97% Owned

[Harry Sacks]

[JustYield]

Oh dear, I gave it a whirl but less than a minute in they show the spoof interview with the fake trader - he admitted the very next day he just wanted to be on TV. If they're leading with that it kind of spoils their credibility.

alessio rastani

I'll give it another chance for a few more minutes... because he's not exactly wrong.

19mins in: "[banks are] restricted solely by their willingness to lend."

Um, that's not true.

24' - 27'20": good section and summary of the issues.

44' - ~50: section on asset price bubbles, particularly HPI.

70' - The fake trader again gets a section. Sloppy.

[shame they felt need to underlay a Zeitgeist-type nervy instrumental soundtrack - it's getting old.]

Edited May 17, 2012 by JustYield

[Police]

This monetary reforum is starting to get dull.

[PopGun]

Yeah - boom/busts and financial crises are so much more interesting I find.

Yep, it's ever decreasing cycles everytime for me.

[DTMark]

Thanks for posting this up - I wondered when we'd get a UK-specific version of "The Money Masters"

As regards that day-trader - true that he wasn't quite who the BBC purported him to be, but I think his sentiments ("I dream of another recession", "Goldman Sachs runs the world") aren't all that contentious? Surely traders do like a good recession. Call it right and you make money...?

The video clearly explains how the banks create money and how the process works. It does say they are not limited in their lending, which isn't quite true, but then if Banks can "mark [their assets] to market" which basically has come to mean "put whatever value they like on them" then it's perhaps not so far from the truth.

I'm left with one question/clarification which is this:

How is the other 3% "created"?

Is it principally public sector spending and wages?

[JustYield]

I'm left with one question/clarification which is this:

How is the other 3% "created"?

Is it principally public sector spending and wages?

It's just the notes and coins in circulation. If you dig deep enough, behind all property (assets) there was a theft at some point. The question is how best to proceed from where we are, not how unfair is history!

(It is a good video overall, minor quibbles aside; however it was too long and didn't need the unsettling soundtrack underlay.)

[DTMark]

It's just the notes and coins in circulation. If you dig deep enough, behind all property (assets) there was a theft at some point. The question is how best to proceed from where we are, not how unfair is history!

(It is a good video overall, minor quibbles aside; however it was too long and didn't need the unsettling soundtrack underlay.)

Is the 3% kept static - for instance, is one of the remits of the BOE to replace coins and notes to keep roughly the same amount of non electronic money in circulation all the time, or, does this 3% dwindle away as notes and coins are defaced/destroyed?

Because I'd have thought some watching that video might think "Well, why doesn't the Government just create more notes and coins"

[winkie]

....a video worth watching......banks and governments don't like people to save.

[The Spaniard]

I'm left with one question/clarification which is this:

How is the other 3% "created"?

Is it principally public sector spending and wages?

This blog post from the positivemoney website explains the origin and nature of the 3% physical cash in circulation:

http://www.positivemoney.org.uk/2012/03/nature-physical-cash-uk/

[The XYY Man]

How is the other 3% "created"?

Is it principally public sector spending and wages?

Dunno where it comes from mate, but I'll bet a fair chunk of it met Harry Redknapp or Ken Dodd somewhere along the way...

XYY

[DTMark]

OK, time for the most contentious post ever

George Osborne is wrong that a deficit reduction programme is the way forward because even if he were theoretically right, it will be mathematically impossible to accomplish.

The slimy, odious twit Ed Balls is right in that we should just keep on spending and borrowing. Everyone else is at it (apart from say Norway?) so we might as well just go down with the rest of them and hope others fall before we do.

Probably not for the reasons he thinks, but only Ed's version can work because there is no alternative.

Can't believe I've just written that.

?

[alexw]

OK, time for the most contentious post ever

George Osborne is wrong that a deficit reduction programme is the way forward because even if he were theoretically right, it will be mathematically impossible to accomplish.

The slimy, odious twit Ed Balls is right in that we should just keep on spending and borrowing. Everyone else is at it (apart from say Norway?) so we might as well just go down with the rest of them and hope others fall before we do.

Probably not for the reasons he thinks, but only Ed's version can work because there is no alternative.

Can't believe I've just written that.

?

The problem is with the way money is created and brought into existence. With the current system debt/money must increase exponentially into infinity, and its pretty obvious that no economy has the ability to credibly absorb all of that. The only question is when will the wheels fall off.

This means that both George 'toff' osborne and Ed 'slimy' balls are wrong.

By cutting all you do is go against the flow of the system, someone must absorb new debt, and since no other sector (household/corporates) want to or have the ability to then the only place left is the government. If noone takes on new debt mass bankruptcies occur and eventual systemic collapse.

If you attempt to just spend spend spend then their must be economic growth to absorb all that new money. If there is not it simply results in price inflation and increased debt, and given the extremely weak economic power of workers without wage inflation . And without that it is impossible for the increases in government debt to be serviced. In essence the spend spend spend policy is an attempt to rebalance and reset the system by redistributing money/debt but in a globalized world where the wage bargaining powers of workers is weak it is doomed to fail. You end up with a stagflationary collapse.

Of course the two failure scenarios I have outlined are only looking into the short-medium term. Infinite growth is impossible so at some point the system will fail completely without any hope of revival.

[Ah-so]

Oh dear, I gave it a whirl but less than a minute in they show the spoof interview with the fake trader - he admitted the very next day he just wanted to be on TV. If they're leading with that it kind of spoils their credibility.

alessio rastani

I'll give it another chance for a few more minutes... because he's not exactly wrong.

19mins in: "[banks are] restricted solely by their willingness to lend."

Um, that's not true.

24' - 27'20": good section and summary of the issues.

44' - ~50: section on asset price bubbles, particularly HPI.

70' - The fake trader again gets a section. Sloppy.

[shame they felt need to underlay a Zeitgeist-type nervy instrumental soundtrack - it's getting old.]

Is it worth watching or is it a lot of half truths and inaccuracies repackaged and presented with computer graphics to indoctrinate the financially illiterate?

[DTMark]

The problem is with the way money is created and brought into existence. With the current system debt/money must increase exponentially into infinity, and its pretty obvious that no economy has the ability to credibly absorb all of that. The only question is when will the wheels fall off.

This means that both George 'toff' osborne and Ed 'slimy' balls are wrong.

By cutting all you do is go against the flow of the system, someone must absorb new debt, and since no other sector (household/corporates) want to or have the ability to then the only place left is the government. If noone takes on new debt mass bankruptcies occur and eventual systemic collapse.

If you attempt to just spend spend spend then their must be economic growth to absorb all that new money. If there is not it simply results in price inflation and increased debt, and given the extremely weak economic power of workers without wage inflation . And without that it is impossible for the increases in government debt to be serviced. In essence the spend spend spend policy is an attempt to rebalance and reset the system by redistributing money/debt but in a globalized world where the wage bargaining powers of workers is weak it is doomed to fail. You end up with a stagflationary collapse.

Of course the two failure scenarios I have outlined are only looking into the short-medium term. Infinite growth is impossible so at some point the system will fail completely without any hope of revival.

Thanks Alex. When I posted that "devils' advocate" post above, I had a feeling you were going to pop up and answer it

I guess the real question is - referring to your last sentence - whether we are at that point or not.

The issue of monetary reform transcends party politics, but, no party is going to preside over reforms that would, in all likelihood, see the largest collapse in house prices and potential redistribution of wealth ever seen in this country. That, and the risk of being shot must weigh heavily on the mind.

Until they have literally no choice but to 1. actually understand what is failing us, and 2. look at more dynamic alternatives to it.

The UK government seem to have spun a nice line that the previous crises have been solved, or are being solved, or that there is a potential exit path from where we are now, back to growth again. (Not of course, that they're all the same crisis, and we're still firmly in the grip of it, if anything, sinking further - the growth just isn't "materialising" - deliberate choice of word there)

In a way, Osborne's continued borrowing - indeed, borrowing more than Labour had planned - does rather vindicate how difficult it's going to be just to keep the wheels on in the short term. A bit of pension raiding, getting rid of the National minimum wage, taxes up, privatising the roads, and so on (just a few guesses of mine). It's more than just party politics, but given how things tip so quickly the Government knows they're closer to the edge than they'll admit. The London riots were an early warning shot about the malaise as were the sentences handed out.

On the point about infinite growth, this guy has other ideas; interested in your and others' take on this..

http://blogs.telegra...net-easy-peasy/

You'll have heard this before, no doubt: infinite growth is impossible on a finite planet. It's something of a mantra for environmentalists and is used as absolute proof that we're just going to have to do without that pesky economic growth thing. The problem here is that the conclusion isn't justified by the premise: it's driven by ignorance of what economic growth actually is.The basic idiocy starts with the observation that there isn't an infinite amount of stuff out of which we can make stuff. This is obviously true and no one asserts differently. However, it's entirely possible to have a system which is finite in one dimension, and this will not limit growth within that system in another, entirely different, direction.

Is it worth watching or is it a lot of half truths and inaccuracies repackaged and presented with computer graphics to indoctrinate the financially illiterate?

Where the video excels is at putting things in a UK context, and especially in pointing out how most people think the economy works so as to contrast that with how it actually works.

The speakers are mostly excellent.

It could be edited better.

And interestingly, while it asserts changes that could or should be made, actually, it doesn't have "the answer". Nobody appears to have "the answer".

It does not end with the usual line about returning to a gold standard.

It does however cement a number of my own views about how a democratic model could be made to work properly for the benefit of people at a localised level.

If you haven't seen others of the same ilk, or you genuinely think that the way in which the country's economy works at a top level is a bit like the way your own household economy works but just a bit bigger, you need to watch it.

To quote our dear Injin: "I can't believe people are still having the left vs right debate".

Anyone who isn't sure why - watch the video.

[winkie]

It's just the notes and coins in circulation. If you dig deep enough, behind all property (assets) there was a theft at some point. The question is how best to proceed from where we are, not how unfair is history!

(It is a good video overall, minor quibbles aside; however it was too long and didn't need the unsettling soundtrack underlay.)

The background music in parts is very annoying, too long, but apart from that the content spells it out as it is...more people should be made aware of the truth, some things have to be done to change what is happening now to protect the innocent in all this and to prevent a more serious painful event happening in the future.

[aa3]

OK, time for the most contentious post ever

George Osborne is wrong that a deficit reduction programme is the way forward because even if he were theoretically right, it will be mathematically impossible to accomplish.

The slimy, odious twit Ed Balls is right in that we should just keep on spending and borrowing. Everyone else is at it (apart from say Norway?) so we might as well just go down with the rest of them and hope others fall before we do.

Probably not for the reasons he thinks, but only Ed's version can work because there is no alternative.

Can't believe I've just written that.

?

I also disagree with Ed Balls on nearly everything, but on fiscal policy I think he is right. And to his credit he does seem to understand the mathematical implications of our monetary system. He has brought up some of the economists that argue the monetary reasons that austerity will fail.

[aa3]

I would argue we do live in an infinite economy.. which is why finite monetary systems keep failing or simply being overtaken by nations which have monetary systems which allow for infinite growth. As Britain expanded her colonial empire there was always money there to finance it, because of the fractional reserve system and printing of fiat currency.

Spain's incredible century in the 1500's was partly because Incan gold expanded the Spanish money supply by 6 times int he century. So the money was there to facilitate a growing nation. While in the dark ages there was finite money available, so everything from the economy to population numbers could not grow beyond a certain point.. sort of like where we are now, its like a plant in a finite pot.

The problem now is that a basically 100% debt money system only can so far. It faces limits to growth. What is needed is more of the money in circulation being debt free, printed money. Like in the 50's-70's, 30% of the money supply was debt free.

Of course the bankers are going to fight this all the way, because the closer to 100% the system is debt money, the greater the control of the society they have.

[Police]

I would argue we do live in an infinite economy.. which is why finite monetary systems keep failing or simply being overtaken by nations which have monetary systems which allow for infinite growth. As Britain expanded her colonial empire there was always money there to finance it, because of the fractional reserve system and printing of fiat currency.

Spain's incredible century in the 1500's was partly because Incan gold expanded the Spanish money supply by 6 times int he century. So the money was there to facilitate a growing nation. While in the dark ages there was finite money available, so everything from the economy to population numbers could not grow beyond a certain point.. sort of like where we are now, its like a plant in a finite pot.

The problem now is that a basically 100% debt money system only can so far. It faces limits to growth. What is needed is more of the money in circulation being debt free, printed money. Like in the 50's-70's, 30% of the money supply was debt free.

Of course the bankers are going to fight this all the way, because the closer to 100% the system is debt money, the greater the control of the society they have.

Spanish exploitation of their silver finds destroyed their economy. Balls is an idiot. What is needed is a redistribution of income - not more money.

[scepticus]

On the point about infinite growth, this guy has other ideas; interested in your and others' take on this..

http://blogs.telegra...net-easy-peasy/

Qualitatively, Mr Worstall is no doubt correct.

However the kind of 'orthogonal vector' growth he proposes is unlikely to be the kind of growth that results in nice positive real interest rates for investors. Conceivably as a society we may grow in many positive ways including happiness, social solidarity, common sense, localisation and so on.

But that is unlikely to mean that 60+ folks can retire comfortably and that prudent (insured) savers can expect a nice growth in their wealth.

Likewise, the kind of monetary reforms set forth by this kind of video are not going to result in the satisfaction of such expectations, even if we assumed they worked, which they don't.

The reality is we don't have any actual thing to use as money that exists in sufficient quantity, except perhaps energy. And energy behaves very differently to money.

An attempt to simulate money by the use of a set of electronic numbers and records that are declared to be scarce by fiat has already failed. The video proposes we try the same thing again, but that we try much harder than last time. Its an idiotic suggestion.

The one thing we are always guaranteed to have enough of to act as money (assuming that unrealistic constraints are not imposed upon it), while at the same time being naturally limited in its quantity, is debt.

[aa3]

One other point it will be insanely hard to reform this system. It will realistically take revolution and wars to change.

And to show why this is think back to that finite world of a gold money system. It really sucks for the majority of the population, there is little work, most men cannot attain the resources to have a family.. the population is stagnant(sort of like now).. when one place is growing, another must be shrinking by an equal amount.

So why didn't they just change the system? Because the people with the gold also were the people in power. If they reformed the system they would lose their relative wealth and power.

Same situation now.. obviously having 97% of our money as borrowed from the bankers is not working for the West. Our populations are actually in decline, our economies are shrinking now. But the guys with the power are these insanely rich bankers. And for obvious reasons they do not want to see the system changed.

[Executive Sadman]

OK, time for the most contentious post ever

George Osborne is wrong that a deficit reduction programme is the way forward because even if he were theoretically right, it will be mathematically impossible to accomplish.

The slimy, odious twit Ed Balls is right in that we should just keep on spending and borrowing. Everyone else is at it (apart from say Norway?) so we might as well just go down with the rest of them and hope others fall before we do.

Probably not for the reasons he thinks, but only Ed's version can work because there is no alternative.

Can't believe I've just written that.

?

Not really.

Ballups version relies on piling on 13% or more of GDP debt every year to deliver 2 or 3% 'growth'. Not sure how that is any more mathematically sustainable.

Austerity is mathematically possible, if rebalancing occured to the necessary extent - eventually we'd hit bottom. Its almost certainly politically/pragmatically impossible though.

The only way foward is default. Admit it for what it is. No public sector pensions to be honoured, no bankster guarantees, no more PFI payments. From then on either have sound money (gold) or go for Bill Stills proposals and hope inflationary socialists arent in power

[Police]

or go for Bill Stills proposals and hope inflationary socialists arent in power

That's a wonderful solution.

Maybe just the default will be enough, hey.

[Executive Sadman]

I would argue we do live in an infinite economy.. which is why finite monetary systems keep failing or simply being overtaken by nations which have monetary systems which allow for infinite growth. As Britain expanded her colonial empire there was always money there to finance it, because of the fractional reserve system and printing of fiat currency.

Spain's incredible century in the 1500's was partly because Incan gold expanded the Spanish money supply by 6 times int he century. So the money was there to facilitate a growing nation. While in the dark ages there was finite money available, so everything from the economy to population numbers could not grow beyond a certain point.. sort of like where we are now, its like a plant in a finite pot.

The problem now is that a basically 100% debt money system only can so far. It faces limits to growth. What is needed is more of the money in circulation being debt free, printed money. Like in the 50's-70's, 30% of the money supply was debt free.

Of course the bankers are going to fight this all the way, because the closer to 100% the system is debt money, the greater the control of the society they have.

Linky?

Sounds plausible, but id like to see some more info.

[scepticus]

So why didn't they just change the system? Because the people with the gold also were the people in power. If they reformed the system they would lose their relative wealth and power.

I don't think that is correct. There was no 'gold standard' prior to the invention of central banking at the beginning of the 18th century. Before that there was just various local standards of money based on gold, silver, local feudal taxation regimes and fealty-barter.

Even before the institution of the 'standard', the gold base itself was being debased by vast output from the americas so it certainly wasn't a constant yardstick.

And as soon as the central banking gold standard was intituted in the 17th century it was supplemented (e.g. fractionally reserved, debased, whatever) by european and US government bond issuance during the 17th century.

There has never been a genuine gold standard, because such a thing is impossible, both in terms of conception and implementation.

[scepticus]

Linky?

Sounds plausible, but id like to see some more info.

I think its correct, more or less. It was a result of WWII.

Of course that situation, 30% of money was debt free, is what led to the inflation problems in the 70's, and why Bill's proposal is nuts.