>>Skeeter I give up. You are incapable of understanding that an IOU is tradeable and hence money.<<
i understand perfectly that it is tradable for EXISTING MONEY IN THE SYSTEM. NEW MONEY can be created only if a bank is involved (makes a loan to buy the IOU).
again, it isn't about money being transferred, it *is* about creating money that didn't previously exist IN THE SYSTEM out of nothing (in effect, counterfeiting, even if legal).
don't give up, you've just misconstrued my original point. creating the paradigm that i'm "obtuse" puts up a mental wall such that you don't listen to what i'm trying to communicate.
>>You think that because someone takes a loan from the bank, and the bank hands them currency cash (i.e. M0 money) that somehow this is different than taking a loan from an individual who hands them something of value.<<
it is - the bank creates money from nothing (they don't have the money they lend, they create it out of nothing), as previously explained, while the individual has to earn something of value first in order to then issue a loan to someone to buy this thing of value someone EARNED.
that is a HUGE distinction. the latter is a big benefit to society.
the person who trades their property for cash had to do productive work to earn that property. the person who signed the note had to do productive work to earn money to pay back the note. the person who buys the note from the original holder has to do productive work to earn the cash to buy the note.
lots of productive work involved in the TRANSFERENCE OF PRE-EXISTING CASH.
the bank, OTOH, does essentially nothing and creates cash that didn't previously exist - very little productive work for society was accomplished.
>>If you are that obtuse<<
why sooooo seeeeerious? no need to get personal. you are misunderstanding the key point, but i don't call you names.
>>then do it this way: A signs a note for $x and gives it to B who also signs a note for $x and gives it to A in exchange. See, no pre-made goods are exchanged in this transaction. Both notes are tradable because there is a market for such things. In this case, 2x money was created. Thats how much new money can circulate in the economy as a result of the actions. The money stays in circulation until the IOUs are redeemed.<<
in this case money is merely transferred. the money supply stays the same.
$x goes from A to B and back to A - no money is created.
the notes change hands - no money is created.
C buys said note from A for $y, C loses $y, A gains $y - no money is created.
no money is created - the money supply stays the same.
transferring existing money is very different than creating money from nothing.
if you think this is wrong, explain exactly how the money supply is increased.
>>If instead, A signs a note for $x and gives it to B in exchange for real property which B already has, then 1x money was created in this transaction.<<
it has been transferred, not created. A has to gain access to money to pay to B. the reason he has to gain access to money to pay B (usually via work) is PRECISELY BECAUSE HE CAN'T CREATE NEW MONEY FROM NOTHING.
B didn't create money, he transferred his property for MONEY THAT ALREADY EXISTS, WHICH A HAS TO WORK TO EARN TO PAY OFF B.
>>It will pop out of existence when A is made to redeem the note to whoever holds it at the time of redemption.<<
no, the holder keeps the money and spends it (assuming no bank loans are involved).
transferring money is not creating money.
>>But in either case, all signed notes represent a commitment to pay when the holders demands payment. That is money.<<
that is a promise to exchange currently existing money for some good or service. it is already existing money - not newly created money out of thin air.
>>The primary difficult with this is that A's note and B's note depend on the individual fortunes of A and B going forward, and although they had equal value at creation, they might well not have equal value in the future. Thats the advantage of a central currency.
Fractional reserve is simply one way of doing it. Charging interest is also one way of doing things. You can construct all sorts of system which might or might not have such particulars. But you can't even grasp what money is.<<
the issue is creating new money out of thin air, not transferring it. between parties for various goods or services.
it is about changes in the actual money supply of the nation.
>> No wonder you are clueless about why interest has utility.<<
no, i'm not. i know all about the opportunity cost of money.
you need to sort the difference between creating money out of nothing and charging interest on it even though the lender did nothing productive and transferring money between people who actually added value to society in order to get into a position to make loans at interest. the latter makes perfect sense.
the former is effectively asset stripping society as practiced by the federal reserve.
>>And please don't come arguing that A & B swapping equal IOUs is not a meaningful transaction and therefore won't happen.<<
i didn't. i analyzed every single aspect of the transaction and proved the money supply of the nation WAS NOT INCREASED. rather, the money supply stayed the same (no money created) and was merely transferred between parties.
>> There are all sorts of reasons why such transactions would happen, and they are the same as why A might sign a note to a BANK who then hands A cash. Also note that all such transactions, even with the bank, generally require collateral.<<
if you think that the money supply of the nation was increased in your example, please show at what point in the transaction it was increased - i'm talking actual dollar and cents.
by money, i mean currency. by new, i mean didn't previously exist and not simply transferred from one party to another (new to the system, not new to an individual). |
