _REAL_ stuff.
The credit card industry is only slightly diffrent. There are
no "hard assets" (very diffcult to repossess and re-market used
underware). For these kinds of transactions there still need
not be a huge pile of gold backing the deals. However, the
"interest" rate (actually the insurance against defaults rate)
must be much higher and there must at all times be a "reserve"
of funds to manage the shortfall caused by bums. Banks, OTOH,
which can, in fact, issue credit at need would seem to have
scant reason to maintain such a pool of liquidity.
But we have not yet talked of "NEW" enterprises. We have not
talked of XYZ buying out ABC, or loans that use shares of
stocks as collateral. We have not discussed "risk" as it
relates to banking. When the bank lends on NEW enterprizes
there may not be any _REAL_ stuff to re-market. And when that
happens and the funds of the stockholders in the bank are
insufficient (this has nothing to do with insured deposits)
money MUST be created from the ether because there is no
other way to take up the slack. This is what happens when
the banks lend to some south American boongoggle, or when
the banks lend money taking stocks as collateral and the
company goes kapowie. Or in faoled Real Estate deals.
And when I speak of a 100% reserve banking system, and when
I talk about the backing for this 100% reserve system being
the current us government guaranteed bonds this is the segment
of the "banking" system to which I allude. And I'm not so
sure that resulting enterprise would even be called a bank.
But my entire "trick" is to stop the current banks from
creating money in this "New" enterprise area so that the
bondholders can draw interest from risk in these NEW
enterprises such that they need not tax MY wages. I'm very
self centered and single minded about this kind of thing.
---------------------------------
Retuning now to the original subject of money creation (outside
the scope of failed enterprises):
The Treasury creates T-Bills and gives them to the Fed and
the Fed Creates money in the account of the Treasury as a loan
from "somewhere". The Treasury is expected to pay interest
on this loan. And that is how the bulk of the "new" money
is "created". The Treasury, meanwhile, is also collecting
money from taxes which is paid to the Fed in respect of
outstanding loans that are secured by these T-Bills. It
is said that the Fed actually returns the interest to the
Treasury that the Treasury has paid to the Fed in respect of
these loans secured by the T-Bills. This leads one to wonder
why we would screw with the interest in the first place.
Perhaps it is a _religious_ thing.
Let us now go inside the Fed and see what's happening with
the T-Bills. If the government is creating money on the
one side and taxing it back out on the other side then the
amount of money is ever the same and no new T-bills need
be created. The Treasury pays interest to the Fed, the Fed
gives it back and along we go. But what does the Fed do
with the T-bills? The Fed simply sits on these T-bills
or the Fed sells these T-bills to a creature called a
T-Bill broker depending on whether the Fed needs to suck
money out of the "system" or put money into the "system".
Whether the Fed sells the T-bills and then makes Bonds
or uses Flippos and Harpos to create fransitach gears or
moonbeams is irrelevant. The sale and redemption of T-Bills
and other government backed financial instruments is a
tool used by the Fed to control the amount of "live" money.
http://GreaterVoice.org/econ/glossary/fiat_money.php
In the beginning the Fed bought
all the gold that was in the banks by creating deposits
in dollars in the accounts of those that brought gold to
Fort Knox. And if that is not exactly how the original
supply of money was created it is close enough. The
fed can still create money from the ether in the name of
the Banking system and buy gold with it. The Fed can
buy chickens if that's what it takes to put more money
into circulation. The Fed can also just create money
and give it to failed banks or to the friends of the Fed
or Santa Claus. That is not an indictment at this point but
only an observation. The Fed can SELL gold to get money
out of circulation if Fort Knox still has any gold (Which
I doubt), but the Fed has no chickens. If in dire
straights the Fed can sell government land and this is
dream of every Hayek worshiper in the world. But at
present, the Fed has these T-Bills that were cranked out by
the US Gummint and the US Gummint has money created by the
Fed. And the Fed can sell these financial instruments
to savers of money and then burn the money in a furnace
or keep it in the same safe where the T-bills were lying
dormant and collecting dust. It really won't matter.
_real_ money is fiat money.
All of the _real_ money (dollars) that has/(have) ever been
created has/(have) been created by the Federal Reserve as
an agent of the United States Government. If the Government
spends too much and does not collect enough taxes then the
Fed _may_ try to sell the T-bills for the lowest interest
rate it can get or the Fed can just let the money in the
live pool grow as it will. The people who receive the
money spent by government just move it around in the economy
and it ends up wherever it ends up. If nobody uses this
money for anything then it does not cause inflation in the
common understanding of that term. It just sits around in
the live pool being quite dead. And this final description
seems to reflect the current condition of the economy. We
have tons and tons of money in the live pool and the
dead pool and nobody cares. At present there is about
8 trillion in _real_ money just parked in bonds and banks
gathering dust and rent.
Michael L. Coburn
> jhogan wrote in part:
>
>>Your (Hummel's) own writings reveal that money is borrowed into existence.
> This is
> presently true. Borrowing means that someone must pay interest. That
> someone is the US public, and as a member of the US public, I object.
> >
> Have you heard of the National Dividend System? Under this proposed scheme
> money would be put into existence via a "gift" or "dividend" to each
> citizen. The FED's Open Market Committee method would be eliminated.
I detect a ray of intelligence/light from the lantern and others....
I also think it laughable that Pravda is being used as a way to
toss water on this very proper and rational concept. The "right
wing" hard at work, slinging that commie paint brush.
James Hogan
> On Sun, 28 Jul 2002 04:24:29 GMT, "James Hogan" <jhog...@attbi.com>
> wrote:
>
> >
> >"William F Hummel" <wfhu...@attbi.com> wrote in message
> >news:m5lpjugji191g12f7...@4ax.com...
>
> >>.....
> >> OK, you've peddled this counterfeit money line before, and I went
> >> into some detail to explain why it's pure nonsense. If this
> >> represents your deep conviction, then join the alt.conspiracy
> >> group where they will no doubt lap up your stuff.
> >
> >The reason that I say that is because it is true: Only the US government
> >can issue money in the name of the United States.
>
> Let's nail this down once and for all.
>
> In a post a while back I asked you *exactly where* this "counterfeit"
> money enters the money creation process. But you didn't answer, so
> I'll ask again what I asked before...
Mr. Coburn's lucid post notwithstanding, it begins at the beginning.
What follows is just an outline of this topic...
In the first place, only the US Congress can create money in the name of the
United States. Others may issue whatever items they wish to exchange among
themselves, but only the US Congress can create (coin) US money.
Therein begins the fraud, the counterfeiting.
All money created since August 15, 1971 is counterfeit. That was the day
when the United States officially threw the dollar on the international
commodity market. (There are reasons why this happened, but they are
somewhat beyond the purview of this post.) All currency issued since then is
a "trading unit" or more specifically, an "accounting unit."
What should have happened on August 16, 1971 is that the United States
dollar should have become an item issued solely by the Treasury of the
United States, at the direction of the U. S. Congress. That did not happen;
instead, what happened is that the dollar became the province of the banking
establishment.
What has happened since is that the banks have been able to take a cut of
every penny that has been introduced into circulation.
What should have happened is that the currency should have first emanated
from the US Treasury, at the direction of the Congress, and spent directly
into the US economy.
Instead, what happened is that the banks gained control of the money supply,
and spent it to their own benefit and to the benefit of their peers.
As a result, in the real world, the public is left to make all that money
good, at our expense.
This is no small amount here. Depending on how it is counted, at *least* 7
**trillion** dollars of value has been heisted from the US. Some say that
this is just "credit" and of no consequence, because no real money has been
lost.
These are the arguments of fools. For your "credit" is the "debit" of
another, and so on. Everybody owes everybody else, with the banks taking a
cut at every step. What a game!
<rest deleted--read it if you are interested>
James Hogan
"Lantern" <gchan...@aol.com> wrote in message
news:20020728125514...@mb-fe.aol.com...
> jhogan wrote in part:
>
> >Your (Hummel's) own writings reveal that money is borrowed into
existence.
> This is
> presently true. Borrowing means that someone must pay interest. That
> someone is the US public, and as a member of the US public, I object.
> >
>
> Have you heard of the National Dividend System? Under this proposed scheme
> money would be put into existence via a "gift" or "dividend" to each
citizen.
> The FED's Open Market Committee method would be eliminated.
This proposal is part of the "Social Credit" platform, IIRC. I don't think
it would work very well, because of its scattershot aspect.
For the currency to have value, it must represent something of value.
Pretty simple, huh?
That's why I advocate that the currency be first spent of things of value,
like roads, bridges, airports, rail systems, dams, electricity generating
plants, ports, etc...things that will be there no matter what
happens...short of a war or natural disaster.
We have just come through a period when dot.bomb stocks were valued into the
stratosphere, and now they make good wallpaper in someone's den.
I don't think we should repeat this experience.
Michael L. Coburn
It REALLY depends on who runs the government.... Doesn't it?
And it _is_ 6 to 8 a trillion. Consumer dept is entirely differnet.
> These are the arguments of fools. For your "credit" is the "debit" of
> another, and so on. Everybody owes everybody else, with the banks taking
> a
> cut at every step. What a game!
I don't disagree with you on principle. It is the mechanics of the
situation that we need to look at so as to understand who actually
owes who. The amount of money/credit/wealth that hes been "heisted
is not yet "heisted". We the people are supposed to control our
government and it is _OUR_ government. We cannot tell how much of
the loot was taken by middlemen and how much was taken by Ronald
Reagan's aristocratic friends that should have paid their taxes and
didn't. But what I _can_ tell you is that the wage earners in the
USA do not owe one damned dime of this 8 trillion.
http://GreaterVoice.org/econ/glossary/The_Great_Ray_Gun_Rip_Off.php
Ray
other "loan me $10 and I'll give you $15 at the end of the month".
This is really a great deal since you have the the one person's $10 and that
covers the $10 you lent the other guy. You have the same amount of money you
started with and you'll have an extra $5 at the end of the month.
O'K, there's an extra $50 in the pockets of the "circle" people. Where did
it come from?
Answer - They (Gov't.) printed it. They had to. It's money out of thin air.
If the US had an interest free central credit union, there would be little
or no inflation or better yet go back on the gold standard. They can't print
gold. This would really piss off the bankers.
I did sort of a MTR (money trashing rate) of various countries from 1970 to
2000. It's a ratio of the # of say Swiss Francs it took to buy a US dollar
in 1970 divided by the # to do the same in 2000. The US would have a ratio
of 1.0.
Not suprisingly, the Swiss Franc was the least trashed at .33. Japan is next
at .36. Germany, Ireland and the U.K. are better than the US. France,
Sweden, Canada, Spain & Italy are worse than the US.
FYI - Ray
"James Hogan" <jhog...@attbi.com> wrote in message
news:Uvm29.729422$352.159974@sccrnsc02...
Gary Forbis
> >Talk about borrowing from Peter to pay Paul! But Peter is broke...
>
> Correct. It delivers its own IOU to the bank in exchange for the
> Treasury's IOU from the bank. What's the big deal?
Would I be going too far to say,
"Money" is the aggregate of IOUs on the market and the goods and
services the borrowers are willing to produce and provide in exchange
for their redemption.
Some may hold "coinage" out as something different but it is not
because its value is due to the identifying marks made on it rather
than its metal content and this value is no more or less than the
guarantee of the marker to exchange metals based upon the marks upon
the coin rather than the commodity price of the metals composing it.
Lantern
>> What should have happened on August 16, 1971 is that the United States
>> dollar should have become an item issued solely by the Treasury of the
>> United States, at the direction of the U. S. Congress.>>
Sounds good to me. What should we do now?
Three proposals I've heard are:
1. 100% Reserve Requrement.
2. National Dividend.
3. National Credit Union.
Lantern
>This proposal (National Dividend System) is part of the "Social Credit"
platform, IIRC.>
What's that? Also,
>>>That's why I advocate that the currency be first spent of things of value,
>like roads, bridges, airports, rail systems, dams, electricity generating
>plants, ports, etc...things that will be there no matter what
>happens...short of a war or natural disaster.>>>
Does that mean you favor the above rather than a national dividend paid to all
citizens?
Lionel Van Leeuw
> Picture this. Take 10 people in a circle, going clockwise each says to the
> other "loan me $10 and I'll give you $15 at the end of the month".
>
> This is really a great deal since you have the the one person's $10 and that
> covers the $10 you lent the other guy. You have the same amount of money you
> started with and you'll have an extra $5 at the end of the month.
>
> O'K, there's an extra $50 in the pockets of the "circle" people. Where did
> it come from?
>
> Answer - They (Gov't.) printed it. They had to. It's money out of thin air.
No. Because everyone in the circle has to pay the extra $5 to everyone,
noone has extra money at the end of the month.
In fact, because everything is circular here, everybody as a nil net
position. Everybody still has his initial $10 and nothing else.
> If the US had an interest free central credit union, there would be little
> or no inflation or better yet go back on the gold standard. They can't print
> gold. This would really piss off the bankers.
>
> I did sort of a MTR (money trashing rate) of various countries from 1970 to
> 2000. It's a ratio of the # of say Swiss Francs it took to buy a US dollar
> in 1970 divided by the # to do the same in 2000. The US would have a ratio
> of 1.0.
>
> Not suprisingly, the Swiss Franc was the least trashed at .33. Japan is next
> at .36. Germany, Ireland and the U.K. are better than the US. France,
> Sweden, Canada, Spain & Italy are worse than the US.
In fact, the U.K. and Ireland are both worse than the US, not better.
--
Lionel Van Leeuw
William F Hummel
wrote:
>William F Hummel <wfhu...@attbi.com> wrote in message news:<0lilju03bp9413grh...@4ax.com>...
>> On Sun, 21 Jul 2002 04:13:45 GMT, "James Hogan"
>> <jhog...@attbi.com> wrote:
>> >The FED gets absolutely nothing but an IOU [from the treasury of the US].
>> >Talk about borrowing from Peter to pay Paul! But Peter is broke...
>>
>> Correct. It delivers its own IOU to the bank in exchange for the
>> Treasury's IOU from the bank. What's the big deal?
>
>Would I be going too far to say,
>"Money" is the aggregate of IOUs on the market and the goods and
>services the borrowers are willing to produce and provide in exchange
>for their redemption.
What the borrower (issuer of an IOU) is _committed_ to produce to
redeem the IOU is what you probably mean, rather than what he is
_willing_ to produce.
"Money" has various definitions. In the narrow sense it is the
IOUs of the Federal Reserve, which consist of notes and coins
plus deposits it holds for non-government entities. For example,
the deposit of the Treasury at the Fed is not considered part of
the money supply. When it spends, it becomes a part of the money
supply. But that amount of money is promptly recaptured in taxes
or bond sales, and thus vanishes from the money supply.
In a broader sense, "money" is the aggregate of IOUs issued by
the Fed and by banks and thrifts.
In a still broader sense, "money" is any IOU widely accepted as a
medium of exchange. How wide depends on what you want to focus
on. For example, in Japan during the initial months of the
occupation after WW2, cigarette packs were money for the Japanese
as well as the US service personnel.
IOUs that are not widely accepted should be viewed as simply a
private debt instrument. The IOU a bank gives a depositor is not
money because it is not negotiable. Nobody will accept your
claim on a bank deposit in payment of goods and services.
>
>Some may hold "coinage" out as something different but it is not
>because its value is due to the identifying marks made on it rather
>than its metal content and this value is no more or less than the
>guarantee of the marker to exchange metals based upon the marks upon
>the coin rather than the commodity price of the metals composing it.
All coinage is a token, just as is paper money. The cost of
producing a dollar's worth of coinage is much higher than
producing a dollar bill, but that simply means the seigniorage
for the producer (the government) is that much less.
Interestingly, the cost of producing a Sacagawea dollar coin is
quoted as 15 cents versus about 4 cents for a dollar bill. Yet
the expected life of the coin is about 15 times greater than the
bill, so the ultimate cost of servicing dollar coins would be
much less than servicing the same number of dollar bills.
Nevertheless production of the dollar coin has been discontinued
because they were not widely used. People were hoarding them
rather than spending them, and many didn't even want to handle
them.
William F Hummel
Grinch
wrote:
>"Grinch" <oldn...@mindspring.com> wrote in message
>news:77f8ku0gapt2nk34q...@4ax.com...
>> On Sun, 28 Jul 2002 04:24:29 GMT, "James Hogan" <jhog...@attbi.com>
>> wrote:
>>
>> >
>> >"William F Hummel" <wfhu...@attbi.com> wrote in message
>> >news:m5lpjugji191g12f7...@4ax.com...
>>
>> >>.....
>> >> OK, you've peddled this counterfeit money line before, and I went
>> >> into some detail to explain why it's pure nonsense. If this
>> >> represents your deep conviction, then join the alt.conspiracy
>> >> group where they will no doubt lap up your stuff.
>> >
>> >The reason that I say that is because it is true: Only the US government
>> >can issue money in the name of the United States.
>>
>> Let's nail this down once and for all.
>>
>> In a post a while back I asked you *exactly where* this "counterfeit"
>> money enters the money creation process. But you didn't answer, so
>> I'll ask again what I asked before...
>
>Mr. Coburn's lucid post notwithstanding, it begins at the beginning.
Lucid??? I guess in the land of the schizoprhenic the merely
incoherent is lucid.
>What follows is just an outline of this topic...
What follows is a 100% dodge of a simple question, which you totally
snip.
I will repeat it for your convenience below, since running away from a
straightforward question like that is hardly persuasive that you have
any answer for it.
But first I will remind you that the Federal Reserve, which is part of
the U.S. government, [see, as I told you before, _Research Triangle
Institute v. Board of Governors of the Federal Reserve System_, 132
F.3d 985 (1997), if you are silly enough to doubt it] prints federal
reserve notes for use as US money as per the instructions of *the US
Congress* as per the Federal Reserve Act, enacted by *the US
Congress*.
So unless you think that members of Congress should *personally* be
engraving, inking, printing, and distributing US currency, which
wouldn't leave them much time for other tasks, you will have to admit
that federal reserve notes, which exist *by act of Congress*, have
been created *by Congress*. If you can't admit that you are a
crackpot, frankly.
Yet I removed even *that* silly objection from the simple question I
posed to you, by using coins created by the Treasury instead!
So try answering.... then I'll make a couple more comments on what you
just wrote.
Here's the three-step process of money creation by banks....
~~
... let's step through the process and you can tell us just *exactly
where* the unconstitutionalilty takes place.
Step 1: You take your roll of awkward & heavy one-dollar US coins
[genuine US money coined by action of Congress!] that a Post Office
vending machine dumped on you as change for a stamp, and deposit them
in your savings account in a local bank.
Step 2: The bank loans the dollar coins out to someone else. Or
perhaps it spends them for its own account on its own costs.
No unconstitutionality there, it surely seems. The bank didn't
"create" those dollar coins, the US mint created them. The bank just
passed them on.
No money created.
Step 3: The bank credits the value of your deposit to your savings
account, increasing it by that much.
THIS is the money that is "created" by the bank -- the entry in
your savings account passbook showing how much more the bank owes you.
The money supply now equals the coins in circulaton *and* the
amount of your deposit in the bank, noted in its books.
And you will note that the bank does *not* collect interest on
this money it created, it PAYS interest on it TO YOU.
So please now explain where the unconstitionality arises.
Perhaps you believe that if you deposit money in a savings account,
it is "unconstitutional" for the bank to note how much it owes you as
a result? ;-)
~~
>In the first place, only the US Congress can create money in the name of the
>United States.
OK, now tell us the name of *who else* creates money "in the name of
the United States" other than Congress when it instructs the Federal
Reserve to do so via its enactment of the Federal Reserve Act.
Tell us the scalawag's name! We'll jail him!!
> Others may issue whatever items they wish to exchange among
>themselves, but only the US Congress can create (coin) US money.
>
>Therein begins the fraud, the counterfeiting.
>
>All money created since August 15, 1971 is counterfeit.
Oh, do tell us now why currency issued *before* that date *wasn't*
counterfeit.
After all, such currency existed of *federal reserve notes* just
EXACTLY like the money issued after that date. The very same notes in
circulation even.
How can the same very dollar bill be genuine on August 15 and
counterfeit in August 16 ???? !!!
And how come the Fed could print money before but not after???
Was there some magicn change in the Constitution?
Did Congress change a law to say the Fed couldn't print currency any
more?
> That was the day
>when the United States officially threw the dollar on the international
>commodity market. (There are reasons why this happened, but they are
>somewhat beyond the purview of this post.) All currency issued since then is
>a "trading unit" or more specifically, an "accounting unit."
Does the Constitution say Congress can't "coin" money for use as a
trading unit.
The Constitution says Congress can "coin" money as it wishes -- not
that Congress's wishes are subject to approval by Hogan.
Why are you trying to override the Constitution and Congress??
Show us the judge or lawyer who agrees with you!
Name that judge!!!
>What should have happened on August 16, 1971 is that the United States
>dollar should have become an item issued solely by the Treasury of the
>United States, at the direction of the U. S. Congress.
How come if Congress tells the Fed to print currency after August 15,
1971 that's bad, but if it tells the Treasury to do so that's OK?
> That did not happen;
>instead, what happened is that the dollar became the province of the banking
>establishment.
>
>What has happened since is that the banks have been able to take a cut of
>every penny that has been introduced into circulation.
Bullshit. Totally.
If the Treasury printed and spent currency directly -- and it has --
and you deposited it in a savings account, "bank money" would be
created in EXACTLY THE SAME WAY as it is now.
So back to the three-step example and explain how that's a bad thing.
Show us how a bank that PAYS interest on every dollar of bank credit
(bank "money") it creates is actually "taking a cut" ;-)
Don't run away again. Show us which of the three steps is
unconstitutional.
Or give up
<snip>
Grinch
OK. Now I'm going to carefully answer every coherent and substantive
observation about "money" that you managed to squeeze into 273
lines....
Grinch
>William F Hummel <wfhu...@attbi.com> wrote in message news:<0lilju03bp9413grh...@4ax.com>...
>> On Sun, 21 Jul 2002 04:13:45 GMT, "James Hogan"
>> <jhog...@attbi.com> wrote:
>> >The FED gets absolutely nothing but an IOU [from the treasury of the US].
>> >Talk about borrowing from Peter to pay Paul! But Peter is broke...
>>
>> Correct. It delivers its own IOU to the bank in exchange for the
>> Treasury's IOU from the bank. What's the big deal?
>
>Would I be going too far to say,
>"Money" is the aggregate of IOUs on the market
Most IOUs are not money. It's rather doubtful that most people would
accept your or my personal IOUs as "money".
Only IOUs that have very near full certainty of being paid off are
used as money, such as short-term obligations of top financial
institutions. And money need not be an IOU.
> and the goods and
>services the borrowers are willing to produce and provide in exchange
>for their redemption.
Goods and services certainly are not "money."
>Some may hold "coinage" out as something different but it is not
>because its value is due to the identifying marks made on it rather
>than its metal content and this value is no more or less than the
>guarantee of the marker to exchange metals based upon the marks upon
>the coin rather than the commodity price of the metals composing it.
??? The issuer of a coin guarantees to exchange me something for it?
What does the US guarantee to exchange me for my Susan B. Anthonys?
If we really get desperate wondering about what constitutes money, we
could in an emergency refer to the definition given by the Federal
Reserve, which ought to know. To wit:
~~~
The narrowest measure, M1, is restricted to the most liquid forms of
money; it consists of currency in the hands of the public; travelers
checks; demand deposits, and other deposits against which checks can
be written.
M2 includes M1, plus savings accounts, time deposits of under
$100,000, and balances in retail money market mutual funds.
M3 includes M2 plus large-denomination ($100,000 or more) time
deposits, balances in institutional money funds, repurchase
liabilities issued by depository institutions, and Eurodollars held by
U.S. residents at foreign branches of U.S. banks and at all banks in
the United Kingdom and Canada.
http://www.ny.frb.org/pihome/fedpoint/fed49.html
~~~