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Posts posted by Andy_K

  1. People on here frequently moan about banks creating money out of thin air when one gets a loan but the more i think about it the more reasonable it .

    Money is, amongst other thngs, effectively a numerical representation of the value of work, in this case mine, allowing me to exchange my output or my skills for the output or skills of someone else, or lots of other people.

    By taking a loan, i'm saying i want to spend the output of my future work (represented by a numerical value of money) now, prior to doing the work i.e I'm taking my future work output, something which doesnt yet exist and bringing it forward to today. So until I decide to bring my output forward why would the money that represents it exist in this current time?

    Also, it seems like I'm the one creating the money from thin air too, not the bank.

    Money is a representation of a claim on a share of resources & labour. For you to spend resources & labour they must exist. You can't buy bread if none has been baked.

    In other words, you aren't spending the results of your future labour. You are spending the results of someone else's finished labour. That labour is completed, so the claim to it must exist, so the money must exist.

  2. Example from US - they are selling out into cash

    Wealthy Dump Assets


    Nov 2012

    "Fearing an increase in capital gains and dividend taxes, many of the rich are unloading stocks, businesses and homes before the end of the year.

    Wealth advisors say that with capital-gains taxes potentially going to 25 percent from 15 percent, and other possible increases in the dividend tax, estate tax and other taxes, many clients are selling now to save millions in taxes.

    I don't doubt it's true, but it's crazy.

    The problem is that the amount of currency in existence is many orders of magnitude larger than the total number of available things to spend it on in the entire world. If even a small fraction of it was spent at once, there would be massive currency devaluation. As the debt bubble grows exponentially, the fraction which can be spent without destroying currencies or wildly inflating asset prices decreases even further. You reach the point where the rich can't actually spend their 'wealth', because in doing so they would destroy it's value. Sooner or later the devaluation can't be avoided any further, and there's a rush to assets before the currency falls apart completely.

    That capital gains tax is simply a mechanism for further delaying the collapse by encouraging the holding of cash.

    How long the plates will stay spinning is anybody's guess, but they won't stay forever.

  3. true if you have saved for your and family needs .. What if you have hoovered up all of the food for the village, city, country... Do you agree there is a limit to what can be seen as reasonable saving.. ?

    Hoarded food or resources, yes - but they are self-correcting in that the more you try to acquire, the more expensive they'll get.

    With money, you can hoard as much as you like in a big scrooge mcduck style money bin if you like. It won't make society poorer, it'll just deflate currencies as you remove it from circulation. Money is just a way of determining the relative share of available assets that you can obtain at any particular time. If your money isn't in the system, your share of resources/assets being distributed is zero. Money is not wealth. It's a representation of your potential ability to acquire real wealth, should you choose to spend it.

    If the rich were spending all their money on real things, they'd be taking a bigger share of the pie, which therefore would leave the rest of us with less.

  4. All these economic theories are very misleading if you're thinking about money instead of wealth. Like Injin says, you need to abstract away the medium of exchange in order to see what's really going on.

    Forget the money. Look at what it produces - food, energy, labour, consumable products, housing, etc. There are a finite amount of these resources existing and being produced at any time. Money determines how big a slice of them you get. More money to person X can only result in more stuff for person Y if person X utilises their resources to increase the amount of resources available. In the real world, this means building power plants, factories, housing, farming, etc.

    On the other hand, if person X just consumes the extra resources, it's detrimental to everyone else

    In other words, redistributing wealth towards the wealthy can only benefit everyone else if the economy is structured so as to encourage investment into real, productive ventures or research. Since ours seems primarily to encourage financial theft/fraud and litigation, it doesn't work.

    But it might in a genuine free market

  5. Yes, what fool would keep buying from a massively indebted nation, with the virtual certainty of massive losses by inflation?

    You are. Though largely not through choice.

    Around 1/3 of UK debt is held by pension & insurance funds. Bank of England (i.e 'your future earnings') holds another third. The rest is various overseas purchasers (probably largely foreign pension funds) and financial institutions.

  6. Thank you for your explanation. :)

    When we talk about government debt (the £1 trillion amount) , then, are we only talking about these gilts/bonds? If so I assume we wouldn't have to worry as the government would have an equivalent amount of assets it has bought using these gilts which it could sell.

    What, like RBS shares? :lol:

    Or is the government having to borrow money from the money markets to fund QE?

    It effectively prints it. The bank of england is not allowed to purchase newly issued gilts (google primary issuance) so what it does is buy them from private holders... who then go out and replace them by buying the newly issued ones. The net effect is that the money created by the BoE gets to be spent by the government, with a cut taken out by the financial services in the middle.

    It also artificially raises demand, and therefore keeps the interest rate on gilts down.

  7. The counjtry would have been just as bust under the tories, btw. Why?: Because this is the time for the natural endgame of the fiat ponzi.

    Sadly true... at best we'd be a few years further away from it collapsing if the tories had been in charge. An Italy instead of a Greece, but ultimately facing the same fate.

    Question: We all know that fiat currencies have gone bust before, as they do every time. Has there ever been a time when so many floundered at the same time? No? Should be an interesting decade or two then...

  8. The argument in the OP seems to be that it doesn't work this way for governments. It seems wrong to me. I think the MMTers want us to believe that there is no positive effect on the real private economy when the government cuts its spending. It seems obvious to me that if the government is not consuming real resources, there will be more resources left for everybody else to work with. Some of those resources will be invested in productive capital which will generate a taxable income at a future date.

    +1 for this and your other posts. Good to see there are a few people who can see through the fog.

    As to whether the government should be spending more or less - that depends. Is the government or the private sector more likely to use resources in a way which increases the productivity of the nation most in the long term?

  9. You can't protect the value of money.

    It is just a means of distributing wealth. All the size of your pension determines is how big your slice of the UK pie will be, relative to how much money everyone else has at that time. Guaranteeing a certain size means necessarily stealing from others in the event that the pie has shrunk in any way.

    Since we know it is shrinking and will continue to do so, these ideas are at best misguided and at worst deliberate misinformation

  10. ?

    Is there high inflation of houses near you? If not and your savings are only to buy a house, then no problem. That is the only rate of inflation you need concern yourself with.

    Disagree with this. You are confusing money with wealth. There are dozens of different ways to store your wealth - UK sterling, foreign currency, precious metals, stocks, land, and so forth. If you have high inflation, the general trend on most of these, measured in £, is going to be upwards. If house prices are dropping during rampant inflation and therefore they maintain the same nominal value, that doesn't mean you haven't lost wealth via inflation on your savings.

    If you had a £50k desposit for a £100k house, and the currency halves in value the same time house prices drop in half, you will still have a £50k deposit towards a £100k house, but really you've only got the equivalent of a £25k desposit for a £50k house. Had your savings been inflation-proof, you'd have £50k for a £50k house.

    Just because the goalposts move with you, doesn't mean you haven't moved.

  11. Money is a means of distributing the finite resources and labour that exist in the world at any one time.

    Western economies discovered that by borrowing money into existence, backed only by a promise to repay, that they could take a much bigger slice of the pie than they deserved. They got more oil, more food, more cars, and the fruits of labour from other countries. All they had to do in return was get into debt and promise to repay. As production moved abroad, the western nations stopped making much for themselves, and imported almost all their goods from abroad whilst developing 'service' based economies which delivered no real productive value.

    When the debt started to reach a critical mass, cracks started appearing. National deficits spiralled. Banks needed bailouts. People couldn't pay their mortgages or credit cards. There was simply too much debt in the system.

    It is yet to be determined how the default happens and the big reset takes effect, but currency devaluation is a likely option. It may take some decades to set it, but ultimately no nation can consume more than it produces. This means we will move, painfully, towards a situation where the west produces a lot more and consumes a lot less.

    We are all going to become a lot poorer.

  12. Ok, but then when things pick up where do the jobs go? Which looks like the best place for any future investment? Don't forget companies will take a long term view when looking at where to open new facilities.

    Imagine if you had a choice of two mobile phone contracts, one where you could change the phone or cancel the contract when ever you wanted, the other where you were fixed to the same phone and tied in for 10 years. Which would you go with?

    If you took the flexible contract then cancelled it after five years, which company benefited most from the deal?

    I realise there are wider issues involved.. but sometimes it helps to put yourself in the shoes of the investor/potential-employer.


    We can't have it both ways. People want security in their employment yet they want to be able to change mobile phone contracts, energy suppliers, mortgages etc all at the drop of a hat.

    If you want a flexible economy, you need to be a part of it. People want their service as an employee to be sacrosanct, yet they want every service they rely on in their lives to be instantly disposable. That sounds like ego and entitlement to me.

  13. If the consumer is the worker how can making consumers poorer and less secure in their employment create growth. This whole idea that employment law holds back growth is a smokescreen.

    Wealth is about production, not money. Money is just a means of distributing wealth. Consumers are poorer when there is less stuff they can afford, not when they're given less money.

    If you make business more efficient there's more stuff for people to have, or to be exported. Either of which is good for the country.

  14. The numbers are bigger, but compared to the figures for the last few years both december and january were very good, hence the positive comments.

    Due to monthly fluctuations, generally figures like this are best compared year-on-year, rather than month-on-month. In this case both dec 2011 and jan 2012 are massive improvements on dec 2010 and jan 2011 respectively.

  15. There was another great game from the 80s, Balance of Power where you get to try and rule the world or some nonsense. I only ever attempted to trigger a war (as it was more fun), though never actually suceeded. The best I could manage were the odd Coup d'Etats and I think once a Civil War. Surprisingly difficult to actually initiate a full blown war - but interesting in itself to observe that fact when playing. Anyway, why don't we get games like this today?! Proper hardcore intellectual war/power/economic games. First person shooters are all very well (and I'm sure you could throw them in as a sort of flip between ruler and grunt control) but they don't allow you to set up the conflict with the country/ target you want B) There's always Farmville I suppose :ph34r:

    More interesting/intellectual games still exist, but they're not mainstream so they're very hard to find.

    Fate Of The World for example, focuses on the upcoming energy crisis, and involves applying economic policies in different parts of the world to try to prevent mass human extinction, riots, & plummeting standards of living. It's the sort of game that might be of interest to the sort of people that would frequent this forum & play an economic simulator, but you'd never catch a hoodie buying a copy in Game (if it were even stocked)

  16. Back in 1982 (this was before personal computers) I studied economics at college. Our class attended a 'Uni' where we ran a virtual economy on one of their mainframe/mini computers. Put simply we could 'raise/lower' tax and interest rates etc, the compter program would show the effects via a model, the idea was to teach us how different aspects of economic policy impacted the economy as a whole.

    Obviously the BoE have such a thing but is a simplified one available for the public to use?

    Great idea, but one big problem.

    Any such model will only be as useful as the rules it is programmed with. Given the dominance in mainstream economics of neoclassical/keynesian approaches, any such model would be built with those rules in mind and to make those rules work. As such, trying to use any of the popular ideas here, which lean towards the Austrian school, would inevitably either be impossible or fail completely.

    The only way to make such a simulation work would be to program the economy from the ground up - this means modelling all food production, energy production, (and associated consumption) every transaction of labour/money and so forth. You could then get some more meaningful results out. But nobody's going to program a model which does that when they can write one based on 'known' economic rules which gives their superiors the 'correct' answers :D

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