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Money Creation

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Hard to have proof of somethign that doesn't occur, Sceppy.

But ofc, the BoE doesn't need ot be consulted - a cash hand over will involves signatures, real life flesh and blood peopel as witnesses.

oddly, though no bank I know of can provide such people either.

Why do you think this is?

when a loan is made that is an event on the loaning bank's balance sheet. The proof is invoked when the loaned balance is withdrawn from that bank.

The items transferred can be electronic or physical currency, and in either case their is a proof. In the former case, there is your bank account, and the respective banks accounts at the BoE. In the latter case, there is the ATM statement, your bank account statement, and whatever account exists between the bank and the BoE to cover the movement of base money between electronic and paper form.

Why can't you accept that paper money is no less fake than electronic bank reserves. There really is no reason to think that paper tenners are better than electronic base tenners.

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when a loan is made that is an event on the loaning bank's balance sheet. The proof is invoked when the loaned balance is withdrawn from that bank.

Surely a bank balance sheet is not an event in and of itself, but merely a recording of events?

The items transferred can be electronic or physical currency, and in either case their is a proof. In the former case, there is your bank account, and the respective banks accounts at the BoE. In the latter case, there is the ATM statement, your bank account statement, and whatever account exists between the bank and the BoE to cover the movement of base money between electronic and paper form.

I'm sorry - you said that base money was notes and coins, which pass between banks when a loan is made.

Do you wish to change your mind?

Why can't you accept that paper money is no less fake than electronic bank reserves. There really is no reason to think that paper tenners are better than electronic base tenners.

Perhaps it's because what people contract to is what should be done?

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I'm sorry - you said that base money was notes and coins, which pass between banks when a loan is made.

No thats what you said. I said that base money is electronic deposits at the BoE plus notes and coins NOT IN CIRCULATION!

Go back an reread what I wrote earlier.

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No thats what you said. I said that base money is electronic deposits at the BoE plus notes and coins NOT IN CIRCULATION!

Go back an reread what I wrote earlier.

So you are saying when people take a loan out, there might not be any notes and coins involved?

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So you are saying when people take a loan out, there might not be any notes and coins involved?

there is no point in distinguishing between notes and coins and elec. base money. Its all debt, public debt. Printing a receipt and putting the queens mug on it (which is what a tenner is) doesn't change anything.

Although you have a better understanding of what money is than most, this little sticking point is really holding you back.

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there is no point in distinguishing between notes and coins and elec. base money. Its all debt, public debt. Printing a receipt and putting the queens mug on it (which is what a tenner is) doesn't change anything.

And if I have agreed to one thing but another is actually happening, there is no point distinguishing?

Although you have a better understanding of what money is than most, this little sticking point is really holding you back.

I'm only going off the contracts.

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And if I have agreed to one thing but another is actually happening, there is no point distinguishing?

I'm only going off the contracts.

Well, this is the point at which you can retreat back into your solipsist fantasy or join the real world. Seeing as it appears you are once again set on the former, I'll leave you to it.

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Well, this is the point at which you can retreat back into your solipsist fantasy or join the real world. Seeing as it appears you are once again set on the former, I'll leave you to it.

I'm actually just asking questions.

Same as I have done with banks.

But you already know my position*, and knew where this was going. That being the case, this all was leading up to you doing this shrill dismissal.

Pathetic, really.

*i.e. I hold the factual one.

Edited by Injin

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You have mistaken my goal. My goal was for you to understand how banking and credit work.

Thats embarrassingly arrogant mate. That was not what I was asking. You have zero credibility to speak on this topic (or I can't find any reference to any whatsoever, and I have at least tried). You're also incredibly sure of yourself - always the telltale sign of a fool I'm afraid.

Then you would be positioned to decide how to make the actual facts digestible by people who have deposit insurance and don't care

You are the one that decided that was why people don't care. You're way off there, but don't let me stop you. Deposit insurance may affect their choice of bank and cause a failure of the retail market to price risk, but it is not the main barrier to an interest in the money supply. But hey, you've stated thats the case so... well it must be right eh? I'll go doctor a big pile of empirical evidence to reflect your obvious insight.

Before you seek to educate others you should ensure you have educated yourself. Sorry if that sounds patronising, but really you should acknowledge your responsibities in the goal you have set yourself.

lol erm... I wouldn't be seeking that from the denizen of an internet forum, it's just your ego compelling you to think that I want you to tell me. You don't know anything about my understanding or perspective but thankyou for being so ready to save me from myself. Doesn't that make you presumptious and foolish in both cases? Having checked your blog, it is clear your ego is the overriding factor. You're just another frustrated mind seeking to make up for a sense of deep inadequacy somewhere else in your life, thats always the way it is with internet soapboxers. I recognise it because once upon a time I used to waste time doing the same thing myself. Good luck with it. <_<

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there is no point in distinguishing between notes and coins and elec. base money. Its all debt, public debt.

Probably nitpicking in the context of this thread but I am not sure "all" is correct.

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Thats embarrassingly arrogant mate. That was not what I was asking. You have zero credibility to speak on this topic (or I can't find any reference to any whatsoever, and I have at least tried). You're also incredibly sure of yourself - always the telltale sign of a fool I'm afraid.

You are the one that decided that was why people don't care. You're way off there, but don't let me stop you. Deposit insurance may affect their choice of bank and cause a failure of the retail market to price risk, but it is not the main barrier to an interest in the money supply. But hey, you've stated thats the case so... well it must be right eh? I'll go doctor a big pile of empirical evidence to reflect your obvious insight.

lol erm... I wouldn't be seeking that from the denizen of an internet forum, it's just your ego compelling you to think that I want you to tell me. You don't know anything about my understanding or perspective but thankyou for being so ready to save me from myself. Doesn't that make you presumptious and foolish in both cases? Having checked your blog, it is clear your ego is the overriding factor. You're just another frustrated mind seeking to make up for a sense of deep inadequacy somewhere else in your life, thats always the way it is with internet soapboxers. I recognise it because once upon a time I used to waste time doing the same thing myself. Good luck with it. <_<

hmm, let me refer you to your opening statement:

I think education is a key to changing some of the wrongs in the world of finance often identified and much maligned here on HPC.

I think that the above summarises your perspective, one that I happen to fully agree with. Your understanding is summarized by your endorsement of the video. So that's what my reply was based on.

The video is factually incorrect or at best deliberately misleading. Its not education. One would expect someone with a CV like the prof to have been accurate with his account. Banks can't lend out money they have not received, so 9900 cannot be 'created' from a 100 deposit by a single bank.

I'm tired of these vids which have someone who seems credible and who claims to be doing some public service when in fact they are leading vulnerable people up the garden path towards mis-investment and getting involved in misdirected projects to 'fix things' that have been misunderstood at the outset.

Do I soapbox against this kind of nonsense? Yes, absolutely, and I'm proud of it. Is there some ego there? Of course - all blogs and forum blather are an exercise in ego, especially if politically or socially motivated. Plus you can't soapbox, like I am doing or like werner or someone like Marc Faber is doing, and like you are doing in some little way with your opening statement while simultaneously saying 'oh but I might be wrong'. That would be pointless. One makes a case, provides the evidence and then stands ready to defend the same, and intellectual relativism doesn't add much to this process, which is why it requires some ego to do it. What does add to the process is when one realises one is wrong, to admit it.

Diversity of knowledge is a great thing so long as there is a balance of viewpoints to chose from but this 'bank money creation' meme is in danger of becoming a damaging groupthink.

In any case, thanks for the free psychoanalysis!

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hmm, let me refer you to your opening statement:

I think that the above summarises your perspective, one that I happen to fully agree with. Your understanding is summarized by your endorsement of the video. So that's what my reply was based on.

The video is factually incorrect or at best deliberately misleading. Its not education. One would expect someone with a CV like the prof to have been accurate with his account. Banks can't lend out money they have not received, so 9900 cannot be 'created' from a 100 deposit by a single bank.

I'm tired of these vids which have someone who seems credible and who claims to be doing some public service when in fact they are leading vulnerable people up the garden path towards mis-investment and getting involved in misdirected projects to 'fix things' that have been misunderstood at the outset.

Do I soapbox against this kind of nonsense? Yes, absolutely, and I'm proud of it. Is there some ego there? Of course - all blogs and forum blather are an exercise in ego, especially if politically or socially motivated. Plus you can't soapbox, like I am doing or like werner or someone like Marc Faber is doing, and like you are doing in some little way with your opening statement while simultaneously saying 'oh but I might be wrong'. That would be pointless. One makes a case, provides the evidence and then stands ready to defend the same, and intellectual relativism doesn't add much to this process, which is why it requires some ego to do it. What does add to the process is when one realises one is wrong, to admit it.

Diversity of knowledge is a great thing so long as there is a balance of viewpoints to chose from but this 'bank money creation' meme is in danger of becoming a damaging groupthink.

In any case, thanks for the free psychoanalysis!

Banks don't lend money - they "monetize" promissory notes.

Which means they pretend to have money (notes and coins) and are believed by most people.

No bank will provide proof of money changing hands if asked.

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I'm actually just asking questions.

Yes, but with the express purpose of obtaining the conclusion you have already settled upon it seems.

The conclusion you seem to be looking for is to establish a difference in monetary terms between physical and electronic currency and I am saying there isn't one and have said why.

There is an important difference and that is that physical currency is anonymous and electronic currency isn't, but that doesn't make one money and the other not, since either are just as good for paying taxes or paying for goods and services. In monetary terms both elec. base money and paper currency are liabilities of the central bank.

Rather than argue by asking questions, it would be more honest to argue by simply stating clearly what you believe to be the case, like I do, such that it could be refuted or confirmed by the relevant evidence. The former technique is very trying because it amounts to implying a willingness to change your position which is not in fact on offer, which is why you get a frustrated response.

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Yes, but with the express purpose of obtaining the conclusion you have already settled upon it seems.

Er nop - the questions always lead to the same place because it's the - gasp - right answer.

The conclusion you seem to be looking for is to establish a difference in monetary terms between physical and electronic currency and I am saying there isn't one and have said why.

But there is in contractual, moral and lawful terms. It's pretty simple - if I pay you for a service but you perform another one that kinda has the same effect with the express intent of saving yourself money by not informing me, you are a fraudster.

There is an important difference and that is that physical currency is anonymous and electronic currency isn't, but that doesn't make one money and the other not, since either are just as good for paying taxes or paying for goods and services. In monetary terms both elec. base money and paper currency are liabilities of the central bank.

The thing that makes it money is general agreement. Central banks don't decide what money is, the general public do.

Rather than argue by asking questions, it would be more honest to argue by simply stating clearly what you believe to be the case, like I do, such that it could be refuted or confirmed by the relevant evidence. The former technique is very trying because it amounts to implying a willingness to change your position which is not in fact on offer, which is why you get a frustrated response.

I've asked the questions to banks, building societies etc etc

No one need repay anything if they just ask for proof they ever got something in the first place.

Why?

Because they almost certainly didn't. The accounting exercise end of looking at the monetary system misses the important point that saying you have done something isn't the same as having actually done it - even if you can subsequently make it good.

There is also the objective truth that sticking a funny hat on your head and calling yourself "central bank grand pumpbah wizard" just makes you a tit, it doesn't actually confer any mystical power. Anyone can slap numbers into a PC, it's piss easy. The whole game of banking is one lie after another, and all those lies collapse under childlike questioning.

Which is why I keep asking.

Edited by Injin

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My understanding of this was that Up until 1844 all Banks were allowed to print their own money, which led to the inevitable boom and bust, because they printed too much for their own profit, and destabilised the entire economy.

The Government then outlawed this practice, by creating the Bank Charter Act.

Which stated that Banks are not allowed to print their own bank notes.

Only the BOE would be allowed to print bank notes.

But there was a major loophole, because the bank charter act only outlaws 'printing bank notes'

The law that made it illegal for banks to create paper money has never been updated to include the creation of digital money.

So Banks extend credit, or make a loan, by basically increasing the numbers on your current account.

Its that simple isnt it?

[i.E. If you want to borrow a sum of 'money'. The woman on the phone, at the bank, simply types into her computer a few more figures, adding it to your account.]

All the actual CASH in the UK amounts to very little. About £57 billion. But if you include the 'Made up' digital money'

The amount rises to something like £2,200 Billion. [M4 Money Supply]

So technically banks, do not create 'money' out of thin air. They create debt out of thin air'

That's about it isnt it? Or am I missing something?

Edited by Dan1

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My understanding of this was that Up until 1844 all Banks were allowed to print their own money, which led to the inevitable boom and bust, because they printed too much for their own profit, and destabilised the entire economy.

The Government then outlawed this practice, by creating the Bank Charter Act.

Which stated that Banks are not allowed to print their own bank notes.

Only the BOE would be allowed to print bank notes.

But there was a major loophole, because the bank charter act only outlaws 'printing bank notes'

The law that made it illegal for banks to create paper money has never been updated to include the creation of digital money.

So Banks extend credit, or make a loan, by basically increasing the numbers on your current account.

Its that simple isnt it?

[i.E. If you want to borrow a sum of 'money'. The woman on the phone, at the bank, simply types into her computer a few more figures, adding it to your account.]

All the actual CASH in the UK amounts to very little. About £57 billion. But if you include the 'Made up' digital money'

The amount rises to something like £2,200 Billion. [M4 Money Supply]

So technically banks, do not create 'money' out of thin air. They create debt out of thin air'

That's about it isnt it? Or am I missing something?

That's about the size of it. The problem and issue they have is that this is fraudulently conveyed - they use the nomenclature of cash and coins for their own oncoctions and always try to give the illusion that the relationship of their "bank credit" is 1:1 with cash.

The last private banks allowed to print their own sterling was in 1920 or so iirc. Anyone can print as many bank notes as they like - as long as they aren't designed to fool people into thinking they are legal tender sterling bank notes.

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The law that made it illegal for banks to create paper money has never been updated to include the creation of digital money.

Banks don't create "digital money". If you make a deposit of cash at the bank, the cash goes out of circulation and ends up in the banks reserve account. Your account is credited and the account says that that bank owes you your deposit. If you transfer a deposit to the bank electronically, funds from the remitting bank's reserve account is transferred to the receiving bank, and you account is credited and the account says that the bank owes you that deposit.

So Banks extend credit, or make a loan, by basically increasing the numbers on your current account.

If you take a loan out, yes the bank credits your account from thin air, but then when you spend that loan money, an equivalent amount of money from the banks reserve account is transferred to wherever you spent you balance. So the bank can't lend money it doesn't have can it? If it had lent all its reserves it could not make another loan until someone pays back a loan to it or it takes another deposit.

Otherwise, if banks can create money from nothing why have they been going bust?

So technically banks, do not create 'money' out of thin air. They create debt out of thin air'

They create private sector debt yes, but not out of thin air. They can't create private sector debt (M4) unless they have at that instant, enough base 'money' (public sector IOUs) to give to the party they made the loan to. Given that this 'money' is public sector debt, only the government can create 'money', which is what they do all the time via open market ops and lately, QE.

Now its perfectly reasonable to argue that public debt is created out of thin air, and therefore that all the money supply base and broad is thin air, but that would be down to the government at the root originator of the thin air issuance.

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Banks don't create "digital money". If you make a deposit of cash at the bank, the cash goes out of circulation and ends up in the banks reserve account. Your account is credited and the account says that that bank owes you your deposit. If you transfer a deposit to the bank electronically, funds from the remitting bank's reserve account is transferred to the receiving bank, and you account is credited and the account says that the bank owes you that deposit.

If you take a loan out, yes the bank credits your account from thin air, but then when you spend that loan money, an equivalent amount of money from the banks reserve account is transferred to wherever you spent you balance. So the bank can't lend money it doesn't have can it? If it had lent all its reserves it could not make another loan until someone pays back a loan to it or it takes another deposit.

Otherwise, if banks can create money from nothing why have they been going bust?

They create private sector debt yes, but not out of thin air. They can't create private sector debt (M4) unless they have at that instant, enough base 'money' (public sector IOUs) to give to the party they made the loan to. Given that this 'money' is public sector debt, only the government can create 'money', which is what they do all the time via open market ops and lately, QE.

Now its perfectly reasonable to argue that public debt is created out of thin air, and therefore that all the money supply base and broad is thin air, but that would be down to the government at the root originator of the thin air issuance.

Now go and find me ten people with a mortgage who actually agreed to any of this.

:)

Edit 0- banks have been going bust because they can't make money from nothing and people have been asking for actual cash rather than settling for bland assurances and half a balance sheet.

Edited by Injin

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All the actual CASH in the UK amounts to very little. About £57 billion. But if you include the 'Made up' digital money'

The amount rises to something like £2,200 Billion. [M4]

The problem and issue they have is that.....they....always try to give the illusion that the relationship of their "bank credit" is 1:1 with cash.

So the bank can't lend money it doesn't have can it?

Seems to be a discrepency in there.

What would happen if there were a jubilee year? [As in the bible. Where periodically debts were written off?]

Edited by Dan1

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Now go and find me ten people with a mortgage who actually agreed to any of this.

Irrelevant. I didn't agree to the UK consitution but I don't have much choice in the matter do I since it was established long before I was born.

This is the way the money we use has operated for generations.

Edit 0- banks have been going bust because they can't make money from nothing and people have been asking for actual cash rather than settling for bland assurances and half a balance sheet.

So you agree banks don't create money out of thin air then? Cos if they did, they couldn't go bust or suffer liquidity issues could they?

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Seems to be a discrepency in there.

where?

What would happen if there were a jubilee year? [As in the bible. Where periodically debts were written off?]

Either everyone would all lose their savings or enough paper money would be printed to pay all the savers off and the banks wound up.

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Irrelevant. I didn't agree to the UK consitution but I don't have much choice in the matter do I since it was established long before I was born.

This is the way the money we use has operated for generations.

Mortgages are contracts.

What people agreed to is primary.

So you agree banks don't create money out of thin air then? Cos if they did, they couldn't go bust or suffer liquidity issues could they?

I agree banks don't create money out of thin air.

They pretend to have money, are believed for a time, call it "broad money" and when people call them on it, are ******ed.

Edited by Injin

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Mortgages are contracts.

What people agreed to is primary.

A mortgagee contracts to be given a sum of base money which they will pay back in the same base money form at a later date with interest. They agree that if they fail to meet the repayment terms and come up with the base money the house would be owned by the bank.

What is the problem with that?

I agree banks don't create money out of thin air.

Good, in which case the professors video is wrong.

They pretend to have money, are believed for a time, call it "broad money" and when people call them on it, are ******ed.

The point is at the instant they make a loan, they definitely have at least enough actual real money to make the loan. Obviously after that they don't have it any more, which is what you are referring to.

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A mortgagee contracts to be given a sum of base money which they will pay back in the same base money form at a later date with interest. They agree that if they fail to meet the repayment terms and come up with the base money the house would be owned by the bank.

What is the problem with that?

A mortgage agrees that if they are loaned existing paper cash and coins, they will repay them plus interest. They don't know about base money - 99% guaranteed.

Good, in which case the professors video is wrong.

his terminology is awry, he's fallen for the con.

The point is at the instant they make a loan, they definitely have at least enough actual real money to make the loan. Obviously after that they don't have it any more, which is what you are referring to.

If that's the case - why will no bank in the western hemisphere provide evidence that is the case?

They've abandoned some pretty hefty sums rather than do so. Any clue?

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A mortgage agrees that if they are loaned existing paper cash and coins, they will repay them plus interest. They don't know about base money - 99% guaranteed.

Well I've got a mortgage and I never received paper cash or coins. I received electronic base money and this is the form in which I repay the bank. Where's the problem?

If that's the case - why will no bank in the western hemisphere provide evidence that is the case?

They do provide evidence. When I took out my mortgage way back when I found that my account at my current account bank had been increased by the sum of the mortgage. I also had paperwork saying that I owed the mortgage bank. The banks would have had paperwork showing that the sum of the loan had been transferred from the mortgage bank to the current account bank, but this is a matter for the banks, and no concern of yours or mine.

What more evidence is needed?

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  • 295 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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