Jump to content
House Price Crash Forum

Recommended Posts

They want a politburo committee deciding who gets the loans that they like. Yeah replace CronyCapitalism with Socialism. Good one. Sure to work.

Share this post


Link to post
Share on other sites

I feel that positive money's ideas are based on a flawed understanding of the monetary system. There is a fundamental difference between a thing and a promise of a thing. Pretending they are all the same - money - then claiming that 97% of it is created by private banks is a gross simplification.

Credit is a promise to provide something. It is not, and never will be, equivalent to that something. Addressing the symptom, rather than the cause, will fail to provide a long term solution.

Share this post


Link to post
Share on other sites

I feel that positive money's ideas are based on a flawed understanding of the monetary system. There is a fundamental difference between a thing and a promise of a thing. Pretending they are all the same - money - then claiming that 97% of it is created by private banks is a gross simplification.

Credit is a promise to provide something. It is not, and never will be, equivalent to that something. Addressing the symptom, rather than the cause, will fail to provide a long term solution.

Not according to The Bank of England:

Money creation in the modern economy

. . .

In the modern economy, most money takes the form of bank

deposits. But how those bank deposits are created is often

misunderstood: the principal way is through commercial

banks making loans. Whenever a bank makes a loan, it

simultaneously creates a matching deposit in the

borrower’s bank account, thereby creating new money.

. . .

Most of the money in circulation is created, not by

the printing presses of the Bank of England, but by the

commercial banks themselves: banks create money whenever

they lend to someone in the economy or buy an asset from

consumers. And in contrast to descriptions found in some

textbooks, the Bank of England does not directly control the

quantity of either base or broad money.

Share this post


Link to post
Share on other sites

Not according to The Bank of England:

The BoE don't get it either.

Promises of stuff != stuff. Never have and never will.

Guaranteeing deposits, bailing out banks when reality strikes, etc, will only work for so long.

Share this post


Link to post
Share on other sites

So, Traktion desribes the way credit is created by a private bank, and Neverwhere provides a BoE confirmation that this is the case, and asserts this proves Traktion and the BoE are in disagreement?

Any private company, any individual, any Government department, can create credit at any time..

For example, I say to Traktion, I'll pay your hotel bill for you with my bitcoins when you leave. I have, even without a pen or keyboard, created credit for Traktion to use at the Hotel. How he and I decide it is to be paid back, is the second part of the deal, and is the bit a bank would profit from.

Its not magic. Its not mysterious until you ask an economist.

Liquidity and sufficient means of exchange when the hotel demands payment for Traktions room, breakfasts, whores and barbills, now thats another matter.

Share this post


Link to post
Share on other sites

The BoE don't get it either.

Promises of stuff != stuff. Never have and never will.

Guaranteeing deposits, bailing out banks when reality strikes, etc, will only work for so long.

Sure, but isn't this essentially an attribute of all modern money? A £££ note is not intrinsically worth any of the stuff that it may be exchanged for, it is essentially a promissary note: "I promise to pay the bearer on demand the sum of..."

Share this post


Link to post
Share on other sites

Sure, but isn't this essentially an attribute of all modern money? A £££ note is not intrinsically worth any of the stuff that it may be exchanged for, it is essentially a promissary note: "I promise to pay the bearer on demand the sum of..."

Modern monetary theory is inherently flawed precisely because it mixes these concepts. Distilling these faults into law will only make the problem worse.

It would be much better to examine what assets we value and what services banks are needed for. We need to analyse the problem from first principles, not just work back from observed behaviours.

Share this post


Link to post
Share on other sites

Sure, but isn't this essentially an attribute of all modern money? A £££ note is not intrinsically worth any of the stuff that it may be exchanged for, it is essentially a promissary note: "I promise to pay the bearer on demand the sum of..."

fiat money is forced upon us by law. In a free market nobody would choose counterfeited paper. Positive Money would not change that, they would merely change who has the monopoly to counterfeit the money. It is a non- solution.

We need money chosen by the free market. Nobody will choose to accept inferior money if they had the choice.

Share this post


Link to post
Share on other sites

Modern monetary theory is inherently flawed precisely because it mixes these concepts. Distilling these faults into law will only make the problem worse.

Sorry if I'm being obtuse but in a fiat system what is the substantial difference between these two concepts, other than that one is physical and the other is not?

It seems to me that both hold no intrinsic value but are accepted mediums of exchange purely because we imbue them with value through collective consensus and state reification e.g. because the general populace regard bank deposits as money and the state accepts bank deposits as money, bank deposits effectively operate as money.

It would be much better to examine what assets we value and what services banks are needed for. We need to analyse the problem from first principles, not just work back from observed behaviours.

I agree. Observed behaviour from the current system can give some useful indication of possible emergent behaviours under any changed system, but to choose a system solely on the basis of observed behaviour would be entirely reactive.

Share this post


Link to post
Share on other sites

I don't understand the core controversy motivating the petition. The problem is the building onto whatever we have a system of forced whole-making and private rent-seeking transfers arising from taking public resources and universal payment tokens, and monopolising them. If the uncompensated monopoly extraction was gone I'm not sure it matters at all who or how credit is advanced.

Our current "...public-interest, in a democratic, transparent and accountable way" process has settled on the Government, MPC and deposit insurance being ok. The latter represents an implied state promise behind commercial bank assets/liabilities. Which in turn implies that lending/borrowing from banks is really lending/borrowing from the state. i.e. even if the state formally issued and controlled the whole system, the practicalities might be much the same.

It doesn't demand any stop-banks-creating-money to rectify, just some social choices. We can debate whether the parasitism is mostly a private or public thing, or whether the scale of commercial bank subsidies are wrong. But aside from academia and idealism I'm not sure what that has to do with which entities functionally do the money creating per se, beyond assuming a moral distinction between private and public (or group and consensus) motivations?

A proposal for 100% deposit backing and I suppose no more need for private banks seems to assume the State would do it all better and more equitably. But commercial bank rights and responsibilities are already determined by their customers and the State. I don't see how say giving Osborne and Carney absolute control over money supply and banking levers would herald anything better.

Share this post


Link to post
Share on other sites

Eurodollar deposits and securities created outside the regulatory authority of the Federal Reserve was the problem, remains the problem. Like lions after slumber, the unvanquishable number. Positive money won't fix that.

Share this post


Link to post
Share on other sites

Sorry if I'm being obtuse but in a fiat system what is the substantial difference between these two concepts, other than that one is physical and the other is not?

It seems to me that both hold no intrinsic value but are accepted mediums of exchange purely because we imbue them with value through collective consensus and state reification e.g. because the general populace regard bank deposits as money and the state accepts bank deposits as money, bank deposits effectively operate as money.

I agree. Observed behaviour from the current system can give some useful indication of possible emergent behaviours under any changed system, but to choose a system solely on the basis of observed behaviour would be entirely reactive.

I didn't say that the state treated them as different things either - the BoE certainly conflates fiat cash and credit together as 'money'.

The state essentially makes private credit equal to state fiat by way of insuring deposits and not letting any banks fail. This in turn sets the incentive for banks to take excessive risk.

However, there is a difference. Private credit is all about promising fiat cash. Now you can argue that fiat cash itself is just a promise, but it is really a threat of force (taxation). Private credit just piggybacks on this.

Share this post


Link to post
Share on other sites

I don't understand the core controversy motivating the petition. The problem is the building onto whatever we have a system of forced whole-making and private rent-seeking transfers arising from taking public resources and universal payment tokens, and monopolising them. If the uncompensated monopoly extraction was gone I'm not sure it matters at all who or how credit is advanced.

Our current "...public-interest, in a democratic, transparent and accountable way" process has settled on the Government, MPC and deposit insurance being ok. The latter represents an implied state promise behind commercial bank assets/liabilities. Which in turn implies that lending/borrowing from banks is really lending/borrowing from the state. i.e. even if the state formally issued and controlled the whole system, the practicalities might be much the same.

It doesn't demand any stop-banks-creating-money to rectify, just some social choices. We can debate whether the parasitism is mostly a private or public thing, or whether the scale of commercial bank subsidies are wrong. But aside from academia and idealism I'm not sure what that has to do with which entities functionally do the money creating per se, beyond assuming a moral distinction between private and public (or group and consensus) motivations?

A proposal for 100% deposit backing and I suppose no more need for private banks seems to assume the State would do it all better and more equitably. But commercial bank rights and responsibilities are already determined by their customers and the State. I don't see how say giving Osborne and Carney absolute control over money supply and banking levers would herald anything better.

The question is - who benefits from the gains and who suffers from the losses. Currently, the answer is bankers and everyone else in that order. This isn't right or sustainable.

If you don't reward success, it is unlikely that people will stretch themselves to achieve it. If you don't punish failure, then there is no reason to fear it and gambling becomes a valid strategy to profit.

Therefore, you need a system which rewards success and punishes failure. The is a way to achieve this and it is the current banking system, sans bailouts and deposit guarantees.

Ofc, this doesn't prevent the state abusing the money supply, but the market is resolving that one too; crypto-currencies are supplying an alternative to meet demand.

IMO, current state money systems will look antiquated before long and the entire broken banking system it supports will fold with it. It is just a matter of time.

Edited by Traktion

Share this post


Link to post
Share on other sites

I didn't say that the state treated them as different things either - the BoE certainly conflates fiat cash and credit together as 'money'.

The state essentially makes private credit equal to state fiat by way of insuring deposits and not letting any banks fail. This in turn sets the incentive for banks to take excessive risk.

However, there is a difference. Private credit is all about promising fiat cash. Now you can argue that fiat cash itself is just a promise, but it is really a threat of force (taxation). Private credit just piggybacks on this.

Thanks for the clarification.

If the state currently treats them both as money then it seems fair enough for them to both to be termed money at the present time, so to me what you're a suggesting seems more like an alternative solution rather than a refutation of Positive Money's understanding of the current status quo.

Re. taxation I'm sure if fiat collapsed the government would just demand taxes be paid in bitcoins or some other medium of exchange.

Share this post


Link to post
Share on other sites

Sure, but isn't this essentially an attribute of all modern money? A £££ note is not intrinsically worth any of the stuff that it may be exchanged for, it is essentially a promissary note: "I promise to pay the bearer on demand the sum of..."

well not quite.

the old banknotes say that fisrt bit, followed by the suffix,"the sum of x pounds" STERLING.

The new banknotes leave off the STERLING bit..so technicaly they are illegal.

as for what money is, well the present batch is really just paper with pretty patterns on,not much else.

alternative means of exchange are quite viable..in fact i think necessary.

monopolisation of money supply is just the same as monopolisation of any other industry......ultimately it reduces quality because the issuers get complacent about their "godhood" status and cease to provide a good service.

occasionally they need a kick up the backside to clean their act up and raise their game.

Edited by oracle

Share this post


Link to post
Share on other sites

Thanks for the clarification.

If the state currently treats them both as money then it seems fair enough for them to both to be termed money at the present time, so to me what you're a suggesting seems more like an alternative solution rather than a refutation of Positive Money's understanding of the current status quo.

Re. taxation I'm sure if fiat collapsed the government would just demand taxes be paid in bitcoins or some other medium of exchange.

The state makes all sorts of daft assertions. If Positive Money want to make them central to their petition, that is up to them. Personally, I don't believe it will fix anything and will likely just make things worse (credit *is* useful).

Re taxation, I am sure they will. However, transactions will become impossible to trace (with better tech) and the state will be unable to inflate the supply. Both would be fundamental changes to the monetary system.

Edited by Traktion

Share this post


Link to post
Share on other sites

The question is - who benefits from the gains and who suffers from the losses. Currently, the answer is bankers and everyone else in that order. This isn't right or sustainable.

If you don't reward success, it is unlikely that people will stretch themselves to achieve it. If you don't punish failure, then there is no reason to fear it and gambling becomes a valid strategy to profit.

Therefore, you need a system which rewards success and punishes failure. The is a way to achieve this and it is the current banking system, sans bailouts and deposit guarantees.

Ofc, this doesn't prevent the state abusing the money supply, but the market is resolving that one too; crypto-currencies are supplying an alternative to meet demand.

IMO, current state money systems will look antiquated before long and the entire broken banking system it supports will fold with it. It is just a matter of time.

Benefit/lose - of course and I was playing devil's advocate a bit because I'd like to see complete overhaul. But, as with talk of drafting a consolidated written constitution, the executive and parliament I do not want doing that is the current one. I appreciate that creates a rolling problem.

We need broader Government revolution before or alongside monetary revolution. I'm not as practically anti-state as you and don't mind contributing towards collective opportunity and progress. I'm also not into the idea of retrospectively rewarding/punishing success/failure, unless I've misunderstood your point. Public factors should be public and private factors private. Relinquishing public benefit should be compensated for perpetually, and private endeavours don't need extra collective reward or punishment if they're actually private.

Change needs to come from an executive using those powers for greater democratic utility, even if it involves a weakening of its own influence. i.e. alongside breaking some of our rentier chains - and not as a means of entrenching its power and commensurate special-flower transfers, which I suspect most parties would be very keen to do.

I agree the banking system has it's days numbered. But I find many money-creation proposals frustrating as they're too focused on maintaining assumed promises and real corruptability. It's a worthy idea and if it raises the profile of transactional realities that's good - but I wish as much energy went into what could first be changed for the better without assuming anything of a system taking powers from one hand and putting them in the other.

Share this post


Link to post
Share on other sites
I didn't say that the state treated them as different things either - the BoE certainly conflates fiat cash and credit together as 'money'.

The state essentially makes private credit equal to state fiat by way of insuring deposits and not letting any banks fail. This in turn sets the incentive for banks to take excessive risk.

However, there is a difference. Private credit is all about promising fiat cash. Now you can argue that fiat cash itself is just a promise, but it is really a threat of force (taxation). Private credit just piggybacks on this.

You can pay a tax bill with privately created bank credit- in fact I doubt the revenue would be happy if you sent them cash. The reality is that cash is a sideshow- 97% of the 'money' in the UK is bank credit.

So the issue is not the 'reality' of bank credit verses the 'reality' of cash- both are equally real/unreal- the issue is who gets to decide how much 'money' the system needs to operate in an optimum fashion. In theory the private banks are the best way to decide this since their exposure to default risk should compel them to act as faithful guardians of the credit supply.

But in practice this no longer works because the bankers have found ways to mitigate or offload their risks onto others and have lost their fear of defaulting borrowers. Like lepers their new found ability to experience no personal pain from the damage they inflict on society has made them a serious liability.

So if the bankers are no longer fit to act as the regulator of the monetary spigot then some other means must be found to do so.

Banks could still take deposits and lend out money I would assume- what they would not be able to do would be to originate money Ex nihilo as they do at present- they would have to source their funding from depositors or via arrangements with the new issuing authority.

Edited by wonderpup

Share this post


Link to post
Share on other sites

You can pay a tax bill with privately created bank credit- snip

No, you cant.

You instruct the organisation that has granted you credit to pay the tax bill.

If they dont have the digicash to settle the account, your instruction is worthless, as is your credit.

Thats the difference between cash and credit. A credit crunch is actually no such thing...its a cash crunch.

Share this post


Link to post
Share on other sites

Benefit/lose - of course and I was playing devil's advocate a bit because I'd like to see complete overhaul. But, as with talk of drafting a consolidated written constitution, the executive and parliament I do not want doing that is the current one. I appreciate that creates a rolling problem.

We need broader Government revolution before or alongside monetary revolution. I'm not as practically anti-state as you and don't mind contributing towards collective opportunity and progress. I'm also not into the idea of retrospectively rewarding/punishing success/failure, unless I've misunderstood your point. Public factors should be public and private factors private. Relinquishing public benefit should be compensated for perpetually, and private endeavours don't need extra collective reward or punishment if they're actually private.

Change needs to come from an executive using those powers for greater democratic utility, even if it involves a weakening of its own influence. i.e. alongside breaking some of our rentier chains - and not as a means of entrenching its power and commensurate special-flower transfers, which I suspect most parties would be very keen to do.

I agree the banking system has it's days numbered. But I find many money-creation proposals frustrating as they're too focused on maintaining assumed promises and real corruptability. It's a worthy idea and if it raises the profile of transactional realities that's good - but I wish as much energy went into what could first be changed for the better without assuming anything of a system taking powers from one hand and putting them in the other.

When I said reward/punish, I just meant that they should stand/fall by their decisions.

Share this post


Link to post
Share on other sites

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now
Sign in to follow this  

  • Recently Browsing   0 members

    No registered users viewing this page.

  • The Prime Minister stated that there were three Brexit options available to the UK:   215 members have voted

    1. 1. Which of the Prime Minister's options would you choose?


      • Leave with the negotiated deal
      • Remain
      • Leave with no deal

    Please sign in or register to vote in this poll. View topic


×

Important Information

We have placed cookies on your device to help make this website better. You can adjust your cookie settings, otherwise we'll assume you're okay to continue.